EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TMP WORLDWIDE INC.,
RICH, XXXXXXX & ASSOCIATES, LTD.,
XXXX XXXX,
AND
XXXXXX XXXXXXX
DATED AS OF AUGUST 31, 2000
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER.........................................................1
1.1 The Merger.....................................................1
1.2 Certificate of Incorporation...................................2
1.3 Bylaws.........................................................2
1.4 Directors and Officers.........................................2
1.5 Effective Time.................................................2
1.6 Filing of Certificate of Merger................................2
ARTICLE II CONVERSION OF SHARES; MANNER OF EXCHANGE..........................2
2.1 TMP and Company Equity Interests...............................2
2.2 Further Assurances.............................................4
2.3 Tax Consequences...............................................5
2.4 Treatment of Certificates......................................5
ARTICLE III-A REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS...................................................5
3.1 Organization and Good Standing.................................5
3.2 Power and Authorization........................................5
3.3 Subsidiaries...................................................6
3.4 Organizational Documents.......................................6
3.5 Ownership of the Company.......................................6
3.6 No Violation...................................................7
3.7 No Consent Required............................................7
3.8 Financial Statements...........................................7
3.9 Absence of Undisclosed Liabilities.............................8
3.10 Compliance with Laws; Permits..................................8
3.11 Property.......................................................8
3.12 Condition of Property and Related Matters......................9
3.13 Material Contracts.............................................9
3.14 Intellectual Property.........................................10
3.15 Accounts Receivable...........................................11
3.16 No Prebillings or Prepayments.................................11
3.17 Employee Benefit Plans........................................11
3.18 Salaries......................................................13
3.19 Personnel Agreements, Plans and Arrangements..................13
3.20 Customers.....................................................14
3.21 Interest of the Company in Customers, etc.....................14
3.22 Books and Records.............................................15
3.23 Insurance Policies............................................15
3.24 Bank Accounts.................................................15
3.25 Taxes.........................................................15
i
3.26 Litigation....................................................18
3.27 Environmental and Safety Requirements.........................18
3.28 Conduct of the Business.......................................19
3.29 Power of Attorney.............................................20
3.30 Brokers.......................................................20
3.31 No Illegal or Improper Transactions...........................20
3.32 Computer Systems..............................................20
3.33 Accounting....................................................20
3.34 No Misrepresentation..........................................21
ARTICLE III-B REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS............21
3.35 Shareholder Power and Authorization...........................21
3.36 Ownership of Shares...........................................21
3.37 Securities Matters............................................21
3.38 Shareholder Accounting........................................23
3.39 Regulatory Matters............................................24
3.40 Power of Attorney.............................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF TMP............................24
4.1 Organization and Good Standing; Power.........................24
4.2 Authorization.................................................24
4.3 No Violation..................................................24
4.4 No Consent Required...........................................25
4.5 TMP Filings...................................................25
4.6 Compliance with Rule 144......................................25
4.7 Issuance......................................................26
4.8 TMP Shares....................................................26
ARTICLE V 26
ARTICLE VI CONDITIONS PRECEDENT TO THE CLOSING..............................26
6.1 Conditions Precedent to Obligations of TMP ...................26
6.2 Conditions Precedent to Obligations of the Company and the
Shareholders................................................27
ARTICLE VII CLOSING.........................................................29
7.1 Closing.......................................................29
7.2 Deliveries by the Company and the Shareholders................29
7.3 Deliveries by TMP.............................................30
7.4 Filings at the Closing........................................31
ARTICLE VIII OTHER AGREEMENTS...............................................31
8.1 Confidentiality...............................................31
ii
8.2 Trading Prohibition...........................................33
8.3 Survival of Representation and Warranties.....................33
8.4 Cooperation After the Closing.................................33
8.5 Registration of TMP Shares....................................34
8.6 Tax Matters...................................................35
8.7 Company 401(k) Plan...........................................36
ARTICLE IX INDEMNIFICATION..................................................36
9.1 Indemnification by the Company and the Shareholders...........36
9.2 Indemnification by TMP........................................37
9.3 Procedure for Indemnification.................................38
9.4 Additional Limitations on Indemnification Rights..............38
9.5 Waiver of Claims..............................................39
9.6 Sole Remedy for Damages.......................................39
ARTICLE X MISCELLANEOUS.....................................................40
10.1 Notices, Consents, etc........................................40
10.2 Severability..................................................41
10.3 Amendment and Waiver..........................................41
10.4 Documents.....................................................41
10.5 Counterparts..................................................42
10.6 Expenses......................................................42
10.7 Governing Law.................................................42
10.8 Headings......................................................42
10.9 Assignment....................................................42
10.10 Definitions...................................................42
10.11 Entire Agreement..............................................43
10.12 Third Parties.................................................44
10.13 Interpretative Matters........................................44
10.14 No Strict Construction........................................44
10.15 Default.......................................................44
iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is dated as of
this 31st day of August, 2000, by and among TMP Worldwide Inc., a Delaware
corporation ("TMP"), Rich, Xxxxxxx & Associates Ltd., a Georgia corporation (the
"COMPANY"), Xxxx Xxxx ("RICH") and Xxxxxx Xxxxxxx ("XXXXXXX") (collectively, the
"SHAREHOLDERS" and, individually, each a "SHAREHOLDER"). The Company and TMP are
hereinafter sometimes collectively referred to as the "CONSTITUENT
CORPORATIONS."
WHEREAS, the Shareholders collectively own all of the equity
interests in the Company (the "EQUITY INTERESTS"), as set forth on SCHEDULE A
hereto;
WHEREAS, the Boards of Directors of TMP and the Company deem it
advisable and in the best interests of each corporation and its shareholders
that TMP and the Company combine in order to advance the long-term business
interests of TMP and the Company, and the Shareholders so agree to the merger of
the Company with and into TMP (the "MERGER");
WHEREAS, for federal income taX purposes, the parties intend that
the Merger shall qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder;
WHEREAS, for accounting purposes, the parties intend that
the Merger shall be accounted for as pooling of interests; and
WHEREAS, the parties wish to set forth certain other agreements
among them.
NOW THEREFORE, in consideration of the mutual covenants of the
parties set forth in this Agreement and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER.
(a) In accordance with the provisions of this Agreement and the
Delaware General Corporation Law (the "GCL"), at the Effective Time (as defined
in SECTION 1.5), the Company shall be merged with and into TMP and TMP shall be
the surviving corporation of the Merger (hereinafter sometimes called the
"SURVIVING CORPORATION") and shall continue its corporate existence under the
laws of the State of Delaware. The name of the Surviving Corporation shall
continue to be the name of TMP prior to the Merger. At the Effective Time, the
separate existence of the Company shall cease.
1
(b) The Surviving Corporation shall possess all the rights,
privileges, immunities, powers and purposes of the Constituent Corporations and
shall by operation of law assume and be liable for all the liabilities and
obligations of the Constituent Corporations.
1.2 CERTIFICATE OF INCORPORATION.
From and after the Effective Time, the certificate of incorporation of TMP shall
be the certificate of incorporation of the Surviving Corporation, which
certificate of incorporation may be amended after the Effective Time as set
forth therein or in its bylaws or in accordance with the GCL.
1.3 BYLAWS.
From and after the Effective Time, the bylaws of TMP shall be the bylaws of the
Surviving Corporation which bylaws may be amended after the Effective Time as
set forth therein or in its certificate of incorporation or in accordance with
the GCL.
1.4 DIRECTORS AND OFFICERS
From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, the officers and
directors of TMP at the Effective Time shall be the officers and directors of
the Surviving Corporation.
1.5 EFFECTIVE TIME.
Subject to the provisions of this Agreement, the Merger shall become effective
on the date and at the time of filing of the certificate of merger, in the form
required by and executed in accordance with the GCL with the Secretary of State
of the State of Delaware (the "CERTIFICATE OF MERGER") or at such other time
specified in the Certificate of Merger. The time when the Merger shall become
effective is herein referred to as the "EFFECTIVE TIME."
1.6 FILING OF CERTIFICATE OF MERGER.
At the Closing (as defined in SECTION 7.1), each of TMP and the Company shall
cause the Certificate of Merger to be executed and filed with the Secretary of
State of the State of Delaware in accordance with the GCL, and shall take any
and all other lawful actions and do any and all other lawful things to cause the
Merger to become effective.
ARTICLE II
CONVERSION OF SHARES; MANNER OF EXCHANGE
2.1 TMP AND COMPANY EQUITY INTERESTS.
(a) Each Equity Interest issued and outstanding immediately prior to
the Effective Time, by virtue of the Merger and without any action on the part
of the holder thereof, shall no longer be outstanding, shall be canceled and
retired and shall cease to exist; and each
2
holder of certificates representing Equity Interests shall thereafter cease to
have any rights with respect to such Equity Interests, except that all of such
Equity Interests shall be converted into the right to receive such Shareholder's
proportionate share (based on the number of outstanding Equity Interests on the
Closing Date) of 43,535 unregistered shares of TMP Common Stock (as defined
below) which equals that number of TMP Shares obtained by dividing $3,300,000
(the "MERGER CONSIDERATION") by $75.802, the average of the closing sale prices
of a share of TMP Common Stock as reported by the Nasdaq National Market for the
thirty (30) consecutive Nasdaq trading day period ending on August 11, 2000 (the
"IMPUTED TMP SHARE VALUE"). As used herein, the term "TMP COMMON STOCK" means
shares of common stock, $.001 par value per share, of TMP (or such other
securities of TMP for which the outstanding TMP Common Stock is exchanged,
without the receipt of new consideration by TMP, through a reorganization,
reclassification or similar change). TMP shall not be required to issue
fractional shares of TMP Common Stock, and any resulting fractional shares will
be rounded up to the nearest whole share of TMP Common Stock. The shares of TMP
Common Stock issuable to the Shareholders hereunder in exchange for the Equity
Interests are sometimes collectively referred to as the "TMP SHARES" and
individually as a "TMP SHARE."
(b) Notwithstanding anything contained in this Section to the
contrary, each Equity Interest of the Company held in the treasury of the
Company immediately prior to the Effective Time shall be canceled without any
conversion therefor, and no payment shall be made with respect thereto.
(c) From and after the Effective Time, there shall be no transfers
on the stock transfer books of the Company of the Company's Equity Interests
that were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates representing the Company's Equity Interests are
presented to the Surviving Corporation, they shall be canceled.
(d) ADJUSTMENT. Notwithstanding anything to the contrary contained
herein, as soon as practicable and in any event no later than thirty days after
the Closing, the Shareholders shall deliver to TMP an unaudited balance sheet
and statements of income and cash flows for the Company as of and for the period
July 1, 2000 through the day immediately preceding the Closing Date
(collectively, the "CLOSING DATE FINANCIALS"). The Closing Date Financials shall
be prepared on the same basis as the Company's other financial statements set
forth on SCHEDULE 3.8 hereto, include all normal and recurring adjustments
necessary for a fair presentation of the information set forth therein. As soon
as is reasonably practicable, but in any event within 45 days following the
receipt of the Closing Date Financials, TMP shall complete a review of the
Closing Date Financials and shall inform the Shareholders in writing that the
Closing Date Financials are acceptable or object to the Closing Date Financials
in writing, setting forth a specific description of TMP's objections. If TMP
does not so object to the Closing Date Financials, then TMP will be deemed to
have accepted the Closing Date Financials. If TMP so objects to the Closing Date
Financials and the Shareholders do not agree with TMP's objections or such
objections are not resolved on a mutually agreeable basis within 15 days of the
Shareholders' receipt of TMP's objections, any such disagreements shall be
promptly submitted by either party to a mutually agreeable independent certified
public accounting firm (the "Independent Firm"). The Independent Firm shall
resolve such dispute within 30 days after submission of the dispute by the
parties. The decision of the Independent Firm shall be final and
3
binding upon the Shareholders and TMP and its fees, costs and expenses shall be
borne by the party against which the Independent Firm shall rule or proportioned
as deemed appropriate by such Independent Firm.
(e) The Merger Consideration shall be adjusted upward, on a
dollar-for-dollar basis, by the amount that Equity (as defined below) is greater
than $0, as shown on the balance sheet included in the Closing Date Financials
(the "CLOSING BALANCE SHEET"), as finally determined, or downward, on a
dollar-for-dollar basis, by the amount that Equity is less than $0, as shown on
the Closing Balance Sheet as finally determined. "EQUITY" is defined as total
assets minus total liabilities, calculated using generally accepted accounting
principles, consistently applied minus the aggregate cash surrender value as of
the Closing Date of the life insurance policies held by the Company on the lives
of the Shareholders as set forth on the Financial Statements. Total liabilities
shall include a provision for any liability that may be imposed on the Company
or TMP as a result of the change from the cash to the accrual method of
accounting with respect to the Company. In the event of an upward adjustment in
the Merger Consideration, TMP shall deliver to the Shareholders within 10
business days of the acceptance of the Closing Balance Sheet as finally
determined one or more certificates representing additional whole shares of TMP
Common Stock having a value equal to the amount of such upward adjustment
divided by the Imputed TMP Share Value. In the event of a downward adjustment in
the Merger Consideration, the Shareholders, shall deliver to TMP within 10
business days of the acceptance of the Closing Balance Sheet as finally
determined one or more certificates representing whole shares of TMP Common
Stock, along with executed stock powers, with all necessary stock transfer and
other documentary stamps attached, free and clear of any Liens (defined below),
having a value equal to the amount of such downward adjustment (based upon the
Imputed TMP Share Value). The Merger Consideration, as adjusted pursuant to this
Section 1.2 (b), shall be referred to as the "ADJUSTED MERGER CONSIDERATION."
(f) EXCHANGE OF INTERESTS. As soon as practicable after the
Effective Time, the Shareholders shall surrender to TMP certificate(s)
representing all of the issued and outstanding Equity Interests, with all
necessary stock transfer and other documentary stamps attached, stock powers and
any other documents that are necessary to transfer to TMP good and marketable
title to the Common Stock free and clear of all Liens (as defined in SECTION
10.10), including any and all assignment and transfer documents as reasonably
requested by TMP (the "TRANSFER DOCUMENTS"). Upon such surrender, such
certificates shall forthwith be canceled and the holders thereof shall be
entitled to receive the Merger Consideration in accordance with this ARTICLE II,
subject to the post-closing adjustment.
(g) ISSUANCE OF TMP COMMON STOCK. Promptly after the surrender and
delivery to TMP of the outstanding Equity Interests, duly endorsed in blank or
accompanied by stock power(s) duly executed in blank, that are necessary to
transfer to TMP good and marketable title to such Equity Interests free and
clear of all Liens, TMP shall distribute the Merger Consideration. TMP will use
its best efforts to deliver the certificates representing the Merger
Consideration to the Shareholders at the Closing.
2.2 FURTHER ASSURANCES.
4
At the Closing and from time to time thereafter, the Shareholders shall execute
such additional instruments and take such other actions as TMP may request in
order to effectively sell, transfer and assign the Equity Interests to TMP and
confirm TMP's title thereto.
2.3 TAX CONSEQUENCES.
For federal income tax purposes, the Merger is intended to constitute a
"reorganization" within the meaning of Section 368(a) of the Code. The parties
to this Agreement hereby adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the Treasury
Regulations, and the parties agree to report and file all necessary
documentation in a manner consistent with the characterization of the Merger as
a "reorganization" within the meaning of Section 368(a) of the Code.
2.4 TREATMENT OF CERTIFICATES.
Until surrendered in accordance with the provisions of this Section
2.4, each Certificate shall represent, for all purposes, only the right to
receive the pro rata portion of the Merger Consideration subject to the
post-closing adjustment pursuant to this Article II in respect of the number of
Equity Interests previously evidenced by such Certificate.
ARTICLE III-A
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
As an inducement to TMP to enter into and perform its obligations
under this Agreement, the Company and the Shareholders, jointly and severally,
represent and warrant to TMP (as of the Closing Date unless otherwise indicated)
as follows:
3.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of Georgia. It has full power and authority to conduct
its business as it is now being conducted and to own, operate or lease the
properties and assets it currently owns, operates or holds under lease. The
Company is not, and is not required to be, licensed or qualified to do business
in any other jurisdiction.
3.2 POWER AND AUTHORIZATION.
(a) The Company has full corporate power and authority to execute
and deliver this Agreement and any agreement, document, certificate or
instrument being delivered pursuant to or in connection with the transactions
contemplated by this Agreement (collectively the "MERGER DOCUMENTS") to which it
is or will be a party, to perform its obligations hereunder and thereunder and
to consummate the Merger. This Agreement and the Merger Documents to which it is
or will be a party have been or will be duly executed and delivered by the
Company and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms.
5
(b) Each of the Shareholders has full power and authority to execute
and deliver this Agreement and each of the Merger Documents to which he is a
party, and to perform his obligations hereunder and thereunder and to consummate
the Merger. This Agreement and the Merger Documents to which he is or will be a
party have been or will be duly executed and delivered by such Shareholder, as
applicable, and constitute the legal, valid and binding obligations of such
Shareholder, enforceable against such Shareholder in accordance with their
respective terms.
(c) The execution and delivery of this Agreement and the Merger
Documents, and the performance by the Company of its obligations hereunder and
thereunder, and the consummation of the transactions contemplated hereunder and
thereunder, have been or will be duly authorized by the Company and by the
Shareholders.
3.3 SUBSIDIARIES.
The Company does not own or control (directly or indirectly), or own or hold any
right to acquire, any stock, partnership interest, joint venture interest,
equity participation or other security or interest in any other entity,
corporation, partnership, trust or any other business association.
3.4 ORGANIZATIONAL DOCUMENTS.
The copies of the certificate of incorporation and bylaws of the Company, each
as heretofore amended, which have been delivered to TMP, are true, complete and
correct. The minute books of the Company made available to TMP are true, correct
and complete and contain a summary of all meetings of directors and shareholders
of the Company since the time of incorporation of the Company.
3.5 OWNERSHIP OF THE COMPANY.
The authorized capital stock of the Company consists of 10,000 shares of common
stock, 1,000 of which are issued and outstanding and are owned of record by the
Shareholders as set forth on SCHEDULE A. The designations, powers, preferences,
rights, qualifications, limitations and restrictions in respect of the Equity
Interests are as set forth in the certificate of incorporation of the Company,
as amended to the date hereof, and all such designations, powers, preferences,
rights, qualifications, limitations and restrictions are valid, binding and
enforceable and in accordance with all applicable laws. All of the Company's
outstanding shares of capital stock have been duly authorized and validly
issued, are fully paid and non-assessable, and were issued in compliance with
all applicable federal and state securities laws. None of the outstanding
securities has been issued in violation of any pre-emptive rights, rights of
first refusal or similar rights. There are no contracts, commitments or
undertakings of any kind for the issuance of additional shares of capital stock
or other securities of the Company, nor is there in effect or outstanding any
subscription, option, warrant or other right to acquire any shares of the Equity
Interests or other instruments convertible into or exchangeable for such shares
or interests, which will not be exercised on or prior to the Closing Date. There
are no voting trust agreements or other contracts, agreements or arrangements
restricting or otherwise relating to voting, dividend
6
or other rights with respect to the capital stock or Equity Interests, as
applicable, of the Company to which the Company is a party or which are known to
the officers of the Company.
3.6 NO VIOLATION.
Except as set forth on SCHEDULE 3.6, the execution, delivery and performance by
the of the Company and the Shareholders of this Agreement and the Merger
Documents and the consummation of the transactions contemplated herein and
therein do not and will not:
(a) conflict with, result in the breach, modification, termination
or violation of, or loss of any benefit under, constitute a default under,
accelerate the performance required by, result in or give rise to a right to
amend or modify the terms of, result in the creation of any Lien upon any assets
or properties, or in any manner release any party thereto from any obligation
under, any mortgage, note, bond, indenture, contract, agreement, lease, license
or other instrument or obligation of any kind or nature by which the Company, or
any of its properties or assets, may be bound or affected;
(b) conflict with, violate or result in any loss of benefit under,
any permit, concession, franchise, order, judgment, writ, injunction,
regulation, statute or decree applicable to the Company; or
(c) conflict with or violate any provision of the articles of
incorporation or bylaws of the Company, each as heretofore amended.
3.7 NO CONSENT REQUIRED.
Except as set forth in SCHEDULE 3.7, no consent, approval, order or
authorization of, or declaration, filing or registration with, any person or
governmental authority is required to be made or obtained by the Company in
connection with the authorization, execution, delivery or performance of this
Agreement, the Merger Documents or the Merger. Each consent set forth on
SCHEDULE 3.7 has been obtained by the Company except as set forth thereon.
3.8 FINANCIAL STATEMENTS.
SCHEDULE 3.8 contains the audited financial statements of and for the fiscal
years ended December 31, 1998 and 1999, the unaudited balance sheet, statement
of income and statement of stockholder's equity as of December 31, 1997, 1996
and 1995 and for the years then ended and the unaudited balance sheet, statement
of income and statement of members' equity as of June 30, 2000 and for the six
months ended June 30, 2000 and 1999. No later than thirty days after the
Closing, the Shareholders shall deliver to TMP the Closing Date Financials. The
materials included in SCHEDULE 3.8 hereto are sometimes collectively referred to
herein as the "FINANCIAL STATEMENTS."
The Financial Statements are, and the Closing Date Financials will
be, consistent with the books and records of the Company and in accordance with
the generally accepted accounting principles consistently applied on the accrual
basis and fairly present the Company's financial condition, assets, liabilities
and retained earnings as of their respective dates and the statements of income
for the periods then ended. The statements of income included in the
7
Financial Statements do not, and included in the Closing Date Financials will
not, contain any material items of special or non-recurring income or other
income not earned in the ordinary course of business except as expressly
specified on SCHEDULE 3.8. The Company has paid off all accounts payable owed
and outstanding as of the Closing Date such that the amount of accounts
payable set forth in the Closing Date Financials will be zero. Aggregate
distributions paid to the Shareholders for the period from January 1, 2000
through August 31, 2000 are approximately equal to the taxable income of the
Company for the same period.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any debts, liabilities or obligations of any nature
(whether accrued, absolute, contingent, direct, indirect, perfected,
unliquidated or otherwise and whether due or to become due whether known or
unknown), including but not limited to liabilities or obligations on account of
Taxes (as defined in SECTION 10.10) or governmental charges or penalties,
assessments, interest or fines thereon or in respect thereof, except for debts,
liabilities or obligations (a) reflected in the balance sheet as of December 31,
1999 or included as part of SCHEDULE 3.8, (b) under agreements, contracts,
leases or commitments disclosed in this Agreement or in a Schedule hereto, (c)
arising in the ordinary course of business, consistent in form and amount with
past practice, since December 31, 1999, none of which debts, liabilities or
obligations, individually or in the aggregate, is material in amount with
respect to the business, prospects, results of operations, financial condition
or assets of the Company, (d) set forth on SCHEDULE 3.9, and (e) associated with
this Agreement and the Merger set forth on SCHEDULE 3.9. The Company is not
under any obligation, contingent or otherwise, to refund or rebate any amounts
paid or payable to it for services rendered prior to the date hereof.
3.10 COMPLIANCE WITH LAWS; PERMITS.
The Company is in compliance with all laws, regulations, rules, ordinances,
orders and other requirements applicable to the operation, conduct or ownership
of its property or business in all material respects. Neither the Company nor
any Shareholders have received notice (written or oral) of the violation or of
any claim of violation of any law, regulation, rule, ordinance, order or other
requirement or Permit (as defined below) applicable to it. The Company holds all
of the permits, licenses, approvals and authorizations of governmental
authorities or third parties (collectively, "PERMITS") necessary for the conduct
of its business. All such Permits are in full force and effect, and will remain
with the Company upon, and will not be affected by, the Closing. There is no
condition, nor has any event occurred, which constitutes a violation of the
terms of any Permit and no cancellation, modification or revocation of any of
the Permits is pending or, to the knowledge of the Company and the Shareholders,
threatened.
3.11 PROPERTY.
(a) Except as set forth on SCHEDULE 3.11(a), the Company does not
own any real property. The Company has good and marketable title or rights as
lessee to all material real, personal, mixed, tangible and intangible property
of any kind or nature owned or used by it, and the Company owns each of the
assets shown or reflected on the Financial Statements as belonging to it, free
and clear of all Liens (as defined in SECTION 10.10), except for Liens
identified on SCHEDULE 3.11(a) hereto. The assets and properties owned or leased
by the
8
Company are sufficient to operate and conduct its Business in all respects in a
manner consistent with the Company's past practice.
(b) All material leases of real and personal property leased by the
Company and utilized in its Business, including any and all leases with related
parties or any Affiliates (as defined in SECTION 10.10 below) (collectively, the
"LEASED PROPERTY"), are listed on SCHEDULE 3.11(b), and true, correct and
complete copies previously have been furnished to TMP. All leases with
Affiliates and related parties carry terms and conditions no less favorable nor
more favorable in all material respects to the Company than those which could
have been obtained in arms' length transactions with unrelated third parties.
The Company enjoys peaceful and undisturbed possession under all such leases.
Any real property that the Company occupies or leases under such leases is in
good condition and repair, with adequate plumbing, heating and air conditioning
and with access to public roads and utilities as required for the conduct of the
Business.
3.12 CONDITION OF PROPERTY AND RELATED MATTERS.
(a) All buildings, machinery, equipment and other tangible assets
used by the Company are in good operating condition and repair, reasonable wear
and tear excepted, are usable in the ordinary course of business and are
adequate and suitable for the uses to which they are being put. None of such
items requires any repairs or replacement except for maintenance in the ordinary
course of business or such other repairs or replacements which are not material,
individually or in the aggregate, in nature or cost. All such assets and
property are located at the premises leased by the Company at Roswell Ridge
Office Park, 8215 Roswell Road, Building 800 or as otherwise identified on
SCHEDULE 3.12 hereto.
(b) The properties and assets reflected in the balance sheet as of
December 31, 1999 which is a part of the Financial Statements and the balance
sheet to be included in the Closing Date Financials had, as of such date, in the
aggregate a fair market or realizable value at least equal to the value thereof
as reflected therein. The Company is not contemplating any capital expenditure
in excess of $10,000 individually or in the aggregate which has not been
disclosed to TMP in writing.
3.13 MATERIAL CONTRACTS.
The Company has not entered into and is not bound by any material contract,
agreement, relationship or commitment, written or oral, including without
limitation any obligations for money borrowed or under leases, other than those
identified on SCHEDULE 3.13 hereto (the "MATERIAL CONTRACTS"); true, correct and
complete copies of all Material Contracts previously have been furnished to TMP
or its counsel. Except as set forth on SCHEDULE 3.13, the Company is not in
default, and no event has occurred which would constitute a default by the
Company, or to the knowledge of the Company and the Shareholders, any other
party under any Material Contract or any other material obligation owed by the
Company and, to the knowledge of the Company and the Shareholders, no event has
occurred which would constitute a default by any other party to any such
Material Contract or obligation. Except as set forth on SCHEDULE 3.13, the
continuation, validity and effectiveness of all Material Contracts will in no
way be affected by the Merger and there are no negotiations pending to revise
the terms of any such Material
9
Contracts. Except as set forth on SCHEDULE 3.13, the Company is not a party to
or bound by any contract, agreement, relationship or commitment, whether or not
deemed material, which in any way restricts or purports to restrict the ability
of the Company to acquire any property or assets or conduct business or provide
services to any person or entity anywhere in the world.
3.14 INTELLECTUAL PROPERTY.
(a) The Company owns and possesses all right, title and interest in
and to, or has a valid license to use, all of the Proprietary Rights (as defined
below) necessary for the operation of the Business as presently conducted and
none of such Proprietary Rights have been abandoned;
(b) No claim by any third party contesting the validity,
enforceability, use or ownership of any such Proprietary Rights has been made,
is currently outstanding or, to the knowledge of the Company and the
Shareholders, is threatened, and, to the knowledge of the Company and the
Shareholders, there is no basis for any such claim;
(c) None of the Company, any Shareholder nor any registered agent of
the Company has received any notice of, nor is the Company or any Shareholder
aware of any reasonable basis for any allegation of, any infringement or
misappropriation by, or conflict with, any third party with respect to such
Proprietary Rights, nor has the Company, the Shareholders, or any registered
agent of any of them received any claim of infringement or misappropriation of
or other conflict with any Proprietary Rights of any third party;
(d) The Company has not infringed, misappropriated or otherwise
violated any Proprietary Rights of any third parties, and none of the Company or
the Shareholders knows of any infringement, misappropriation or conflict which
will occur as a result of the continued operation of the Company as presently
operated and as contemplated to be operated or as a result of the consummation
of the Merger; and
(e) All personnel, including without limitation employees, agents,
consultants and contractors, who have contributed to or participated in the
conception and/or development of all or any part of the Proprietary Rights which
are not licensed to the Company from a third party either (1) have been party to
a "work for hire" arrangement or agreement with the Company, in accordance with
applicable federal and state law, that has accorded the Company full, effective,
exclusive, and original ownership of all tangible and intangible property
thereby arising, or (2) have executed appropriate instruments of assignment in
favor of the Company as assignee that have conveyed to the Company full,
effective and exclusive ownership of all tangible and intangible property
thereby arising.
(f) As used herein, the term "PROPRIETARY RIGHTS" means all
proprietary information of the Company, including all patents, patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice), all trademarks, service marks, trade dress,
trade names, corporate names, domain names, copyrights, all trade secrets,
confidential information, ideas, formulae, compositions, know-how, processes and
techniques, drawings, specifications, designs, logos, plans, improvements,
proposals, technical and computer data, documentation and software, financial,
business and marketing plans, and
10
related information and all other proprietary, industrial or intellectual
property rights relating to the Business, including those proprietary,
industrial or intellectual property rights found at the Company's websites
listed on SCHEDULE 3.14.
(g) The consummation of the transactions contemplated by this
Agreement will result in the Surviving Corporation having all right, title and
interest in and to the Proprietary Rights and will not adversely affect the
right of TMP or the Surviving Corporation to use the Proprietary Rights. To the
extent that the registration of any Proprietary Right is required by law, such
Proprietary Right has been duly and validly registered or filed, and any fees
that are necessary to maintain in force any Proprietary Rights or registrations
thereof have been paid. SCHEDULE 3.14 sets forth a list and description of the
copyrights, trademarks, service marks, trade dress, trade names and domain names
used or held by the Company and, where appropriate, the date, serial or
registration number, and place of any registration thereof.
3.15 ACCOUNTS RECEIVABLE.
SCHEDULE 3.15 is a true, correct and complete listing and aging of the accounts
receivable of the Company as of December 31, 1999, determined in accordance with
generally accepted accounting principles consistently applied and which Schedule
is prepared on a basis that is consistent with the presentation in the Financial
Statements and sets forth the standard billing practices of the Company. All of
such accounts receivable have arisen in bona fide arm's length transactions in
the ordinary course of business and are valid and binding obligations of the
account debtors. None of the accounts receivable of the Company are subject to
counterclaims or set-offs and all of the accounts receivable of the Company are
collectible in full in the ordinary course of business within 120 days of the
relevant invoice date, except to the extent that reserves for doubtful accounts
have been established by the Company and set forth on SCHEDULE 3.15 and which
reserves have been adequately reflected on, and are consistent with the
presentation in, the Financial Statements attached hereto on the date hereof.
3.16 NO PREBILLINGS OR PREPAYMENTS.
Except as set forth on SCHEDULE 3.16, the Company has not billed and will not
xxxx, and the Company has not received any payments (in the form of retainers or
otherwise) from, any of its customers or potential customers for services to be
rendered or for expenses to be incurred subsequent to the Closing Date. To the
extent that accounts receivable include pre-billed amounts, the corresponding
liabilities have been accrued to the extent actual invoices representing such
liabilities have not been recorded on the Company's books.
3.17 EMPLOYEE BENEFIT PLANS.
Except as set forth in SCHEDULE 3.17, neither the Company nor any Plan Affiliate
(as defined in SECTION 10.10 below) has maintained, sponsored, adopted, entered
into, made contributions to or obligated itself to make contributions to or to
pay any benefits or grant rights under or with respect to or made any
commitments to create any employee benefit plan, program or arrangement for the
benefit of any current or former employee, officer, director or consultant of
the Company or its predecessors (or any beneficiaries or dependents of such
individuals) whether or not written or pursuant to a collective bargaining
agreement, which has been in effect at any
11
time since January 1, 1996 or which could give rise to or result in the Company
or Buyer having any debt, liability, claim or obligation of any kind or nature,
whether accrued, absolute, contingent, direct, indirect, known or unknown,
perfected or inchoate or otherwise and whether or not due or to become due
including, without limitation, any "employee pension benefit plan" (as defined
in Section 3(2) of ERISA (as defined in SECTION 10.10 below)), "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), "multi-employer plan" (as
defined in Section 3(37) of ERISA), "employee benefit plan" (as defined in
Section 3(3) of ERISA), plan of deferred compensation, medical plan, life
insurance plan, disability plan, dental plan or other plan providing, personnel
policy (including but not limited to vacation time, holiday pay, bonus programs,
moving expense reimbursement programs and sick leave), excess benefit plan,
bonus or incentive plan (including but not limited to stock options, restricted
stock, phantom stock, stock bonus and deferred bonus plans), salary reduction
agreement, change-of-control agreement, golden parachute, employment agreement,
or consulting agreement or any other benefit program or contract (collectively,
"EMPLOYEE BENEFIT PLANS"). True, correct and complete copies of all Employee
Benefit Plans previously have been furnished to Buyer along with all applicable
summary plan descriptions, material employee communications, annual reports for
the two most recent years, the most recent annual and periodic accounting of
plan assets, the most recent determination letter of the Internal Revenue
Service and the most recent actuarial valuation relating thereto. Each Employee
Benefit Plan (which, for purposes of this sentence and notwithstanding the
reference to January 1, 1996 above, includes any such plan maintained,
sponsored, adopted, contributed to or obligated to by the Company or any Plan
Affiliate within the last six years) has been maintained in all material
respects in compliance with governing documents and agreements and with
applicable laws, regulations, rules, ordinances, orders and other requirement of
law. The Company and the Plan Affiliates have fulfilled all applicable
obligations under the minimum funding standards of ERISA and the Code (as
defined in Section 10.10 below), have not incurred and will not incur any
liability under Title IV of ERISA to the Pension Benefit Guaranty Corporation
("PBGC") and have not incurred any "accumulated funding deficiency" (as defined
in Section 302 of ERISA). None of the Employee Benefits Plans is a
"Multi-employer Plan" within the meaning of Section 3(37) of ERISA or is subject
to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA and
neither the Company nor any Plan Affiliate contributes to or has an obligation
to contribute to, or has within the last six years contributed to or had an
obligation to contribute to, a Multi-employer Plan. Each Employee Benefit Plan
which is intended to be a tax qualified plan under Section 401(a) of the Code
has been since its inception so qualified and is the subject of a favorable
determination or opinion letter from the Internal Revenue Service with respect
to such qualified status. No termination, cancellation, discontinuance or other
fees are or would become payable as a result of the termination or
discontinuance of any group annuity contract maintained under any Employee
Benefit Plan that is intended to be qualified under Section 401(a) of the Code.
All voluntary employee benefit associations have been submitted to and approved
as exempt from federal income tax under Section 501(c)(9) of the Code by the
Internal Revenue Service. With respect to each Employee Benefit Plan, there has
occurred no transaction prohibited by Section 406 of ERISA or which constitutes
a "prohibited transaction" under Section 4975(c) of the Code and with respect to
which a prohibited transaction exemption is not currently in effect. The
consummation of the transactions contemplated by this Agreement and the Merger
Documents will not (either alone or in conjunction with another event, such as
termination of employment or other services) entitle any employee or other
person to receive severance or other
12
compensation which would not otherwise be payable absent the consummation of the
transactions contemplated by this Agreement and the Merger Documents or cause
the acceleration of the time of payment or vesting of any award or entitlement
under any Employee Benefit Plan. Each Employee Benefit Plan may be unilaterally
terminated and/or amended by the Company at any time without damage or penalty.
All contributions, insurance premiums, benefits and other payments to or under
each Employee Benefit Plan with respect to all through the Closing have or will
be made prior to the Closing or have been accrued on the Financial Statements or
will be accrued on the Closing Date Financials, in each case in accordance with
GAAP consistently applied. With respect to each Employee Benefit Plan, (i) the
Company has no knowledge of any application, proceeding or other matter that is
pending before the Internal Revenue Service, the Department of Labor or any
other governmental agency; (ii) no action, suit, proceeding or claim (other than
routine claims for benefits) is pending or, to the Company's knowledge,
threatened; and (iii) to the knowledge of the Company, no facts exist which are
likely to give rise to an action, suit, proceeding or claim which, if asserted,
could result in a material liability or expense to the Company or the plan
assets. Neither the Company nor any Plan Affiliate maintains, contributes to, or
is obligated under any plan, contract, policy or arrangement providing health or
death benefits (whether or not insured) to current or former employees or other
personnel beyond the termination of their employment or other services.
3.18 SALARIES.
SCHEDULE 3.18 contains a true, complete and correct list setting forth (i) the
names, job descriptions/titles, current compensation rate (including but not
limited to salary, commission and bonus compensation), date of hire, vacation
accrual rate and accrued vacation time of all individuals presently employed by
the Company indicating whether they are employed on a salaried, hourly or
piecework basis, and (ii) the names and total annual compensation for all
independent contractors who render services on a regular basis to the Company
whose current annual compensation is or is expected to be in excess of $50,000.
Except as set forth on SCHEDULE 3.18 there has been no increase in the
compensation of the foregoing individuals or independent contractors since
December 31, 1999. There has not been any promise to the employees listed on
SCHEDULE 3.18 orally or in writing of any bonus or increase in compensation,
whether or not legally binding, except for increases in the ordinary course of
business consistent with past compensation practices of the Company, and except
for obligations incurred under existing bonus, insurance, pension or other
Employee Benefit Plans described on SCHEDULE 3.17 or 3.18. The Company has not
made any prepayments of salaries, bonuses or any other amounts due to any of its
employees or former employees.
3.19 PERSONNEL AGREEMENTS, PLANS AND ARRANGEMENTS.
Except as listed in SCHEDULES 3.17, 3.18, 3.19 and 3.26, the Company is not a
party to or obligated with respect to any (a) outstanding contracts with current
or former employees, agents, consultants, advisers, salesmen, sales
representatives, distributors, sales agents, independent contractors, or
dealers, or (b) collective bargaining agreements or contracts with any labor or
trade union, employee bargaining agency or other representative of employees or
any employee benefits provided for by any such agreement, true, correct and
complete copies of which previously have been furnished to TMP. No strike,
picketing, slow-down, work stoppage, lock-out, union organizational activity,
allegation, charge or complaint of employment discrimination,
13
unfair labor practice or other similar occurrence has occurred or is pending or,
to the knowledge of the Company and any of the Shareholders, is threatened
against the Company nor do the Company or the Shareholders know any basis for
any such allegation, charge, or complaint. The Company has complied in all
material respects with all applicable laws relating to the employment of labor,
including but not limited to provisions thereof relating to wages, hours,
vacation pay, equal opportunity, collective bargaining and the payment,
deduction and remittance of all amounts required to be deducted and/or remitted
in respect of wages and salaries and of other Taxes and such deductions are
consistent with past practices and in accordance with generally accepted
accounting principles consistently applied and consistent with the Financial
Statements, and either remitted same to the legally constituted authorities
entitled to receive payment thereof or has reserved for same in its accounts and
an amount of cash equal to the amount of such reserve has been set aside for
payment thereof. The Company is not liable for any arrears of wages or any taxes
or penalties with respect to the foregoing. The Company has not entered into and
is not obligated to enter into any agreement relating to the payment of vacation
pay to any employee, and it has no obligation to any employees to provide them
with pay for vacation time other than as required by generally applicable
provisions of law. Neither the Company nor any Shareholder has received notice
from any employee of the Company that any such employee is terminating his or
her employment with the Company, nor to the best knowledge of the Company and
the Shareholders does any employee intend to terminate his or her employment
with the Company as a result of the Merger. There are no administrative charges
or court complaints pending or, to the knowledge of the Company and the
Shareholders, threatened against the Company concerning alleged employment
discrimination or any other matters relating to the employment of labor. No
trade union, counsel of trade unions, employee bargaining agency or affiliated
bargaining agent (i) holds bargaining rights with respect to any of the
Company's employees by way of certification, interim certification, voluntary
recognition, designation or successor right, (ii) has applied to be certified as
the bargaining agent of the Company's employees, or (iii) has applied to have
the Company declared a related employer pursuant to the provision of applicable
law. Except as set forth in SCHEDULE 3.19, no claim, injunction, fact, event or
condition exists which would give rise to a material claim by any employee or
former employee (including dependents and spouses thereof and other individuals
covered thereunder) of the Company under any workers compensation laws,
regulations, requirements or programs.
3.20 CUSTOMERS.
SCHEDULE 3.20 is a complete list by dollar volume of xxxxxxxx (for the fiscal
year ended December 31, 1999) of the Company's top twenty customers by revenue.
Except as set forth on SCHEDULE 3.20, since December 31, 1999, none of these
customers has canceled or otherwise terminated, or, to the knowledge of the
Company and the Shareholders, threatened to cancel or otherwise terminate, its
relationship with the Company or reduced, or to the knowledge of the Company and
the Shareholders, threatened to reduce, its business with the Company. Neither
the Company nor any of the Shareholders have received any notice or has any
knowledge or reason to believe that any customer intends to cancel or otherwise
modify its relationship with the Company on account of the Merger or otherwise.
3.21 INTEREST OF THE COMPANY IN CUSTOMERS, ETC.
14
Except as set forth on SCHEDULE 3.21, neither the Company, the Shareholders nor
any of their respective Affiliates has any direct or indirect ownership interest
in or other business relationship with any competitor, supplier or customer of
the Company, or in any person from whom or to whom the Company leases any real
or personal property or in any other person with whom the Company has any
business relationship. SCHEDULE 3.21 describes (i) all management,
administrative, computer, telephone or other services provided to the Company by
any of the Company's Affiliates, or any of the Affiliates of the officers or
Shareholders of the Company, and all such services provided by the Company to
any of such persons and entities, and (ii) all other contracts, agreements,
arrangements or transactions (including the purchase and sale of inventory,
supplies and other goods) between the Company, on the one hand, and any of such
individuals or entities on the other hand, currently in effect, including,
without limitation any agreement or arrangement relating to indebtedness to or
from any of such individuals or entities, in each case setting forth the terms
thereof if not effected on an arm's-length basis.
3.22 BOOKS AND RECORDS.
All the books, records and accounts of the Company are in all material respects
accurate and complete, accurately reflect all matters normally entered into the
books, records or accounts maintained by similar small businesses, are in all
material respects in accordance with all laws, regulations and rules applicable
to the Company and accurately present and reflect in all material respects all
of the transactions described therein. The Company has accounting controls
sufficient to ensure that its transactions are in all material respects executed
in accordance with its management's general or specific authorization.
3.23 INSURANCE POLICIES.
SCHEDULE 3.23 is a correct and complete list and description, including policy
numbers, of all insurance policies owned or held by the Company or otherwise
covering the Company, its employees or assets. Such policies are in full force
and effect, and the Company is not in default under any of them. The Company has
not received any notice of non-renewal, cancellation or intent to cancel, not
renew or increase premiums or deductibles with respect to such insurance
policies nor, to the knowledge of the Company and the Shareholders, is there any
basis for any such action. SCHEDULE 3.23 also contains a list of all pending
claims with any insurance company (other than health, medical and dental
insurance claims of employees) and any instances within the previous three years
of a denial of coverage of the Company by any insurance company.
3.24 BANK ACCOUNTS.
SCHEDULE 3.24 is a complete and correct list of each bank and brokerage firm in
which the Company has an account or safe deposit box, the number of each such
account or box and the names of all persons authorized to draw thereon or to
have access thereto.
3.25 TAXES.
Except as set forth on SCHEDULE 3.25:
(a) All Tax Returns (as defined in SECTION 10.10) required to be
filed by or on behalf of the Company have been properly prepared and duly and
timely filed with the
15
appropriate taxing authorities in all jurisdictions in which such Tax Returns
are required to be filed (after giving effect to any valid extensions of time in
which to make such filings), and all such Tax Returns were true, complete and
correct in all material respects.
(b) All Taxes (whether or not shown on any Tax Return) payable by or
on behalf of the Company or with respect to its income, assets or operations
have been fully and timely paid. The cash reserves or accruals, if any, for
Taxes provided in the books and records of the Company with respect to any
period for which Tax Returns have not yet been filed or for which Taxes are not
yet due and owing are, or prior to the Closing Date, will be, sufficient for all
unpaid Taxes of the Company through and including the Closing Date (including,
without limitation, any Taxes resulting from the transactions contemplated by
this Agreement). The Company has no liability for Taxes of any other person as a
transferee, successor, by contract or otherwise.
(c) The Company has not executed or filed with the Internal Revenue
Service (the "IRS") or any other taxing authority any agreement, waiver or other
document or arrangement extending or having the effect of extending the period
for assessment or collection of Taxes (including, but not limited to, any
applicable statute of limitations), and no power of attorney granted by the
Company with respect to any Tax matter is currently in force.
(d) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and has duly and timely withheld from employee salaries, wages and
other compensation and has paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws.
(e) TMP has been provided complete copies of (i) all U.S. federal,
state and local, and foreign income or franchise Tax Returns of the Company
relating to the taxable periods beginning after 1995 and (ii) any audit report
issued within the last three years relating to Taxes due from or with respect to
the Company and its income, assets or operations. SCHEDULE 3.25 lists the income
and franchise Tax Returns filed by or on behalf of the Company that have been
examined by the relevant taxing authority.
(f) SCHEDULE 3.25 lists all material types of Taxes paid and
material types of Tax Returns filed by or on behalf of the Company and indicates
those Taxes with respect to which the Company is or has been a member of an
Affiliated Group for any Tax purpose. No claim has been made by a taxing
authority in a jurisdiction where the Company does not file Tax Returns such
that it is or may be subject to taxation by that jurisdiction.
(g) All deficiencies asserted or assessments made as a result of any
examinations by the IRS or any other taxing authority of the Tax Returns of or
covering or including the Company have been fully paid and there are no other
audits or investigations by any taxing authority or proceedings in progress, nor
has the Company or the Shareholders received any notice from any taxing
authority that it intends to conduct such an audit or investigation. No issue
has been raised by a U.S. federal, state, local or foreign taxing authority in
any current or prior examination which, by application of the same or similar
principles, could reasonably be expected to result in a proposed deficiency for
any subsequent taxable period.
16
(h) Neither the Company nor any other Person on behalf of the
Company has (A) filed a consent pursuant to Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
the Company, (B) agreed to or is required to make any adjustments pursuant to
Section 481(a) of the Code or any similar provision of state, local or foreign
law by reason of a change in accounting method initiated by the Company or has
any knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company, or has otherwise taken any action that
would have the effect of deferring any liability for Taxes from any taxable
period ending on or before the Closing to any taxable period ending thereafter,
(C) executed or entered into closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law with respect to the Company, or (D) requested any extension
of time within which to file any Tax Return, which Tax Return has since not been
filed.
(i) No property owned by the Company is (i) property required to be
treated as being owned by another Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of
the Code or (iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code.
(j) The Company is not a party to any tax sharing or similar
agreement or arrangement (whether or not written) pursuant to which it will have
any obligation to make any payments after the Closing.
(k) There is no contract, agreement, plan or arrangement covering
any person that, individually or collectively, could give rise to the payment of
any amount that would not be deductible by TMP by reason of Section 280G of the
Code, or would constitute compensation in excess of the limitation set forth in
Section 162(m) of the Code.
(l) The Company is not subject to any private letter ruling of the
IRS or comparable rulings of other taxing authorities.
(m) There are no Liens as a result of any unpaid Taxes upon any of
the assets of the Company.
(n) All material Federal Tax elections of the Company are clearly
set forth in the Tax Returns described in Section 3.25(e)(i).
(o) The Company has never been a member of any affiliated group
within the meaning of Section 1504 of the Code or any similar group defined
under a similar provision of state, local or foreign law, including, but not
limited to, any combined, consolidated or unitary group. The Company does not
own any interest in any entity that is treated as a partnership for U.S. federal
income tax purposes or would be treated as a pass-through or transparent entity
for tax purposes.
17
(p) No shares of capital stock of the Company have been (or, prior
to the Closing Date, will be) redeemed prior to or in connection with the
transactions contemplated by this Agreement, and the Company has not made (and,
prior to the Closing Date, will not make) any extraordinary distribution (within
the meaning of Section 1.368-IT(e) of the Treasury Regulations) with respect to
its stock prior to or in connection with the Merger. The consummation of the
Merger will not result in Taxes payable by the Company.
(q) To the knowledge of the Company and the Shareholders, the
Company has not taken or agreed to take any action that would, or has knowledge
of, any fact or circumstance that is reasonably likely to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(r) The Company has properly and timely elected under Section 1362
of the Code, and under each analogous or similar provision of state or local law
in each jurisdiction where it is required to file a Tax Return to be treated as
an "S" corporation for all taxable periods since its incorporation. There has
been no voluntary or involuntary termination or revocation of any such election.
Other than the Georgia net worth tax, the Company is not subject to any
entity-level income, franchise or similar Taxes imposed by any taxing authority.
(s) None of the Shareholders is a foreign person within the meaning
of Section 1445 of the Code.
3.26 LITIGATION.
Except as set forth in SCHEDULE 3.26, there is no claim, counter-claim, action,
suit, order, proceeding or investigation pending or, to the knowledge of the
Company and the Shareholders, threatened against or involving the Company (or
pending or, to the knowledge of the Company and the Shareholders, threatened
against any of the officers, directors or key employees of the Company with
respect to business activities on behalf of the Company) with respect to or
affecting the Company, its accounts, business, properties, assets or rights, or
relating to the Merger, before any court, agency, regulatory, administrative or
other governmental body or officer or before any arbitrator; nor, to the
knowledge of the Company and the Shareholders, is there any reasonable basis for
any such claim, action, suit, proceeding or governmental, administrative or
regulatory investigation. The Company is not directly subject to or affected by
any order, judgment, decree or ruling of any court or governmental agency.
Neither the Company nor any Shareholder has received any written opinion or
memorandum of legal advice from legal counsel to the effect that any of them are
exposed to any liability which may be material to the business, prospects,
results of operations, financial condition or assets of the Company. The Company
is not engaged in any legal action to recover monies due it or for damages
sustained by it, and none of the assets of the Company nor any of its business
practices is in any manner, directly or indirectly, affected by injunction of
any court or governmental, administrative or regulatory agency, body or officer.
3.27 ENVIRONMENTAL AND SAFETY REQUIREMENTS.
The Company is, in all material respects, in compliance with all applicable
Environmental and Safety Requirements (as defined below), and possesses all
required permits, licenses and
18
certificates, and has filed all notices or applications, required thereby.
Neither the Company nor any Shareholder has received any notice or other
communication from any party with respect to the failure by the Company to
comply with Environmental and Safety Requirements. For purposes of this
Agreement, "ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal, foreign
and local laws, bylaws, rules, regulations, ordinances, decrees, orders,
statutes, actions, guidelines, standards, arrangements, injunctions, policies
and requirements relating to public health and safety, worker health and safety,
pollution and protection of the environment (including without limitation the
handling of any polluted, toxic or hazardous materials), all as amended or
hereafter amended. The Company has no, nor are its properties subject to, nor
are there any facts or circumstances which the Company or the Shareholders
reasonably believe could form the basis for, any liability, contingent or
otherwise, arising out of any Environmental and Safety Requirements. The Company
does not have in its possession or under its control any hazardous substances.
3.28 CONDUCT OF THE BUSINESS.
Except as set forth on SCHEDULE 3.28, since December 31, 1999, the Company has
conducted its business only in the ordinary course of business consistent with
past custom and practice, and has incurred no liabilities or obligations
whatsoever other than in the ordinary course of business consistent with past
custom and practice and there has been no material adverse change in the assets,
condition (financial or otherwise), results of operations, employee or customer
relations, business activities or business prospects of the Company, nor does
the Company or the Shareholders know of any such change which is threatened, nor
has there been any damage, destruction or loss materially adversely affecting
any of the assets, or the business condition (financial or otherwise), results
of operations, prospects or activities of the Company, whether or not covered by
insurance. Without limitation of the foregoing and except as set forth on
SCHEDULE 3.28, since December 31, 1999, the Company has not:
(a) voluntarily or involuntarily sold, transferred, abandoned,
surrendered, subjected to a Lien or otherwise disposed of any material assets or
property rights except in the ordinary course of business consistent with past
custom or practice;
(b) changed any accounting principles, methods or practices utilized
by it or changed any of its depreciation rates or amortization policies or
rates;
(c) made any loan or advance to any party in excess of $5,000;
(d) issued, redeemed or purchased any stock, bond or corporate
security or declared or made any payment or distribution on or with respect to
its capital stock;
(e) incurred debt, liabilities, or obligations of any nature whether
accrued, absolute, contingent, direct, indirect, perfected or otherwise and
whether due or to become due except current liabilities incurred and liabilities
under contracts entered into in the ordinary course of business consistent with
past custom and practice;
(f) increased the compensation payable to any of its officers,
employees or agents;
19
(g) paid any amounts to or for the benefit of any of the
Shareholders or;
(h) entered into any other material transaction, or committed to any
of the foregoing.
3.29 POWER OF ATTORNEY.
Neither the Company nor any Shareholder has given to any person or entity for
any purpose any power of attorney which is currently in effect.
3.30 BROKERS.
Neither the Company nor any Shareholder has incurred any obligation or
liability, contingent or otherwise, for brokers' or finders' fees or commissions
in connection with the transactions contemplated by this Agreement or the Merger
Documents.
3.31 NO ILLEGAL OR IMPROPER TRANSACTIONS.
Neither of the Company, nor any Shareholder nor any of the Company's directors
or officers has, directly or indirectly, used funds or other assets of the
Company, or made any promise or undertaking in such regard, for (a) illegal
contributions, gifts, entertainment or other expenses relating to political
activity; (b) illegal payments to or for the benefit of governmental officials
or employees, whether domestic or foreign; (c) illegal payments to or for the
benefit of any person, firm, corporation or other entity, or any director,
officer, employee, agent or representative thereof; or (d) the establishment or
maintenance of a secret or unrecorded fund; and there have been no false or
fictitious entries made in the books or records of the Company.
3.32 COMPUTER SYSTEMS.
The computer systems of the Company listed on SCHEDULE 3.32 (including without
limitation all software, hardware, workstations and related components,
automated devices, embedded chips and other date sensitive equipment such as
security systems, alarms, elevators and HVAC systems) constitute all computer
systems necessary to conduct the Business as presently conducted. The Company
has not experienced any material problems or difficulties with such computer
systems related to or resulting from the "Year 2000" concern.
3.33 ACCOUNTING.
Neither the Company nor any of the Company's directors or officers has taken any
action nor is the Company or any of the Shareholders aware of any facts or
circumstances in respect of the Company or its accounting procedures which such
person believes may have the effect of precluding accounting for the
transactions contemplated by this Agreement and the Merger Documents as a
"pooling of interests," which facts or circumstances have not been disclosed to
TMP or to its independent auditors. Except as disclosed on SCHEDULE 3.33, since
April 1, 1998: (i) the Company has not in any way changed the equity interests
of its securities; (ii) the Company has not acquired any treasury securities;
and (iii) the Company has not disposed of significant assets, and any changes in
equity interests, acquisitions of treasury securities or
20
disposal of assets disclosed on SCHEDULE 3.33 were not in contemplation of the
transactions contemplated by this Agreement.
3.34 NO MISREPRESENTATION.
The representations and warranties of the Company and the Shareholders set forth
in this Agreement or any of the Merger Documents do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein or therein in light of the circumstances in
which they were made, not misleading as of the Closing Date. There is no
material fact or information particular to the business of the Company which has
not been disclosed to TMP in writing which materially adversely affects or could
reasonably be anticipated to materially adversely affect the business, condition
(financial or otherwise), property or assets of the Company or the ability of
the Company to consummate the Merger as of the Closing Date.
ARTICLE III-B
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
As an inducement to TMP to enter into and perform its obligations
under this Agreement, each Shareholder severally (and not jointly with the
Company or any other Shareholder) represents and warrants to TMP (as of the
Closing Date unless otherwise indicated) as follows:
3.35 SHAREHOLDER POWER AND AUTHORIZATION.
Each of the Shareholders has full power and authority to execute and deliver
this Agreement and each of the other Merger Documents to which he is or will be
a party, and to perform his obligations hereunder and thereunder and to
consummate the Merger. This Agreement and the Merger Documents to which each of
them is or will be a party, have been or will be duly executed and delivered by
such Shareholder and constitute the legal, valid and binding obligations of such
Shareholder, enforceable against such Shareholder in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy and other laws of general application relating to creditors' rights
and general principles of equity.
3.36 OWNERSHIP OF SHARES.
Such Shareholder is the legal record and beneficial owner of the Equity
Interests set forth on SCHEDULE A hereto. Such Shareholder owns his Equity
Interests free and clear of any Liens.
3.37 SECURITIES MATTERS.
Except as set forth on SCHEDULE 3.37:
(a) Such Shareholder has such knowledge and experience in financial
and business matters and such experience in evaluating and investing in
companies such as TMP as to be capable of evaluating the merits and risks of an
investment in the TMP Common Stock.
21
Such Shareholder has the financial ability to bear the economic risk of his
investment in the TMP Common Stock being acquired hereunder, has adequate means
for providing for his current needs and contingencies and has no need for
liquidity with respect to his investment in TMP.
(b) Such Shareholder is acquiring the TMP Shares for his own
account, for investment purposes only, and not with the view to, or for resale
in connection with, any distribution thereof. Such Shareholder understands that
the TMP Shares have not been registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or under the securities laws of various states,
by reason of a specified exemption from the registration provisions thereunder
which depends upon, among other things, the bona fide nature of such
Shareholder's investment intent as expressed herein. Such Shareholder
acknowledges that his representations and warranties contained herein are being
relied upon by TMP as a basis for the exemption of the issuance of the TMP
Common Stock hereunder from the registration requirements of the Securities Act
and any applicable state securities laws.
(c) Such Shareholder acknowledges that the TMP Shares must be held
indefinitely unless they are subsequently registered under the Securities Act
and under applicable state securities laws or an exemption from such
registration is available. Such Shareholder has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act which permits
limited resale of the securities purchased in a private placement subject to the
satisfaction of certain conditions including, among other things, the
availability of certain current public information about TMP and compliance with
applicable requirements regarding the holding period and the amount of
securities to be sold and the manner of sale. Such Shareholder understands that
only TMP can take action to register the TMP Shares.
(d) Such Shareholder has relied upon independent investigations made
by such Shareholder and is fully familiar with the business, results of
operations, financial condition, prospects and other affairs of TMP and realizes
the TMP Shares are a speculative investment involving a high degree of risk for
which there is no assurance of any return. Such Shareholder has, among other
things, accessed and carefully reviewed (i) TMP's Annual Report on Form 10-K for
the year ended December 31, 1999, (ii) TMP's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2000 and June 30, 2000, (iii) TMP's Proxy Statement
dated May 19, 2000, (iv) TMP's Registration Statement on Form S-1 (SEC file
number 333-41996) and all amendments thereto, (v) TMP's current Reports on Form
8-K filed in 2000, and (vi) all other information filed by TMP pursuant to the
Securities Act or the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") since January 1, 2000. Such Shareholder acknowledges that in connection
with the Merger, neither TMP nor anyone acting on its behalf or any other person
has made, and such Shareholder is not relying upon, any representations,
statements or projections concerning TMP, its present or projected results of
operations, financial condition, prospects, present or future plans, acquisition
plans, products and services, or the value of the TMP Shares or TMP's business
or any other matter in relation to TMP's business or affairs. Such Shareholder
has had an opportunity to discuss TMP's business, management, financial affairs
and acquisition plans with TMP's management, to review TMP's facilities, and to
obtain such additional information concerning such Shareholder's investment in
the TMP Shares in order for such Shareholder to evaluate its merits and risks,
and such Shareholder has determined that the TMP Shares are a suitable
investment for such Shareholder and that at this time such Shareholder could
bear a complete loss of his investment.
22
(e) Such Shareholder is aware that no federal or state or other
agency has passed upon or made any finding or determination concerning the
fairness of the transactions contemplated by this Agreement and the Merger
Documents or the adequacy of the disclosure of the exhibits and schedules hereto
or thereto and such Shareholder must forego the security, if any, that such a
review would provide.
(f) Such Shareholder understand and acknowledge that neither the IRS
nor any other tax authority has been asked to rule on the tax consequences of
the Merger or by the Merger Documents and, accordingly, in making his decision
to acquire the TMP Shares such Shareholder has relied upon the investigations of
such Shareholder's own tax and business advisers in addition to such
Shareholder's own independent investigations, and that such Shareholder and such
Shareholder's advisers have fully considered all the tax consequences of such
Shareholder's acquisition of the TMP Shares.
(g) Except as set forth on SCHEDULE A, such Shareholder is an
"ACCREDITED INVESTOR" as that term is defined in Rule 501(a) of Regulation D
under the Securities Act by reason of being a natural person who had an
individual income in excess of $200,000 in each of the two most recent years or
joint income with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same income level in the
current year.
(h) Such Shareholder understands that all certificates for the TMP
Shares issued to the Shareholders shall bear a legend in substantially the
following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF WITHOUT SUCH REGISTRATION OR THE DELIVERY TO THE ISSUER
OF AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER, THAT SUCH
DISPOSITION WILL NOT REQUIRE REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS."
3.38 SHAREHOLDER ACCOUNTING.
Such Shareholder has not taken or agreed to take any action, and is not aware of
any facts or circumstances in respect of the Company or its accounting
procedures, which is reasonably likely to prevent the transactions contemplated
by this Agreement and the Merger Documents from being accounted for as a
"pooling of interests." Such Shareholder has not (i) sold, transferred or
assigned any securities of the Company or (ii) at any time in any way reduced
his risk or committed to reduce his risk with respect to the capital stock owned
by such Shareholder. Such Shareholder has not at any time in any way reduced his
risk or committed to reduce his risk with respect to the TMP Shares to be
acquired by such Shareholder hereunder, whether by entering into a put, collar,
option, margin or other arrangement. Between January 1, 1998 and the Closing
Date, such Shareholder has not owned any shares of TMP Common Stock.
23
3.39 REGULATORY MATTERS.
Such Shareholder has not taken or agreed to take any action that would, or has
knowledge of any fact or circumstance that is reasonably likely to (i) prevent
the Merger contemplated hereby from qualifying as a reorganization within the
meaning of Section 368(a) of the Code, or (ii) materially impede or delay
receipt of any consents of any governmental authorities referred to in SECTION
6.2(C) hereof.
3.40 POWER OF ATTORNEY.
Such Shareholder has not given to any person or entity for any purpose any power
of attorney with respect to the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TMP
As an inducement to the Company and the Shareholders to enter into
and perform their respective obligations under this Agreement, TMP hereby
represents and warrants to the Company and the Shareholders as follows:
4.1 ORGANIZATION AND GOOD STANDING; POWER.
TMP is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. TMP has full power and authority to execute
and deliver this Agreement and the Merger Documents, to perform its obligations
hereunder and thereunder and to consummate the Merger contemplated hereby and
thereby.
4.2 AUTHORIZATION.
The execution and delivery of this Agreement and the Merger Documents, and the
performance by TMP of its obligations hereunder and thereunder, and the
consummation of the Merger have been duly authorized by TMP. This Agreement and
the Merger Documents have been duly executed and delivered by TMP and constitute
the legal, valid and binding obligations of TMP, enforceable against TMP in
accordance with their respective terms, except as the enforcement thereof may be
limited by bankruptcy and other laws of general application relating to
creditors' rights or general principles of equity.
4.3 NO VIOLATION.
The execution, delivery and performance by TMP of this Agreement and the Merger
Documents and the consummation of the transactions contemplated herein and
therein do not and will not:
(a) conflict with, result in the breach, modification, termination
or violation of, or loss of any benefit under, constitute a default under,
accelerate the performance required by, result in or give rise to a right to
amend or modify the terms of, result in the creation of any Lien upon any assets
or properties, or in any manner release any party thereto from any obligation
24
under, any mortgage, note, bond, indenture, contract, agreement, lease, license
or other instrument or obligation of any kind or nature by which TMP or any of
its properties or assets may be bound or affected;
(b) conflict with, violate or result in any loss of benefit under,
any permit, concession, franchise, order, judgment, writ, injunction,
regulation, statute or decree; or
(c) conflict with or violate any provision of the certificate of
incorporation or bylaws, each as heretofore amended, of TMP.
4.4 NO CONSENT REQUIRED.
No consent, approval, order or authorization of, or declaration, filing or
registration with, any person or governmental authority is required to be made
or obtained by TMP in connection with the authorization, execution, delivery or
performance of this Agreement, the Merger Documents or the Merger.
4.5 TMP FILINGS.
The following information with respect to TMP is available in the Xxxxx database
on the website of the U.S. Securities and Exchange Commission (the "SEC") at
XXXX://XXX.XXX.XXX: (i) TMP's Annual Report on Form 10-K for the year ended
December 31, 1999, (ii) TMP's Proxy Statement dated May 19, 2000, (iii) TMP's
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000 and June
30, 2000, (iv) TMP's Registration Statement on Form S-1 (SEC file number
333-41996) and all amendments thereto and (v) TMP's Current Reports on Form 8-K
filed in 2000 (collectively referred to herein as the "Exchange Act Filings").
None of the Exchange Act Filings, as of their respective filing date, contained
any untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading (except any statement
or omission therein which has been corrected or otherwise disclosed or updated
in a subsequent Exchange Act Filing). Except as disclosed to the Shareholders in
writing, in materials filed by TMP pursuant to the Securities Act or the
Exchange Act, or set forth in press releases that have been made public by TMP
(including but not limited to those from time to time posted at or available
through Nasdaq's website at XXXX://XXX.XXXXXX.XXX), there has been no material
adverse change in the financial condition of TMP since January 1, 2000, and as
of the date hereof and the Closing Date, taken collectively, the Exchange Act
Filings and such press releases do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements made
therein, in the light of the circumstances in which they were made, not
misleading.
4.6 COMPLIANCE WITH RULE 144.
TMP agrees to (i) comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about TMP; (ii) use
its best efforts to file with the Commission in a timely manner all reports and
other documents required to be filed by TMP under the Exchange Act; and (iii)
furnish to the Shareholders upon request (x) a written statement by TMP as to
its compliance with the requirements of said Rule 144(c), and the
25
reporting requirements of the Exchange Act; (y) a copy of the most recent annual
or quarterly report of TMP and (z) such other reports and documents of TMP as
the Shareholders may reasonably request.
4.7 ISSUANCE.
The TMP Shares to be delivered by TMP hereunder have been duly authorized and,
when issued and delivered in accordance with the terms of this Agreement, will
be validly issued, fully paid and non-assessable and will not be issued in
violation of any preemptive rights, rights of first refusal or similar rights.
4.8 TMP SHARES.
The TMP Shares to be delivered to the Shareholders hereunder constitute "voting
stock" within the meaning of Section 368(a)(2)(B) of the Code.
ARTICLE V
[INTENTIONALLY OMITTED]
ARTICLE VI
CONDITIONS PRECEDENT TO THE CLOSING
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF TMP .
The obligations of TMP under this Agreement to consummate the Merger will be
subject to the satisfaction, at or prior to the Closing, of all of the following
conditions, any one or more of which may be waived at the option of TMP:
(a) NO BREACH OF COVENANTS; TRUE AND CORRECT REPRESENTATIONS AND
Warranties. There shall have been no material breach by the Company or the
Shareholders in the performance of any of their respective covenants herein to
be performed by it in whole or in part prior to the Closing, and the
representations and warranties of the Company and the Shareholders contained in
this Agreement shall be true and correct in all material respects as of the
Closing, except for representations or warranties that are made by their terms
as of a date specified by month, day and year (it being understood that
representations and warranties made "as of the date hereof" are not as of a date
specified by month, day and year), which shall be true and correct in all
material respects as of such specified date. TMP shall receive at the Closing a
certificate dated and validly executed on behalf of the Company and the
Shareholders certifying, in such detail as TMP may reasonably require, the
fulfillment of the foregoing conditions, and restating and reconfirming as of
the Closing all of the covenants, representations and warranties of the Company
and the Shareholders contained in this Agreement, specifying in detail the
extent of any breaches thereof.
26
(b) DELIVERY OF DOCUMENTS. TMP shall have received all documents and
other items to be delivered under SECTION 7.2.
(c) NO LEGAL OBSTRUCTION. No suit, action or proceeding not
disclosed in the Schedules to this Agreement by any person, entity or
governmental agency shall be pending or threatened in writing, which if
determined adverse to the Company, the Shareholders or TMP's interests, could
reasonably be expected to have a material adverse effect upon (i) the
properties, assets, condition (financial or otherwise), operating results,
employee, customer or supplier relations, business activities or business
prospects of the Company, (ii) TMP or its Affiliates, or (iii) the benefits to
TMP or its Affiliates of the Merger. No injunction, restraining order or order
of any nature shall have been issued by or be pending before any court of
competent jurisdiction or any governmental agency challenging the validity or
legality of the Merger or restraining or prohibiting the consummation of such
transactions or compelling TMP to dispose of or discontinue or materially
restrict the operations of a significant portion of the Company. All Requisite
Regulatory Approvals (as defined in SECTION 10.10) shall have been made,
obtained or expired, as the case may be, and all such Requisite Regulatory
Approvals shall be in full force and effect.
(d) DAMAGE OR DESTRUCTION. From the date hereof until the Closing,
there shall have been no material loss or destruction of any portion of the
properties or assets of the Company, nor any institution or threat of any
condemnation or other proceedings to acquire or limit the use of any of the
properties or assets of the Company.
(e) NO MATERIAL ADVERSE CHANGE. From the date hereof until the
Closing, there shall have been no material adverse change in the properties,
assets, condition (financial or otherwise), operating results, employee,
customer or supplier relations, business activities or business prospects of the
Company.
(f) APPROVAL BY TMP'S COUNSEL AND ACCOUNTANTS. All actions,
proceedings, instruments and documents reasonably required to carry out this
Agreement and all other related legal and accounting matters shall have been
reasonably approved as to form and substance by counsel and accountants for TMP
including, without limitation, such accountants' conclusion that the acquisition
of the Equity Interests by TMP may be accounted for by TMP as a pooling of
interests.
(g) TERMINATION OF COMPANY 401(K) PLAN. The Board of Directors of
the Company shall have adopted a resolution terminating the Rich, Xxxxxxx &
Associates, Ltd. 401(k) Retirement Plan (the "Company 401(k) Plan") as of a date
prior to the Closing Date.
(h) PAYMENT OF ACCOUNTS PAYABLE. The Company shall have paid all
accounts payable owed and outstanding as of the Closing Date.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS.
The obligations of the Company and the Shareholders under this Agreement to
consummate the Merger contemplated hereby will be subject to the satisfaction,
at or prior to the Closing, of all
27
the following conditions, any one or more of which may be waived at the option
of the Company and the Shareholders:
(a) NO BREACH OF COVENANTS; TRUE AND CORRECT REPRESENTATIONS AND
Warranties. There shall have been no material breach by TMP in the performance
of any of the covenants herein to be performed by it in whole or in part prior
to the Closing, and the representations and warranties of TMP contained in this
Agreement shall be true and correct in all material respects as of the Closing,
except for representations or warranties that are made by their terms as of a
date specified by month, day and year (it being understood that representations
and warranties made "as of the date hereof" are not as of a date specified by
month, day and year), which shall be true and correct in all material respects
as of such specified date. The Company on behalf of itself and the Shareholders
shall receive at the Closing a certificate dated as of the Closing and executed
on behalf of TMP, certifying in such detail as the Company may reasonably
require, as to the fulfillment of the foregoing conditions, and restating and
reconfirming as of the Closing all of the covenants, representations and
warranties of TMP contained in this Agreement, specifying in detail the extent
of any breaches thereof.
(b) DELIVERY OF DOCUMENTS. The Company on behalf of itself and the
Shareholders shall have received all documents and other items to be delivered
by TMP under SECTION 7.3.
(c) NO LEGAL OBSTRUCTION. No suit, action or proceeding not
disclosed in the Schedules to this Agreement by any person, entity or
governmental agency shall be pending or threatened in writing, which if
determined adverse to the Company, the Shareholders or TMP's interests, would
have a material adverse effect upon (i) the properties, assets, condition
(financial or otherwise), operating results, employee, customer or supplier
relations, business activities or business prospects of the Company, (ii) TMP or
its Affiliates, or (iii) the benefits to TMP or its Affiliates of the Merger. No
injunction, restraining order or order of any nature shall have been issued by
or be pending before any court of competent jurisdiction or any governmental
agency challenging the validity or legality of the Merger or restraining or
prohibiting the consummation of such transactions or compelling TMP to dispose
of or discontinue or materially restrict the operations of a significant portion
of the Company. Requisite Regulatory Approvals shall have been obtained, made or
expired, as the case may be, and all such Requisite Regulatory Approvals shall
be in full force and effect.
(d) APPROVAL BY COUNSEL AND ACCOUNTANTS. All actions, proceedings,
instruments and documents reasonably required to carry out this Agreement and
all other related legal and accounting matters shall have been reasonably
approved as to form and substance by counsel and accountants for the Company.
(e) NO MATERIAL ADVERSE CHANGE. From the date hereof until the
Closing, there shall have been no material adverse change in the properties,
assets, condition (financial or otherwise), operating results, employee,
customer or supplier relations, business activities or business prospects of the
Company.
28
ARTICLE VII
CLOSING
7.1 CLOSING.
The consummation of the Merger shall be closed (the "Closing") at the office of
Fulbright & Xxxxxxxx L.L.P., 000 0xx Xxxxxx, Xxx Xxxx, XX 00000 no later than
the third business day after the satisfaction or waiver of the conditions to the
parties' obligations set forth in ARTICLE VI hereof (other than the delivery of
certificates and opinions contemplated to be delivered at the Closing, which
shall be delivered at the Closing) or at such other time or place as the parties
may mutually agree (the "Closing Date"). In the event that the Merger has not
closed on or before August 31, 2000, and (i) on such date the Company and the
Shareholders on the one hand or TMP on the other is ready, willing and able to
satisfy the conditions precedent to Closing of the other parties (the "Ready
Party") and the other parties are not so ready, willing and able, or (ii) the
conditions to a party's obligations set forth in Article VI hereof are not
satisfied (except as a result of a material default or breach of this Agreement
by such party) (the "Specified Party"), then the Ready Party or Specified Party
may, in addition to any other remedies it may have, terminate this Agreement
upon written notice to the others without liability to such other parties.
7.2 DELIVERIES BY THE COMPANY AND THE SHAREHOLDERS.
At the Closing, the Company and the Shareholders shall deliver or cause to be
delivered to TMP:
(a) STOCK CERTIFICATES AND INSTRUMENTS OF CONVEYANCE. Certificate(s)
for all of the Company's outstanding Equity Interests, accompanied by stock
power(s) duly executed in blank, with all necessary stock transfer and other
documentary stamps attached, and all Transfer Documents, including evidence that
any capital stock which was converted for a share of Equity Interests, has
terminated and is of no force or effect;
(b) CONSENTS. Copies of all written consents required to be obtained
by either of them in connection with the mergers contemplated by this Agreement
and the Merger Documents, if any, in form and substance reasonably satisfactory
to TMP;
(c) OPINION OF COUNSEL. An opinion of counsel for the Company, dated
as of the Closing Date, in form and substance reasonably satisfactory to TMP,
addressing the matters set forth in SECTIONS 3.1, 3.2(A), 3.5, 3.6, 3.7 and
3.26;
(d) CORPORATE DOCUMENTS. The articles of incorporation of the
Company certified by an appropriate official of its jurisdiction of
incorporation as being in effect as of a recent date, and bylaws of the Company
certified by an appropriate officer of the Company as in effect at the Closing;
(e) CERTIFICATE OF GOOD STANDING. Certificate of good standing,
dated as of a recent date, issued by an appropriate official of the State of
Georgia;
(f) BOARD AND SHAREHOLDER RESOLUTIONS. A copy of the resolutions of
the Board of Directors and of the Shareholders of the Company certified by the
secretary of the Company as having been duly and validly adopted and in full
force and effect as of the Closing Date,
29
authorizing execution and delivery of this Agreement and the Merger Documents
and performance, and the appointment and elections of officers and directors of
the Company and consummation of the Merger contemplated hereby and thereby by
the Company;
(g) BOARD RESOLUTIONS FOR 401(K) PLAN TERMINATION. A copy of the
resolutions of the Board of Directors of the Company certified by the secretary
of the Company as having been duly and validly adopted and in full force and
effect as of the Closing Date, authorizing the termination of the Company 401(k)
Plan in accordance with Section 6.1(g) of this Agreement.
(h) RESIGNATIONS. Resignations of all of the directors and officers
of the Company, effective as of the Closing;
(i) OTHER DOCUMENTS. Such other documents and instruments as TMP or
its counsel or accountants reasonably shall deem necessary to consummate the
Merger;
(j) LEASE AGREEMENT. The Lease Agreement attached hereto as EXHIBIT
A duly executed by Xxxx Xxxxxxx Property, LLC;
(k) EMPLOYMENT AGREEMENT. An employment agreement, duly executed by
Xxxx Xxxx, substantially in the form attached hereto as EXHIBIT B (the
"Employment Agreement"); and
(l) CERTIFICATE OF MERGER. The Certificate of Merger, duly executed
by the Company.
(m) LIEN SEARCHES. Such lien searches and such other instruments
showing that there were no financing statements, judgments, taxes or other liens
recorded against either Company or any of their assets or properties as of a
date that is not more than ten (10) days prior to the Closing Date.
(n) TERMINATION OF SHAREHOLDER AGREEMENTS AND ORAL LEASE.
Terminations of all Shareholders agreements, buy-sell agreements or similar
agreements among the Shareholders of the Company as well as a termination of the
oral lease with Xxxx Xxxxxxx Property LLC for the condominium at the Inlet Reef
Club.
(o) CAR LEASES AND INSURANCE. The car leases identified in
paragraphs (e) and (f) of Schedule 3.11(b) have been transferred to Rich and
Xxxxxxx, respectively and the insurance policies relating to all automobiles
have been terminated or transferred to Rich and Xxxxxxx or shall be terminated
or transferred within 30 days of the Closing.
(p) LIFE INSURANCE. The life insurance policies held by the Company
on the lives of Rich and Xxxxxxx, respectively, have been transferred to Rich
and Xxxxxxx or will be transferred within 30 days of the Closing.
All documents delivered to TMP shall be in form and substance
reasonably satisfactory to counsel and accountants for TMP.
7.3 DELIVERIES BY TMP.
30
At the Closing, TMP will deliver to the Company and/or the
Shareholders, simultaneously with delivery of the items referred to in SECTION
7.2 above:
(a) LEASE AGREEMENT. The Lease Agreement attached hereto as EXHIBIT
A duly executed by TMP;
(b) EMPLOYMENT AGREEMENT. The Employment Agreement attached hereto
as Exhibit B duly executed by TMP;
(c) CERTIFICATE OF MERGER. The Certificate of Merger, duly executed
by TMP; and
(d) OTHER DOCUMENTS. Such other documents and instruments as the
Company, the Shareholders or their counsel or accountants reasonably shall deem
necessary to consummate the Merger.
All documents delivered to the Company and/or the Shareholders shall
be in form and substance reasonably satisfactory to counsel for the Company and
the Shareholders.
7.4 FILINGS AT THE CLOSING.
Subject to the provisions of this ARTICLE VII, TMP shall file at the
Closing the Certificate of Merger and shall cause the Certificate of Merger to
be recorded in accordance with the applicable provisions of the GCL, and shall
take any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
ARTICLE VIII
OTHER AGREEMENTS
8.1 CONFIDENTIALITY.
(a) After the Closing, such Shareholder and his Affiliates shall
strictly maintain the confidentiality of all information, documents and
materials relating to the mergers contemplated by this Agreement, including
without limitation the existence of this Agreement and the terms thereof, except
to the extent disclosure of any such information is required by law or
authorized by TMP, or otherwise made publicly available by TMP, or reasonably
occurs in connection with disputes over the terms of this Agreement. In the
event that such Shareholder reasonably believes after consultation with counsel
that it is required by law to disclose any confidential information described in
this SECTION 8.1, such Shareholder will (i) provide TMP with prompt notice
before such disclosure in order that TMP may attempt to obtain a protective
order or other assurance that confidential treatment will be accorded to
confidential information, and (ii) cooperate with TMP in attempting to obtain
such order or assurance. The provisions of this SECTION 8.1 shall not apply to
any information, documents or materials which are in the public domain or shall
come into the public domain, other than by reason of default by such Shareholder
or his Affiliates of this Agreement or becomes known in the industry through no
wrongful act on the part of such Shareholder or any of his Affiliates.
31
(b) NONCOMPETITION. Each of Rich and Xxxxxxx acknowledges that he
has extensive knowledge and a unique understanding of the Business, has been
directly involved with the establishment and continued development of the
Company's client relations and has had access to the proprietary and
confidential information used in the Business. Each of Rich and Xxxxxxx further
acknowledges that if he was to compete, directly or indirectly, with TMP in the
Business following the Closing, great harm would come to TMP thereby potentially
decreasing any value associated with the Merger. In furtherance of the Merger,
by virtue of the transactions contemplated hereby and to more effectively
protect the value of the Company after the Merger, each of Rich and Xxxxxxx
covenants and agrees that, for a period beginning on the Closing and ending on
the date which is three years after the Closing Date, neither of Rich or Xxxxxxx
shall, directly or indirectly, as employee, agent, consultant, stockholder,
director, partner or in any other individual or representative capacity, own,
operate, manage, control, engage in, invest in or participate in any manner in,
act as a consultant or advisor to, render services for (alone or in association
with any person, firm, corporation or entity), or otherwise assist any person or
entity that engages in or owns, invests in, operates, manages or controls any
venture or enterprise that directly or indirectly engages or proposes to engage
in the Business anywhere in or into the United States (the "TERRITORY"), other
than on behalf of and as an employee of TMP or an Affiliate of TMP.
Notwithstanding the foregoing, nothing contained in this SECTION 8.1(B) shall
prohibit the Shareholders from owning, directly or indirectly, not more than an
aggregate of one percent (1%) of any class of stock of any company which is
listed on a national securities exchange or traded in the over-the-counter
market. Each of the Shareholders acknowledges that the covenants contained in
this ARTICLE VIII are essential conditions for TMP entering into this Agreement
without which TMP would not have entered into this Agreement or have paid the
consideration payable by it. Each of the Shareholders acknowledges that the
restrictions set forth herein are reasonable, valid and necessary for the
protection of the legitimate interest of TMP.
(c) NONSOLICITATION. Without limiting the provisions of SECTION
8.1(A) or (B) hereof, each of Rich and Xxxxxxx agrees that, for a period
beginning on the Closing Date and ending on the date which is three years after
the Closing Date, neither Rich nor Xxxxxxx shall directly or indirectly, as
employee, agent, consultant principal or otherwise (i) solicit any Business
from, provide any services related to the Business to, in any way transact or
seek to transact any Business with or otherwise seek to influence or alter the
relationship between TMP or any of its Affiliates with any person or entity both
(x) to whom the Company, TMP or any of their respective Affiliates provided
services at any time during the one year period preceding the date Rich or
Xxxxxxx, as the case may be, ceases to be employed by TMP or an Affiliate of
TMP, or to whom the Company, TMP or any of their respective Affiliates made a
presentation at any time during the six month period preceding such date, and
(y) with whom Rich or Xxxxxxx or any employee or consultant reporting to Rich or
Xxxxxxx has or had any involvement or interaction while an employee of the
Company, TMP or any of their respective Affiliates, including, without
limitation, in the context of marketing, recruiting, client development or
provision of services, or (ii) employ or solicit for employment or other
services or otherwise seek to influence or alter the relationship between the
Company or any of its Affiliates with any person who is or was an employee of
the Company, TMP or any of their respective Affiliates at any time during the
one year period preceding the date Rich or Xxxxxxx, as the case may be, ceases
to be employed by the Company, TMP or an Affiliate of TMP, other than on behalf
of and as an employee of the Company, TMP or an Affiliate of TMP.
32
(d) Without limiting the right of TMP to pursue all other legal and
equitable rights available to it, including without limitation, damages for the
actual or threatened violation of this SECTION 8.1 by each Shareholder, or any
of his respective Affiliates, it is agreed that other remedies cannot fully
compensate TMP for such a violation and that TMP shall be entitled to injunctive
relief and/or specific performance to prevent violation or continuing violation
thereof, without bond and without the necessity of showing actual money damages.
It is the intent and understanding of each party hereto that if, in any action
before any court or agency legally empowered to enforce this SECTION 8.1, any
term, restriction, covenant or promise in this SECTION 8.1 is found to be
unreasonable and for that reason unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency.
8.2 TRADING PROHIBITION.
The Company and each Shareholder hereby acknowledge that the Merger and
information disclosed and to be disclosed to the Company, such Shareholder and
their representatives may, from time to time, constitute or include material
non-public information concerning TMP. The Company and each Shareholder
acknowledges that they are aware, and that they have advised and will continue
to advise all employees and representatives of the Company or such Shareholder
to whom the existence of the Merger or any such information has been or may be
disclosed that (i) the federal securities laws may prohibit a person who has
material, non-public information from purchasing or selling securities of any
company to which such information relates and (ii) material non-public
information shall not be communicated to any other person except as expressly
permitted by this Agreement. The Shareholders will not in any way sell, transfer
or assign any TMP Shares to be acquired by them, reduce their risk or commit to
reduce their risk with respect to the TMP Shares to be acquired by them, whether
by entering into a put, collar, option, margin or other arrangement, until after
the filing with the SEC of financial results of TMP covering at least 30 days of
post-Closing combined operations of TMP and the Company.
8.3 SURVIVAL OF REPRESENTATION AND WARRANTIES.
All representations and warranties contained in this Agreement shall survive the
Closing and shall remain in full force and effect for the applicable period of
time set forth in this SECTION 8.3. Any representations, warranties or portion
thereof the breach or misrepresentation with respect to which would be expected
to be encountered or discerned in the audit of the financial statements of TMP
for the fiscal year ending December 31, 2000 shall survive until the date TMP's
independent certified public accountants issue their final report and opinion on
such audit. Any other representations and warranties shall survive for a period
of one year after the Closing.
8.4 COOPERATION AFTER THE CLOSING.
The Shareholders will, at any time, and from time to time, after the Closing
Date, execute and deliver such further instruments of conveyance and transfer
and take such additional action as may be reasonably necessary to effect,
consummate, confirm or evidence the transactions contemplated by this Agreement
and the Merger Documents, including transfer of automobile leases and insurance
policies after the Closing. Without limiting the other obligations of the
33
Shareholders hereunder, each of the Shareholders agrees that, after the Closing,
he shall provide reasonable cooperation and assistance to TMP, at TMP's sole
cost and expense, with respect to any matters, disputes, suits or claims by or
against any person not a party to this Agreement.
8.5 REGISTRATION OF TMP SHARES.
(a) REGISTRATION. TMP shall, for the benefit of each Shareholder, at
TMP's expense, (i) use its best efforts to cause to be filed with the SEC within
120 days after the Closing a resale registration statement (the "REGISTRATION
STATEMENT") to register 100% of the TMP Shares issued to the Shareholders at
Closing, (ii) use its commercially reasonable efforts to cause such Registration
Statement to be declared effective under the Securities Act by the SEC as soon
as practicable and (iii) use its commercially reasonable efforts to keep such
Registration Statement effective until the first anniversary of the Closing
Date. The foregoing obligation of TMP shall be subject to TMP's receipt of all
necessary accountants' consents and TMP's ability to comply with (i) all
applicable federal and state securities laws, including those pertaining to the
Registration Statement and (ii) all applicable confidentiality agreements. Each
of the Shareholders hereby agrees to furnish to TMP all information with respect
to such Shareholder necessary to make the disclosure in the Registration
Statement with respect to such Shareholder not materially misleading. TMP
further agrees, if necessary, to use commercially reasonable efforts to
supplement or amend the Registration Statement, if required by the rules,
regulations or instructions applicable to the registration form used by TMP for
such Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for resale registrations, subject to TMP's receipt of all
necessary accountants' consents and TMP's ability to comply with (i) all
applicable federal and state securities laws, including those pertaining to the
Registration Statement and (ii) all applicable confidentiality agreements.
Notwithstanding the foregoing, if in TMP's opinion, the disclosure of
information required to make the Registration Statement not materially
misleading would cause harm to TMP, TMP may prevent such Shareholder from using
the Registration Statement until such time as TMP discloses such information as
may be necessary so that the Registration Statement is no longer materially
misleading. In such event, TMP agrees to release such information as soon as is
reasonably practicable.
(b) DISPOSITION. Notwithstanding the generality of the foregoing
clauses, each Shareholder agrees that upon notice from TMP at any time or from
time to time during the time the prospectus relating to the securities proposed
to be sold by such Shareholder is required to be delivered under the Securities
Act of the happening of any event as a result of which, in TMP's opinion, the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, such Shareholder will
forthwith discontinue such Shareholders' disposition of such securities pursuant
to the Registration Statement until the time of such Shareholder's receipt of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include, in TMP's opinion, an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
It is understood and agreed that, after the Registration Statement has been
declared effective, its effectiveness may be suspended pursuant to this SECTION
8.5(B)
34
on one more occasions for up to an aggregate of 90 days; PROVIDED, that no
single suspension of such effectiveness shall be in effect for more than 45
consecutive days.
(c) USE OF REGISTRATION STATEMENT. Each Shareholder agrees that it
will give TMP five business days notice in writing prior to any proposed
utilization of the Registration Statement specifying the proposed number of
shares of TMP Common Stock to be sold and the proposed dates of sale (which date
shall be no more than ten days from the date of notice) and also specifying the
proposed manner of sale. Such notice to be given by facsimile transmission for
the attention of Xxxxx Xxxxxxxxxx, Esq., telecopy number (000) 000-0000. TMP
must, if it wishes to prevent any Shareholder from using the Registration
Statement, give notice to such effect to such Shareholder by the expiration of
such five business day period. To the extent that any sale is not consummated
within seven days of the proposed date of sale indicated in the original notice
from any Shareholder, any proposed sale utilizing the Registration Statement
shall once again be subject to the provisions of SECTION 8.5(B) and this SECTION
8.5(C). It is understood that TMP's failure to respond to any notice of proposed
sale shall not be construed as permission to sell TMP shares in contravention of
any other obligation of such Shareholder (such as contractual restrictions of
resale set forth elsewhere in this Agreement).
(d) PUBLIC INFORMATION. During the one-year period commencing on the
first anniversary of the Closing, for so long as TMP is subject to the reporting
requirements of Section 13 or 15 of the Exchange Act and any of the TMP Shares
are not freely tradable, TMP will use its best efforts to file the reports
required to be filed by it under the Securities Act and Section 13(a) or 15(d)
of the Exchange Act and the rules and regulations adopted by the SEC thereunder,
or, if it ceases to be so required to file such reports, it will, upon the
request of the Shareholders who then own TMP shares delivered to turn at the
Closing (i) make publicly available such information as is necessary to permit
sales of TMP Shares pursuant to Rule 144 under the Securities Act and (ii) take
such further action that is reasonable in the circumstances, in each case, to
the extent required from time to time to enable the Shareholders to sell their
TMP Shares without registration under the Securities Act as provided by Rule 144
under the Securities Act, as such rule may be amended from time to time, or any
similar rules or regulations hereafter adopted by the SEC.
8.6 TAX MATTERS.
(a) TAX RETURNS. TMP shall be responsible for preparing or causing
to be prepared, and filing Tax Returns required to be filed by the Company after
the Closing Date; PROVIDED, HOWEVER, that the Shareholders shall have the right
to prepare and file, at their sole cost and expense, the Tax Returns of the
Company for the "S short year" (within the meaning of Section 1362(e)(1)(A) of
the Code), which shall be delivered to TMP for filing no later than thirty (30)
days prior to the filing of such returns, and shall be prepared in a manner
consistent with prior practice unless otherwise required by applicable laws.
(b) PRE-CLOSING PERIOD/POST-CLOSING PERIOD. For purposes of this
Agreement, (i) the allocation of Taxes for a Straddle Period (as defined in
SECTION 10.10 below) between the period prior to the Closing Date (the
"PRE-CLOSING PERIOD") and the period after the Closing Date (the "POST-CLOSING
PERIOD") shall be made on the basis of an interim Closing of the books as of the
end of the Closing Date, except as otherwise provided in clause (iii) of this
SECTION 8.6(B);
35
(ii) any Tax resulting from any transaction undertaken pursuant to or
contemplated by this Agreement is attributable to the Pre-Closing Period; and
(iii) the portion of any franchise Taxes based on capitalization, debt or shares
of stock authorized, issued and outstanding and AD VALOREM Taxes attributable to
the Straddle Period shall be divided between the Pre-Closing Period and the
Post-Closing Period based on the number of days in the period ending on the
Closing Date. TMP agrees to make available, upon reasonable notice, any books or
records of the Company reasonably required by the Company or the Shareholders
after the Closing.
(c) NOTIFICATION. TMP and the Shareholders shall promptly notify
each other in writing of any notice of any Tax audits of or assessments against
the Company for any Pre-Closing Periods. The failure of one party to notify the
other party of any such audit or assessment shall not relieve the other party of
its indemnification obligations under this Agreement except to the extent any
such failure actually prejudices the defense of any Tax claim. The Shareholders
shall, at their sole expense and in their reasonable discretion, either settle
any Tax claim with respect to any Tax assessed directly against the Shareholders
for any Pre-Closing Period at such time and on such terms as they shall deem
appropriate or assume the entire defense thereof; PROVIDED, HOWEVER, that the
Shareholders shall in no event take any position in such settlement or defense
that subjects TMP or any affiliate thereof, or the Company to any civil fraud or
any civil or criminal penalty. Notwithstanding the foregoing, the Shareholders
shall not settle any Tax claim without the prior written consent of TMP, which
prior written consent shall not be unreasonably withheld, to any change in the
treatment of any item which would, in any manner whatsoever, increase the Tax
liability of TMP or the Company for any Post-Closing Period. Except as set forth
in this SECTION 8.6(C), the Shareholders shall not file or cause to be filed any
amended Tax Return for a Pre-Closing Period on behalf of the Company without the
prior written consent of TMP.
8.7 COMPANY 401(K) PLAN.
Prior to the Closing, the Company will take such actions as may be
required in order to effect, as of a date prior to the Closing, the termination
of the Company 401(k) Plan.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE COMPANY AND THE SHAREHOLDERS.
(a) Subject to SECTION 9.1(B), from and after the Closing, the
Company and each Shareholder agree, jointly and severally, to indemnify, defend
and save TMP and its Affiliates, and each of their respective officers,
directors, employees, agents, employee benefit plans and fiduciaries, plan
administrators or other parties dealing with any such plans (each, an
"INDEMNIFIED TMP PARTY"), harmless from and against, and to promptly pay to an
Indemnified TMP Party or reimburse an Indemnified TMP Party for, any and all
liabilities (whether contingent, fixed or unfixed, liquidated or unliquidated,
or otherwise), obligations, deficiencies, demands, claims, suits, actions, or
causes of action, assessments, losses, costs, expenses, interest, fines,
penalties, actual or punitive damages or costs or expenses of any and all
investigations,
36
proceedings, judgments, environmental analyses, remediations, settlements and
compromises (including reasonable fees and expenses of attorneys, accountants
and other experts incurred by any indemnified party in any action or proceeding
between such indemnified party and the indemnitor or between any indemnified
party and any third party or otherwise) (individually a "LOSS" and collectively,
the "LOSSES") sustained or incurred by any Indemnified TMP Party relating to,
resulting from, arising out of or otherwise by virtue of (i) any
misrepresentation or breach of a representation or warranty made herein by the
Company or any Shareholder, (ii) any non-compliance with or breach by the
Company or any Shareholder, or any Affiliate of the Company or any Shareholder,
of any of their respective covenants or agreements contained in this Agreement
or the Merger Documents to be performed by the Company, Shareholders, or any
Affiliate of the Company or the Shareholders, (iii) allegations by a third party
that is not an Indemnified TMP Party which, if true, would constitute a
misrepresentation or breach of a representation or warranty made herein by the
Company or any Shareholder or non-compliance with or breach by the Company or
any Shareholder of any of their respective covenants or agreements contained in
this Agreement or the Merger Documents to be performed by any Shareholder, the
Company or any or their respective Affiliates, (iv) any claims, suits, actions,
complaints, allegations or demands which have been or may be brought against the
Company, any of the Shareholders, TMP, and their respective Affiliates and any
of their respective officers, directors, employees or agents, including by the
Specified Entities (as defined below), relating to the claims set forth on
Schedule 3.26 or arising from similar facts and circumstances as any claims
brought by the Specified Entities, and (v) Taxes owed by the Company pursuant to
SECTION 8.6 hereof.
(b) Notwithstanding SECTION 9.1(A), no Indemnified TMP Party shall
be entitled to indemnification under this SECTION 9.1 until the total Losses
under SECTION 9.1(A) shall exceed $100,000 (the "INDEMNIFICATION Threshold").
Once total Losses under SECTION 9.1(A) exceed the Indemnification Threshold,
each Indemnified TMP Party shall be entitled to indemnification for the full
amount of any and all such Losses, including the first $100,000 of Losses
applied to the Indemnification Threshold. The Indemnification Threshold shall
not apply to any Loss arising out of a breach of a representation or warranty
made in SECTIONS 3.5, 3.25 and 3.30; in the event of such a breach by the
Company or the Shareholders, the Indemnified TMP Party shall be entitled to full
recovery of all Losses under SECTION 9.1(A) to the extent of the Purchase Price.
In addition, the aggregate maximum amount of Losses for which the Shareholders
shall be liable pursuant to SECTION 9.1 hereof shall be the Purchase Price.
(c) If the Indemnified TMP Party is TMP or another non-natural
person Affiliate of TMP, then the Shareholders shall be entitled, at their sole
option, to satisfy their indemnification obligations under this SECTION 9.1 by
surrendering that number of TMP Shares obtained by dividing (i) the amount of
such indemnification obligation by (ii) the Imputed TMP Share Value.
9.2 INDEMNIFICATION BY TMP.
From and after the Closing, TMP agrees to indemnify, defend and save each
Shareholder and his Affiliates, and each of their respective officers,
directors, employees, agents, Employee Benefit Plans and fiduciaries, plan
administrators or other parties dealing with such plans (each, an "Indemnified
Seller Party") harmless from and against, and to promptly pay to an Indemnified
37
Seller Party or reimburse an Indemnified Seller Party for, any and all Losses
sustained or incurred by any Indemnified Seller Party relating to, resulting
from, arising out of or otherwise by virtue of (i) any misrepresentation or
breach of a representation or warranty made herein by TMP or (ii) any
non-compliance with or breach by TMP or any Affiliate of TMP of any of the
covenants or agreements contained in this Agreement or the Merger Documents to
be performed by TMP or any of its Affiliates.
9.3 PROCEDURE FOR INDEMNIFICATION.
The following procedure shall apply to the foregoing agreements to indemnify and
hold harmless:
(a) The party who is seeking indemnification (the "CLAIMANT") shall
give written notice to the party from whom indemnification is sought (the
"INDEMNITOR") promptly after the Claimant learns of the claim or proceeding;
PROVIDED, that the failure to give such notice shall not relieve the Indemnitor
of its obligations hereunder except to the extent it is actually damaged
thereby.
(b) With respect to any third-party claims or proceedings as to
which the Claimant is entitled to indemnification, the Indemnitor shall have the
right to select and employ counsel of its own choosing to defend against any
such claim or proceeding, to assume control of the defense of such claim or
proceeding, and to compromise, settle or otherwise dispose of the same, if the
Indemnitor deems it advisable to do so, all at the expense of the Indemnitor.
The parties will fully cooperate in any such action, and shall make available to
each other any books or records useful for the defense of any such claim or
proceeding. The Claimant may elect to participate in the defense of any such
third party claim, and may, at its sole expense, retain separate counsel in
connection therewith. Subject to the foregoing (i) the Claimant shall not settle
or compromise any such third party claim without the prior written consent of
the Indemnitor and (ii) the Indemnitor shall not settle or compromise any such
third party claim without the prior written consent of the Claimant, in each
case of (i) and (ii) which consent shall not be unreasonably withheld.
9.4 ADDITIONAL LIMITATIONS ON INDEMNIFICATION RIGHTS.
(a) Subject to the provisions of SECTIONS 9.4(B) and (C) below it is
understood and agreed that no claim for recovery of indemnifiable damages may be
asserted based on a representation, warranty or applicable portion thereof set
forth in this Agreement or the Merger Documents after such representation,
warranty or applicable portion thereof has been extinguished in accordance with
SECTION 8.3 hereof. The date on which a claim would be extinguished in
accordance with SECTION 8.3 but for the provisions of this SECTION 9.4 is
sometimes referred to as the "EXPIRATION DATE" of such claim.
(b) Notwithstanding anything in this Agreement or this SECTION 9.4
to the contrary, any and all Losses sustained or incurred by any Indemnified TMP
Party relating to, resulting from, arising out of, or otherwise by virtue of any
and all claims, suits, actions, complaints, allegations or demands of the
persons or entities described in SCHEDULE 3.26 (the "SPECIFIED ENTITIES") shall
be subject to the indemnification obligations of the Company and the
38
Shareholders under, and shall be deemed Losses for which the Indemnified TMP
Parties are entitled to indemnification under, SECTIONS 9.1 and 9.3 hereof,
despite the disclosure of some or all of such matters or potential matters in
the Schedules to this Agreement (including but not limited to SCHEDULE 3.26).
The particular indemnification obligation relating to the Specified Entities
shall survive until the later of (i) thirty days after the expiration of all
applicable statutes of limitations (including extensions thereof) applicable to
any claims, suits, actions, complaints, allegations or demands the Specified
Entities may bring relating to, resulting from, arising out of or otherwise by
virtue of any acts or omissions or alleged acts or omissions of the Company or
any of its employees or representatives, or (ii) the Shareholders' or the
Company's satisfaction in full of any and all obligations (contingent or
otherwise) the Company, TMP or the Shareholders may have upon the rendering of a
final and unappealable judgment of a court of competent jurisdiction with
respect to any and all claims, suits, actions, complaints, allegations or
demands the aforesaid Specified Entities may bring relating to, resulting from,
arising out of or otherwise by virtue of any acts or omissions or alleged acts
or omissions of the Company or its employees or representatives.
(c) In order to ensure that the transactions contemplated by this
Agreement and the Merger Documents qualify for treatment as a pooling of
interests, the parties agree that any dispute, disagreement or controversy
between any party relating to a warranty or representation or applicable portion
thereof set forth in this Agreement or Merger Documents that is not resolved by
the applicable Expiration Date shall promptly be submitted to the American
Arbitration Association to be resolved by binding arbitration in accordance with
their rules, it being understood that this SECTION 9.4(C) does not apply to any
claims, suits, actions, complaints, allegations or demands brought by or related
to the Specified Entities. The place of arbitration shall be New York, New York.
The arbitration tribunal shall be composed of three arbitrators, one of which
shall be appointed by TMP within ten (10) business days prior to the applicable
Expiration Date and one of whom shall be appointed by the other party or parties
to the dispute, disagreement or controversy within ten (10) business days prior
to the applicable Expiration Date and one of whom shall be appointed by such two
arbitrators within five (5) business days prior to the applicable Expiration
Date. The arbitrators will be directed to and shall resolve such dispute,
disagreement or controversy on the basis of the information provided to them or
soon as practicable and, in any event, by the Expiration Date. The decision of
the arbitrators shall be binding on all parties thereto and the party against
which a finding is made shall be responsible for all costs, fees and expenses of
such arbitration in addition to any damages or other amounts awarded.
9.5 WAIVER OF CLAIMS.
Without in any way limiting the obligations of the Shareholders under this
Agreement, each Shareholders hereby expressly and irrevocably waive any rights
of contribution, subrogation, recoupment, counterclaim, set-off or
indemnification that such Shareholders may have against the Company.
9.6 SOLE REMEDY FOR DAMAGES.
Subject to the provisions of the next sentence of this SECTION 9.6, the
indemnification obligations of the parties set forth in this ARTICLE IX shall
constitute the sole and exclusive remedy of the
39
parties for the recovery of money damages with respect to any and all matters
arising out of this Agreement. Notwithstanding the foregoing, the terms of this
SECTION 9.6 shall not be construed as limiting in any way whatsoever any remedy
to which any party may be entitled other than the recovery of money damages,
including but not limited to equitable remedies, specific performance,
injunctive relief and rescission.
ARTICLE X
MISCELLANEOUS
10.1 NOTICES, CONSENTS, ETC.
Any notices, consents or other communication required to be sent or given
hereunder to any of the parties shall in every case be in writing and shall be
deemed properly served if (i) delivered personally, (ii) delivered by registered
or certified mail, in all such cases with first class postage prepaid, return
receipt requested, (iii) delivered by courier, at the addresses as set forth
below or at such other addresses as may be furnished in writing.
All such notices and communications shall be deemed received upon
the actual delivery thereof in accordance with the foregoing:
(a) If to the Shareholders:
Xxxx Xxxx
000 Xxxxxxxxx Xxx
Xxxxxxx, Xxxxxxx 00000
Xxxxxx Xxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
With a copy to:
Kaufman, Chaiken, Xxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
40
(b) If to the Company prior to the Closing:
Rich/Xxxxxxx & Associates Ltd.
Roswell Ridge Office Park
0000 Xxxxxxx Xxxx, Xxxxxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Kaufman, Chaiken, Xxxxxx & Klofein
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Fax: (000) 000-0000
(c) If to TMP or the Company after the Closing:
TMP Worldwide Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
With a copy to:
TMP Worldwide Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxx, Esq.
10.2 SEVERABILITY.
The unenforceability or invalidity of any provision of this Agreement shall not
affect the enforceability or validity of any other provision which shall remain
in full force and effect and be enforceable to the fullest extent permitted by
law.
10.3 AMENDMENT AND WAIVER.
This Agreement may not be amended orally. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any other breach.
10.4 DOCUMENTS.
Each party will execute all documents and take such other actions as any other
party may reasonably request in order to consummate the transactions provided
for herein and to accomplish the purposes of this Agreement.
41
10.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same agreement.
10.6 EXPENSES.
The Shareholders shall pay their and the Company's costs and expenses, and TMP
shall pay its costs and expenses, in each case incurred or to be incurred in
negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement and the Merger Documents, including
without limitation all legal and accounting fees and expenses and fees and
expenses relating to the preparation of the Financial Statements.
10.7 GOVERNING LAW.
This Agreement shall be construed and enforced in accordance with, and all
questions concerning the construction, validity, interpretation and performance
of this Agreement shall be governed by, the laws of the State of New York
without giving effect to provisions thereof regarding conflicts of law.
10.8 HEADINGS.
The subject headings of Articles and Sections of this Agreement are included for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
10.9 ASSIGNMENT.
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns. Neither this Agreement nor
any of the rights, interests or obligations hereunder may be assigned or
delegated in any manner whatsoever, whether directly or by operation of law or
otherwise, without the prior written consent of TMP.
10.10 DEFINITIONS.
For purposes of this Agreement, the following terms have the meaning set forth
below:
"AFFILIATE" shall have the meaning ascribed to that term in Rule 405
of the Securities Act of 1933, as amended, and shall include each past and
present Affiliate of such person or entity.
"AFFILIATED GROUP" shall mean any affiliated group within the
meaning of Section 1504 of the Code or any similar group defined under a similar
provision of state, local or foreign law, including, but not limited to, any
combined, consolidated or unitary group.
"BUSINESS" shall mean the recruitment advertising business.
"CODE" means the Internal Revenue Code of 1986, as amended.
42
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"LIENS" means any liens, claims, mortgages, charges, security
interests, pledges or other encumbrances or adverse claims or interests of any
nature.
"PLAN AFFILIATE" means any person or entity with which the Company
constitutes all or part of a controlled group of corporations, a group of trades
or businesses under common control or an affiliated service group, as each of
those terms is defined in Section 414 of the Code.
"POST-CLOSING PERIOD" means any taxable period or portion thereof
that is not a Pre-Closing Period.
"PRE-CLOSING PERIOD" means a taxable period or portion thereof that
ends on or prior to the Closing Date. If a taxable period begins on or prior to
the Closing Date and ends after the Closing Date, then the portion of the
taxable period that ends on (and including) the Closing Date shall constitute a
Pre-Closing Period.
"REQUISITE REGULATORY APPROVALS" means the approval or consent of
any court, administrative agency or commission or other federal, state or local
government or governmental authority or instrumentality.
"STRADDLE PERIOD" means a taxable period that begins prior to the
Closing Date and ends after the Closing Date.
"TAX" AND "TAXES" includes any federal, state, local or foreign
income, gross receipts, capital, franchise, import, goods and services, value
added, sales and use, estimated, alternative minimum, add-on minimum, sales,
use, transfer, registration, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee withholding, or other tax, of any kind
whatsoever, including any interest, penalties or additions to tax or additional
amounts in respect of the foregoing; the foregoing shall include any transferee
or secondary liability for a Tax and any liability assumed by agreement or
arising as a result of being (or ceasing to be) a member of any Affiliated
Group, as defined in Section 1504 of the Code (or being included (or required to
be included) in any Tax Return relating thereto).
"TAX RETURNS" means returns, declarations, reports, claims for
refund, information returns or other documents (including any related or
supporting Schedules, statements or information) filed or required to be filed
in connection with the determination, assessment or collection of any Taxes of
any party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
10.11 ENTIRE AGREEMENT.
This Agreement, the Merger Documents, and the documents, schedules and exhibits
described herein or attached or delivered pursuant hereto collectively
constitute the sole and only
43
agreement among the parties with respect to the subject matter hereof. Any
agreements, representations or documentation respecting the transactions
contemplated by this Agreement, including without limitation, any
correspondence, discussions or course of dealing, which are not expressly set
forth in this Agreement, the Merger Documents, or the documents, schedules and
exhibits described herein or attached or delivered pursuant hereto or are null
and void, it being understood that no party has relied on any representation not
set forth in this Agreement, the Merger Documents or the documents, schedules
and exhibits described herein or attached or delivered pursuant hereto.
10.12 THIRD PARTIES.
Except as expressly set forth in ARTICLE VI, VII or VIII of this Agreement,
nothing herein expressed or implied is intended or shall be construed to confer
upon or give to any person or entity, other than the parties to this Agreement
and their respective permitted successors and assigns, any rights or remedies
under or by reason of this Agreement.
10.13 INTERPRETATIVE MATTERS.
Unless the context otherwise requires, (a) all references to Articles, Sections
or Schedules are to Articles, Sections or Schedules in this Agreement, (b) words
in the singular or plural include the singular and plural, (c) pronouns stated
in either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter, and (d) the term "including" shall mean by way
of example and not by way of limitation.
10.14 NO STRICT CONSTRUCTION.
The language used in this Agreement will be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto.
10.15 DEFAULT.
The mere lapse of time for performing any obligation or covenant contained
herein shall serve to put the party who is obliged to perform or fulfill such
obligation or covenant in default, without any notice or demand being required
therefor.
44
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
TMP WORLDWIDE INC.
By: /s/ Xxxxxx X. Xxxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice Chairman
RICH, XXXXXXX & ASSOCIATES, LTD.
By: /s/ Xxxx Xxxx
------------------------------
Name: Xxxx Xxxx
Title: President
/s/ Xxxx Xxxx
---------------------------------
Xxxx Xxxx
/s/ Xxxxxx Xxxxxxx
---------------------------------
Xxxxxx Xxxxxxx
SCHEDULE A
Name Stock Ownership
---- ---------------
Xxxx Xxxx 525 Shares of Common Stock
Xxxxxx Xxxxxxx 475 Shares of Common Stock
