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AGREEMENT AND PLAN OF MERGER
AMONG
CORESTAFF, INC.,
CORESTAFF ACQUISITION SUB #12, INC.,
SAGE I.T. PARTNERS, INC.,
AND
THE SHAREHOLDERS OF SAGE I.T. PARTNERS, INC.
December 23, 1997
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
ARTICLE II
CLOSING AND POST CLOSING MATTERS
2.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 MERGER; CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 EFFECTIVE TIME OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 BY-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 OTHER EFFECTS ON CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 SAGE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 AGREEMENT TO VOTE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.12 DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.13 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.14 DISSENTERS RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE TRANSACTION
3.1 AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 BROKER'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORESTAFF
CONCERNING THE TRANSACTION
4.1 ORGANIZATION OF CORESTAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
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4.3 NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 BROKER'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
5.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER . . . . . . . . . . . . . . . . . . . . . 14
5.2 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . 15
5.7 UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9 TANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.11 REAL PROPERTY LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.12 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.13 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 NOTES AND ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.17 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.18 EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.19 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.20 GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.21 ENVIRONMENT, HEALTH, AND SAFETY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.22 LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.23 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY . . . . . . . . . . . . . . . . . . . . . . 32
5.24 BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.25 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.26 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.27 COMPLIANCE WITH THE LETTER OF INTENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.28 PAYMENTS TO OFFICIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
PRE-CLOSING COVENANTS
6.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 NOTICES AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 OPERATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 PRESERVATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 FULL ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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6.6 NOTICE OF DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.7 EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.8 PREPARATION OF FINANCIAL STATEMENTS;
DELIVERY OF FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.9 DELIVERY OF SCHEDULES; ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
ADDITIONAL COVENANTS
7.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 MONITORING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 ADDITIONAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.9 CONDUCT OF BUSINESS DURING EARN-OUT PERIOD . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
CONDITIONS TO OBLIGATIONS TO CLOSE
8.1 CONDITIONS TO OBLIGATION OF CORESTAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF CORESTAFF . . . . . . . . . . . . . . . . . . . . 41
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . 43
9.4 MATTERS INVOLVING THIRD PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 DETERMINATION OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 EXCLUSIVE REMEDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 PAYMENT; GENERAL RIGHT OF OFFSET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 TAX DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XI
MISCELLANEOUS
11.1 THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 PRESS RELEASES AND ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3 NO THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 SUCCESSION AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 FACSIMILE/COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.12 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.13 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.14 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES . . . . . . . . . . . . . . . . . . . . . 50
11.15 SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.16 SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Employment Agreement
Exhibit C Form of Employee Non-Competition Agreement
Exhibit D Form of Opinion of Company's Legal Counsel
Exhibit F Form of Opinion of Buyer's Legal Counsel
Exhibit 4(l) Form of Nondisclosure Agreement
ANNEXES
Annex I Determination of EBIT
SCHEDULES
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of December 23, 1997 (this
"Agreement"), among CORESTAFF, Inc., a Delaware corporation ("CORESTAFF" or the
"Buyer"), CORESTAFF Acquisition Sub #12, Inc., a Delaware corporation and
wholly-owned subsidiary of CORESTAFF ("Merger Sub"), Sage I.T. Partners, Inc.,
a California corporation (the "Company" or "Target," which, for the purposes of
this Agreement, shall be deemed to include the Subsidiaries (as defined herein)
except where the context indicates otherwise), and the shareholders of the
Company named on the signature page hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders own all of the capital stock of the Company;
and
WHEREAS, the persons listed in Section 5.2 of the Disclosure Schedule
as the optionholders (the "Optionholders") are the sole owners of outstanding
Sage Options; and
WHEREAS, the parties hereto deem it advisable and in the best
interests of their respective companies and shareholders to consummate the
merger of Merger Sub with and into the Company (the "Merger"), with the Company
as the surviving corporation in the Merger, upon the terms and conditions set
forth in this Agreement; and
WHEREAS, for federal income tax purposes it is intended that the
Merger shall be a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties, covenants and agreements made by each to the other
in connection with the transactions described in this Agreement, including
certain additional agreements related to the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
"ADVERSE CONSEQUENCES" means all charges, complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions,
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damages, dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
all attorneys' fees and court costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Sec. 1504 (or any similar group defined under a similar
provision of state, local or foreign law).
"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CASH PORTION OF THE PURCHASE PRICE" has the meaning set forth
in Section 2.2(a) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CLOSING" shall have the meaning set forth in Section 2.15.
"CLOSING DATE" shall have the meaning set forth in Section
2.15.
"COMPANY COMMON STOCK" shall mean the common stock, no par
value, of the Company.
"CONFIDENTIAL INFORMATION" means all confidential information
and trade secrets of Target including, without limitation, the identity, lists
or descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth
in Code Sec. 1563.
"CUSTOMER CONTRACT OR AGREEMENT" means any contract or
agreement of Target related to (a) information technology or computer support
services, training, education and change management services; (b) maintenance
contracts for application software; (c) maintenance support arrangements, (d)
reengineering and refurbishment arrangements; (e) consulting arrangements; (f)
any other contract computer support services arrangement; and (g) agreements
related to any other services provided by Target.
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"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 5
below.
"DOCUMENTATION" has the meaning set forth in Section 5.12
below.
"EARN-OUT PAYMENT" has the meaning set forth in Section 2.2(b)
below.
"EARN-OUT PAYMENT DETERMINATION" has the meaning set forth in
Section 2.2(c) below.
"EARN-OUT PAYMENT DISAGREEMENT NOTICE" has the meaning set
forth in Section 2.2(c) below.
"EARN-OUT PERIOD" has the meaning set forth in Section 2.2(b)
below.
"EBIT" means earnings before interest and taxes (prepared on
an accrual basis of accounting and in accordance with GAAP, as consistently
applied with the past practice of Metamor Technologies, Ltd.), plus mutually
agreed upon "ADJUSTMENTS" and "ADDBACKS" during the Earn-Out Period (as defined
in Section 2(c) below), and as determined by Annex I attached hereto.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.3.
"E&Y EARN-OUT PAYMENT DETERMINATION" has the meaning set forth
in Section 2.2(c) below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi employer Plan), or (d) Employee Welfare Benefit Plan or
Material fringe benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(1).
"EPA" shall mean the United States Environmental Protection
Agency.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EVALUATION LICENSE " has the meaning set forth in Section
5.12 below.
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"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 5.5.
"FIRST EARN-OUT PAYMENT" has the meaning set forth in Section
2.2(b) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any governmental,
quasi-governmental, state, county, city or other political subdivision of the
United States or any other country, or any agency, court or instrumentality,
foreign or domestic, or statutory or regulatory body thereof.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9.4
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.4
below.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service
marks, trade dress, logos, trade names, and corporate names and registrations
and applications for registration thereof, (b) patents, patent applications,
and provisional applications, including all continuations, divisionals and
related applications, (c) copyrights and registrations and applications for
registration thereof, (d) computer software, data, and documentation, (e) to
the extent legally protectable, trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing, and business data, pricing and
cost information, business and marketing plans, and customer and supplier lists
and information), (f) to the extent legally protectable, other proprietary
rights, and (g) copies and tangible embodiments thereof (in whatever form or
medium).
"JOINT AND SEVERAL" has the meaning set forth in Section 11.1
below.
"KNOWLEDGE" means actual knowledge after reasonable
investigation and inquiry, which inquiry shall include an inquiry of the
employees of Target with responsibility for the matters in question.
"LIABILITY" means any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
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"LICENSES" has the meaning set forth in Section 5.12 below.
"MERGER CONSIDERATION" has the meaning set forth in Section
2.2(a) below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained
within the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in Section 5.5 below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in
Section 5.5 below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec.
3(37).
"NET WORKING CAPITAL" means total current assets less total
current liabilities of Target (including but not limited to all deferred
taxes), further reduced by (i) any long-term debt of Target, as determined in
accordance with GAAP, consistently applied and (ii) Transaction Expenses of the
Shareholders and/or the Company over $25,000 that are liabilities of the
Company. The Net Working Capital shall also be adjusted for the net affect on
Net Working Capital of any compensation charge or expense attributable to
options awarded on or prior to the date of Closing.
"OPTIONHOLDER" has the meaning set forth in the recitals
above.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec.
4043.
"REQUISITE SHAREHOLDERS" means Shareholders holding a majority
in interest of the Shares as set forth in Section 4(b) of the Disclosure
Schedule.
"SAGE OPTIONS" shall mean all outstanding options to purchase
Company Common Stock as described in Section 5.2 of the Disclosure Schedule.
"SECOND EARN-OUT PAYMENT" has the meaning set forth in Section
2.2(b) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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"SECURITY INTEREST" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for Taxes not yet due and payable
(or for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings), (c) liens arising under worker's compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit, (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"SEVERAL" has the meaning set forth in Section 11.1 below.
"SHAREHOLDER" has the meaning set forth in the preface above.
"SHAREHOLDERS" has the meaning set forth in the preface
above.
"SHARES" means the shares of the Company Common Stock.
"SOURCE CODE LICENSE" has the meaning set forth in Section
5.12 below.
"SOURCE CODE LICENSEES" has the meaning set forth in Section
5.12 below.
"SOFTWARE PROGRAMS" has the meaning set forth in Section 5.12
below.
"SUBSIDIARY" means any corporation with respect to which
another specified corporation has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
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ARTICLE II
CLOSING AND POST CLOSING MATTERS
2.1 THE MERGER. In reliance upon the representations, warranties,
covenants and agreements of the parties set forth herein and upon the terms and
subject to the conditions of this Agreement, at the Closing, Merger Sub shall
be merged with and into the Company (the "Merger"), with the Company being the
surviving corporation (the "Surviving Corporation").
2.2 MERGER; CONSIDERATION.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any shares of Company
Common Stock, each Shareholder and Optionholder, in consideration for
all of the Company Common Stock owned or held by such Shareholder and
the cancellation of all Sage Options held by such Optionholder, shall
receive, upon the surrender of the certificates formerly representing
such shares and/or the agreements representing such Sage Options, (i)
an amount in cash, representing (A) such Shareholders or Optionholders
proportionate interest in the Company (treating all shares of the
Company Common Stock issuable upon the exercise of any option,
warrants or other rights and upon conversion of any other rights as
outstanding for such purpose) and (B) an aggregate sum of $10,000,000
(the "Cash Portion of the Purchase Price") and (ii) a proportionate
share of the Earn-Out Payment (as hereinafter defined) (collectively,
the "Merger Consideration"). The Cash Portion of the Purchase Price
payable to each Optionholder shall be reduced by the respective
exercise price for each Sage Option. The proportionate share of the
Earn-Out Payment, if any, shall reflect each Shareholder and
Optionholder's proportionate interest in the Company (treating all
shares of the Company Common Stock issuable upon the exercise of any
options, warranties or other rights and upon conversion of any other
rights as outstanding for such purpose).
(b) In addition to the Cash Portion of the Purchase
Price, CORESTAFF agrees to pay to the Shareholders and Optionholders,
if earned, the following earned payout amounts (the "Earn-Out
Payment"):
(i) an earned payout amount (the "First Earn-Out
Payment") equal to the product of 2.0 multiplied by the EBIT
of the Company for the twelve (12) month period ending
December 31, 1998 (subject to adjustment as set forth below);
and
(ii) an additional amount (the "Second Earn-Out
Payment") equal to the product of 1.4 multiplied by the EBIT
of the Company for the twelve (12) month period ending
December 31, 1999.
The First Earn-Out Payment and the Second Earn-Out Payment are
collectively referred to herein as the "Earn-Out Payments." In no
event shall the Earn-Out Payments exceed $35,000,000 in the aggregate.
The period from January 1, 1998 to December 31, 1999 shall be
referred to as the "Earn-Out Period."
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(c) The First Earn-Out Payment and the Second Earn-Out
Payment shall be payable by CORESTAFF to the Shareholders in cash by
March 15, 1999 and 2000, respectively, and shall be based on the
internally-generated financial statements (which have been prepared
under the direction of CORESTAFF) of the Company for the Earn- Out
Period. In the event there is a dispute between CORESTAFF and the
Shareholders regarding the Earn-Out Payment, the Earn-Out Payment
shall be determined by Ernst & Young, LLP in accordance with this
Agreement (at the expense of CORESTAFF), which determination (each an
"E&Y Earn-Out Payment Determination") shall be submitted in writing to
CORESTAFF and the Shareholders no later than February 15, 1999, in the
case of the First Earn-Out Payment, and February 15, 2000, in the case
of the Second Earn-Out Payment. If, within five (5) days after
receipt of an E&Y Earn-Out Payment Determination, CORESTAFF and/or the
Shareholders delivers written notice to the other Party that such
Party disagrees with the E&Y Earn-Out Payment Determination (an
"Earn-Out Payment Disagreement Notice"), then CORESTAFF and the
Shareholders shall attempt in good faith to mutually determine the
correct amount of the Earn-Out Payment within five (5) days after
CORESTAFF and/or Shareholders delivers the Earn-Out Payment
Disagreement Notice to the other Party. If CORESTAFF and
Shareholders cannot in good faith mutually determine the amount of the
Earn-Out Payments within such period, then CORESTAFF and Shareholders
shall have ten (10) days following their receipt of such determination
to object in good faith to the Earn-Out Payment, in which event the
item or items in dispute shall be resolved by another "Big Six" (as
combined from time-to-time) accounting firm mutually acceptable to
CORESTAFF and Shareholders (whose decision shall be conclusive and
binding on the Parties with respect to such disputed item(s)). Any
adjustment in the Earn-Out Payment determined by such "Big Six"
accounting firm shall be made within ten (10) days following such
resolution. In the event such resolution would result in an increase
in the Earn-Out Payment, the cost of such "Big Six" accounting firm
shall be paid for solely by CORESTAFF. Conversely, in the event that
such "Big Six" accounting firm determines that such resolution would
result in a decrease in the Earn-Out Payment, the cost of such "Big
Six" accounting firm shall be paid for solely by Shareholders. In the
event that such "Big Six" accounting firm determines that no changes
shall be made to the Earn-Out Payment, the cost of such "Big Six"
accounting firm shall be paid by the Party requesting such dispute
resolution.
(d) The Net Working Capital of the Company will be
determined in accordance with GAAP, by the Parties on or before thirty
(30) days after the time of Closing and shall be based on the
Company's financial statements as of the Closing, which shall have
been provided to CORESTAFF. In the event that the Net Working Capital
as of December 31, 1997 is less than $900,000, the First-Earn-Out
Payment shall be adjusted on a dollar-for-dollar basis downward. In
the event there is a dispute between CORESTAFF and Shareholders
regarding the Net Working Capital of the Company as of the date thirty
(30) days after the time of the Closing, Ernst & Young, LLP shall
prepare the calculation of the Net Working Capital of the Company (at
the expense of CORESTAFF), which calculation shall be submitted to
CORESTAFF and the Shareholders not later than sixty (60) days from the
Closing Date. The Net Working Capital derived from such calculation
shall be final, conclusive and binding on the Parties.
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(e) At the Closing, each Shareholder shall surrender to
CORESTAFF the certificates for Company Common Stock owned by such
Shareholder in exchange for the Merger Consideration, as may be
adjusted pursuant to Section 2(d)above. As of and after the Effective
Time, no holder of any certificate that immediately prior to the
Effective Time represented shares of Company Common Stock shall have
any rights as a holder of Company Common Stock other than to receive
the Merger Consideration issuable to such holder pursuant to the
Merger.
2.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date, the
parties shall file this Agreement and the officers' certificates required
pursuant to the General Corporation Law of the State of California ("CGCL") and
shall make all other filings or recordings required under the CGCL to cause the
Merger to become effective. The Merger shall become effective at such time as
the Merger Agreement, together with any required supporting documentation, is
duly filed with the Secretary of State of the State of California or at such
other time as is permissible in accordance with the CGCL and as CORESTAFF and
the Company shall agree (the time the Merger becomes effective being the
"Effective Time").
2.4 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Merger Sub shall be the Articles of Incorporation of the Surviving Corporation
after the Effective Time.
2.5 BY-LAWS. The By-Laws of Merger Sub shall be the By-Laws of
the Surviving Corporation after the Effective Time.
2.6 DIRECTORS. The directors of Merger Sub shall be the directors
of the Surviving Corporation, who shall serve until their respective successors
are duly elected and qualified in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by law.
2.7 OFFICERS. The officers of the Surviving Corporation shall
initially consist of the officers of Merger Sub, until their successors are
duly elected and qualified in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by law.
2.8 OTHER EFFECTS ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or capital stock of Merger Sub:
(a) each issued and outstanding share of the capital
stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, $1.00 par value, of the
Surviving Corporation.
(b) all shares of Company Common Stock that are owned by
the Company as treasury stock shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in exchange
therefore.
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(c) all options, warrants and other rights to purchase
Shares of Company Common Stock shall be cancelled immediately prior to
the Effective Time.
2.9 SAGE OPTIONS. Immediately prior to the Merger, the Company
shall, and the Shareholders shall cause the Company to, cause the cancellation
of each Sage Option held by an Optionholder and each Optionholder shall receive
his proportionate share of the Merger Consideration (less the aggregate of the
exercise price for each Sage Option held and cancelled by such Optionholder) as
provided in Section 2.2.
2.10 RIGHTS. At and after the Effective Time, the Surviving
Corporation shall possess all the rights and property and be subject to all of
the debts and liabilities of Merger Sub and the Company as provided in the
CGCL.
2.11 AGREEMENT TO VOTE SHARES. The Shareholders agree to approve
this Agreement in the manner required by the CGCL, and the Company will deliver
to CORESTAFF at the Closing complete and correct copies, certified by its
secretary, of the resolutions duly and validly adopted by Shareholders
evidencing such approval (which resolutions will not have been modified,
revoked or rescinded in any respect prior to, and will be in full force and
effect at, the Closing). Each Shareholder further agrees (i) at any meeting of
the shareholders of the Company or with respect to any written consent
solicited in lieu thereof, to vote all of the shares of capital stock of the
Company beneficially owned by him in favor of approval of the Merger and any
matter which could reasonably be expected to facilitate the Merger and against
approval of any proposal made in opposition to or competition with consummation
of the Merger, and against any other matter which would, or could reasonably be
expected to, prohibit or discourage the Merger and (ii) to otherwise use his
reasonable best efforts to cause the transactions contemplated herein to be
consummated. The Shareholders, as the holders of all of the voting stock of the
Company, each agree to be present, in person or by proxy, at all meetings of
the shareholders of the Company so that all their shares of Company Common
Stock are counted for the purposes of determining the presence of a quorum at
such meetings.
2.12 DOCUMENTS. On the Closing Date, CORESTAFF, Merger Sub, the
Company and the Shareholders shall execute and deliver all appropriate
documents and instruments to effectuate the transactions as set forth in this
Agreement, including, on the part of the Shareholders, the various
certificates, instruments and documents referred to in Section 8.1 below and,
on the part of CORESTAFF, the various certificates, instruments and documents
referred to in Section 8.2 below.
2.13 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including cooperating fully with the other
parties, including by provision of information and making of all necessary
filings with Governmental Entities (including, if required, filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act")). In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all
SAGE I.T. PARTNERS, INC.
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properties, assets, rights, approvals, immunities and franchises of either of
the Company or Merger Sub, the parties shall take all such necessary action.
2.14 DISSENTERS RIGHTS. The Shareholders each hereby waive any
dissenters rights of appraisal or similar rights to which they may be entitled
under the CGCL, including any notice required in connection therewith.
2.15 CLOSING. Subject to the terms and conditions of this
Agreement, including without limitation thereto the conditions to closing set
forth in Article IX hereof, the transactions described and provided for in this
Agreement shall be consummated at a closing (the "Closing") that shall take
place at the offices of CORESTAFF in Houston, Texas commencing at 9:00 a.m.
local time on the second business day following the satisfaction or waiver of
all conditions to the obligations of the Parties to consummate the transactions
contemplated hereby or such other date as CORESTAFF and the Shareholders may
mutually determine (the "Closing Date"); provided, however, that the Closing
Date shall be no later than January 7, 1998 which dates may be extended with
the mutual consent of CORESTAFF and the Shareholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE TRANSACTION
Each of the Shareholders, represents and warrants to CORESTAFF that
the statements contained in this Article III are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Article III) with respect to himself
except as set forth in Annex II attached hereto.
3.1 AUTHORIZATION OF TRANSACTION. The Shareholder has full power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Shareholder, enforceable in accordance with its terms
and conditions, except that (A) such enforceability may be subject to
bankruptcy, insolvency, reorganization, moratorium or other laws, decisions or
equitable principles now or hereafter in effect relating to or affecting the
enforcement of creditors' rights or debtors' obligations generally, and to
general equity principles, and (B) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought. The Shareholder need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.2 NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
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governmental agency, or court to which the Shareholder is subject or (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
arrangement to which the Shareholder is a party or by which he is bound or to
which any of his assets is subject.
3.3 BROKER'S FEES. The Shareholder has no Liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which CORESTAFF could
become liable or obligated.
3.4 SHARES. The Shareholder holds of record and owns beneficially
the number of Shares set forth next to his name in Section 3.4 of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), claims,
Taxes, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities, and demands. The Shareholders hold all of the issued
and outstanding shares of the Company and upon the consummation of the
transaction contemplated hereby, CORESTAFF will hold all of the issued and
outstanding shares of the Company. The Shareholder is not a party to any
option, warrant, right, contract, call, put, or other agreement or commitment
providing for the disposition or acquisition of any capital stock of the
Company (other than this Agreement). The Shareholder is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company. The Shareholder hereby further
represents and warrants that (i) except as provided in Section 5.2 of the
Disclosure Schedule, all other Shares or options, rights, warrants or other
interests in the equity of the Company, if any, have been fully repurchased by
the Company prior to the Closing Date and (ii) there are no pending or
threatened suits, claims or actions by any former holders of Shares or options,
rights, warrants or other interests in the equity of the Company with respect
to the repurchase of their equity interest in the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORESTAFF
CONCERNING THE TRANSACTION
CORESTAFF represents and warrants to the Shareholders that the
statements contained in this Article IV are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Article IV), except as set forth in Annex III
attached hereto.
4.1 ORGANIZATION OF CORESTAFF. CORESTAFF is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. CORESTAFF has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of
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CORESTAFF, enforceable in accordance with its terms and conditions. CORESTAFF
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
4.3 NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which CORESTAFF is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which CORESTAFF is a party or by which it is
bound or to which any of its assets is subject.
4.4 BROKER'S FEES. CORESTAFF has no Liability or Obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Shareholder could
become liable or obligated.
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Shareholders, represent and warrant to CORESTAFF that the
statements contained in this Article V are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Article V), except as set forth in the
disclosure schedule delivered by the Shareholders to CORESTAFF on the date
hereof (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule may be updated one
or more times prior to the date which is five (5) days prior to the Closing
Date. Any updated Disclosure Schedule shall be delivered at or before the
Closing. An updated Disclosure Schedule shall only be deemed to modify a
representation and/or warranty made as of the date of the Agreement in the
event, and only in the event, that the Shareholders acted in good faith and
used their reasonable best efforts when preparing the original Disclosure
Schedule delivered to CORESTAFF as of the date of this Agreement. In the event
any such updated Disclosure Schedule indicates a Material change from the
information previously provided to CORESTAFF, CORESTAFF shall be entitled to
terminate this Agreement notwithstanding any other provision contained in this
Agreement by written notice delivered to the Shareholders. An event or matter
will be deemed to be "MATERIAL," to have a "MATERIAL" change in or in respect
of, to have a "MATERIAL ADVERSE EFFECT" or to be "MATERIALLY" affected;
provided that in the opinion of CORESTAFF, acting reasonably, such loss is
material or the loss may reasonably be expected to occur to the Company or
CORESTAFF with respect to such event or matter, when taken together with all
other related losses that may reasonably be expected to occur to the Company or
CORESTAFF as a result of any such events or matters, would exceed $20,000 in
the aggregate or unless such event or matter constitutes a criminal violation
of law. For purposes of this paragraph,
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the word "LOSS" shall mean any and all direct or indirect payments,
obligations, assessments, losses, losses of income, liabilities, costs and
expenses paid or incurred, or reasonably likely to be paid or incurred, or that
are reasonably expected to occur, including without limitation, penalties,
interest on any amount payable to a third party as a result of the foregoing,
and any legal or other expenses reasonably expected to be incurred in
connection with defending any demands, claims, actions or causes of action
that, if adversely determined, could reasonably be expected to result in
losses, and all amounts paid in settlement of claims or actions; provided,
however, that losses shall be net of any insurance proceeds entitled to be
received from a nonaffiliated insurance company on account of such loss (after
taking into account any cost incurred in obtaining such proceeds). A Customer
Contract or Agreement is "MATERIAL" if during the ten months ended October 31,
1997 such Customer Contract or Agreement produced $25,000 of Gross Profit
Margin less any bad debt specifically related to such Customer Contract or
Agreement. Any item intended to be disclosed must be identified with the
particular representation or warranty it is intended to limit and shall not be
deemed to limit any other representation, warranty or covenant in the
Agreement. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail to the satisfaction of
CORESTAFF. Without limiting the generality of the foregoing, the mere listing
(or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other items itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article V.
5.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company. The Company
has full corporate power and authority to carry on the business in which it is
engaged and to own and use the properties owned and used by it. Section 5.1 of
the Disclosure Schedule lists the directors and officers of the Company. The
Shareholders have delivered to CORESTAFF correct and complete copies of the
charter and bylaws of the Company (as amended to date). The minute books
containing the records of meetings of the stockholders, the board of directors,
and any committees of the board of directors, the stock certificate books, and
the stock record books of the Company are correct and complete. The Company is
not in default under or in violation of any provision of its charter or bylaws.
The execution and delivery of this Agreement and the effectuation of the
transactions contemplated hereby has been duly authorized by all of the
directors and the Requisite Shareholders of the Company, and the Company will
deliver to CORESTAFF on the date hereof and at the Closing complete and correct
copies, certified by its secretary, of the resolutions duly and validly adopted
by its directors and shareholders evidencing such authorization (which
resolutions will not have been modified, revoked or rescinded in any respect
prior to, and will be in full force and effect at, the Closing). No other
corporate act or proceeding on the part of the Company or the Shareholders is
necessary for the due and valid authorization of this Agreement or the
transactions contemplated hereby.
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5.2 CAPITALIZATION. The entire authorized capital stock of the
Company consists of 10,000,000 shares of common stock, no par value (the
"Shares"), of which 2,000,000 Shares are issued and outstanding and no Shares
are held in treasury. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Shareholders as set forth in Section 3.4 of the
Disclosure Schedule. Section 5.2 of the Disclosure Schedule sets forth all
outstanding Sage Options and the amounts owned by each Optionholder. Other
than as set forth in Section 5.2 of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights, or other agreements or commitments to
which the Company is a party or which are binding upon the Company providing
for the issuance, disposition, or acquisition of any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
deferred bonus programs, or similar rights with respect to the Company. There
are no voting trusts, proxies, or any other agreements or understandings with
respect to the voting of the capital stock of the Company.
5.3 NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the charter or bylaws of the Company or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any part the right to accelerate, terminate, modify, or cancel, or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the Company is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets),
except that the Merger will trigger the acceleration of the vesting periods for
the Sage Options. The Company does not need to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency, which it has not already obtained, in order
for the Parties to consummate the transactions contemplated by this Agreement.
5.4 SUBSIDIARIES. The Company has no Subsidiaries.
5.5 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
financial statements (collectively the "FINANCIAL STATEMENTS"), including
balance sheets, income statements, and cash flow statements, for the Company
prepared in accordance with GAAP for each of the (i) fiscal years ended
December 31, 1995 and 1996 (the "MOST RECENT FISCAL YEAR END"), (ii) the ten
(10) month period ended October 31, 1997 (the "MOST RECENT FINANCIAL
STATEMENTS"); provided, however, that the unaudited Most Recent Financial
Statements are not presented in accordance with GAAP as described in Section
5.5 of the Disclosure Schedule.
5.6 EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS. Except
as set forth in Section 5.6 of the Disclosure Schedule, since the date of the
Most Recent Financial Statements, there has not been any material adverse
change in the assets, Liabilities, business, financial condition,
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operations, results or operations, or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
(a) The Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(b) The Company has not entered into any contract, lease,
sublease, license or sublicense (or series of related contracts,
leases, subleases, licenses and sublicenses) either involving more
than $20,000 or outside the Ordinary Course of Business;
(c) No party (including the Company) has accelerated,
terminated, modified, or canceled any contract, lease, sublease,
license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses) or notified the Company of such
involving more than $20,000 to which the Company is a party or by
which it is bound;
(d) The Company has not imposed any Security Interest
upon any of its assets, tangible or intangible;
(e) The Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$50,000 singly or $200,000 in the aggregate, or outside the Ordinary
Course of Business;
(f) The Company has not made any capital investment in,
any loan to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans, and
acquisitions) either involving more than $40,000 individually or
$100,000 in the aggregate or outside the Ordinary Course of Business;
(g) The Company has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
either involving more than $20,000 singly or $50,000 in the aggregate
or outside the Ordinary Course of Business;
(h) The Company has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other
Liabilities;
(i) The Company has not settled, canceled, compromised,
waived, or released any right, claim action or proceeding (or series
of related rights, claims, actions or proceedings) either involving
more than $20,000 or outside the Ordinary Course of Business;
(j) The Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(k) There has been no change made or authorized in the
charter or bylaws of the Company;
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(l) The Company has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion or exercise) any of its capital stock;
(m) The Company has not declared, set aside, or paid any
dividend or distribution with respect to its capital stock or
redeemed, purchased, or otherwise acquired any of its capital stock;
(n) The Company has not experienced any material damage,
destruction or loss (whether or not covered by insurance) to its
property;
(o) The Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and
employees outside the Ordinary Course of Business giving rise to any
claim or right on its part against the person or on the part of the
person against it;
(p) The Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(q) The Company has not granted an increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(r) The Company has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance,
(G) severance, or (H) other plan, contract or commitment for any of
its directors, officers, and employees, or modified or terminated any
existing such plan, contract or commitment;
(s) The Company has not made any other change in
employment terms for any of its directors, officers, and full-time
staff employees;
(t) The Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(u) The Company shall have made no dividend, consulting
or other payment to the Shareholders, except for payments to the
Shareholders necessary to cover their federal and state income tax
obligations as calculated on a cash basis for income tax purposes not
in excess of the accrued earnings generated for the period from
January 1, 1997 through the Closing Date and for employment salaries
(not to exceed current compensation levels) to Shareholders, except
for those payments set forth in Section 5.6(u) of the Disclosure
Schedule which were made prior to the contemplation of the transaction
contemplated by this Agreement;
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(v) There has not been any other Material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company; and
(w) The Company has not committed to any of the
foregoing.
5.7 UNDISCLOSED LIABILITIES. The Company does not have any
Liability (and there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against it
giving rise to any Liability), except for (i) Liabilities set forth on the face
of the Financial Statements (rather than in any notes thereto), and (ii)
Liabilities which have arisen after the Most Recent Fiscal Year End in the
Ordinary Course of Business (none of which relates to any breach of contract,
breach of warranty, tort, infringement, or violation of law or arose out of any
charge, complaint, action, suit, proceedings, hearing, investigation, claim, or
demand).
5.8 TAX MATTERS.
(a) The Company has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. All Taxes owed by the Company (whether or not shown on
any Tax Return) have been paid. The Company currently is not the
beneficiary of any extension of time within which to file any Tax. No
claim has ever been made by an authority in a jurisdiction where the
Company does not file Tax Returns that either of them is or may be
subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) The Company has withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other
third party.
(c) No Shareholder or director or officer (or employee
responsible for Tax matters) of the Company expects any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability
of the Company either (A) claimed or raised by any authority in
writing or (B) as to which any of the Shareholders and the directors
and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of
such authority. Section 5.8 of the Disclosure Schedule lists all Tax
Returns filed with any Governmental Authority with respect to the
Company for taxable periods ended on or after December 31, 1990,
indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The
Company has delivered to CORESTAFF correct and complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since
December 31, 1990.
(d) The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to
a Tax assessment or deficiency.
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(e) The Company has not filed a consent under Code Sec.
341(f) concerning collapsible corporations. The Company has not made
any payments, is not obligated to make any payments, or is not a party
to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Sec. 280G.
The Company has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Sec. 6661. The Company
is not a party to any Tax allocation or sharing agreement. The
Company has never been (or has any Liability for unpaid Taxes because
it once was) a member of an Affiliated Group during any part of any
consolidated return year within any part of which consolidated return
year any corporation other than the Company also was a member of the
Affiliated Group.
(f) Section 5.8 of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Company in its assets; (B)
the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to the Company; and (C) the amount of any
deferred gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction.
(g) The unpaid Taxes of the Company do not exceed the
reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income)
set forth on the face of the Financial Statements (rather than in any
notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Company in
filing their Tax Returns.
5.9 TANGIBLE ASSETS. The Company owns or leases all tangible
assets necessary for the conduct of its business as presently conducted. To
the Company's knowledge, each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice,
is in good operating condition and repair (subject to normal wear and tear),
and is suitable for the purposes for which it presently is used.
5.10 REAL PROPERTY. Section 5.10 of the Disclosure Schedule lists
the real property that the Company owns. With respect to each such parcel of
owned real property, and except for matters which would not have a material
adverse effect on the financial condition of the Company:
(a) The identified owner has good and marketable title to
the parcel of real property, free and clear of any security interests,
easement, covenant, or other restriction;
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(b) There are no leases, subleases, licenses, concessions
or other agreements granting to any party or parties use or occupancy
of any portion of the parcel of real property;
(c) There are no outstanding options or rights of first
refusal to purchase the parcel of real property or any portion thereof
or interests therein;
(d) There are no parties in possession of any portion of
any real property as lessees, subtenants or tenants at sufferance or
trespassers;
(e) There is no pending, threatened condemnation, eminent
domain or similar proceeding or special assessment affecting any
portion of the real property, nor has the Company or any of the
Shareholders received notification that any such proceeding or
assessment is contemplated;
(f) Permanent certificates of occupancy and all other
licenses, permits, authorizations, and approvals required by any
governmental authority having jurisdiction have been issued for each
improvement on the real property and all such certificates, licenses,
permits, authorizations and approvals have been paid for and are in
full force and effect;
(g) No commitments have been made by Shareholder to any
governmental authority, utility company, school board, church or other
religious body or any homeowners' association, or any other
organization, group or individual, relating to the real property that
would impose an obligation on the Company or their successors or
assigns to make any contribution or dedications of money or land, or
to construct, install, or maintain any improvements of a public or
private nature on or off of the real property;
(h) All improvements related to the real property have
been located and constructed and are being used, occupied and
maintained in accordance with all applicable legal requirements
(including local municipal laws and regulations), surface leases,
easements, contracts, permits, insurance requirements, restrictions,
building setback lines, covenants and reservations;
(i) The improvements related to the real property are
free from material patent and latent structural and mechanical defects
and are suitable and adequate for their intended use and operation
subject to ordinary wear and tear;
(j) All facilities located on the parcel of real property
are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules,
and regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real
property; and
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(k) Each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via
a permanent, irrevocable, appurtenant easement benefitting the parcel
of real property, and access to the property is provided by paved
public right-of-way with adequate curb cuts available.
5.11 REAL PROPERTY LEASES. Section 5.11 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the
Company. The Shareholders have delivered to CORESTAFF correct and complete
copies of the leases and subleases listed in Section 5.11 of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease listed
in Section 5.11 of the Disclosure Schedule:
(a) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(b) The Shareholders shall use their reasonable best
efforts to ensure that the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the Closing;
(c) The Company is not and, to the Company's knowledge,
no other party to the lease or sublease is in breach or default, and
no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(d) No party to the lease or sublease has repudiated any
provision thereof;
(e) There are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(f) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(g) All facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws,
rules, and regulations; and
(h) The real property listed in Sections 5.10 and 5.11 of
the Disclosure Schedule represents all of the real property necessary
to operate the business in the manner that it is currently being
operated.
5.12 INTELLECTUAL PROPERTY.
(a) The Company is the sole and exclusive owner of all
right, title and interest in and has good, valid and marketable title
to, or, as to third party rights, has obtained a valid license to use
all copyrights and trade secrets, and to the Company's knowledge all
patents,
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necessary for the operation of the business of the Company as
presently conducted, free and clear of all mortgages, pledges, liens,
security interest, conditional sales agreements, encumbrances or
charges of any kind. The Company is the sole and exclusive owner of
all right, title and interest in and has good, valid and marketable
title to, or, as to third party programs identified in Section 5.12 of
the Disclosure Schedule, has obtained a license to use and the right
to sublicense, the software programs developed, authored and/or
licensed by the Company and that are listed on Section 5.12 of the
Disclosure Schedule (the "SOFTWARE PROGRAMS") and the Documentation,
free and clear of all mortgages, pledges, liens, security interest,
conditional sales agreements, encumbrances or charges of any kind.
Section 5.12 of the Disclosure Schedule contains a complete list of
all Software Programs, registered trademarks and service marks, all
reserved trade names, all registered copyrights, all pending
applications for registration of any marks or copyrights, and all
filed patent applications and issued patents owned or licensed by the
Company.
(b) Section 5.12 of the Disclosure Schedule sets forth
the form and placement of the proprietary legends and copyright
notices displayed in or on the Software Programs. In no instance has
the eligibility of the Software Programs for protection under
applicable copyright law been forfeited to the public domain by
omission of any required notice or any other action.
(c) The Company has enforced the trade secret protection
program set forth in Section 5.12 of the Disclosure Schedule, except
as set forth in Section 5.12 of the Disclosure Schedule, and there has
been no violation of such program by any person or entity. Except as
set forth in Section 5.12(c) of the Disclosure Schedule, the source
code and Documentation (except end-user manuals) relating to the
Software Programs (i) have at all times been maintained in confidence,
(ii) have been disclosed by the Company only to employees, independent
contractors, Source Code Licensees and potential Source Code Licensees
having a "need to know" the contents thereof in connection with the
performance of their duties to the Company or for evaluation by
potential Source Code Licenses or pursuant to a Source Code License
and (iii) have not been disclosed to any other third party. The source
code and Documentation to the Software Programs has been provided only
to the Source Code Licensees under Source Code Licenses containing the
restrictions on use and disclosure of such source code and
Documentation set forth in Section 5.12(c) of the Disclosure
Schedules.
(d) All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated
in the conception and development of the Software Programs,
Documentation or Intellectual Property have executed nondisclosure
agreements substantially in the form of Exhibit 5.12 and either (1)
have been party to a written agreement with the Company that has
accorded the Company full, effective, exclusive and original ownership
of all the Software Programs and related Documentation and
Intellectual Property, 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 the
Software Programs and related Documentation and Intellectual Property.
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(e) All use of the software libraries, compilers and
other third-party software used in the development of the Software
Programs by the Company has been in full compliance with the
respective license agreement or other right of use for such software.
(f) The Software Programs will perform in accordance with
the documentation and other technical specifications therefor and with
the warranties set forth in the Licenses.
(g) The Software Programs, the use thereof by the Company
and the use, license, sale or lease of the Software Programs, or of
any part thereof, or of any copy, or of any part thereof, do not and
will not infringe on, or contribute to the infringement of, any
copyright or trade secret, or, to the knowledge of the Company, any
patent or any other exclusionary right of any third party in either
the United States or any foreign country. No person or entity has
asserted a claim that the use, license, sale or lease of any Software
Program, or any part thereof, infringes or contributes to the
infringement of any patent claim, copyright or trade secret right of
any third party in either the United States or any foreign country,
and the Shareholders are not aware of any basis for any such claim.
(h) Except with respect to demonstration or trial copies,
no portion of the Software Programs contains or will contain any "back
door," "time bomb," "Trojan horse," "worm," "drop dead device,"
"virus" or other software routines or hardware components designed to
permit unauthorized access; to disable or erase software, hardware, or
data; or to perform any other such actions.
(i) The documentation of the Software Programs includes
without limitation the source code (with comments) for all Software
Programs, as well as any pertinent commentary or explanation that may
be necessary to render such materials understandable and usable by a
trained computer programmer in the same area of software development,
any Company developed (i) programs (including compilers), (ii)
"workbenches," (iii) tools and higher level (or "proprietary")
language necessary for the development, maintenance and implementation
of the Software Programs and (iv) any all materials relating to the
Software Programs, including without limitation all notes, flow
charts, programmer's or user's manuals (collectively, the
"DOCUMENTATION").
(j) The Shareholders have delivered to CORESTAFF correct
and complete copies of all registered trademarks, service marks, trade
names, copyrights, patents, and applications for the same (as amended
to date), and have made available to CORESTAFF correct and complete
copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. With respect to each
item of Intellectual Property set forth in the preceding sentence used
in, or otherwise necessary for the conduct of, the business of the
Company as heretofore conducted:
(i) the Company possesses all right, title, and
interest in and to the item;
(ii) the item is not subject to any outstanding
judgment, order, decree, stipulation, injunction, or charge;
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(iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is
pending or, to the Knowledge of the Company and the officers
(and employees with responsibility for Intellectual Property
matters) of the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the
item; and
(iv) Other than pursuant to Source Code Licenses
or other Company licenses of such Intellectual Property, the
Company has never agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(k) The Shareholders have supplied or made available to
CORESTAFF correct and complete copies of all third party licenses,
sublicenses, agreements, and permissions (as amended to date) related
to the Intellectual Property (other than patents to which the Company
has no knowledge of infringement) used in, or otherwise necessary for
the conduct of the business of the Company as heretofore conducted.
With respect to each such item:
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding and in
full force and effect unless terminated by its own terms;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding and in
full force and effect on identical terms following the Closing
unless terminated by its own terms;
(iii) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event
has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(v) the underlying item of Intellectual Property
is not subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge wherein the Company is a
named party thereto;
(vi) no charge, complaint, action, suit,
proceedings, hearing, investigation, claim or demand is
pending or is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property wherein the Company is a named party
thereto; and
(vii) The Company has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission, that the Company did not have the
right to grant.
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(l) Section 5.12 of the Disclosure Schedule sets forth a
complete and accurate list of all licenses and sublicenses of the
Software Programs (the "LICENSES") and of all customer trial
agreements for the Software Programs granted by the Company to other
parties. All Licenses identified in Section 5.12 of the Disclosure
Schedule are designated as either (A) source code licenses for use in
developing software products derivative of the Software Programs (the
"Source Code Licenses") or (B) evaluation licenses or customer trial
agreements to potential Source Code Licensees for Software Programs
(the "Evaluation Licenses"). Section 5.12 of the Disclosure Schedule
sets forth the royalty rates and other significant financial terms for
each of the Licenses. As used in this Agreement, "Source Code
Licensees" shall mean those persons to whom the Company has licensed
any source code for any of the Software Programs.
5.13 CONTRACTS. Section 5.13 of the Disclosure Schedule lists the
following contracts, agreements, and other written arrangements to which the
Company is a party:
(a) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third
parties providing for lease payments in excess of $20,000 per annum;
(b) any written arrangement (or group of related written
arrangements) for the purchase or sale of raw materials, commodities,
supplies, products, or other personal property or for the furnishing
or receipt of services which either calls for performance over a
period of more than one year or involves more than the sum of $20,000;
(c) any written arrangement concerning a partnership or
joint venture;
(d) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or
guaranteed (or may create, incur, assume, or guarantee) indebtedness
(including capitalized lease obligations) involving more than $20,000
or under which it has imposed (or may impose) a Security Interest on
any of its assets, tangible or intangible;
(e) any written arrangement concerning confidentiality or
noncompetition;
(f) any written arrangement involving any of the
Shareholders and their Affiliates;
(g) any written arrangement with any of its directors,
officers, and employees in the nature of a collective bargaining
agreement, employment agreement, or severance agreement;
(h) any written arrangement under which the consequences
of a default or termination could have a material adverse effect on
the assets, Liabilities, business, financial condition, operations,
results of operations, or future prospects of the Company;
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(i) any written arrangement involving a governmental
entity or quasi-governmental agency;
(j) any written Customer Contract or Agreement; or
(k) any other written arrangement (or group of related
written arrangements) either involving more than $20,000 or not
entered into in the Ordinary Course of Business.
The Company has delivered or made available to CORESTAFF a correct and
complete copy of each written arrangement listed in Section 5.13 of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, enforceable and in full force and effect
on the same or substantially similar terms following the Closing; (C) no party
is in Material breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (D) no party
has repudiated any provision of the written arrangement. The Company is not a
party to any verbal contract, agreement, or other arrangement which, if reduced
to written form, would be required to be listed in Section 5.13 of the
Disclosure Schedule under the terms of this Section 5.13. No unfilled Material
Customer Contract or Agreement obligating the Company to perform services will
result in a loss to the Company upon completion of performance. The Company is
not a party to any contract, agreement or other arrangement which was entered
into on terms which would not be considered market standard if such arrangement
was entered into in an arms-length transaction. None of the Company's
twenty-five (25) highest grossing revenue customers in the ten months ended
October 31, 1997 has Materially curtailed or terminated its relationship with
it or has indicated that it will stop, or Materially decrease the rate of,
buying services from it.
5.14 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Company are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are presently current
and collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Financial Statements (rather than in any notes thereto) as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Company.
5.15 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company.
5.16 INSURANCE. Section 5.16 of the Disclosure Schedule sets forth
the following information with respect to each insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) to which the Company has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within the past three (3) years:
(a) The name, address, and telephone number of the agent;
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(b) The name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) The policy number and the period of coverage;
(d) The scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(e) A description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal,
valid, binding, and enforceable and in full force and effect; (B) the policy
will continue to be legal, valid, binding, and enforceable and in full force
and effect on identical terms following the Closing Date; (C) the Company is
not in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated any provision thereof. The Company has been covered during the
past three (3) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
Section 5.16 of the Disclosure Schedule describes any self-insurance
arrangements affecting the Company.
5.17 LITIGATION. Section 5.17 of the Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any unsatisfied
judgment, order, decree, stipulation, injunction, or charge or (ii) is a party
or, to the Knowledge of any of the Shareholders and the officers (and employees
with responsibility for litigation matters) of the Company, is threatened to be
made a party to any charge, complaint, action, suit, proceeding, hearing, or
investigation of or in any court or quasi-judicial or administrative agency of
any Governmental Authority or before any arbitrator. None of the Shareholders
and the directors and officers (and employees with responsibility for
litigation matters) of the Company has any reason to believe that any such
charge, complaint, action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Company.
5.18 EMPLOYEES. No key employee or full-time group of employees
has any plans to terminate employment with the Company. The Company is not a
party to or bound by any collective bargaining agreement, nor has it
experienced any strikes, grievances, claims of unfair labor practices, or other
collective bargaining disputes. The Company has not committed any unfair labor
practice. None of the Shareholders and the directors and officers (and
employees with responsibility for employment matters) of the Company has any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of the Company.
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5.19 EMPLOYEE BENEFITS. Section 5.19 of the Disclosure Schedule
lists all Employee Benefit Plans that the Company maintains or to which the
Company contributes for the benefit of any current or former employee of the
Company.
(a) Each Employee Benefit Plan (and each related trust or
insurance contract) complies in form and in operation in all respects
with the applicable requirements of ERISA and the Code.
(b) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each Employee Benefit Plan. The requirements of Part 6 of
Subtitle B of Title I of ERISA and of Code Sec. 4980(b) have been met
with respect to each Employee Welfare Benefit Plan.
(c) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice of the
Company. All premiums or other contributions for all periods ending
on or before the Closing Date have been paid with respect to each
Employee Welfare Benefit Plan.
(d) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Sec. 401(a) and has received, within the last two years, a
favorable determination letter from the Internal Revenue Service.
(e) The market value of assets under each Employee
Pension Benefit Plan (other than any Multiemployer Plan) equals or
exceeds the present value of Liabilities thereunder (determined on a
plan termination basis) as of the last day of the most recent plan
year. No Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the subject
of a Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any
Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been instituted or, to the Knowledge of any of the Shareholders and
the officers (and employees with responsibility for employee benefits
matters) of the Company, threatened.
(f) There have been no Prohibited Transactions with
respect to any Employee Benefit Plan. No Fiduciary has any Liability
for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
Employee Benefit Plans. No charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand with respect to
the administration or the investment of the assets of any Employee
Benefit Plan (other than routine claims for benefits) is pending or,
to the Knowledge of any of the Shareholders and the officers (and
employees with responsibility for employee benefits matters) of the
Company, threatened. None of the Shareholders and the directors and
officers (and employees with responsibility for employee
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benefits matters) of the Company has any Knowledge of any Basis for
any such charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand.
(g) The Shareholders have delivered to CORESTAFF correct
and complete copies of (A) the plan documents and summary plan
descriptions, (B) the most recent determination letter received from
the Internal Revenue Service, (C) the most recent Form 5500 Annual
Report, and (D) all related trust agreements, insurance contracts, and
other funding agreements which implement each Employee Benefit Plan.
(h) The Company has maintained all employee benefit
schemes in accordance with the applicable statutory requirements and
all contributions (including all employer and employee contributions),
which have accrued for periods prior to the Closing Date, to such
schemes have been made.
Neither the Company nor the other members of the Controlled Group of
Corporations that includes the Company contributes to, ever has contributed to,
or ever has been required to contribute to any Multiemployer Plan or has any
Liability (including withdrawal Liability) under any Multiemployer Plan. The
Company has not incurred, and none of the Shareholders and the directors and
officers (and employees with responsibility for employee benefits matters) of
the Company has any reason to expect that the Company will incur, any Liability
to the PBGC (other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal Liability) or under the Code with respect to
any Employee Pension Benefit Plan that the Company and the Controlled Group of
Corporations which includes the Company maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been required
to contribute. The Company does not maintain, nor has it ever maintained or
contributed to, or ever been required to contribute to any Employee Welfare
Benefit Plan providing health, accident, or life insurance benefits to former
employees, their spouses, or their dependents (other than in accordance with
Code Sec. 4980(b)).
5.20 GUARANTIES. The Company is not a guarantor or otherwise
liable for any Liability or obligation (including indebtedness) of any other
person.
5.21 ENVIRONMENT, HEALTH, AND SAFETY.
(a) To the Knowledge of Shareholders and the officers of
the Company, the Company and its predecessors and Affiliates has
complied with all laws (including rules and regulations thereunder) of
any Governmental Authority concerning the environment, public health
and safety, and employee health and safety, and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against any of them alleging any
failure to comply with any such law or regulation, the violation of
which would have a Material adverse effect.
(b) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Liability (and there is
no Basis related to the past or present operations, properties, or
facilities of the Company and its predecessors and Affiliates for any
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present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Company giving
rise to any Liability) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972,
the Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the
Toxic Substances Control Act of 1976, the Refuse Act of 1989, or the
Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), any other law (or rule or regulation thereunder) of any
Governmental Authority or common law remedy concerning release or
threatened release of hazardous substances, public health and safety,
or pollution or protection of the environment.
(c) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Liability (and the
Company and its predecessors and Affiliates has handled or disposed of
any substance, arranged for the disposal of any substance, or owned or
operated any property or facility in any manner that could form the
Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common
law or pursuant to any statute) against the Company giving rise to any
Material Liability) for damage to any site, location, or body of water
(surface or subsurface) or for illness or personal injury.
(d) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Material Liability (and
there is no Basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand against the
Company giving rise to any Liability) under the Occupational Safety
and Health Act, as amended, or any other law (or rule or regulation
thereunder) of any Governmental Authority concerning employee health
and safety.
(e) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Material Liability (and
the Company has not exposed any employee to any substance or condition
that could form the Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand
(under the common law or pursuant to statute) against the Company
giving rise to any Liability) for any illness of or personal injury to
any employee.
(f) To the Knowledge of the Shareholders and the officers
of the Company, the Company has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all laws of any Governmental Authority (including rules,
regulations, codes, plans, judgments, orders, decrees, stipulations,
injunctions, and charges thereunder) relating to public health and
safety, worker health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharge,
releases, or threatened releases of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes into
ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use,
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treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes, the violation of which would have a Material adverse
effect.
(g) To the Knowledge of the Shareholders and the officers
of the Company, all properties and equipment used in the business of
the Company have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2 trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(h) To the Knowledge of the Shareholders and the officers
of the Company, no pollutant, contaminant, or chemical, industrial,
hazardous, or toxic material or waste ever has been buried, stored,
spilled, leaked, discharged, emitted, or released on any real property
that the Company owns or ever has owned or that the Company leases or
ever has leased.
5.22 LEGAL COMPLIANCE.
(a) The Company has complied with all laws (including
rules and regulations thereunder) of all Governmental Authorities, and
no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced
against the Company alleging any failure to comply with any such law
or regulation.
(b) The Company has complied with all applicable laws
(including rules and regulations thereunder) relating to the
employment of labor, employee civil rights, and equal employment
opportunities.
(c) The Company has not violated in any respect or
received a notice or charge asserting any violation of the Xxxxxxx
Act, the Xxxxxxx Act, the Xxxxxxxx-Xxxxxx Act, or the Federal Trade
Act, each as amended.
(d) The Company has complied with all applicable laws
(including rules and regulations thereunder) relating to the residency
status of foreign individuals which are employees of the Company and
obtaining the requisite visas, permits and other documentation to
permit such individuals to work in the United States.
(e) The Company has not:
(i) made or agreed to make any contribution,
payment, or gift of funds or property to any governmental
official, employee, or agent where either the contribution,
payment, or gift or the purpose thereof was illegal under the
laws of any Governmental Authority;
(ii) established or maintained any unrecorded fund
or asset for any purpose, or made any false entries on any
books or records for any reason; or
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(iii) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any
other person, to any candidate for public office with regards
to any Governmental Authority.
(f) The Company has filed in a timely manner all reports,
documents, and other materials it was required to file (and the
information contained therein was correct and complete in all
respects) under all applicable laws (including rules and regulations
thereunder).
(g) The Company has possession of all records and
documents it was required to retain under all applicable laws
(including rules and regulations thereunder).
5.23 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
set forth in Section 4(w) of the Disclosure Schedule, none of the Shareholders
and their Affiliates has been involved in any business arrangement or
relationship with the Company within the past twelve (12) months, and none of
the Shareholders and their Affiliates owns any property or right, tangible or
intangible, which is used in the business of the Company.
5.24 BROKERS' FEES. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
5.25 DISCLOSURE. The representations and warranties contained in
this Section 5 along with the Disclosure Schedule and any other information,
statement or certificate provided by the Company or the Shareholders does not
contain any untrue statement of fact or omit to state any fact necessary in
order to make the statements and information contained in this Article V not
misleading.
5.26 BOOKS AND RECORDS. The Company has furnished CORESTAFF with
true and complete copies of the books and records relating to the ownership and
operation of the Company. The books and records reflect all minutes and
written consents adopted by the Boards of Directors of the Company. The books
and records have been maintained in accordance with applicable legal
requirements, comprise all of the books and records relating to the ownership
and operation of the Company, reflect all proceedings and transactions
customarily contained in corporate books and records.
5.27 COMPLIANCE WITH THE LETTER OF INTENT. Shareholders have
complied in all respects with the terms of the Letter of Intent dated November
21, 1997 by and among Shareholders, the Company and CORESTAFF.
5.28 PAYMENTS TO OFFICIALS. During the three year period prior to
the date hereof, neither the Company nor any of the Shareholders on behalf of
the Company has paid or given or has authorized or committed to the payment or
gift of money or anything of value to any official or employee of any
government entity or instrumentality or any political party or candidate for
political office for the purpose of influencing any governmental action or
decision in order to obtain or retain business or to direct business to any
other party.
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ARTICLE VI
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
6.1 GENERAL. Each of the Parties will use his or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable to consummate and make effective the transactions contemplated by
this Agreement (including satisfying the closing conditions set forth in
Article VIII below).
6.2 NOTICES AND CONSENTS. The Shareholders will or will cause the
Company to give any notices to third parties required by this Agreement or the
transactions contemplated hereby, and will or will cause the Company to obtain
all third-party consents required by this Agreement or the transactions
contemplated hereby or in connection with the matters pertaining to the Company
disclosed or required to be disclosed in the Disclosure Schedule. Shareholders
will take additional actions (and the Shareholders will cause the Company to
take all additional actions) that may be deemed necessary, proper, or advisable
by CORESTAFF in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that he, she, it or the Company may be required to give,
make, or obtain as reasonably required by this Agreement or the transactions
contemplated hereby in order that CORESTAFF is able to conduct the business of
the Company in the same manner as it is currently being conducted.
6.3 OPERATION OF BUSINESS. The Shareholders will not cause or
permit the Company to engage in any practice, take any action, embark on any
course of inaction, or enter into any transaction outside the Ordinary Course
of Business. Without limiting the generality of the foregoing, the
Shareholders will not cause or permit the Company to engage in any practice,
take any action, embark on any course of inaction, or enter into any
transaction of the sort described in Section 5.6 above.
6.4 PRESERVATION OF BUSINESS. The Shareholders will cause the
Company to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers, and employees.
6.5 FULL ACCESS.
(a) Each of the Shareholders will permit, and the
Shareholders will cause the Company to permit, representatives of
CORESTAFF to have reasonable access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of
the Company, to all premises, properties, books, records, contracts,
Tax records, and documents of or pertaining to the Company.
CORESTAFF's on-site investigation of the
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Company shall be limited to ten (10) business days, unless otherwise
agreed to by CORESTAFF and the Shareholders in writing; provided,
however, that such limitation of time shall not otherwise limit
CORESTAFF's investigation of the Company off-site. During CORESTAFF's
on-site investigation, CORESTAFF shall not discuss any aspects of the
operation of the Company with any employee of the Company, and
CORESTAFF shall direct all requests for information and material only
through Xxxx Xxxxxx or Xxxxx Xxxxxxx, unless otherwise agreed to by
CORESTAFF and the Shareholders in writing. CORESTAFF shall not
contact or speak or correspond with any lender, customer, employee or
other person associated in business with the Company without the
written consent of the Company.
(b) Upon completion of the accounting review and
business, legal and accounting due diligence by CORESTAFF and so long
as this agreement has not been terminated, CORESTAFF shall arrange
with Shareholders a mutually agreeable time and place at which
CORESTAFF may conduct interviews with designated key employees and/or
customers of the Company mutually agreed to by CORESTAFF and
Shareholders. Such interviews shall be in strict conformity with a
format mutually agreed to by CORESTAFF and the Shareholders and shall
take place and be completed wholly within the last ten (10) days prior
to Closing.
6.6 NOTICE OF DEVELOPMENTS. The Shareholders will give prompt
written notice to CORESTAFF of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company. Each Party will give prompt written notice
to the others of any material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement. No disclosure
by any Party pursuant to this Section 6.6 however, shall be deemed to amend or
supplement Annex II, Annex III, or the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
6.7 EXCLUSIVITY. None of the Shareholders will (and the
Shareholders will not cause or permit the Company to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any person relating to
any (A) liquidation, dissolution, or recapitalization, (B) merger or
consolidation, (C) acquisition or purchase of securities or assets, other than
pursuant to the exercise of outstanding options in connection with the
transactions contemplated by this Agreement, or (D) similar transaction or
business combination involving the Company or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any person to do or seek any of the foregoing. The Shareholders
will notify CORESTAFF immediately if any person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
6.8 PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF FINANCIAL
INFORMATION. The Company will prepare (as soon as is reasonably practicable
hereafter) the balance sheets as of, and the income statement and the cash flow
statement for, the 12-month period ending December 31, 1995 and 1996 and for
the 10-month period ending October 31, 1997 from its books and records and
Shareholders will cause such balance sheets and income statements to be
reviewed by Ernst & Young LLP (at Buyer's sole expense) and will provide such
records, documentation and assistance
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as may be requested by Ernst & Young LLP to complete such review. The Company
will prepare and deliver to CORESTAFF, on a bi-weekly basis until the Closing
Date, the financial and other information it generates, consistent with its
past practice.
6.9 DELIVERY OF SCHEDULES; ACCEPTANCE. CORESTAFF acknowledges
that the preparation and delivery of the Schedules to the Agreement may not be
prepared and/or final at the time of the execution and delivery of the
Agreement. As such, the parties agree as follows:
(a) the Shareholders shall have the right to deliver the
Schedules to the Agreement and/or to amend, restate and update the
Schedules to the Agreement up to the date which is five (5) days prior
to the Closing Date.
(b) at least five (5) days prior to the Closing, the
Shareholder shall deliver to CORESTAFF a complete copy of the proposed
final Schedules to the Agreement noting all changes from the Schedules
provided upon execution of the Agreement; and
(c) CORESTAFF shall notify Shareholders at or prior to
the Closing that either (i) CORESTAFF accepts such revised Schedules,
in which case they shall become part of this Agreement as if in
existence on the date of this Agreement and all such disclosures made
in such amended Schedules shall be deemed disclosed as if they had
been disclosed in the Schedules as of the date of this Agreement or
(ii) that CORESTAFF in its sole discretion does not accept such
Schedules and elects to terminate this Agreement.
ARTICLE VII
ADDITIONAL COVENANTS
The Parties further agree as follows:
7.1 GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 9 below). The Shareholders acknowledge and agree that from and
after the Closing CORESTAFF will be entitled to possession of all documents,
books, records, agreements, and financial data of any sort relating to the
Company.
7.2 LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available
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their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article IX below).
7.3 TRANSITION. None of the Shareholders will take any action
that primarily is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of the
Company from maintaining the same business relationships with the Company after
the Closing for a period of twenty-four (24) months thereafter as it
maintained with the Company prior to the Closing. Each of the Shareholders
will refer all customer inquiries relating to the lines of businesses of the
Company to CORESTAFF from and after the Closing for a period of twenty-four
(24) months thereafter.
7.4 CONFIDENTIALITY. Each of the Shareholders will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement for a period
of three (3) years from the Closing, and deliver promptly to CORESTAFF or
destroy, at the request and option of CORESTAFF, all tangible embodiments (and
all copies) of the Confidential Information which are in his or its possession.
In the event that any of the Shareholders is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, that Shareholder will notify CORESTAFF
promptly of the request or requirement so that CORESTAFF may seek an
appropriate protective order or waive compliance with the provisions of this
Section 7.4. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Shareholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, that Shareholder may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Shareholder
shall use his reasonable best efforts to obtain, at the reasonable request of
CORESTAFF, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as CORESTAFF shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
7.5 MONITORING INFORMATION. Prior to the Closing, Shareholders
shall cause the Company to deliver such information as may reasonably be
requested by CORESTAFF.
7.6 LEASES. Shareholders shall cause prior to the Closing Date,
the Company to obtain from its landlords (to the extent required under the
pertinent premises lease) written consent to the assignment of all leases being
indirectly assumed by CORESTAFF, which assignments are deemed to have resulted
from the transactions contemplated by this Agreement.
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7.7 ADDITIONAL TAX MATTERS.
(a) The Company shall file with the appropriate
governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the
Company shall remit any Taxes due in respect of such Tax Returns.
(b) CORESTAFF and the Shareholders recognize that each of
them will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by CORESTAFF
and/or the Company to the extent such records and information pertain
to events occurring on or prior to the Closing Date; therefore,
CORESTAFF agrees to cause the Company to (A) use its best efforts to
properly retain and maintain such records for a period of six (6)
years from the date the Tax Returns for the year in which the Closing
occurs are filed or until the expiration of the statute of limitations
with respect to such year, whichever is later, and (B) allow the
Shareholders and their agents and representatives at times and dates
mutually acceptable to the Parties, to inspect, review and make copies
of such records as such other party may deem necessary or appropriate
from time to time, such activities to be conducted during normal
business hours and at the other Party's expense.
(c) The Shareholders shall reimburse CORESTAFF for the
Taxes for which the Company is liable pursuant to Section 7.7(a)
hereof, but which are payable in respect of Tax Returns to be filed by
CORESTAFF pursuant to Section 7.7(a) hereof within ten (10) business
days after receipt by the Shareholders of signed copies of such Tax
Returns as filed; however, only to the extent such Taxes are in excess
of the reserve for such Tax Liability used to determine the Net
Working Capital of the Company.
7.8 COVENANT NOT TO COMPETE.
(a) For a period of two (2) years from and after the
Closing Date or two (2) years beyond the term of his employment with
the Company, which ever is longer, none of the Shareholders will (i)
engage directly or indirectly in any business that is substantially
similar to that conducted by the Company as of the Closing Date within
a one hundred (100) mile radius of any office of the Company; (ii)
service or solicit any current or future customer of the Company
relating to any business that is substantially similar to that
conducted by the Company; or (iii) offer employment to or attempt to
induce any director, officer, employee, agent, or customer of the
Company to terminate such relationship with the Company; provided,
however, that no owner of less than 1% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason
of such ownership in the Company's business;
(b) If any Shareholder commits a breach, or overtly
threatens to commit a breach, of any of the provisions of Section
7.8(a) above, CORESTAFF shall have the right and remedy to seek to
have the provisions of Section 7.8(a) specifically enforced by any
court having jurisdiction, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury and
continuing damage to CORESTAFF, the Company and their affiliates, and
that the exact amount of which would be difficult to ascertain and
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that in any event money damages will not provide adequate remedy and
CORESTAFF shall be entitled to seek to obtain injunctive relief
restraining any violation of Section 7.8(a);
(c) It is expressly understood and agreed that CORESTAFF
and the Shareholders consider the restrictions contained in Section
7.8(a) above to be reasonable and necessary for the purposes of
preserving and protecting the business of the Company and goodwill
purchased by CORESTAFF; and
(d) If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 7.8
is invalid or unenforceable, the Parties agree that the court making
the determination of invalidity or unenforceability shall have the
power to reduce the scope, duration, or area of term or provision, to
delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of
the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time
within which the judgment may be appealed.
7.9 CONDUCT OF BUSINESS DURING EARN-OUT PERIOD. During the
Earn-Out Period, unless terminated pursuant to their respective employment
agreements, the Shareholders shall be entitled to operate and manage the
business of the Company, consistent with prudent business practices. CORESTAFF
agrees that it will not, during the Earn-Out Period, unreasonably require that
the business of the Company be operated substantially differently than it was
operated in the past, unreasonably change the prices charged, the level of
compensation of full-time corporate employees and the level of "G&A" expenses,
unless the prior practices are unreasonable or imprudent, and in no event shall
CORESTAFF do any of the foregoing during the Earn-Out Period without the prior
consultation with and notice to the Shareholders. In addition, during the
Earn-Out Period, CORESTAFF will provide such capital to the Company as
reasonably necessary to operate the business as provided in the budget of the
Company as agreed to by CORESTAFF and the Shareholders prior to the date
hereof; provided that in no event shall CORESTAFF be required to fund capital
in excess of $1,000,000 to the Company during the Earn-Out Period. The Parties
shall agree on the Company's employees that are eligible to participate in the
Buyer's stock option programs.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS TO CLOSE
8.1 CONDITIONS TO OBLIGATION OF CORESTAFF. The obligation of
CORESTAFF to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in
Article III and Article V above shall be true and correct in all
material respects at and as of the Closing Date;
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(b) The Shareholders and the Company shall have performed
and complied with all of their covenants hereunder in all Material
respects through the Closing;
(c) The Company shall have procured all of the
governmental or third party consents and approvals specified in
Section 6.2 including any landlord consents related to any rental
property.
(d) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency within the jurisdiction of any Governmental Authority wherein
an unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation,
or (C) affect adversely the right of CORESTAFF to own, operate, or
control the Shares or the Company (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(e) The Shareholders shall have delivered to CORESTAFF a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 8.1(a)-(d) is satisfied in all respects;
(f) CORESTAFF shall have received from Xxxx Xxxxxx and
Xxxxx Xxxxxxx, executed and delivered satisfactorily, determined in
the sole good faith discretion of CORESTAFF, employment arrangements;
(g) CORESTAFF shall have received from Xxxx Xxxxxx and
Xxxxx Xxxxxxx mutually agreed to by the Parties an executed
non-competition agreement in the form and substance attached hereto as
Exhibit C;
(h) CORESTAFF shall have received from counsel to the
Company an opinion with respect to the matters set forth in Exhibit D
attached hereto, addressed to CORESTAFF and dated as of the Closing
Date;
(i) CORESTAFF shall have received the resignations,
effective as of the Closing, of each director of the Company
designated by CORESTAFF prior to the Closing;
(j) All officers and directors of the Company and each of
the Shareholders shall have repaid in full all debts or other
obligations, if any, owed to the Company;
(k) No Material adverse change shall have occurred before
the Closing in the Company's business or its future business
prospects;
(l) All appropriate consents and shareholder
authorizations of the Company shall have been obtained;
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(m) CORESTAFF shall be satisfied that at Closing all
facilities of the Company are under legal, valid and binding leases or
subleases, each of which have received all approvals of governmental
authorities;
(n) The Requisite Shareholders shall have delivered to
CORESTAFF stock certificates evidencing all of the stock of the
Company in good delivery form and duly endorsed for transfer or
accompanied by duly executed stock power or other appropriate
assignment documents and no dissenters or appraisal rights have been
asserted by Shareholders representing more than 1% of the outstanding
shares;
(o) The Shareholders shall have caused and the Company
shall have cancelled any stock options, deferred bonus programs, and
phantom equity plans outstanding as of the Closing Date (to the extent
not reserved for in the December 31, 1997 financial statements of the
Company and excluding the Company's regular bonus plan which shall not
be treated as a deferred bonus program for these purposes), at no cost
to CORESTAFF. The cancellation of such programs will be on terms and
conditions as reasonably agreed to by CORESTAFF. In conjunction with
the cancellation of such programs, optionholders representing
substantially all of the Shares underlying outstanding options shall
have signed cancellation agreements in the form agreed to by
CORESTAFF. All former employees who are optionholders shall have
executed option cancellation agreements in substantially the form
agreed to by CORESTAFF. The Company shall have made arrangements for
the cancellation or replacement of options satisfactory to CORESTAFF
relating to persons to whom employment offers have been made by the
Company and whose employment date is effective after the Closing.
(p) All liens and security interests securing debts of
the Company which have been paid in full prior to or at the Closing
shall have been fully released of record to the reasonable
satisfaction of CORESTAFF and all Uniform Commercial Code financing
statements or other filings of any kind whatsoever, covering or
evidencing such debts, liens and/or security interests shall have been
terminated;
(q) All obligations of the Company which are not being
retired or satisfied by the Shareholders prior to or at the Closing,
shall have been modified in such a manner that their covenants,
repayment schedules, and other provisions will be upon terms
reasonably satisfactory to CORESTAFF; and
(r) No unsatisfied liens for the failure to pay Taxes of
any nature whatsoever shall exist against the Company, or against or
in any way affecting any of the Shares.
CORESTAFF may waive any condition specified in this Section
8.1 if it executes a writing so stating at or prior to the Closing.
8.2 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of the Shareholders to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
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(a) the representations and warranties set forth in
Article IV above shall be true and correct in all material respects at
and as of the Closing Date;
(b) CORESTAFF shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(c) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
within the jurisdiction of any Governmental Authority wherein an
unfavorable judgment, order, decree, stipulation, injunction, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation
(and no such judgment, order, decree, stipulation, injunction, or
charge shall be in effect);
(d) CORESTAFF shall have delivered to the Shareholders a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 8.2(a)-(c) is satisfied in all respects; and
(e) all actions to be taken by CORESTAFF in connection
with consummation of the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Shareholders.
The Requisite Shareholders may waive any condition specified in this
Section 8.2 if they execute a writing so stating at or prior to the Closing.
ARTICLE IX
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 SURVIVAL. Except as otherwise specifically provided in this
Agreement, all of the representations, warranties and covenants of the
Shareholders (other than the representations and warranties of the Shareholders
contained in Article III or Section 5.8 above) shall survive the Closing
hereunder (even if CORESTAFF knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of sixteen (16) months thereafter. All of
the representations and warranties of Shareholders contained in Article III and
Section 5.8 of this Agreement and the representations, warranties and covenants
of CORESTAFF shall survive the Closing (even if CORESTAFF knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect for the statute of limitations.
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9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF CORESTAFF.
(a) In the event the Shareholders (or in the event any
third party alleges facts that, if true, would mean any of the
Shareholders has breached) breach any of their Joint and Several
representations, warranties, and covenants contained herein during the
period such representations, warranties and covenants survive, and
provided that CORESTAFF makes a written claim for indemnification
against any of the Shareholders pursuant to Section 11.8 below within
the applicable survival period, then each of the Shareholders agrees
to indemnify CORESTAFF from and against the entirety of any Adverse
Consequences CORESTAFF may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences
CORESTAFF may suffer after the end of the applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach); provided, however, that
the Shareholders shall not have any obligation to indemnify CORESTAFF
from and against any Adverse Consequences resulting from, arising out
of, relating to, in the nature of, or caused by the breach of any
representation or warranty of the Shareholders contained in Article V
above (i) until CORESTAFF has suffered aggregate losses by reason of
all such breaches in excess of a $50,000 threshold (at which point the
Shareholders will be obligated to indemnify CORESTAFF from and against
all such aggregate losses including losses relating back to the first
dollar above a $25,000 deductible) and (ii) in excess of the aggregate
of ten percent (10%) of the Cash Portion of the Purchase Price
received by the Shareholders and the Earn-Out Payments allocated to
the Shareholders (after which point Shareholders shall have no
obligation to indemnify CORESTAFF from and against further such
Adverse Consequences); provided, however, that the limitation set
forth in (i) and (ii) above specifically shall not apply to the
liability of any Shareholder with respect to Adverse Consequences
resulting from or attributable to intentional fraud or any willful
misconduct by the Shareholders; provided further, however that the
limitation set forth in (i) above specifically shall not apply to the
liability of any Shareholder with respect to Adverse Consequences
resulting from breaches of the representations and warranties
contained in Sections 5.8 and 5.14 hereof.
(b) All indemnity claims under this Section 9 shall be
made after the end of the First Earn-Out Period and shall, subject to
the limitations set forth in Section 9.2(a), be made against the
Earn-Out Payments before being made against the Cash Portion of the
Purchase Price.
(c) In the event any of the Shareholders breaches (or in
the event any third party alleges facts that, if true, would mean any
of the Shareholders has breached) any of his Several representations,
warranties, and covenants contained herein, and provided that the
particular representation, warranty, or covenant survives the Closing
and that CORESTAFF makes a written claim for indemnification against
the Shareholder pursuant to Section 11.8 below within the applicable
survival period, then the Shareholder agrees, subject to the
limitations set forth in Section 9.2(a) to indemnify CORESTAFF from
and against the entirety of any Adverse Consequences CORESTAFF may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences CORESTAFF may suffer after the end
of the applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach).
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(d) Each of the Shareholders agrees to indemnify
CORESTAFF from and against the entirety of any Adverse Consequences
CORESTAFF may suffer resulting from, arising out of, relating to, in
the nature of, or caused by any Liability of the Company arising under
United States Treasury Reg. Section 1.1502-6 (because the Company once
was a member of an Affiliated Group during any part of any
consolidated return year within any part of which consolidated return
year any corporation other than the Company also was a member of the
Affiliated Group).
(e) Each of the Shareholders agree to indemnify CORESTAFF
from and against the entirety of any Taxes which may become due and
owing to any Governmental Authority by reason of the sale of the
Company to CORESTAFF.
(f) Each of the Shareholders agree to indemnify CORESTAFF
from and against the entirety of any Adverse Consequences which may
become due and owing by reason of the Company's failure to properly
obtain any visas required for employees of the Company to work in the
United States.
(g) Each of the Shareholders shall be liable for, and
hereby indemnifies, CORESTAFF for all income Taxes imposed on the
Company with respect to any taxable year or period beginning before
and ending after the Closing Date; provided, however, that such
indemnity shall be made only to the extent such Taxes are in excess of
the reserve; if any, for such Tax Liability as reflected in the
Financial Statements or in the computation of the Net Working Capital.
In order to apportion appropriately any income Taxes relating to any
taxable year or period that begins before and ends after the Closing
Date, the Parties hereto shall, to the extent permitted or not
prohibited by applicable law, elect with the relevant taxing
authority, if required or necessary, to terminate the taxable year of
the Company as of the Closing Date. In any case where applicable law
does not permit the Company to treat such date as the end of a taxable
year or period, then whenever it is necessary to determine the
liability for income Taxes of the Company, for a portion of a taxable
year or period, such determination shall (unless otherwise agree to in
writing by CORESTAFF and the Shareholders) be determined by a closing
of the Company' books, except that exemptions, allowances or
deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis. In
no event shall such apportionment of income Taxes be greater than the
income Taxes which would have been allocated to the Company if such
income Taxes had been based upon a time period in proportion to the
number of days during such taxable year or period the Shareholders and
CORESTAFF owned the stock in the Company.
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SHAREHOLDERS.
In the event CORESTAFF breaches any of its representations, warranties, and
covenants contained herein, and provided that any of the Shareholders makes a
written claim for indemnification against CORESTAFF pursuant to Section 11.8
below within the applicable survival period, then CORESTAFF agrees to indemnify
each of the Shareholders from and against the entirety of any Adverse
Consequences the Shareholder may suffer through and after the date of the claim
for
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indemnification (including any Adverse Consequences the Shareholder may suffer
after the end of the applicable survival period) resulting from, arising out
of, relating to, in the nature of, or caused by the breach.
9.4 MATTERS INVOLVING THIRD PARTIES. If any third party shall
notify any Party (the "INDEMNIFIED PARTY") with respect to any matter which may
give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Article IX, then the Indemnified Party shall
notify each Indemnifying Party thereof promptly; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any liability or obligation hereunder
unless (and then solely to the extent) the Indemnifying Party thereby is
damaged. In the event any Indemnifying Party notifies the Indemnified Party
within thirty (30) days after the Indemnified Party has given notice of the
matter that the Indemnifying party is assuming the defense thereof, (A) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (B) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party
reasonably concludes that the counsel the Indemnifying Party has selected has a
conflict of interest), (C) the Indemnified Party will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the written consent of the Indemnifying Party (not to be withheld
unreasonably), and (D) the Indemnifying Party will not consent to the entry of
any judgment with respect to the matter, or enter into any settlement which
does not include a provision whereby the plaintiff or claimant in the matter
releases the Indemnified Party from all Liability with respect thereto, without
the written consent of the Indemnified Party (not to be withheld unreasonably).
In the event no Indemnifying Party notifies the Indemnified Party within thirty
(30) days after the Indemnified Party has given notice of the matter that the
Indemnifying Party is assuming the defense thereof, however, the Indemnified
Party may defend against, or enter into any settlement with respect to, the
matter in any manner it reasonably may deem appropriate. At any time after
commencement of any such action, any Indemnifying Party may request an
Indemnified Party to accept a bona fide offer from the other Parties to the
action for a monetary settlement payable solely by such Indemnifying Party
(which does not burden or restrict the Indemnified Party nor otherwise
prejudice him or her) whereupon such action shall be taken unless the
Indemnified Party determines that the dispute should be continued, the
Indemnifying Party shall be liable for indemnity hereunder only to the extent
of the lesser of (i) the amount of the settlement offer or (ii) the amount for
which the Indemnified Party may be liable with respect to such action. In
addition, the Party controlling the defense of any third party claim shall
deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
9.5 DETERMINATION OF LOSS. The amount of indemnification to be
paid by any Party to another Party hereto shall be reduced by (i) any insurance
proceeds received, including both defense and indemnification costs, with
respect to any insurance policy maintained by the Company providing coverage
with respect to any of the Adverse Consequences; and (ii) any Tax benefits
received by CORESTAFF as a result of any of the Adverse Consequences (utilizing
the Applicable
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Rate as the discount rate). All indemnification payments under this Article IX
shall be deemed adjustments to the Purchase Price.
9.6 EXCLUSIVE REMEDY. CORESTAFF and Shareholder acknowledge and
agree that the foregoing indemnification provisions in this Section 9 shall be
the exclusive remedy of both CORESTAFF and Shareholders for any breach of the
representations and warranties of either Party.
9.7 PAYMENT; GENERAL RIGHT OF OFFSET. Subject to the limitations
set forth in this Section 9, the Indemnifying Parties shall promptly pay to
CORESTAFF or such other Indemnified Party as may be entitled to indemnity
hereunder in cash the amount of any Adverse Consequences to which CORESTAFF or
such Indemnified Party may become entitled to by reason of the provisions of
this Agreement. Furthermore, and in lieu of receiving a cash payment from the
Shareholders, CORESTAFF, in good faith, may elect to offset against any Earned
Payout Amount, including any interest payable thereon, payable to Shareholders
the amount of any Adverse Consequences or any other payments to which CORESTAFF
or such Indemnified Parties may become entitled to by reason of the provisions
of this Agreement. In the event that CORESTAFF offsets more than the amount of
any Adverse Consequences (as finally determined), CORESTAFF shall be
responsible to Shareholder for such sums which should not have been subject to
an offset.
9.8 TAX DISPUTES. In the event that any dispute arises between
the Company and the Internal Revenue Service or any state tax authority
relating to an issue in which Shareholders have agreed to indemnify CORESTAFF,
the Shareholders shall have the right to associate with CORESTAFF in the
defense or settlement of any such claims. Moreover, CORESTAFF at all times
shall act in good faith in order to minimize the tax liability as to issues in
which Shareholders have agreed to indemnify CORESTAFF (so long as it does not
adversely affect the Company) and shall not settle or compromise any claims
without the consent of Shareholders, which consent shall not be unreasonably
withheld.
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT. Certain of the Parties may
terminate this Agreement as provided below:
(a) CORESTAFF and the Shareholders may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) CORESTAFF may terminate this Agreement by giving
written notice to the Shareholders at any time prior to the Closing in
the event any of the Shareholders is in breach, and the Shareholders
may terminate this Agreement by giving written notice to CORESTAFF at
any time prior to the Closing in the event CORESTAFF is in breach of
any material representation, warranty, or covenant contained in this
Agreement in any material respect;
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(c) CORESTAFF may terminate this agreement in accordance
with the provision of Article V;
(d) no later than five (5) days from the date which
CORESTAFF is notified by Shareholders that it may contact key
employees and customers of the Company, CORESTAFF may terminate this
Agreement by giving written notice to the Shareholders if CORESTAFF is
not reasonably satisfied with the results of its interviews with the
key employees and/or customers of the Company as provided for in
Section 6.5(a) hereof;
(e) CORESTAFF may terminate this Agreement by giving
written notice to the Shareholders at any time prior to the Closing if
the Closing shall not have occurred on or before January 30, 1998 by
reason of the failure of any condition precedent under Section 7.1
hereof (unless the failure results primarily from CORESTAFF itself
breaching any representation, warranty, or covenant contained in this
Agreement); or
(f) the Shareholders may terminate this Agreement by
giving written notice to CORESTAFF at any time prior to the Closing if
the Closing shall not have occurred on or before January 30, 1998 by
reason of the failure of any condition precedent under Section 7.2
hereof (unless the failure results primarily from any of the
Shareholders themselves breaching any representation, warranty, or
covenant contained in this Agreement).
10.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party. Upon
termination, CORESTAFF shall return or destroy all confidential documents,
notes or other written memoranda regarding the Company delivered in connection
with the transactions contemplated hereby within five (5) business days
thereafter.
ARTICLE XI
MISCELLANEOUS
11.1 THE SHAREHOLDERS.
(a) When any particular Shareholder (as opposed to the
Shareholders as a group) makes a representation, warranty, or covenant
herein, then that representation, warranty, or covenant will be
referred to herein as the "SEVERAL" obligation of that Shareholder.
This means that the particular Shareholder making the representation,
warranty, or covenant will be solely responsible for any Adverse
Consequences CORESTAFF may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any breach thereof. The
representations and warranties of each of the Shareholders in Article
III above concerning the transaction are the Several obligations of
the Shareholders.
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(b) When the Shareholders as a group make a
representation, warranty, or covenant herein, then that
representation, warranty, or covenant will be referred to herein as
the "JOINT AND SEVERAL" obligation of the Shareholders. This means
that each Shareholder will be responsible for the entirety of any
Adverse Consequences CORESTAFF may suffer resulting from, arising out
of, relating to, in the nature of, or caused by any breach thereof.
The representations and warranties of the Shareholders in Article V
above concerning the Company are examples of Joint and Several
obligations.
11.2 PRESS RELEASES AND ANNOUNCEMENTS. No Party shall issue any
press release or announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of CORESTAFF and the
Shareholders; provided, however, that any Party may make any public disclosure
it believes in good faith is required by law or regulation (in which case the
disclosing Party will advise the other Parties prior to making the disclosure).
11.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer
any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
11.4 ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, that may have related in any way to the subject
matter hereof.
11.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of CORESTAFF and the Shareholders; provided, however, that
CORESTAFF may (i) assign any or all of its rights and interests hereunder to a
wholly-owned subsidiary of CORESTAFF (in any or all of which cases CORESTAFF
nonetheless shall remain liable and responsible for the performance of all of
its obligations hereunder).
11.6 FACSIMILE/COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. A facsimile,
telecopy or other reproduction of this Agreement may be executed by one or more
parties hereto, and an executed copy of this Agreement may be delivered by one
or more parties hereto by facsimile or similar instantaneous electronic
transmission device pursuant to which the signature of or on behalf of such
party can be seen, and such execution and delivery shall be considered valid,
binding and effective for all purposes. At the request of any party hereto,
all parties hereto agree to execute an original of this Agreement and provide
such requesting party with a full set of original signature pages for each of
the parties hereto other than the requesting party within two (2) days of the
original execution date hereof.
11.7 HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
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11.8 NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to a Shareholder:
at the address shown for such Shareholder on
Section 3.4 of the Disclosure Schedule.
with a copy to:
Pillsbury Madison & Sutro LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx del Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to CORESTAFF:
CORESTAFF, Inc.
0000 Xxxx Xxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx, Esq.
Xxxxxxxx X. Xxxx, Esq.
CORESTAFF, Inc.
0000 Xxxx Xxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests,
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demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts)
of the State of Texas.
11.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
CORESTAFF and the Shareholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgement of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
11.12 EXPENSES.
(a) If the Closing under this Agreement shall occur,
CORESTAFF agrees to pay up to $25,000 of fees or expenses incurred by
the Shareholders and/or the Company arising under or relating to this
Agreement or the transactions contemplated by this Agreement (the
"Transaction Expenses"). The Transaction Expenses shall not be
included in any calculation of the EBIT of the Company. CORESTAFF
shall pay the Shareholders the Transaction Expenses or cause the
Transaction Expenses to be paid at the Closing, or after the Closing
within three (3) business days following CORESTAFF's receipt from
Shareholders of copies of invoices or other documents relating to the
Transaction Expenses.
(b) Except as provided in paragraph (a) above, each of
CORESTAFF and the Company will bear their own costs and expenses
(including legal and investment banking fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby. Except as provided in paragraph (a) above, Shareholders
acknowledge and agree that any fees or expenses (including but not
limited to legal, accounting and/or investment banking) associated
with the transactions contemplated by this Agreement of the
Shareholders and/or the Company shall be included in the definition of
Net Working Capital of Target.
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11.13 CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any Party. Any
reference to any statute or law of any Governmental Authority shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance.
If any Party has breached any representation, warranty, or covenant relating to
the same subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or mitigate the fact
that the Party is in breach of the first representation, warranty, or covenant.
11.14 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
11.15 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 11.16 below), in addition to any other remedy to which they
may be entitled, at law or in equity.
11.16 SUBMISSION TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF SHAREHOLDERS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS. ANY LEGAL ACTION OR PROCEEDING
AGAINST ANY SHAREHOLDER WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT AND
ENFORCED IN A FEDERAL OR STATE COURT LOCATED IN THE STATE OF DELAWARE AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, SHAREHOLDERS HEREBY IRREVOCABLY
ACCEPTS FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY, IRREVOCABLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. SHAREHOLDERS
AGREE THAT A JUDGMENT, AFTER EXHAUSTION OF ALL AVAILABLE APPEALS, IN ANY SUCH
ACTION OR PROCEEDINGS SHALL BE CONCLUSIVE AND BINDING UPON SHAREHOLDERS, AND
MAY BE ENFORCED IN ANY OTHER JURISDICTION BY A SUIT UPON SUCH JUDGMENT, A
CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE JUDGMENT.
SHAREHOLDERS HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT
CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF IN WILMINGTON, DELAWARE, SO
LONG AS THIS AGREEMENT IS OUTSTANDING, AS ITS DESIGNEE, APPOINTEE AND AGENT
WITH RESPECT TO ANY ACTION OR PROCEEDING TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR
AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION
OR PROCEEDING AND AGREES THAT THE FAILURE OF ANY SUCH AGENT TO GIVE ANY ADVICE
OF ANY SERVICE OF PROCESS TO SHAREHOLDERS SHALL NOT IMPAIR OR AFFECT THE
VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON. IF FOR ANY REASON
SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH,
SHAREHOLDERS AGREE TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN THE
STATE OF DELAWARE ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO CORESTAFF. SHAREHOLDERS FURTHER IRREVOCABLY CONSENT TO THE
SERVICE OF PROCESS
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OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
SHAREHOLDERS, AT ITS ADDRESS SET FORTH IN SECTION 9(H) HEREOF, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF CORESTAFF TO SERVE PROCESS OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST SHAREHOLDERS IN ANY OTHER MANNER PERMITTED BY LAW.
SHAREHOLDERS HEREBY WAIVE IRREVOCABLY, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION TO THE LAYING OF VENUE IN HOUSTON, TEXAS OR ANY CLAIM OF
INCONVENIENT FORUM IN RESPECT OF ANY SUCH ACTION IN WILMINGTON, DELAWARE TO
WHICH IT MIGHT OTHERWISE NOW OR HEREAFTER BE ENTITLED IN ANY ACTIONS ARISING
OUT OF OR BASED ON THIS AGREEMENT.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
CORESTAFF:
CORESTAFF, INC.
By:
------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President and Secretary
THE COMPANY:
SAGE I.T. PARTNERS, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
THE SHAREHOLDERS:
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XXXXXX XXXXXX
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XXXXX XXXXXXX
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