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EXHIBIT 2.2
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
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..............................................................11
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.......................................................................................12
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..............................................................................13
4.2 AUTHORIZATION OF TRANSACTION...........................................................................13
4.3 NONCONTRAVENTION.......................................................................................13
4.4 BROKER'S FEES..........................................................................................13
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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...........................................................................................16
5.5 FINANCIAL STATEMENTS...................................................................................16
5.6 EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS..................................................16
5.7 UNDISCLOSED LIABILITIES................................................................................18
5.8 TAX MATTERS............................................................................................18
5.9 TANGIBLE ASSETS........................................................................................20
5.10 REAL PROPERTY..........................................................................................20
5.11 REAL PROPERTY LEASES...................................................................................21
5.12 INTELLECTUAL PROPERTY..................................................................................22
5.13 CONTRACTS..............................................................................................25
5.14 NOTES AND ACCOUNTS RECEIVABLE..........................................................................27
5.15 POWERS OF ATTORNEY.....................................................................................27
5.16 INSURANCE..............................................................................................27
5.17 LITIGATION.............................................................................................28
5.18 EMPLOYEES..............................................................................................28
5.19 EMPLOYEE BENEFITS......................................................................................28
5.20 GUARANTIES.............................................................................................30
5.21 ENVIRONMENT, HEALTH, AND SAFETY........................................................................30
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......................................................................................33
5.27 COMPLIANCE WITH THE LETTER OF INTENT...................................................................33
5.28 PAYMENTS TO OFFICIALS..................................................................................33
ARTICLE VI
PRE-CLOSING COVENANTS
6.1 GENERAL................................................................................................33
6.2 NOTICES AND CONSENTS...................................................................................33
6.3 OPERATION OF BUSINESS..................................................................................34
6.4 PRESERVATION OF BUSINESS...............................................................................34
6.5 FULL ACCESS............................................................................................34
6.6 NOTICE OF DEVELOPMENTS.................................................................................34
6.7 EXCLUSIVITY............................................................................................35
6.8 PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF FINANCIAL INFORMATION.................................35
6.9 DELIVERY OF SCHEDULES; ACCEPTANCE......................................................................35
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ARTICLE VII
ADDITIONAL COVENANTS
7.1 GENERAL................................................................................................36
7.2 LITIGATION SUPPORT.....................................................................................36
7.3 TRANSITION.............................................................................................36
7.4 CONFIDENTIALITY........................................................................................36
7.5 MONITORING INFORMATION.................................................................................37
7.6 LEASES.................................................................................................37
7.7 ADDITIONAL TAX MATTERS.................................................................................37
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..................................................................39
8.2 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS..........................................................41
ARTICLE IX
REMEDIES FOR BREACHES IN THIS AGREEMENT
9.1 SURVIVAL...............................................................................................42
9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF CORESTAFF....................................................42
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SHAREHOLDERS.............................................44
9.4 MATTERS INVOLVING THIRD PARTIES........................................................................44
9.5 DETERMINATION OF LOSS..................................................................................45
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...............................................................................46
10.2 EFFECT OF TERMINATION..................................................................................47
ARTICLE XI
MISCELLANEOUS
11.1 THE SHAREHOLDERS.......................................................................................47
11.2 PRESS RELEASES AND ANNOUNCEMENTS.......................................................................47
11.3 NO THIRD-PARTY BENEFICIARIES...........................................................................47
11.4 ENTIRE AGREEMENT.......................................................................................47
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11.5 SUCCESSION AND ASSIGNMENT..............................................................................48
11.6 FACSIMILE/COUNTERPARTS.................................................................................48
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...............................................................................................50
11.13 CONSTRUCTION...........................................................................................50
11.14 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES......................................................50
11.15 SPECIFIC PERFORMANCE...................................................................................50
11.16 SUBMISSION TO JURISDICTION.............................................................................51
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:
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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, 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.
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"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.
"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).
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"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.
"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.
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"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.
"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.
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"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.
"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.
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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."
(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
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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.
(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:
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(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.
(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
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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 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
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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, 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.
SAGE I.T. PARTNERS, INC.
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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 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
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"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, 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
SAGE I.T. PARTNERS, INC.
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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.
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
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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, 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;
SAGE I.T. PARTNERS, INC.
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(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
(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;
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(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;
(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.
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(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.
(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.
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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;
(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
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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
(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;
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(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, 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
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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.
(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
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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;
(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
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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.
(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;
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(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;
(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
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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;
(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.
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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.
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.
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(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 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
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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
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.
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(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, 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.
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(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
(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.
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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.
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.
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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 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,
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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 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.
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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 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
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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.
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
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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 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
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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 i 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;
(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;
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(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;
(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
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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:
(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.
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ARTICLE IX
REMEDIES FOR BREACHES IN 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.
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 8 and 5.14 hereof.
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(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).
(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
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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
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
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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 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.
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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;
(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).
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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.
(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.
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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.
11.8 NOTICE. 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
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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, 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
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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.
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
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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 D 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 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: /s/ XXXXX X. XXXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Senior Vice President and
Secretary
THE COMPANY:
SAGE I.T. PARTNERS, INC.
By: /s/ XXXXXX XXXXXX
--------------------------------
Name:
------------------------------
Title:
-----------------------------
THE SHAREHOLDERS:
/s/ XXXXXX XXXXXX
-----------------------------------
XXXXXX XXXXXX
/s/ XXXXX XXXXXXX
-----------------------------------
XXXXX XXXXXXX
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