EXECUTION COPY
STOCK PURCHASE AGREEMENT
Among
VENTURI PARTNERS, INC.,
PFI CORP.
(AS "SELLER")
AND
COMPASS CS INC.
(AS "BUYER")
DATED AS OF JULY 19, 2004
CINCINNATI LIBRARY: 38461
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS......................................................... 4
2. SALE AND TRANSFER OF SHARES; CLOSING................................ 14
2.1 SHARES......................................................... 14
2.2 PURCHASE PRICE................................................. 14
2.3 CLOSING........................................................ 14
2.4 CLOSING OBLIGATIONS............................................ 14
2.5 DETERMINATION AND PAYMENT OF FINAL PURCHASE PRICE.............. 16
2.6 ESCROWED FUNDS................................................. 17
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND VENTURI................ 17
3.1 ORGANIZATION AND GOOD STANDING................................. 17
3.2 AUTHORITY; NO CONFLICT......................................... 18
3.3 CAPITALIZATION................................................. 19
3.4 FINANCIAL STATEMENTS........................................... 20
3.5 BOOKS AND RECORDS.............................................. 20
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.............................. 21
3.7 CONDITION AND SUFFICIENCY OF ASSETS............................ 22
3.8 ACCOUNTS RECEIVABLE............................................ 22
3.9 NO UNDISCLOSED OR LONG-TERM LIABILITIES........................ 23
3.10 TAXES.......................................................... 23
3.11 NO MATERIAL ADVERSE CHANGE..................................... 25
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS................................................. 26
3.13 LEGAL PROCEEDINGS; ORDERS...................................... 27
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS.......................... 28
3.15 CONTRACTS; NO DEFAULTS......................................... 29
3.16 INSURANCE...................................................... 32
3.17 INTELLECTUAL PROPERTY.......................................... 34
3.18 CERTAIN PAYMENTS............................................... 37
3.19 RELATIONSHIPS WITH RELATED PERSONS............................. 37
3.20 BROKERS OR FINDERS............................................. 38
4. REPRESENTATIONS AND WARRANTIES OF BUYER............................. 39
4.1 ORGANIZATION AND GOOD STANDING................................. 39
4.2 AUTHORITY; NO CONFLICT......................................... 39
4.3 INVESTMENT INTENT.............................................. 40
4.4 CERTAIN PROCEEDINGS............................................ 41
4.5 BROKERS OR FINDERS............................................. 41
4.6 ACCESS TO INFORMATION.......................................... 41
5. COVENANTS OF SELLER AND VENTURI PRIOR TO CLOSING DATE;
POST-CLOSING COVENANTS OF SELLER AND VENTURI........................ 42
5.1 ACCESS AND INVESTIGATION....................................... 42
5.2 OPERATION OF THE BUSINESS...................................... 42
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5.3 NEGATIVE COVENANT.............................................. 43
5.4 REQUIRED APPROVALS............................................. 43
5.5 NOTIFICATION; UPDATING OF DISCLOSURE LETTER.................... 43
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS..................... 44
5.7 NO SOLICITATION................................................ 44
5.8 COMMERCIALLY REASONABLE EFFORTS................................ 46
5.9 [RESERVED]..................................................... 46
5.10 DENVER OPERATIONS.............................................. 46
5.11 WORKERS COMPENSATION........................................... 46
5.12 DELIVERY OF APPLICABLE CONTRACTS............................... 47
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE; POST-CLOSING COVENANTS
OF BUYER............................................................ 47
6.1 APPROVALS OF GOVERNMENTAL BODIES............................... 47
6.2 COMMERCIALLY REASONABLE EFFORTS................................ 47
6.3 NOTIFICATION................................................... 47
6.4 WORKERS COMPENSATION........................................... 47
6.5 VENTURI LEASE GUARANTIES....................................... 47
6.6 RESTRUCTURING CHARGES.......................................... 48
6.7 LICENSE AGREEMENT.............................................. 48
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE................. 48
7.1 ACCURACY OF REPRESENTATIONS.................................... 48
7.2 PERFORMANCE OF VENTURI AND SELLER.............................. 49
7.3 REQUIRED CONSENTS.............................................. 49
7.4 OPINION OF COUNSEL TO SELLER, VENTURI, THE COMPANY AND
COMPANY'S SUBSIDIARIES......................................... 49
7.5 NO INJUNCTION.................................................. 49
7.6 NO PROHIBITION................................................. 50
7.7 TERMINATION OF CERTAIN EQUITY.................................. 50
7.8 HCE PLAN....................................................... 50
7.9 ESCROW AGREEMENT............................................... 50
7.10 MERGER TRANSACTION............................................. 50
7.11 EMPLOYMENT AGREEMENT........................................... 50
8. CONDITIONS PRECEDENT TO VENTURI'S AND SELLER'S OBLIGATION TO CLOSE.. 51
8.1 ACCURACY OF REPRESENTATIONS.................................... 51
8.2 BUYER'S PERFORMANCE............................................ 51
8.3 REQUIRED CONSENTS.............................................. 51
8.4 OPINION OF COUNSEL TO BUYER.................................... 51
8.5 NO INJUNCTION.................................................. 51
8.6 NO PROHIBITION................................................. 51
8.7 ESCROW AGREEMENT............................................... 52
8.8 MERGER TRANSACTION............................................. 52
8.9 SHAREHOLDER APPROVAL........................................... 52
9. TERMINATION......................................................... 52
9.1 TERMINATION EVENTS............................................. 52
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9.2 EFFECT OF TERMINATION.......................................... 53
9.3 EXPENSE REIMBURSEMENT AGREEMENT................................ 53
10. INDEMNIFICATION; REMEDIES........................................... 54
10.1 SURVIVAL....................................................... 54
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND VENTURI... 54
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER................ 55
10.4 TIME LIMITATIONS............................................... 55
10.5 LIMITATIONS ON AMOUNT -- SELLER AND VENTURI.................... 56
10.6 LIMITATIONS ON AMOUNT -- BUYER................................. 57
10.7 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS............ 57
10.8 TAX MATTERS.................................................... 59
10.9 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS.................. 62
11. GENERAL PROVISIONS.................................................. 62
11.1 EXPENSES....................................................... 62
11.2 NOTICES........................................................ 62
11.3 JURISDICTION; SERVICE OF PROCESS............................... 63
11.4 SECTION 338(H)10 ELECTION...................................... 63
11.5 FURTHER ASSURANCES............................................. 64
11.6 WAIVER......................................................... 64
11.7 ENTIRE AGREEMENT AND MODIFICATION.............................. 64
11.8 DISCLOSURE LETTER.............................................. 65
11.9 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS.............. 65
11.10 SEVERABILITY............................................... 65
11.11 SECTION HEADINGS; CONSTRUCTION............................. 65
11.12 GOVERNING LAW.............................................. 66
11.13 COUNTERPARTS............................................... 66
11.14 CONFIDENTIALITY............................................ 66
EXHIBITS
Exhibit 1(a) Buyer Termination Expenses
Exhibit 1(b) Merger Agreement
Exhibit 2.4(a)(ii) Form of Release
Exhibit 2.4(a)(iii) Form of Transition Services Agreement
Exhibit 2.6 Form of Escrow Agreement
Exhibit 3.4 May 23rd Operating Balance Sheet
Exhibit 5.7(a) Form of Press Release
Exhibit 7.4 Form of Opinion of Counsel to Venturi, Seller,
Company and Company's Subsidiaries
Exhibit 8.4 Form of Opinion of Counsel to Buyer
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of July 19,
2004 by and among VENTURI PARTNERS, INC., a Delaware corporation ("Venturi"),
PFI CORP., a Delaware corporation (the "Seller") and COMPASS CS INC., a Delaware
corporation (the "Buyer").
RECITALS
Seller desires to sell, and Buyer desires to purchase, all of the issued
and outstanding shares of capital stock (the "Shares") of VENTURI STAFFING
PARTNERS, INC., a Delaware corporation (the "Company"), for the consideration
and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"ACQUISITION PROPOSAL" - as defined in Section 5.7(a).
"AIG WORKERS COMPENSATION POLICIES" - as defined in Section 3.16(c)(i).
"APPLICABLE CONTRACT" means any Contract (a) under which the Company or
any of Company's Subsidiaries has or may acquire any rights, (b) under which the
Company or any of Company's Subsidiaries has or may become subject to any
obligation or liability, or (c) by which the Company or any of Company's
Subsidiaries or any of the respective assets owned or used by it or them is or
may become bound.
"AUDITED CARVE-OUT BALANCE SHEET" - as defined in Section 3.4
"BENEFIT PLANS" means all Defined Contribution Plans, the HCE Plan,
Multiemployer Plans, Pension Plans, Welfare Plans, VEBAs, bonus, deferred
compensation, stock bonus, stock purchase, restricted stock, stock option,
employment, severance or other employee or fringe benefit plan, program, policy,
arrangement or contract sponsored, maintained, has contributed to, or is
required to be contributed to, by the Seller, the Company or any ERISA Affiliate
for the benefit of their current or former directors, officers, employees or
independent contractors.
"BREACH" - a "Breach" of a representation, warranty, covenant, obligation
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to
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perform or comply with, such representation, warranty, covenant, obligation or
other provision, and the term "Breach" means any such inaccuracy, breach or
failure.
"BUSINESS" means the business of the Company and its Subsidiaries as
conducted in the Ordinary Course of Business immediately prior to March 28,
2004.
"BUYER" - as defined in the first paragraph of this Agreement.
"BUYER TERMINATION EXPENSES" means all expenses incurred or committed to
by or on behalf of Buyer through the termination of this Agreement in connection
with the investigation and evaluation of the Business, the Company and Company's
Subsidiaries and with the preparation, execution and performance of this
Agreement, each other agreement or document contemplated by this Agreement and
the Contemplated Transactions, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants and all commitment
and other fees and costs to secure and preserve the availability of financing
necessary to consummate the Contemplated Transactions, which Buyer Termination
Expenses are preliminarily estimated to be as set forth in Exhibit 1 attached
hereto.
"CARVE-OUT BALANCE SHEETS" - as defined in Section 3.4.
"CLOSING" - as defined in Section 2.3.
"CLOSING DATE" means the date on which the Closing actually takes place.
"CLOSING DATE BALANCE SHEET" - as defined in Section 2.5(a).
"CLOSING NET WORKING CAPITAL" means the current assets of the Company and
its Subsidiaries at the close of business on the Closing Date less the current
liabilities of the Company and its Subsidiaries on such date. For purposes of
this Agreement, "current assets" shall equal the sum of all accounts receivable
and other current assets (excluding cash and cash equivalents and cash
overdrafts), and "current liabilities" shall equal the sum of all accounts
payable (excluding cash overdrafts), accrued expenses, current income taxes
payable and any other current liabilities (other than (i) current liabilities
for SUI Taxes and Unclaimed Property Taxes and (ii) the San Francisco Payroll
Tax Settlement Amount). Except as otherwise specifically provided in this
definition, all such calculations shall be made in accordance with GAAP and on
the same basis as, and by applying the same accounting principles, policies and
practices that were used in preparing, the May 23rd Operating Balance Sheet.
"CNA LCS" - as defined in Section 3.16(d)(vii).
"CNA WORKERS COMPENSATION POLICIES" - as defined in Section 3.16(c)(i).
"COMMERCIALLY REASONABLE EFFORTS" means the efforts that a reasonably
prudent business Person would use in similar circumstances to achieve a desired
result in a reasonably efficient and cost-effective manner and within the
applicable time period, if any; provided that an obligation to use Commercially
Reasonable Efforts shall not require the Person subject to that
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obligation to take any action that would, in and of itself, result in a material
adverse effect on the assets, properties, business, results of operations or
financial condition of such Person.
"COMMERCIAL STAFFING PORTION OF HISTORICAL WORKERS COMPENSATION CLAIMS"
means that portion of Venturi's Historical Workers Compensation Claims that are
attributable to the Business, which claims specifically exclude all claims
attributable to Venturi's IT staffing business and Nursefinders, Inc.
"COMPANY" - as defined in the Recitals of this Agreement.
"CONFIDENTIALITY AGREEMENT" means that certain Confidentiality Agreement,
dated as of May 18, 2004, between Venturi and the Buyer, as amended or modified.
"CONSENT" means any approval, consent, ratification, waiver or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Shares by Seller to Buyer;
(b) the execution, delivery and performance of the Transition
Services Agreement, the License Agreement, the Escrow Agreement and the
Release; and
(c) the performance by Buyer, Seller and Venturi of their
respective covenants and obligations under this Agreement.
"CONTRACT" means any agreement, contract, obligation, promise or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" - as defined in Section 10.2.
"DEFINED CONTRIBUTION PLAN" means a "pension plan" (as defined in Section
3(2) of ERISA) that is described in Section 3(34) of ERISA and Section 414(i) of
the IRC and that is established, maintained or contributed to by the Seller, the
Company any Subsidiary or any ERISA Affiliate.
"DISCLOSURE LETTER" means the disclosure letter delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement.
"DISCLOSURE LETTER SUPPLEMENTS" - as defined in Section 5.5(b).
"ENCUMBRANCE" means any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor law, and regulations and rules issued pursuant to that
Act or any successor law. References to sections of ERISA shall be construed to
also refer to any successor sections.
"ERISA AFFILIATE" shall mean any corporation, trade or business that is,
along with the Seller, the Company or any of their Subsidiaries, a member of a
controlled group of corporations or a group of trades or businesses (whether or
not incorporated) that are under common control, as described in Sections 414(b)
and 414(c), respectively, of the IRC or Section 4001 of ERISA.
"ESCROW AGENT" - as defined in Section 2.6.
"ESCROW AGREEMENT" - as defined in Section 2.6.
"ESCROW AMOUNT" means $2,500,000 or such lesser amount as may be agreed in
writing by Buyer and Seller.
"EXPENSE REIMBURSEMENT AGREEMENT" means that certain letter agreement,
dated May 25, 2004, between Venturi and Buyer pursuant to which Venturi agrees,
subject to the conditions specified therein, to reimburse Buyer for certain
expenses relating to the Contemplated Transactions, as amended or modified.
"GAAP" means : (i) with respect to the May 23rd Operating Balance Sheet
and the Closing Date Balance Sheet, United States generally accepted accounting
principles applied on a consistent basis for the periods involved; and (ii) with
respect to Carve-Out Balance Sheets and related financial statements, United
States generally accepted accounting principles applied on a consistent basis
for the periods involved, subject to the qualifications and limitations set
forth in Note 2 to the March 28th Carve-Out Balance Sheet including the fact
that such statements have been prepared on a basis consistent with this
Agreement and that only those assets and liabilities of the Company that will be
acquired pursuant to this Agreement are presented in such balance sheets;
provided that all such balance sheets and related financial statements other
than the Audited Carve-Out Balance Sheet are further subject to normal recurring
year-end adjustments. .
"GOVERNMENTAL AUTHORIZATION" means any Consent, license, permit or other
authorization issued, granted, given or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" means any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or entity
and any court or other tribunal);
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(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority
or power of any nature.
"HARTFORD LCS" - as defined in Section 3.16(d)(vii).
"HARTFORD WORKERS COMPENSATION POLICIES" - as defined in Section
3.16(c)(i).
"HCE PLAN" means the Personnel Group of America, Inc. Non-Qualified Profit
Sharing Plan Amendment and Restatement effective January 1, 1996, as thereafter
amended from time to time, available to certain highly compensated employees of
the Company and its Subsidiaries.
"INDEMNIFIED PERSONS" - as defined in Section 10.2.
"INTELLECTUAL PROPERTY ASSETS" - as defined in Section 3.17(a).
"IRC" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
"IRS" means the United States Internal Revenue Service or any successor
agency and, to the extent relevant, the United States Department of the
Treasury.
"JUNE 27TH CARVE-OUT BALANCE SHEET" - as defined in Section 3.4.
"LEGAL REQUIREMENT" means any federal, state, local, municipal, foreign,
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"LICENSE AGREEMENT" - as defined in Section 6.7.
"MARCH 28TH CARVE-OUT BALANCE SHEET" - as defined in Section 3.4.
"MATERIAL ADVERSE CHANGE" - as defined in Section 3.11.
"MATERIAL ADVERSE EFFECT" means any change or effect that, when taken
individually or together with all other adverse changes or effects, has or is
reasonably likely to have a material adverse effect on the assets, properties,
Business, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole; provided, however, that the following shall not
be considered when determining whether a Material Adverse Effect has occurred:
any effect resulting from (i) any change in economic conditions generally or in
the temporary staffing industry; (ii) any change in the financial condition or
results of operation of the Company caused by the pending sale of the Company to
the Buyer or the announcement thereof; or (iii) any actions to be taken pursuant
to or in accordance with this Agreement.
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"MATERIAL CONTRACT" - as defined in Section 3.15.
"MATERIAL LEASE" - as defined in Section 3.6(a)(i).
"MAY 23RD OPERATING BALANCE SHEET" - as defined in Section 3.4.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger, dated
as of the date hereof, among Venturi, COMSYS Information Technology Services,
Inc. and the other parties thereto pursuant to which Venturi's Merger Subsidiary
is, simultaneously with the consummation of the Contemplated Transactions,
merged with and into COMSYS Holding, Inc. and, following the consummation of
such merger, Venturi owns, directly or indirectly, all of the combined
businesses of Venturi Technology Partners and COMSYS Information Technology
Services, Inc. substantially as such businesses exist and are conducted on the
date of this Agreement, a copy of which is attached hereto as Exhibit 1(b). Each
term or provision of the Merger Agreement that is incorporated by reference into
this Agreement shall mean that term or provision as it is in effect on the date
hereof as set forth on Exhibit 1(b).
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of Seller, the Company,
any Subsidiary or any ERISA Affiliate or to which Seller, the Company, any
Subsidiary or any ERISA Affiliate has contributed in the past or currently
contributes.
"NON-CONSUMMATION FEE" - as defined in Section 5.7(d)(ii).
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any Governmental Body
or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" - an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if such action is
consistent both in nature and magnitude with the past practices of such Person,
is not prohibited by applicable law, is taken in the ordinary course of the
normal day-to-day operations of such Person and is not required to be
specifically authorized by the board of directors (or by any Person or group of
Persons exercising similar authority) or parent company (if any) of such Person.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any corporation, its
articles or certificate of incorporation and its bylaws and, with respect to any
limited liability company, its articles or certificate of organization and its
operating agreement and, with respect to any partnership, its partnership
agreement and, with respect to any other Person, its charter or similar document
adopted or filed in connection with its creation, formation or organization, in
each case including any amendments thereto and as currently in effect.
"OUTSIDE CLOSING DATE" means October 31, 2004 or such later date, if any,
as to which Buyer and Seller may agree.
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"PENSION PLAN" means a "pension plan," as such term is defined in Section
3(2) of ERISA, which is established or maintained by Seller, the Company, any
Subsidiary or any ERISA Affiliate, other than a Multiemployer Plan.
"PERMITTED CAPITAL EXPENDITURES" - as defined in Section 5.2(c).
"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or Governmental Body.
"PRE-CLOSING PERIOD" - as defined in Section 10.8(a).
"PROCEEDING" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" - as defined in Section 2.2.
"QUALIFYING OFFER" means an unsolicited offer from an unaffiliated third
party or related group of third parties (none of which Persons shall be a
Related Person of Venturi, Seller, COMSYS Holding, Inc., COMSYS Information
Technology Services, Inc., or of their respective Subsidiaries) to acquire (i)
the Shares, through purchase, merger, consolidation, reorganization, share
exchange, recapitalization, liquidation, direct or indirect business combination
or other similar transaction or (ii) all or substantially all of the assets of
the Company, which in either such case is on terms that Venturi's board of
directors determines in its good faith judgment, taking into account all
relevant factors, including any conditions to such offer, the timing of closing
thereof, the risk of nonconsummation, the ability of the Person making the offer
to finance the transaction contemplated thereby, any required governmental or
other consents, filings and approvals, (A) would, if consummated, result in a
transaction that is more favorable to Venturi's stockholders from a financial
point of view than the transactions contemplated by this Agreement and (B) is
reasonably likely to be completed (including as to any financing) without undue
delay.
"REFERENCE AMOUNT" - as defined in Section 2.2.
"RELATED PERSON" means, with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
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(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor or trustee (or in a similar capacity); and
with respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
executor or trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b)
or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with
such individual and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of voting securities or other voting interests representing at least 20% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 20% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" - as defined in Section 2.4(a)(ii).
"REPORTABLE EVENT" shall have the meaning given to such term in ERISA
Section 4043.
"REPRESENTATIVE" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor or other representative of such
Person, including legal counsel, accountants and financial advisors.
"SAN FRANCISCO PAYROLL TAX SETTLEMENT AMOUNT" means the amount due and
owing as of Closing to the City and County of San Francisco Treasurer and Tax
Collector Department in respect of payroll Taxes under that certain Settlement
Agreement and Release of All Claims dated January 16, 2004 (not to exceed
$214,748).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
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"SELECTED ACCOUNTING FIRM" means the Minneapolis, Minnesota office of R.
S. McGladrey.
"SELLER" - as defined in the first paragraph of this Agreement.
"SELLER'S KNOWLEDGE" means the knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇▇▇, where "knowledge" of any such
individual means that:
(a) such individual is actually aware of the relevant fact,
condition, or matter; or
(b) it is reasonable to expect that such individual would discover
or otherwise become aware of such fact or other matter in the performance of his
responsibilities in the Ordinary Course of Business;
provided, however, that such individuals shall not be deemed for purposes of
this definition to have an independent duty of inquiry as the result of or with
respect to this Agreement.
"SHAREHOLDER AND BOARD APPROVAL" means approval of the Contemplated
Transactions by (i) each Five Percent Shareholder (as such term is defined in
the Restated Certificate of Incorporation of Venturi as filed with the Secretary
of State of Delaware, Division of Corporations, on August 1, 2003 ("Venturi's
Certificate of Incorporation")), (ii) the holders of a majority of the issued
and outstanding shares of Venturi's common stock, and (iii) directors
constituting at least 80% of Venturi's board of directors as required by
Venturi's Certificate of Incorporation.
"SHARES" - as defined in the Recitals of this Agreement.
"SUBSIDIARY" means, with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries.
"SUI TAXES" means all Taxes of the Company or its Subsidiaries (or for
which the Company and/or any of its Subsidiaries are obligated) due, or at any
time determined to be due, and payable to the State of California or any
subdivision or agency thereof, for unemployment insurance contributions and
related interest and penalties for the calendar year ending December 31, 2003,
including without limitation, any such contributions and related interest and
penalties covered by the Notice of Assessment from the Employment Development
Department of the State of California issued to Staffplus, Inc. on December 17,
2003.
"SUPERIOR PROPOSAL" means Superior Proposal as such term is defined in the
Merger Agreement.
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"TAKEOVER PROPOSAL" means Takeover Proposal as such term is defined in the
Merger Agreement.
"TAX" means any tax (including, without limitation, any income tax,
capital gains tax, value-added tax, sales tax, property tax, gift tax or estate
tax, employment, social security, disability, unemployment or other payroll
withholding tax, including SUI Taxes), levy, assessment, tariff, duty (including
any customs duty), and any unclaimed property charge (including the Unclaimed
Property Taxes), deficiency or other fee, and any related charge or amount
(including any fine, penalty, interest or addition to tax), imposed, assessed or
collected by or under the authority of any Governmental Body or payable pursuant
to any tax-sharing agreement or any other Contract relating to the sharing or
payment of any such tax, levy, assessment, tariff, duty, deficiency or fee.
"TAX RETURN" means any return (including any information return), report,
statement, schedule, notice, form or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection or payment of
any Tax or in connection with the administration, implementation or enforcement
of or compliance with any Legal Requirement relating to any Tax, and including
any amendments thereof.
"TERMINATION FEE" - as defined in Section 5.7(d)(ii).
"THREATENED" means a claim, Proceeding, dispute, action or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made in writing or any notice has been given in writing.
"TRANSITION SERVICES AGREEMENT" means an agreement between Buyer, Seller
and Venturi, to be dated as of the Closing Date, pursuant to which Seller and/or
Venturi will provide, or cause to be provided, certain back office support and
other services to Buyer for an initial period of three (3) months (the "Initial
Transition Period") and such additional period or periods (the "Extended
Transition Period") as Buyer, Seller and Venturi shall agree, which agreement
shall be substantially in the form attached hereto as Exhibit 2.4(a)(iii);
provided, however, that with respect to the Extended Transition Period, the
"Services" and the "Services Fee" (as such terms are defined in Exhibit
2.4(a)(iii)), shall be those Services, if any, and that Services Fee as Venturi
and Buyer shall in good faith agree prior to Closing and further provided that
such Services Fee for the Extended Transition Period shall be an escalating fee
in an amount agreed to in good faith by Venturi and Buyer that is greater than
the Services Fee in effect for the Initial Transition Period.
"UNCLAIMED PROPERTY TAXES" means all Taxes of the Company or its
Subsidiaries (or for which the Company and/or any of its Subsidiaries are
obligated) due, or at any time determined to be due, and payable to the State of
Delaware or to the State of North Carolina, or any subdivision or agency
thereof, in respect of escheated property for any Pre-Closing Period.
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"VEBA" means a voluntary employees' beneficiary association under IRC
ss.501(c)(9) that is established or maintained by Seller, the Company, any
Subsidiary or any ERISA Affiliate.
"VENTURI LEASE GUARANTEES" - as defined in Section 3.6(a).
"VENTURI'S HISTORICAL WORKERS COMPENSATION CLAIMS" means all claims,
whether known or unknown, for workers compensation by persons covered by any
insurance contract or program (including any self-insurance program) of Venturi
or any of its Subsidiaries, including all such claims arising from or in
connection with the Business, to the extent that such claims arise from or in
connection with events or circumstances that occurred on or before the Closing
Date.
"VENTURI'S MERGER SUBSIDIARY" means the wholly-owned subsidiary of Venturi
that will merge with and into COMSYS Holding, Inc. pursuant to the Merger
Agreement.
"WELFARE PLAN" means a "welfare plan" as such term is defined in Section
3(1) of ERISA, which is established or maintained by Seller, the Company, any
Subsidiary or any ERISA Affiliate, other than a Multiemployer Plan.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
At the Closing, Seller will sell and transfer the Shares to Buyer, and
Buyer will purchase the Shares from Seller, all on the terms and subject to the
conditions set forth in this Agreement.
2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") shall be $30,500,000.00 minus
the San Francisco Payroll Tax Settlement Amount plus the amount, if any, by
which Closing Net Working Capital is greater than $12,500,000.00 (the "Reference
Amount") and minus the amount, if any, by which Closing Net Working Capital is
less than the Reference Amount.
2.3 CLOSING
The purchase and sale provided for in this Agreement (the "Closing") will
take place at the offices of either Akin Gump or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
in Houston, Texas, at 10:00 a.m. (local time) on September 30, 2004 or at such
other time and place as the parties may agree. Subject to the provisions of
Section 9, failure to consummate the Closing on the date and time and at the
place determined pursuant to this Section 2.3 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement.
2.4 CLOSING OBLIGATIONS
At the Closing:
(a) Seller and Venturi, as applicable, will deliver to Buyer:
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(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), which Shares shall be
free and clear of all Encumbrances (other than Encumbrances created
by Buyer);
(ii) a release in the form of Exhibit 2.4(a)(ii) executed by
each of Seller and Venturi (the "Release");
(iii) the Transition Services Agreement, executed by Seller
and Venturi;
(iv) a certificate or certificates executed by each of Seller
and Venturi representing and warranting to Buyer that (A) each of
Seller's and Venturi's representations and warranties in this
Agreement is accurate in all material respects as of the Closing
(giving full effect to any Disclosure Letter Supplements that Seller
delivered to Buyer prior to the Closing in accordance with Section
7.1) and (B) all covenants or obligations that they are required to
perform or comply with prior to Closing have been duly performed and
complied with in all material respects;
(v) the License Agreement, executed by Venturi; and
(vi) the Escrow Agreement, executed by Seller and Venturi;.
(b) Buyer will deliver to Seller:
(i) by wire transfer of immediately available funds to such
account as Seller shall specify, the sum of $30,500,000.00 minus the
San Francisco Payroll Tax Settlement Amount and minus the Escrow
Amount;
(ii) the Transition Services Agreement, executed by Buyer;
(iii) a certificate executed by Buyer to the effect that (A)
each of Buyer's representations and warranties in this Agreement is
accurate in all respects as of the Closing Date and (B) all
covenants or obligations that it is required to perform or comply
with prior to Closing have been duly performed and complied with in
all material respects;
(iv) the License Agreement, executed by Buyer; and
(v) the Escrow Agreement, executed by Buyer.
(c) Buyer will deliver to the Escrow Agent by wire transfer of
immediately available funds the Escrow Amount.
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2.5 DETERMINATION AND PAYMENT OF FINAL PURCHASE PRICE
(a) Within forty-five (45) days after the Closing Date, Seller shall
prepare and deliver to Buyer a consolidated balance sheet of the Company and its
Subsidiaries as at the close of business on the Closing Date, which balance
sheet shall be prepared in accordance with GAAP and on the same basis as, and by
applying the same accounting principles, policies and practices that were used
in preparing, the May 23rd Operating Balance Sheet (the "Closing Date Balance
Sheet"), which Closing Date Balance Sheet shall evidence Seller's determination
of Closing Net Working Capital and be accompanied by such schedules and
accounting work papers as Seller in good faith determines are reasonably
required in order to support such determination. Buyer shall provide Seller such
reasonable access to the Company's books and records as is reasonably required
in order to enable Seller to prepare the Closing Date Balance Sheet. Subject to
paragraphs (b) and (c) of this Section 2.5, if Closing Net Working Capital
exceeds the Reference Amount, then Buyer shall pay to or as directed by Seller
the amount of such excess or, if Closing Net Working Capital is less than the
Reference Amount, then Seller shall pay to or as directed by Buyer the
difference between such amounts. The amount so payable to or as directed by
Seller or Buyer, as applicable, shall be paid, within five (5) days of final
determination thereof, by wire transfer of immediately available funds to such
bank account or accounts as the recipient thereof shall specify.
(b) Buyer may object to Seller's determination of Closing Net Working
Capital by delivering a written statement of objections (stating the basis of
the objections with reasonable specificity) and its revised Closing Date Balance
Sheet to Seller within thirty (30) days following delivery by Seller of its
proposed Closing Date Balance Sheet. If Buyer so objects, Seller and Buyer shall
seek in good faith to resolve the differences specified in such objection within
fifteen (15) days following Buyer's delivery of its objection. During such time,
if Seller disagrees with Buyer's objection, Seller shall provide to Buyer, with
reasonable specificity, a written statement of the basis of its disagreement. If
Buyer does not so timely object to Seller's determination of Closing Net Working
Capital, then such determination by Seller shall be considered final and binding
upon the parties. If Buyer does so timely object to Seller's determination of
Closing Net Working Capital and Seller does not so timely object to such
objection by Buyer, then Buyer's revised Closing Date Balance Sheet and Buyer's
determination of Closing Net Working Capital evidenced thereby shall be
considered final and binding upon the parties.
(c) In the event Buyer and Seller are unable to resolve a dispute or
disagreement set forth in a written objection pursuant to Section 2.5(b), either
party may elect, by written notice to the other party, to have all such disputes
or disagreements resolved by the Selected Accounting Firm. Promptly upon
delivering or receiving, as applicable, such notice, Buyer and Seller shall
submit to the Selected Accounting Firm its version of the Closing Date Balance
Sheet and determination of Closing Net Working Capital evidenced thereby
together with supporting schedules and accounting work papers, the May 23rd
Operating Balance Sheet and an executed copy of this Agreement, and Buyer shall
provide to the Selected Accounting Firm reasonable access to the books and
records (and other relevant information), and to accounting personnel, of the
Company and its Subsidiaries to the extent such access is reasonably necessary
to permit the Selected Accounting Firm to make its determinations. The Selected
Accounting Firm shall apply the terms and conditions of this Agreement and,
consistent with such terms and conditions, make
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a final and binding resolution of the disputes or disagreements. In making its
final and binding resolution, the Selected Accounting Firm shall be instructed
that it must select either the Closing Date Balance Sheet of the Buyer in its
entirety or the Closing Date Balance Sheet of the Seller in its entirety,
together with the determination of Closing Net Working Capital evidenced
thereby. No appeal from such determination shall be permitted. The Selected
Accounting Firm shall be instructed to use every reasonable effort to perform
its services within thirty (30) days after the date it receives the first of
Buyer's or Seller's, as the case may be, version of the Closing Date Balance
Sheet. The costs and expenses for the services of the Selected Accounting Firm
shall be borne by the non-prevailing party; provided, however, that each of the
parties shall agree to jointly and severally indemnify the Selected Accounting
Firm to the extent reasonably and customarily requested by the Selected
Accounting Firm to do so. Judgment upon any award or decision by the Selected
Accounting Firm may be enforced by any court having jurisdiction thereof.
2.6 ESCROWED FUNDS
The Escrow Amount shall be deposited in an account with a commercial bank
or trust company or other third party mutually selected by Buyer and Seller to
act as Escrow Agent hereunder (the "Escrow Agent") for the purpose of securing
Seller's and Venturi's indemnification obligations under Section 10.8(a) with
respect to SUI Taxes and Unclaimed Property Taxes. The Escrow Amount, together
with all interest, dividends and other income thereon, shall be held and
released by the Escrow Agent in accordance with this Agreement and an escrow
agreement, which escrow agreement shall (i) be entered into among Buyer, Seller,
Venturi and the Escrow Agent, (ii) provide for the release of the Escrow Amount
only as and when, and to the extent that, obligations for the SUI Taxes and
Unclaimed Property Taxes are fully paid or otherwise satisfied, and (iii)
otherwise be in substantially the form attached hereto as Exhibit 2.6 (except
that it shall include such additional customary terms and conditions as the
Escrow Agent may require) (the "Escrow Agreement").
3. REPRESENTATIONS AND WARRANTIES OF SELLER AND VENTURI
Each of Seller and Venturi hereby represents and warrants to Buyer as
follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for the Company and each of its Subsidiaries of its name, its jurisdiction
of organization, other jurisdictions in which it is authorized to conduct the
Business, the names under which it conducts the Business and its capitalization
(including the identity of each stockholder and the number of shares held by
each).
(b) The Company and each Subsidiary is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization, with
full corporate, limited liability company or limited partnership power and
authority to conduct the Business as it is now being conducted, to own or use
the properties and assets that it purports to own or use.
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(c) The Company and each of its Subsidiaries is duly qualified to
conduct the Business as a foreign corporation, limited liability company or
limited partnership, as applicable, and is in good standing under the laws of
each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to qualify would not
reasonably be expected to have a Material Adverse Effect.
(d) Seller has delivered to Buyer copies of the Organizational Documents
of the Company and each of its Subsidiaries, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) (i) This Agreement constitutes the legal, valid and binding
obligation of Seller and Venturi, enforceable against each of Seller and Venturi
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
laws relating to or limiting creditors' rights generally or by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity. Upon the execution and delivery by Seller and
Venturi of the Release, the Transition Services Agreement, the Escrow Agreement
and the License Agreement (collectively, the "Seller's Closing Documents"), the
Seller's Closing Documents will constitute the legal, valid and binding
obligations of Seller and Venturi, enforceable against each of Seller and
Venturi in accordance with their respective terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws relating to or limiting creditors' rights generally or by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity.
(ii) Each of Seller and Venturi has full corporate power and
authority to execute and deliver this Agreement and the Seller Closing
Documents, and to perform its obligations under, this Agreement and the Seller
Closing Documents.
(b) Except as set forth in Part 3.2(b) of the Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation or performance
of any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time):
(i) conflict with or result in a violation of (A) any provision of
the Organizational Documents of Venturi, Seller, the Company or the
Company's Subsidiaries, or (B) any resolution adopted by the board of
directors of Venturi, Seller, the Company or any of Company's
Subsidiaries;
(ii) conflict with or result in a violation of any material Legal
Requirement or any Order to which the Company or any of Company's
Subsidiaries, or any material assets owned or used by any of them, may be
subject;
(iii) conflict with or result in a material violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend,
18-
cancel, terminate or modify, any Governmental Authorization that is held
by the Company or any of Company's Subsidiaries or that otherwise relates
to the Business;
(iv) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company or any
of its Subsidiaries.
(c) Except as set forth in Part 3.2(c) of the Disclosure Letter, none of
Venturi, the Seller, the Company or Company's Subsidiaries is or will be
required to give any notice to or obtain any Consent from any Person except for
those notices or Consents the failure of which to perform or obtain would not
reasonably be expected to have a Material Adverse Effect, in connection with the
execution and delivery of this Agreement or the consummation of the Contemplated
Transactions.
3.3 CAPITALIZATION
(a) The authorized equity securities of the Company consist of one
thousand (1,000) shares of common stock, par value $0.01 per share, of which one
thousand (1,000) shares are issued and outstanding, all of which constitutes the
Shares. As of the date of this Agreement, except as set forth in Part 3.3 of the
Disclosure Letter, (i) Seller is the record and beneficial owner and holder of
the Shares, free and clear of all Encumbrances (other than Encumbrances created
by Buyer), (ii) all of the outstanding equity securities and other securities of
the Company and each of its Subsidiaries are owned of record and beneficially
by, in the case of the Shares, the Seller and, in the case of such Subsidiaries,
one or more of the Company and its Subsidiaries, free and clear of all
Encumbrances, and (iii) there are no Contracts (other than this Agreement)
relating to the issuance, sale or transfer of any equity securities or other
securities of the Company or any of its Subsidiaries. At Closing, (x) Seller
will be the record and beneficial owner and holder of the Shares, free and clear
of all Encumbrances, (y) all of the outstanding equity securities and other
securities of the Company and each of its Subsidiaries will be owned of record
and beneficially by, in the case of the Shares, the Seller and, in the case of
such Subsidiaries, one or more of the Company and its Subsidiaries, free and
clear of all Encumbrances, and (z) there will be no Contracts (other than this
Agreement) relating to the issuance, sale or transfer of any equity securities
or other securities of the Company or any of its Subsidiaries. Except for
legends required by the Securities Act of 1933, as amended, no legend or other
reference to any purported Encumbrance appears upon any certificate representing
equity securities of the Company or any of its Subsidiaries. All of the
outstanding equity securities of the Company and each of its Subsidiaries have
been duly authorized and validly issued and are fully paid and nonassessable.
(b) None of the outstanding equity securities or other securities of the
Company or any of its Subsidiaries was issued in violation of the Securities Act
or any other Legal Requirement. Neither the Company nor any of its Subsidiaries
owns or holds, or has any Contract that obligates the Company or such Subsidiary
to acquire, any equity securities or other securities of any Person (other than
the Company or its Subsidiaries) or any direct or indirect equity or ownership
interest in any other business.
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(c) Except as set forth in Part 3.3 of the Disclosure Letter, neither
the Company nor any of its Subsidiaries will be obligated on or with respect to
any indebtedness of the Company or its Subsidiaries for borrowed money.
3.4 FINANCIAL STATEMENTS
Seller has delivered or caused to be delivered to Buyer: (i) a draft
(which draft is substantially complete in all respects other than non-material
modifications of the notes thereto and except that it is not accompanied by the
report thereon of PriceWaterhouseCoopers) audited consolidated special purpose
balance sheet of the Company and its Subsidiaries as at December 28, 2003 (such
audited consolidated balance sheet, including the notes thereto, being referred
to herein as the "Audited Carve-Out Balance Sheet"), and the related draft
audited consolidated special purpose statements of operations and changes in
investment of parent company and in cash flow for the fiscal year then ended,
including the notes thereto;, (ii) a draft (which draft is substantially
complete in all respects other than non-material modifications of the notes
thereto) unaudited consolidated special purpose balance sheet of the Company and
its Subsidiaries as at March 28, 2004 (such unaudited, consolidated balance
sheet of the Company and its Subsidiaries, including the notes thereto, being
herein referred to as the "March 28th Carve-Out Balance Sheet"), and the related
unaudited consolidated special purpose statements of operations and changes in
investment of parent company and in cash flow for the fiscal quarter then ended,
including the notes thereto; and (iii) the internal, unaudited consolidated
balance sheet of the Company and its Subsidiaries as at May 23, 2004 (the "May
23rd Operating Balance Sheet"), which is attached hereto as Exhibit 3.4. On or
before August 2, 2004, Seller will cause to be delivered to Buyer an unaudited
special purpose consolidated balance sheet of the Company and its Subsidiaries
(the "June 27th Carve-Out Balance Sheet") as at the close of business on June
27, 2004 and the related unaudited consolidated statement of income for the six
(6) months then ended, including the notes thereto (if any). On or before the
date seven (7) days after the date hereof, Seller shall deliver to Buyer the
Audited Carve-Out Balance Sheet, in final form, accompanied by the report
thereon of PriceWaterhouseCoopers, and the March 28th Carve-Out Balance Sheet,
in final form. The Audited Carve-Out Balance Sheet, the March 28th Carve-Out
Balance Sheet and the June 27th Carve-Out Balance Sheet are referred to
collectively as the "Carve-Out Balance Sheets". All such financial statements
and notes fairly present (or, as applicable, will fairly present) in all
material respects the financial condition and the results of operations, changes
in investment of parent company and in cash flow of the Company and its
Subsidiaries as at the respective dates and for the periods referred to in such
financial statements, all in accordance with GAAP. The financial statements
referred to in this Section 3.4 reflect the consistent application of such
accounting principles throughout the periods involved. No financial statements
of any Person other than the Company and its Subsidiaries are required by GAAP
to be included in the consolidated financial statements of the Company.
3.5 BOOKS AND RECORDS
Except as set forth in Part 3.5 of the Disclosure Letter, the books of
account and stock record books of the Company and its Subsidiaries, all of which
have been made available to Buyer, are complete and correct and have been
maintained in accordance with sound business practices. Except as set forth in
Part 3.5 of the Disclosure Letter, the minute books of the
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Company and its Subsidiaries, all of which have been made available to Buyer,
contain accurate and complete records of all meetings held of, and action taken
by, the stockholders, the members, the partners, the managers, the boards of
directors and committees of the boards of directors of the Company and its
Subsidiaries, and no meeting of any such stockholders, members, partners,
managers, board of directors or committee has been held for which minutes have
not been prepared and are not contained in such minute books. At the Closing,
all of the books and records of the Company and its Subsidiaries will be in the
possession of the Company and its Subsidiaries.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
(a) Part 3.6 of the Disclosure Letter contains a complete and accurate
list of each parcel of real property leased by the Company or any of its
Subsidiaries (as lessor or lessee) in connection with the conduct of the
Business (each a "Lease" and collectively, the "Leases"). Except as set forth in
Part 3.6 of the Disclosure Letter, neither Venturi, the Seller, nor the Company
or Company's Subsidiaries is or will be required to give any notice or obtain
any consent pursuant to any Lease in connection with or as a result of the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions. Part 3.6 of the Disclosure Letter also
contains a complete and accurate list of each guaranty executed by Venturi or
Seller (as guarantor) in connection with a Lease (collectively, the "Venturi
Lease Guarantees"). The Company and each applicable Subsidiary have a valid and
subsisting leasehold estate in and the right to quiet enjoyment of the real
properties leased by it as lessee under the Leases for the full term of the
Lease thereof, subject to the terms of each Lease. The Company and each
Subsidiary enjoys peaceful and undisturbed possession in all material respects
under all Leases under which it is operating as a lessee.
(i) Each Lease that requires annual rents/payments in excess of
$50,000 (each such Lease a "Material Lease") is a legal, valid and
binding agreement of the Company, or its Subsidiary (as the case may
be), enforceable in accordance with its terms and, to Seller's
Knowledge, of each other Person that is a party thereto, and except
as set forth in Part 3.6 of the Disclosure Letter, to Seller's
Knowledge, there is no material default (or any condition or event
which, after notice or lapse of time or both, would constitute a
material default) thereunder.
(ii) The Company has delivered to Buyer, prior to the execution of
this Agreement, true and complete copies of all Leases (including
any amendments and renewal letters) with respect to the real
property leased by the Company.
(iii) The Leases and the demised premises identified therein (the
"Leasehold Properties") together with all of the right, title and
interest of the Company in and to all buildings, facilities,
fixtures and other improvements located on the Leasehold Properties
and all other privileges, easements and appurtenances appertaining
to the Leases, the Leasehold Properties or to any of the
improvements located thereon, constitute all the real property as is
occupied by the Company or any of its Subsidiaries in connection
with the conduct of the Business. The Company does not own or lease
any other real property with respect to the Business.
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(iv) Except as set forth in Part 3.6 of the Disclosure Letter, all
real property leased by the Company or any of its Subsidiaries is
used solely by the Company or its Subsidiaries in conducting the
Business.
(b) The Company and its Subsidiaries own, subject only to the matters
permitted by the following sentence, all the properties and assets (whether
tangible or intangible) reflected in the March 28th Carve-Out Balance Sheet
(except for assets held under capitalized leases disclosed or not required to be
disclosed in Part 3.15 of the Disclosure Letter and personal property sold or
otherwise disposed of in the Ordinary Course of Business since March 28, 2004),
and all of the properties and assets purchased or otherwise acquired by the
Company and its Subsidiaries since March 28, 2004 (except for personal property
acquired and sold or otherwise disposed of since March 28, 2004 in the Ordinary
Course of Business). All material properties and assets reflected in the March
28th Carve-Out Balance Sheet are free and clear of all Encumbrances except as
set forth in Part 3.6(b) of the Disclosure Letter and, with respect to all such
properties and assets, (a) mortgages or security interests shown on the March
28th Carve-Out Balance Sheet (or referred to in the notes thereto), (b)
mortgages or security interests incurred in connection with the purchase of
property or assets after March 28, 2004 (such mortgages and security interests
being limited to the property or assets so acquired), (c) liens for current
taxes not yet due or, if due, being contested in good faith and by appropriate
proceedings being diligently conducted and for which adequate reserves in
accordance with GAAP have been provided, and (d) with respect to real property,
(i) minor imperfections of title, if any, including mechanics' liens,
materialmen's liens and similar liens imposed by law, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of the Company or any of
its Subsidiaries, and (ii) zoning laws and other land use restrictions that do
not impair the present or anticipated use of the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The properties and assets of the Company and its Subsidiaries at Closing,
including without limitation the rights of the Company and its Subsidiaries
under the Transition Services Agreement, will be sufficient for the conduct of
the Business immediately after the Closing in substantially the same manner as
conducted prior to March 28, 2004. Neither Venturi nor the Seller, nor any of
their Subsidiaries (other than the Company and its Subsidiaries), conducts or is
engaged in any commercial staffing business.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company and its Subsidiaries (collectively,
the "Accounts Receivable") that are reflected on the March 28th Carve-Out
Balance Sheet represent, and that are reflected on the Closing Date Balance
Sheet will represent, valid obligations arising from sales actually made or
services actually performed in the Ordinary Course of Business. The respective
reserves for uncollectible accounts shown on the March 28th Carve-Out Balance
Sheet and the Closing Date Balance Sheet, as applicable, are (or, in the case of
the Closing Date Balance Sheet, will be) prepared in accordance with GAAP. Part
3.8 of the Disclosure Letter
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contains a complete and accurate list of all Accounts Receivable as of May 30,
2004, which list sets forth the aging of such Accounts Receivable.
3.9 NO UNDISCLOSED OR LONG-TERM LIABILITIES
(a) To Seller's Knowledge, except as set forth in Part 3.9(a) of the
Disclosure Letter, neither the Company nor its Subsidiaries has any liabilities
or obligations of the type required to be reflected on a balance sheet prepared
in accordance with GAAP (whether absolute, accrued, contingent or otherwise)
except for liabilities or obligations reflected or reserved against in the March
28th Carve-Out Balance Sheet, current liabilities incurred in the Ordinary
Course of Business since March 28, 2004, liabilities or obligations under
Applicable Contracts (other than liabilities for breach thereof), and
liabilities and obligations that are not, individually and in the aggregate,
reasonably likely to result in a Material Adverse Effect.
(b) Except as set forth on Party 3.9(b) of the Disclosure Letter (but
without taking into consideration any Disclosure Letter Supplement), neither the
Company nor any of its Subsidiaries will, as of the Closing Date, be obligated
on or with respect to any liabilities or obligations of the type required to be
reflected on a balance sheet prepared in accordance with GAAP (whether absolute,
accrued, contingent or otherwise) as a long-term liability.
3.10 TAXES
(a) Except as set forth in Part 3.10(a) of the Disclosure Letter,
Venturi and Seller have filed or caused to be filed (on a timely basis since
December 31, 2000) all Tax Returns that are or were required to be filed by
Venturi, Seller, the Company and the Company's Subsidiaries with respect to the
Company, its Subsidiaries and the Business, either separately or as a member of
a group of corporations, pursuant to applicable Legal Requirements. Seller has
delivered or made available to Buyer copies of, and Part 3.10(a) of the
Disclosure Letter contains a complete and accurate list of, all such Tax Returns
filed since December 31, 2000. Venturi and Seller have paid or caused to be
paid, or have made or caused to have been made provision for the payment of, all
Taxes that have or may have become due pursuant to those Tax Returns or
otherwise, or pursuant to any assessment received by Venturi, Seller, the
Company or any of the Company's Subsidiaries, except such Taxes, if any, as are
listed in Part 3.10(a) of the Disclosure Letter.
(b) The United States federal and state income Tax Returns of Venturi,
the Seller, the Company and each of the Company's Subsidiaries subject to such
Taxes have been audited by the IRS or relevant state tax authorities or are
closed by the applicable statute of limitations for all taxable years through
December 31, 2000 (the "Final Closed Tax Year"). Except as set forth in Part
3.10(b) of the Disclosure Letter, all deficiencies proposed as a result of such
audits have been paid, reserved against or settled. Part 3.10(b) of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by the Company or any of its Subsidiaries or any group of
corporations including the Company or any of its Subsidiaries for all taxable
years since the Final Closed Tax Year, and the resulting deficiencies, if any,
proposed by the IRS. Except as described in Part 3.10 of the Disclosure Letter,
and other than waivers or extensions that have lapsed, neither Venturi, the
Seller nor the Company or its Subsidiaries has
23-
given or been requested to give waivers or extensions (or is or would be subject
to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes for which the Company or any of its
Subsidiaries may be liable.
(c) To Seller's Knowledge, there exists no proposed tax assessment
against Venturi, the Seller, the Company or any of the Company's Subsidiaries
except as disclosed in the Balance Sheet or in Part 3.10(c) of the Disclosure
Letter. Except as set forth in Part 3.10(c) of the Disclosure Letter, all
material Taxes that the Company or any of its Subsidiaries is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(d) All Tax Returns filed by (or that include on a consolidated basis)
the Company or any of its Subsidiaries are true, correct and complete in all
material respects. Except as set forth in Part 3.10(d) of the Disclosure Letter,
there is no tax sharing agreement that will require any payment by the Company
or any of its Subsidiaries after the date of this Agreement.
(e) Since the Final Closed Tax Year, neither the Company nor any of its
Subsidiaries has been a member of an affiliated group (other than the affiliated
group of which Venturi is the common parent) filing a consolidated federal
income tax return, nor taken any other action that could result in liability for
Taxes of an affiliated group (other than the affiliated group of which Venturi
is the common parent) under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local or foreign law), including as a transferee or
successor, by contract or otherwise. Except as set forth in Part 3.10(e) of the
Disclosure Letter, neither the Company nor any of its Subsidiaries is currently
the beneficiary of any extensions of time within which to file any Tax Return.
Except as set forth in Part 3.10(e) of the Disclosure Letter, no claim has ever
been made by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction, nor, to Seller's Knowledge, is there any factual or legal
basis for any such claim.
(f) All material Tax elections that have been made by the Company or any
of its Subsidiaries since the end of the Final Closed Tax Year are shown on Part
3.10(f) of the Disclosure Letter.
(g) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of IRC Section
897(c)(2) during the applicable period specified in IRC Section
897(c)(1)(A)(ii).
(h) Neither the Company nor any of its Subsidiaries (i) has agreed, nor
to Seller's Knowledge is required, to make any adjustment under Section 481(a)
of the IRC by reason of a change in accounting method or otherwise that will
affect the liability of the Company or its Subsidiaries for Taxes, (ii) has made
an election, nor to Seller's Knowledge is required, to treat any asset as owned
by another person pursuant to the provisions of Section 168(f) of the IRC or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of section 168 of the IRC, (iii) has made any of the foregoing elections nor to
Seller's Knowledge is required to apply any of the foregoing rules under any
comparable state or local tax provision, and (iv) owns any material assets that
were financed directly or indirectly with, or that directly or indirectly
secure, debt the interest on which is tax-exempt under section 103(a) of the
IRC.
24-
(i) The Contemplated Transactions, either alone or in conjunction with
any other transaction that the Company or any of its Subsidiaries may have
entered into or agreed to, will not give rise to any federal income tax
liability under section 355(e) of the IRC for which the Company or any of its
Subsidiaries may in any way be held liable.
(j) Neither the Company nor any of its Subsidiaries is a party to any
"Gain Recognition Agreements" as such term is used in the Treasury Regulations
promulgated under Section 367 of the IRC.
(k) Neither the Company nor any of its Subsidiaries has made or become
obligated to make, nor will the Company or any of its Subsidiaries, as a result
of any event connected with any of the Contemplated Transactions and/or any
termination of employment related thereto, make or become obligated to make, any
"excess parachute payment," as defined in Section 280G of the IRC (without
regard to subsection (b)(4) thereof).
(l) Except as set forth in Part 3.10(l) of the Disclosure Letter, there
are no liens for Taxes (other than for current Taxes that are not yet due and
payable or are being contested in good faith) upon the assets of the Company or
any of its Subsidiaries.
(m) Except as set forth in Part 3.10(m) of the Disclosure Letter, there
are no joint ventures, partnerships, limited liability companies or other
arrangements or contracts to which the Company or any of its Subsidiaries is a
party and that could be treated as a partnership for federal income tax
purposes.
(n) Neither the Company nor any of its Subsidiaries has, nor has it or
any of them ever had, a "permanent establishment" in any foreign country, as
such term is defined in any applicable Tax treaty or convention between the
United States and such foreign country, nor has it otherwise taken steps that
have exposed, or will expose, it to the taxing jurisdiction of a foreign
country.
(o) The tax basis of each of the receivables owed by the Company to
Venturi and/or the Seller contributed by Seller to the Company in contemplation
of the consummation of the Contemplated Transactions is equal in each case to
the principal amount of such receivable.
(p) To Seller's Knowledge, the Company has not been notified of any
potential liability that may be imposed after the Closing with respect to the
Income Tax Sharing Agreement dated September 29, 1995 by and among ▇▇▇▇▇▇▇, ▇▇▇▇
Services, Inc., a California corporation and Adia Services Inc., a Delaware
corporation.
3.11 NO MATERIAL ADVERSE CHANGE
Since March 28, 2004, except as set forth in Part 3.11 of the Disclosure
Letter there has not been any Material Adverse Change in the Business or in the
operations, properties, assets or condition (financial or otherwise) of the
Company or any of its Subsidiaries, and no event has occurred or circumstance
exists that would reasonably be expected to result in any such Material Adverse
Change. "Material
25-
Adverse Change" means the occurrence of an event or a change in circumstances or
conditions that, when taken individually or together with all other adverse
changes or effects, is or is reasonably likely to have or result in a Material
Adverse Effect.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.12 of the Disclosure Letter:
(i) the Company and each of its Subsidiaries is, and at all times
since March 28, 2004 has been, in compliance in all material respects with
each Legal Requirement that is or was applicable to it or to the conduct
or operation of the Business or the ownership or use of any of its assets;
(ii) to Seller's Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may constitute
or result in a violation by the Company or any of its Subsidiaries of, or
a failure on the part of the Company or any of its Subsidiaries to comply
with, any material Legal Requirement, or (B) may give rise to any
obligation on the part of the Company or any of its Subsidiaries to
undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(iii) Neither the Company nor any of its Subsidiaries has received,
at any time since March 28, 2004, any written notice or other
communication from any Governmental Body or any other Person regarding (A)
any actual, alleged, possible or potential violation of, or failure to
comply with, any material Legal Requirement, or (B) any actual, alleged,
possible or potential obligation on the part of the Company or any of its
Subsidiaries to undertake, or to bear all or any portion of the cost of,
any remedial action of any nature.
(b) The Company and each Subsidiary possess all Governmental
Authorizations necessary to permit the Company and its Subsidiaries to lawfully
conduct and operate the Business in the manner in which it was operated
immediately prior to March 28, 2004 and to permit the Company and each of
Company's Subsidiaries to own and use their assets in the manner in which they
currently own and use such assets.
(c) No event has occurred or circumstance exists that would reasonably be
expected (with or without notice or lapse of time) to (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any material Governmental Authorization, or (B) result directly
or indirectly in the revocation, withdrawal, suspension, cancellation or
termination of, or any modification to, any material Governmental Authorization;
(d) Other than as set forth in Part 3.12 of the Disclosure Letter, neither
Venturi, Seller, the Company, nor any Subsidiary of the Company is or will be
required to provide any notice or to obtain any Consent from any Person in order
for such Governmental Authorizations to remain valid and in full force and
effect upon execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
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3.13 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.13 of the Disclosure Letter, there is
no pending Proceeding:
(i) that has been commenced by or against the Company or any of
its Subsidiaries or, to Seller's Knowledge, that otherwise relates to or
may affect the Business or any of the assets owned or used by the Company
or any of its Subsidiaries which, if determined adversely against the
Company or any Subsidiary, would reasonably be expected to have a Material
Adverse Effect; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of the
Contemplated Transactions.
To Seller's Knowledge, no such Proceeding has been Threatened. Seller has
delivered or, within thirty (30) days after the date of this Agreement, will
have delivered to Buyer copies of all pleadings and all material correspondence
and other material documents relating to each Proceeding listed in Part 3.13 of
the Disclosure Letter.
(b) Except as set forth in Part 3.13 of the Disclosure Letter:
(i) there is no Order to which any of the Company or its
Subsidiaries, or any of the assets owned or used by any of them or the
Business, is subject;
(ii) neither Venturi nor Seller is subject to any Order that
relates to the Business or to any of the assets owned or used by the
Company or any of its Subsidiaries; and
(iii) to Seller's Knowledge, no officer, director, agent or employee
of the Company or any of its Subsidiaries is subject to any Order that
prohibits such officer, director, agent or employee from engaging in or
continuing any conduct, activity or practice relating to the Business.
(c) Except as set forth in Part 3.13 of the Disclosure Letter:
(i) the Company and each of its Subsidiaries is, and at all times
since March 28, 2004, has been, in full compliance with all of the terms
and requirements of each Order to which it, or any of the assets owned or
used by it, is or has been subject;
(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any
Order to which the Company or any of its Subsidiaries, or any of the
assets owned or used by the Company or any of its Subsidiaries or the
Business, is subject; and
27-
(iii) neither the Company nor any of its Subsidiaries has received,
at any time since March 28, 2004, any written notice or other
communication from any Governmental Body or any other Person regarding any
actual, alleged, possible or potential violation of, or failure to comply
with, any term or requirement of any Order to which the Company or any of
its Subsidiaries, or any of the assets owned or used by the Company or any
of its Subsidiaries or the Business, is or has been subject.
3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.14 of the Disclosure Letter, since March 28,
2004, the Company and Company's Subsidiaries have conducted the Business only in
the Ordinary Course of Business and there has not been any:
(a) change in the Company or any of its Subsidiaries' authorized or
issued capital stock; grant of any stock option or right to purchase shares of
capital stock of the Company or any of its Subsidiaries; issuance of any
security convertible into such capital stock; grant of any registration rights;
or purchase, redemption, retirement or other acquisition by the Company or any
of its Subsidiaries of any shares of any such capital stock;
(b) amendment to the Organizational Documents of the Company or any of
its Subsidiaries;
(c) except for payments or increases in the Ordinary Course of Business,
payment or increase by the Company or any of its Subsidiaries of any bonuses,
salaries or other compensation to any director or officer or to any employee or
entry by the Company or any of its Subsidiaries into any employment, severance
or similar Contract with any director, officer or management employee;
(d) damage to or destruction or loss of any asset or property that has
had, or is expected to have, a Material Adverse Effect;
(e) entry into, termination of, or receipt of notice of termination of
(i) any material license, distributorship, dealer, sales representative, joint
venture, credit or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company or any of its
Subsidiaries of at least $50,000.00;
(f) sale, lease or other disposition of any material asset or property
of the Company or any of its Subsidiaries or mortgage, pledge or imposition of
any lien or other encumbrance on any material asset or property of the Company
or any of its Subsidiaries, including the sale, lease or other disposition of
any of the Intellectual Property Assets;
(g) cancellation or waiver of any claims or rights with a value to the
Company or any of its Subsidiaries in excess of $50,000.00;
(h) Tax election or material change in the accounting methods used by
the Company and its subsidiaries;
28-
(i) incurrence of indebtedness for borrowed money or other material
liabilities (other than intercompany borrowings and borrowings under the credit
facilities of Venturi that are guaranteed by the Company and its Subsidiaries);
(j) capital expenditure involving more than $50,000.00 by the Company or
any of its Subsidiaries or any other material transaction outside the Ordinary
Course of Business to which the Company or any of its Subsidiaries is or was a
party;
(k) Contract (or series of related Contracts) involving more than
$50,000.00 or outside the Ordinary Course of Business entered into by the
Company or any of its Subsidiaries;
(l) dividend declared, set aside or paid or any distribution made with
respect to the Shares (whether in cash or in kind, redemption, purchase or other
acquisition of any of the Shares by the Company;
(m) loan by the Company or any of its Subsidiaries to, or any other
transaction with, any of the shareholders, directors, officers, employees or
Related Persons or any of them;
(n) written or oral: (i) employment Contract with any operating company
president or more senior executive officer of the Company or of any Subsidiary,
or (ii) collective bargaining agreement, entered into by the Company or any of
its Subsidiaries, or modification the terms of any existing such Contract or
agreement;
(o) except for hourly employees, increase in the base compensation of
any of the Company's or any of its Subsidiaries' officers or employees or any
other change by the Company or any of its Subsidiaries in the employment terms
for any of such officer or employee, in each case, with respect to those
officers or employees, whose annual compensation, including any bonuses, equals
or exceeds $75,000.00;
(p) deterioration or diminution in the Company's or its applicable
Subsidiaries' relationship with any customer or supplier of any of them, which
individually or in the aggregate has had or would reasonably be expected to have
a Material Adverse Effect;
(q) prepayment of any indebtedness of the Company or any of its
Subsidiaries;
(r) written agreement by the Company or any of its Subsidiaries to do,
or which could result in, any of the foregoing; or
(s) amendment of any foreign, federal, state or local Tax election,
amendment of any Tax return, agreement to waive or extend any statute of
limitations, or resolution or agreement to resolve any audit or proceeding
relating to Taxes, to the extent such action relates to the Taxes of Company or
any of its Subsidiaries.
3.15 CONTRACTS; NO DEFAULTS
(a) Part 3.15(a) of the Disclosure Letter contains a complete and
accurate list of the following Applicable Contracts (each a "Material
Contract"):
29-
(i) each of the fifty (50) largest Applicable Contracts that
involves performance of services or delivery of goods or materials by one
or more of the Company and its Subsidiaries;
(ii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of
one or more of the Company and its Subsidiaries in excess of $50,000.00;
(iii) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a
group of employees;
(iv) each joint venture, partnership, limited liability company and
other Applicable Contract (however named) involving a sharing of profits,
losses, costs or liabilities by the Company or any of its Subsidiaries
with any other Person;
(v) each Applicable Contract (other than subcontracts, service
agreements and teaming agreements entered into in the Ordinary Course of
Business) containing covenants that in any way purport to restrict the
Business or activities related thereto or limit the freedom of the Company
or any of its Subsidiaries or, to Seller's Knowledge, any Related Person
of the Company or its Subsidiaries to engage in any line of business or to
compete with any Person;
(vi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Company or any of its Subsidiaries to be responsible
for consequential damages;
(vii) each Applicable Contract for capital expenditures in excess of
$50,000.00;
(viii) each Applicable Contract under which the Company or any
Subsidiary is a borrower, guarantor or obligor with respect to, or a
lessee under, any guaranty of indebtedness of any Person (other than the
Company and its Subsidiaries), or capitalized lease;
(ix) each Applicable Contract for the supply or purchase of goods
or services with the Federal government or any state or local government
or any agency thereof, to which the Company or any Subsidiary is a party
to or bound by, the termination or cancellation of which could reasonably
be expected to have a Material Adverse Effect; and
(x) each amendment, supplement and modification (whether oral or
written) in respect of any of the foregoing.
Part 3.15(a) of the Disclosure Letter sets forth, with respect to each such
Material Contract, the parties thereto and the dates thereof.
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(b) Except as set forth in Part 3.15(b) of the Disclosure Letter, to
Seller's Knowledge, no officer, director, agent, employee, consultant or
contractor of the Company or any of its Subsidiaries is bound by any Contract
that purports to limit the ability of such officer, director, agent, employee,
consultant or contractor to (A) engage in or continue any conduct, activity or
practice relating to the Business or (B) assign to the Company or any of its
Subsidiaries or to any other Person any rights to any invention, improvement or
discovery, where such limitations would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(c) Except as set forth in Part 3.15(c) of the Disclosure Letter, the
Company and its Subsidiaries have full corporate, limited liability company or
limited partnership power and authority to perform their respective obligations
under each Contract identified or required to be identified in Part 3.15(a) of
the Disclosure Letter, and each such Contract is in full force and effect and is
valid and enforceable in accordance with its terms against the Company or its
Subsidiaries, as applicable, and to Seller's Knowledge is valid and enforceable
in accordance with its terms against the other parties thereto, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws relating to or limiting creditors'
rights generally or by general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
(d) Except as set forth in Part 3.15(d) of the Disclosure Letter:
(i) the Company and each of its Subsidiaries are in compliance
with all applicable terms and requirements of each Material Contract;
(ii) to Seller's Knowledge, each other Person that has or had any
obligation or liability under any Material Contract under which the
Company or its Subsidiaries has or had any rights is, and at all times
since March 28, 2004, has been, in compliance with all applicable terms
and requirements of each such Material Contract; and
(iii) to Seller's Knowledge, no event has occurred or circumstance
exists that (with or without notice or lapse of time) may conflict with,
or result in a violation or breach of, or give the Company or any of its
Subsidiaries or other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to
cancel, terminate or modify, any Material Contract.
(e) Except as set forth in Part 3.15(e) of the Disclosure Letter, there
are no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to the Company or any of its
Subsidiaries under current or completed Contracts with any Person, and no such
Person has made written demand for such renegotiation, where such
renegotiations, attempts to renegotiate or written demands for renegotiation
would, individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
(f) The Contracts relating to the sale, design, manufacture or provision
of products or services by the Company and its Subsidiaries have been entered
into in the Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with
31-
any other Person, or any consideration having been paid or promised, that is or
would be in violation of any material Legal Requirement.
(g) To Seller's Knowledge, (i) no material purchase or other commitment
of the Company or any Subsidiary is in excess of the normal, ordinary and usual
requirements of the Business, and (ii) there is no material outstanding bid,
sales proposal, contract or unfilled order of the Company or any Subsidiary
which requires or, if accepted, would reasonably be expected to require, the
Company or any Subsidiary to supply services at a cost to the Company or any
Subsidiary in excess of the revenues to be received therefore.
3.16 INSURANCE
(a) Seller has delivered to Buyer:
(i) true and complete copies of all policies of insurance to which
the Company or any of its Subsidiaries is a party or under which the
Company or any of its Subsidiaries, or any director of the Company or any
of its Subsidiaries, is or has been covered;
(ii) true and complete copies of all pending applications for
policies of insurance;
(iii) any statement by the auditor of the financial statements of
the Company or any of its Subsidiaries with regard to the adequacy of such
entity's coverage or of the reserves for claims; and
(iv) all loss runs from all policies of insurance that could have
any potential claim or premium liabilities and these loss runs contain
specific claim information, including name of claimant, type of injury,
date of injury, details on amounts paid and incurred.
(b) Part 3.16(b) of the Disclosure Letter describes any self-insurance
arrangement by or affecting the Company or any of its Subsidiaries, including
any reserves established thereunder;
(c) Part 3.16(c) of the Disclosure Letter lists:
(i) each policy of insurance and other agreement relating to the
providing of workers compensation coverage with respect to historical
claims of Venturi, Seller, the Company or any of Company's Subsidiaries,
including all such policies issued by and agreements with AIG Insurance
Company or its affiliates (the "AIG Workers Compensation Policies"), CNA
Insurance Company or its affiliates (the "CNA Workers Compensation
Policies") and Hartford Insurance Company or its affiliates (the "Hartford
Workers Compensation Policies");
32-
(ii) any contract or arrangement related to business insurance,
other than a policy of insurance (except for the AIG Workers Compensation
Policies, the CNA Workers Compensation Policies and the Hartford Workers
Compensation Policies), for the transfer or sharing of any risk by the
Company or any of its Subsidiaries; and
(iii) all obligations of the Company and its Subsidiaries to third
parties with respect to insurance (excluding such obligations under leases
and services agreements) and identifies the policy under which such
coverage is provided.
(d) Except as set forth on Part 3.16(d) of the Disclosure Letter:
(i) all policies to which the Company or any of its Subsidiaries
is a party or that provide coverage to the Company or any of its
Subsidiaries, or any director or officer of any of them:
(A) are currently in effect and there are no periods for
which such policies do not provide coverage;
(B) taken together, provide insurance coverage for the
assets and the operations of the Company and its Subsidiaries
against risks of the nature normally insured against by similar
entities in the same or similar lines of business as the Business in
coverage amounts typically and reasonably carried by such entities;
(C) are sufficient for compliance with all Legal
Requirements and with requirements to maintain insurance contained
in Contracts to which the Company or any of its Subsidiaries is a
party or by which any of them is bound;
(D) following Closing, will continue in full force and
effect and will cover claims made against the Company or any of its
Subsidiaries arising out of occurrences or events that occurred
prior to Closing; and
(E) do not provide for any retrospective premium adjustment
or other experience-based liability on the part of the Company or
any of its Subsidiaries;
(ii) none of the Seller, Venturi, the Company or any of Company's
Subsidiaries has received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other written indication that any insurance policy is
no longer in full force or effect or will not be renewed or that the
issuer of any policy is not willing or able to perform its obligations
thereunder;
(iii) the Company and its Subsidiaries and, with respect to the CNA
Workers Compensation Policies and the Hartford Workers Compensation
Policies, Venturi and the Seller have paid, or caused to be paid, all
premiums due, and have otherwise performed all of their respective
obligations, under each policy to which the Company or any of its
33-
Subsidiaries is a party or that provides coverage to the Company or any of
its Subsidiaries;
(iv) the Company and its Subsidiaries have given notice to the
insurer of all claims that may be insured thereby, unless Company and its
Subsidiaries do not have knowledge of such claims, in which case, upon
receipt of knowledge, notice will be given as required;
(v) all reserves for self-insurance claims are properly and
accurately reflected, in accordance with GAAP, in the Audited Carve-Out
Balance Sheet and the March 28th Carve-Out Balance Sheet;
(vi) Venturi and Seller agree that, for the period from the Closing
date through December 31, 2009, Venturi and Seller shall cause the
coverage provided under their Directors and Officers liability insurance
policy for pre-Closing wrongful acts to be maintained with no change in
coverage, in order to provide continuous coverage for any such pre-Closing
wrongful acts; provided, however, that Venturi and Seller may satisfy the
obligation set forth in this clause (vi) by obtaining a six-year "tail"
policy on terms and conditions no less protective of such Directors and
Officers than the existing Directors and Officers insurance policy
maintained by Venturi;
(vii) there are no letters of credit or other collateral posted or
pledged, or required to be posted or pledged, to or for the benefit of (A)
CNA Insurance Company (or its affiliates) with respect to the CNA Workers
Compensation Policies (such collateral referred to herein as the "CNA
LCs") or (B) Hartford Insurance Company (or its affiliates) with respect
to the Hartford Workers Compensation Policies (such collateral referred to
herein as the "Hartford LCs"); and
(viii) at Closing, the aggregate face value of all CNA LCs and all
Hartford LCs (whether posted or pledged, or required to be posted or
pledged) will not exceed $6,478,455.40, and all cash collateral held by
either CNA Insurance Company or Hartford Insurance Company (or their
respective affiliates), including approximately $250,000 held by Harford
Insurance Company to secure Venturi's loss fund under the Hartford Workers
Compensation Policies, will be held for the account of Buyer.
3.17 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets-The term "Intellectual Property Assets"
includes:
(i) the name `Venturi,' and such other fictional business names,
trading names, registered and unregistered trademarks, service marks,
domain names and applications for the same as are currently used in the
Business (collectively, "Marks");
(ii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
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(iii) all rights in mask works (collectively, "Rights in Mask
Works");
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings and blue prints that are not generally known to other
Persons and have value to the Company or its Subsidiaries used in the
Business or owned or licensed by the Company or any of its Subsidiaries as
licensee or licensor (collectively, the "Trade Secrets"); and
(v) all patents and patent applications used in the Business or
owned, or licensed by the Company or any of its Subsidiaries as licensee
or licensor (collectively, the "Patents").
(b) Agreements
Part 3.17(b) of the Disclosure Letter contains a complete and accurate
list of all Contracts relating to the Intellectual Property Assets to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound, including agreements with current or former
employees, consultants or contractors regarding the appropriation or the
nondisclosure of any of the Intellectual Property Assets, and except for any
license implied by the sale of a product and perpetual, paid-up licenses for
commonly available software programs with a value of less than $50,000 under
which the Company or any of its Subsidiaries is the licensee. There are no
outstanding and, to Seller's Knowledge, no Threatened disputes or disagreements
with respect to any such agreement.
(c) Know-How Necessary for the Business
The Intellectual Property Assets are all those necessary for the operation
of the Business as conducted immediately prior to March 28, 2004. The Company
owns or is licensed or otherwise possesses the right to use (without payment to
any third party) each of the Intellectual Property Assets used in the Business,
free and clear of all Encumbrances (except as set forth on Part 3.17(c) of the
Disclosure Letter). On or before the Closing Date, the Company will be the owner
of all right, title and interest in and to, or, in the case of Intellectual
Property Assets used in the Business, but not owned by the Company, Venturi,
Seller or any of their respective Subsidiaries, will have a valid right to use,
each of the Intellectual Property Assets, in each case, free and clear of all
Encumbrances except, with respect only to Intellectual Property Assets not owned
by the Company, Venturi, Seller or any of their respective Subsidiaries,
Encumbrances imposed by, or arising from any act or omission of, the licensor or
owner of such Intellectual Property Assets. Except as set forth in Part 3.17(c)
of the Disclosure Letter, to Seller's Knowledge, there is no potentially
interfering use of any of the Intellectual Property Assets (other than the
Marks) owned by the Company, Venturi, Seller or any of their respective
Subsidiaries by any third party.
(d) Trademarks
(i) Part 3.17(d) of Disclosure Letter contains a complete and
accurate list of all Marks.
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(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in material compliance with all
formal legal requirements (including the timely post-registration filing
of affidavits of use and incontestability and renewal applications), are
valid and enforceable and are not subject to any maintenance fees or taxes
or actions falling due within ninety days after the Closing Date.
(iii) No ▇▇▇▇ has been or is now involved in any opposition,
invalidation or cancellation and no such action has been Threatened.
(iv) To Seller's Knowledge, none of the Marks used by the Company
or any of its Subsidiaries infringes or is alleged to infringe any trade
name, trademark or service ▇▇▇▇ of any third party.
(e) Copyrights
(i) Part 3.17(e) of the Disclosure Letter contains a complete and
accurate list of all registered Copyrights and Copyright applications used
in the Business.
(ii) All the Copyrights used in the Business that have been
registered with the United States Copyright Office are currently in
material compliance with formal legal requirements, are valid and
enforceable and are not subject to any maintenance fees or taxes or
actions falling due within ninety days after the date of Closing.
(iii) No Copyright used in the Business and owned by the Company,
Venturi, Seller or their respective Subsidiaries has been Threatened and,
to Seller's Knowledge, no Copyright used in the Business has been
Threatened and, to Seller's Knowledge, no Copyright used in the Business
is infringed or has been challenged in any way. To Seller's Knowledge,
none of the subject matter of any of the Copyrights infringes or is
alleged to infringe any copyright of any third party or is a derivative
work based on the work of a third party.
(f) Trade Secrets
(i) Except as set forth on Part 3.17(f) of the Disclosure Letter,
with respect to each Trade Secret, the documentation relating to such
Trade Secret is accurate, and sufficient in detail and content to identify
and explain it and to allow its full and proper use by qualified
individuals without reliance on the knowledge or memory of any individual.
(ii) The Company, Seller and Venturi and each of their respective
Subsidiaries have taken commercially reasonable precautions to protect the
secrecy, confidentiality and value of the Trade Secrets owned by Venturi,
Seller, the Company or any of their respective Subsidiaries. The Company
and its Subsidiaries have the right to use the Trade Secrets owned by
Venturi or the Seller without restriction. The Trade Secrets owned by
Venturi, Seller, the Company or any of their respective Subsidiaries are
not
36-
part of public knowledge or literature, and to Seller's Knowledge, have
not been used, divulged, or appropriated either for the benefit of any
Person (other than one or more of the Company and the Company
Subsidiaries) or to the detriment of the Company and the Company
Subsidiaries. To Seller's Knowledge, the Trade Secrets used but not owned
by Venturi, Seller, the Company or any of their respective Subsidiaries
are not part of public knowledge or literature and have not been used,
divulged, or appropriated either for the benefit of any Person (other than
one or more of the Company and the Company Subsidiaries) or to the
detriment of the Company and the Company Subsidiaries.
(iii) No adverse claims, the subject of which is a Trade Secret,
have been made or Threatened against the Company or any of its
Subsidiaries. To Seller's Knowledge, no Trade Secret has been challenged
in any way.
(g) Patents
Neither the Company, nor any Company Subsidiary owns, licenses, uses or
holds or has rights under any Patent.
3.18 CERTAIN PAYMENTS
Except as set forth on Part 3.18 of the Disclosure Letter, since December
31, 2000, neither the Company nor any of its Subsidiaries or director, officer,
agent or employee of the Company or any of its Subsidiaries or, to Seller's
Knowledge, any other Person acting for or on behalf of the Company or any of its
Subsidiaries, has directly or indirectly in violation of a Legal Requirement,
(a) made any contribution, gift, bribe, rebate, payoff, influence payment, kick
back or other payment to any Person, private or public, regardless of form,
whether in money, property or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured, or
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company or any of its Subsidiaries or any Related
Person of the Company or any of its Subsidiaries, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company.
3.19 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.19 of the Disclosure Letter:
(a) neither Venturi nor Seller nor, to Seller's Knowledge, any Related
Person of Venturi or Seller has any material interest in any material asset used
in or pertaining to the Business as operated currently;
(b) neither Venturi nor Seller nor, to Seller's Knowledge, any Related
Person of Venturi, Seller or the Company, or of any of Company's Subsidiaries,
owns (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has (i) had business dealings or
a material financial interest in any transaction with the Company or any of its
Subsidiaries, or (ii) engaged in competition with the Company or any of its
37-
Subsidiaries with respect to any line of the products or services of the Company
or any of its Subsidiaries (a "Competing Business") in any market presently
served by it or them; and
(c) neither Venturi nor Seller nor, to Seller's Knowledge, any Related
Person of Venturi, Seller or the Company, or of any of Company's Subsidiaries,
is a party to any Contract with, or has any claim or right against, the Company
or any of its Subsidiaries.
3.20 BROKERS OR FINDERS
Except as set forth in Part 3.20 of the Disclosure Letter, neither
Venturi, Seller, the Company nor the Company's Subsidiaries have any obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement or the
Contemplated Transactions (other than (i) amounts Seller will pay, or cause to
be paid, at the Closing to Sun Trust ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and (ii) any such
obligation or liability (a) incurred or purported to be incurred on behalf of
Venturi, Seller, the Company or the Company's Subsidiaries by Buyer or a Related
Person of Buyer or (b) as to which Buyer or any Related Person of Buyer has
actual knowledge).
3.21 PENSION AND WELFARE PLANS.
Part 3.21 of the Disclosure Letter sets forth all Pension Plans and
Welfare Plans. Except as set forth in Part 3.21 of the Disclosure Letter, each
Pension Plan and Welfare Plan complies in all material respects with ERISA and
all other applicable statutes and governmental and regulatory rules and
regulations; no Reportable Event has occurred and is continuing with respect to
any Pension Plan; neither Seller, nor the Company nor any Subsidiary nor any
ERISA Affiliate has withdrawn from any Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203 or 4205 of
ERISA, respectively; neither Seller nor the Company nor any Subsidiary nor any
ERISA Affiliate has entered into an agreement pursuant to Section 4204 of ERISA;
neither Seller nor the Company nor any Subsidiary nor any ERISA Affiliate has in
the past contributed to or currently contributes to a Multiemployer Plan;
neither Seller nor the Company nor any Subsidiary nor any ERISA Affiliate has
any withdrawal liability with respect to a Multiemployer Plan; no steps have
been instituted by the Company or any Subsidiary or any ERISA Affiliate to
terminate any Pension Plan (other than a Defined Contribution Plan); no
condition exists or event or transaction has occurred in connection with any
Pension Plan, Multiemployer Plan or Welfare Plan which could result in the
incurrence by Seller, the Company or any Subsidiary or any ERISA Affiliate of
any material liability, fine or penalty; and neither Seller nor the Company nor
any Subsidiary nor any ERISA Affiliate is a "contributing sponsor" as defined in
Section 4001(a)(13) of ERISA of a "single-employer plan" as defined in Section
4001(a)(15) of ERISA which has two or more contributing sponsors at least two of
whom are not under common control. Except as disclosed on the Financial
Statements of Seller, the Company and its Subsidiaries delivered by the Company
to Buyer, neither Seller nor the Company nor any Subsidiary nor any ERISA
Affiliate has any unfunded liability with respect to any Welfare Plan. Any
Pension Plan that is intended to be a qualified plan under Section 401(a) of the
IRC has received a favorable determination letter from the IRS covering
amendments to such Pension Plan required or permitted under GUST (as defined in
Rev. Proc. 2004-6) or relies upon an opinion letter covering such amendments
from the IRS issued to the
38-
prototype or volume submitter plan sponsor concerning such Pension Plan's
qualified status under Section 401(a) of the IRC, and since the date of such
last letter there are no pending issues with the IRS, the Department of Labor or
the Pension Benefit Guaranty Corporation or any other issues that would result
or is likely to result in the revocation of such determination letter or a loss
of reliance on such opinion letter. In addition, each Pension Plan that is
intended to be a qualified plan under Section 401(a) of the IRC has been amended
to comply with all applicable changes required or permitted under the Economic
Growth and Tax Relief Reconciliation Act of 2001 and any subsequent applicable
legislation, rule making, announcement, notice or regulation promulgation.
Seller, the Company, each Subsidiary and each ERISA Affiliate is in
compliance with the Multiemployer Pension Plan Amendments Act of 1980, as
amended ("MEPPAA"), and has no liability for pension contributions pursuant to
MEPPAA.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms. Buyer has the
absolute and unrestricted right, power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance of any
of the Contemplated Transactions by Buyer will give any Person the right to
prevent, delay or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of Buyer; or
(iii) any Legal Requirement or Order to which Buyer may be subject.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
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4.3 INVESTMENT INTENT
(a) Buyer is acquiring the Shares for its own account and not with a
view to their distribution within the meaning of Section 2(11) of the Securities
Act. Buyer confirms that Seller and the Company have made available to Buyer and
its representatives and agents the opportunity to ask questions of the officers
and management employees of the Company and its Subsidiaries and to acquire such
additional information about the Business and the financial condition of the
Company and its Subsidiaries as Buyer has requested and all such information has
been received.
(b) Buyer is a sophisticated investor with such knowledge and experience
in financial and business matters and investments in evaluating the merits and
risks of acquiring the Shares. Buyer is (i) able to bear the economic risk of
this investment, (ii) able to hold the Shares indefinitely and (iii) presently
able to afford a complete loss of this investment.
(c) Buyer is an "accredited investor" as defined in Regulation D under
the Securities Act.
(d) Buyer acknowledges that, except as expressly stated in Article 3 of
this Agreement, none of Venturi, Seller, the Company (including any Company
Subsidiary) nor any officer, director, employee, agent or representative of
Venturi, Seller, the Company or any Company Subsidiary, has made any
representations or warranties of any kind to Buyer with respect to its
investment in the Shares.
(e) Buyer acknowledges that the Shares will not have not been registered
under the Securities Act, or any other applicable state or federal securities
statutes. Buyer has no present intention of reselling, directly or indirectly
participating in any distribution of, or otherwise disposing of the Shares.
Buyer acknowledges that Buyer may bear the economic risk of holding such shares
for an indefinite period of time.
(f) Buyer acknowledges that the Shares may not be offered for sale, sold
or transferred except in compliance with the applicable securities laws of other
jurisdictions.
(g) Buyer acknowledges that the Shares were not offered to Buyer by
means of any general solicitation, publicly disseminated advertisement or sales
literature.
(h) Buyer has not authorized any broker, dealer, agent or finder to act
on its behalf, nor does Buyer have any knowledge of any broker, dealer, agent or
finder purporting to act on its behalf with respect to the Contemplated
Transactions.
(i) Buyer acknowledges that no federal or state agency has made any
finding or determination relating to the fairness of the Contemplated
Transactions or investment in the Shares and no federal or state agency has
recommended or endorsed an investment in the Shares.
40-
(j) Buyer was not organized for the specific purpose of acquiring the
Shares and has other investments or business activities.
(k) Buyer acknowledges that the Shares are being transferred to it in
reliance upon specific provisions of federal and state securities laws and that
Seller is relying upon the truth and accuracy of the representations,
warranties, agreements and acknowledgments of Buyer set forth in this Section
4.3(a), (b) and (c) to determine the applicability of such provisions.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and
that challenges, or may have the effect of preventing, delaying, making illegal
or otherwise interfering with, any of the Contemplated Transactions. To Buyer's
knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement and will
indemnify and hold Seller harmless from any such payment alleged to be due by or
through Buyer as a result of the action of Buyer or its officers or agents.
4.6 ACCESS TO INFORMATION
Buyer has had a reasonable opportunity to discuss with the management of
the Company and its Subsidiaries the management and financial affairs of the
Company and its Subsidiaries and to review and consider the Business and the
operations of the Company and its Subsidiaries, including the properties,
operations, liabilities, obligations, books, accounts, records, contracts and
documents.
41-
5. COVENANTS OF SELLER AND VENTURI PRIOR TO CLOSING DATE; POST-CLOSING
COVENANTS OF SELLER AND VENTURI
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Venturi and
Seller will, and will cause Company and its Subsidiaries and their
Representatives to, (a) afford Buyer and its Representatives and prospective
lenders and their Representatives (collectively, "Buyer's Advisors") reasonable
access to personnel, properties, contracts, books and records and other
documents and data of the Company and its Subsidiaries, (b) furnish Buyer and
Buyer's Advisors with copies of all such contracts, books and records and other
existing documents and data as Buyer may reasonably request, and (c) furnish
Buyer and Buyer's Advisors with such additional financial, operating and other
data and information as Buyer may reasonably request. The foregoing access shall
be provided and investigation conducted in a manner so as not to interfere
unreasonably with the operation of the Business. Without limiting the foregoing,
on or before the thirtieth (30th) day of each calendar month between the date of
this Agreement and the Closing Date, Seller shall prepare and deliver, or cause
to be prepared and delivered, to Buyer a consolidated balance sheet of the
Company and its Subsidiaries as at the close of business on the last day of the
immediately preceding calendar month and the related consolidated statements of
income, changes in investment of parent company and cash flow for such calendar
month. All confidential information furnished in connection herewith shall be
and remain subject to the Confidentiality Agreement.
5.2 OPERATION OF THE BUSINESS
Between the date of this Agreement and the Closing Date, Venturi and
Seller will, and will cause the Company and its Subsidiaries to:
(a) except as contemplated by this Agreement or as required to comply
with Section 3.7 or as set forth in Part 5.2(a) of the Disclosure Letter,
conduct the Business in (and only in) the Ordinary Course of Business,
including, without limitation, funding the Business as needed in the Ordinary
Course of Business;
(b) use Commercially Reasonable Efforts to preserve intact the current
organization of the Company and its Subsidiaries, keep available the services of
their current officers, employees and agents, maintain the relations and good
will with their suppliers, customers, landlords, creditors, employees and
agents, and preserve for continued use by the Company and each of its
Subsidiaries, up through and subsequent to Closing, their respective federal
employer identification numbers;
(c) not commit to or incur capital expenditures in connection with the
Business in excess of $250,000.00 ("Permitted Capital Expenditures");
(d) increase the bonuses, salaries or other compensation to any director
or officer or to any employee in excess of the amounts previously set forth in
the Company's 2004 annual budget, a copy of which has been provided to Buyer;
and
42-
(e) otherwise report periodically to Buyer concerning the status of the
Business.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement or necessary in
order to perform their obligations under this Agreement, between the date of
this Agreement and the Closing Date, neither Seller nor Venturi will, and
neither will cause or permit Company and its Subsidiaries to, without the prior
consent of Buyer, take any affirmative action, or fail to take any reasonable
action within their or its control, as a result of which any of the changes or
events listed in Section 3.14 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Venturi and
Seller will, and will cause Company and its Subsidiaries to, make all filings
required by Legal Requirements to be made by them in order to consummate the
sale of the Shares as contemplated by this Agreement. Between the date of this
Agreement and the Closing Date, Venturi and Seller will, and will cause Company
and its Subsidiaries to, cooperate with Buyer (a) with respect to all filings
that Buyer elects to make or is required by Legal Requirements to make in
connection with the sale of the Shares as contemplated by this Agreement, (b) in
obtaining all consents identified in Schedule 4.2 and (c) in obtaining any other
consents and/or waivers, and otherwise assisting in responding to informational
requests of lenders, in connection with Buyer's financing of the Contemplated
Transactions.
5.5 NOTIFICATION; UPDATING OF DISCLOSURE LETTER
(a) Between the date of this Agreement and the Closing Date, Venturi and
Seller will promptly notify Buyer in writing if Venturi, Seller, the Company or
any of Company's Subsidiaries becomes aware of any fact or condition that causes
or constitutes a Breach of any of Venturi's or Seller's representations and
warranties as of the date of this Agreement, or if Venturi, Seller, the Company
or any of Company's Subsidiaries becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would (except as expressly
contemplated by this Agreement) reasonably be expected to cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. During the same period, Venturi and Seller will promptly notify Buyer
of the occurrence of any Breach of any covenant of Venturi or Seller in this
Section 5 or of the occurrence of any event that would reasonably be expected to
make the satisfaction of the conditions in Section 7 impossible or unlikely.
(b) Should any fact or condition described in Section 5.5(a) require any
change in the Disclosure Letter if the Disclosure Letter were dated the date of
the occurrence or discovery of any such fact or condition, Venturi and Seller
will promptly supplement the Disclosure Letter by addition, deletion or other
revision (a "Disclosure Letter Supplement") and deliver such Disclosure Letter
Supplement to Buyer.
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5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Venturi and Seller will
cause all intercompany accounts between, on the one hand, the Company or its
Subsidiaries and, on the other hand, Venturi or Seller (or any Related Person of
either Venturi or Seller other than the Company or Company's Subsidiaries), to
be paid in full or otherwise eliminated prior to Closing.
5.7 NO SOLICITATION
(a) From the date of this Agreement until the Closing or, if earlier,
the termination of this Agreement in accordance with its terms, each of Venturi
and Seller agrees that it shall not, and it shall not authorize or permit any of
its Related Persons or any officer, director, employee, investment banker,
attorney or other advisor or representative of Venturi, Seller, the Company or
any of their Related Persons, directly or indirectly, to (i) solicit, initiate
or knowingly encourage the submission of any inquiry, proposal or offer (whether
in writing or otherwise) requesting or requiring Company and its Subsidiaries to
be involved with (A) any merger, consolidation, share exchange, business
combination or other similar transaction with respect to the Company or any of
its Subsidiaries other than the sale of the Shares as contemplated by this
Agreement, (B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of any assets of the Company or its Subsidiaries representing 5% or
more of the assets of the Company and its Subsidiaries, taken as a whole, in a
single transaction or series of transactions, (C) other than the Contemplated
Transactions, any acquisition by any Person of beneficial ownership or the right
to acquire beneficial ownership of, or formation of any "group" (as such term is
defined under Section 13(d) of the ▇▇▇▇ ▇▇▇) which would beneficially own or
have the right to acquire beneficial ownership of, any outstanding equity
securities of the Company or any of its Subsidiaries, or (D) any issuance, sale
or grant of any additional shares of capital stock of the Company or any of its
Subsidiaries, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of the Company or any of its Subsidiaries (any of the foregoing,
an "Acquisition Proposal"), (ii) enter into any agreement with respect to any
Acquisition Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any Person any information for the purpose of
facilitating the making of, or take any other action to knowingly facilitate any
inquiries or the making of, any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal; provided, however, that
notwithstanding the foregoing, Venturi and Seller may, upon authorization of
Venturi's board of directors, at any time prior to termination of this
Agreement, (x) provide information to and engage in discussions and negotiations
with any Person who has made a Qualifying Offer or who has made an Acquisition
Proposal that is reasonably likely to lead to a Qualifying Offer (provided that
such Person shall have entered into a confidentiality agreement in customary
form that is no less favorable to Venturi than is the Confidentiality Agreement
and that prohibits such Person, and all officers, directors, employees, agents
and other representatives of such Person, from engaging in discussions or
negotiations, or otherwise communicating, directly or indirectly, orally or in
writing, with any officer, director or employee of the Company or its
Subsidiaries except for ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
or ▇▇▇ ▇▇▇▇▇▇▇▇), (y) subject to paragraphs (b), (c) and (d) of this Section
5.7, accept a Qualifying Offer, and (z) issue a press release announcing the
entering into of this Agreement, among other matters, which press release has
been attached hereto as Exhibit 5.7(a), file a current report on Form 8-K that
will include as an attachment, among other things, a description
44-
and copy of this Agreement, and file and disseminate a proxy statement and other
proxy materials for the purpose of soliciting proxies from Venturi's
stockholders to approve, among other matters, the sale of the Shares as
contemplated by this Agreement.
The foregoing provisions shall not limit the ability of Venturi or any
officer, director, employee, investment banker, attorney or other advisor or
representative of Venturi, Seller, the Company or any of their Related Persons
to (i) solicit, initiate or knowingly encourage the submission of an inquiry,
proposal or offer requesting Venturi or Seller to be involved in a merger,
consolidation, share exchange, business combination or similar transaction with
respect to Venturi or Seller and any of their respective Subsidiaries (other
than the Company and its Subsidiaries), (ii) enter into any agreement with
respect to such a transaction or (iii) participate in any discussions or
negotiations regarding or furnish to any Person any information for the purpose
of facilitating the making of, or take any other action to facilitate any
inquiries or the making of, any proposal with respect to such a transaction. In
addition, it shall not be a breach by Venturi, Seller or the Company of this
provisions of this Section 5.7(a) if any action permitted to be taken under
Section 6.10 of the Merger Agreement with respect to a Takeover Proposal results
in the making of an Acquisition Proposal.
(b) Venturi and Seller shall not accept a Qualifying Offer unless
Venturi's Board of Directors or a special committee thereof determines in its
good faith judgment (after consultation with its independent outside legal
counsel) that it is necessary to do so in order to comply with its fiduciary
duties to Venturi's stockholders under applicable laws.
(c) Seller and Venturi shall promptly advise Buyer of the receipt of any
Qualifying Offer (including the terms thereof and the identity of the Person
making the Qualifying Offer). All liabilities of Venturi and Seller arising from
breaches of this Section 5.7 by Venturi or Seller shall survive termination of
this Agreement unless Seller terminates this Agreement and Venturi pays the
Non-Consummation Fee or the Termination Fee, as applicable, in accordance with
the terms of paragraph (d) of this Section 5.7.
(d) Venturi and Seller may terminate this Agreement at any time prior to
the receipt of Shareholder and Board Approval if:
(i) Venturi and Seller, subject to complying with the terms of
paragraph (a) above, enter into a binding written agreement in respect of
a Qualifying Offer or a Superior Proposal and Venturi notifies Buyer in
writing that it intends to terminate this Agreement and enter into such
other agreement; and
(ii) Venturi has paid, or caused to be paid, to or as directed by
Buyer, in cash by wire transfer of immediately available funds to an
account designated by Buyer, a non-refundable fee in the amount of, (A)
with respect to a termination in connection with entering into a binding
agreement in respect of a Qualifying Offer, the sum of 4.5% of the
Purchase Price plus all Buyer Termination Expenses (the "Non-Consummation
Fee"), less all amounts previously paid by Venturi to Buyer pursuant to
the Expense Reimbursement Agreement; or (B) with respect to a termination
in connection with entering into a binding agreement in respect of a
Superior Proposal, the sum of 3% of the
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Purchase Price plus all Buyer Termination Expenses (the "Termination
Fee"), less all amounts previously paid by Venturi to Buyer pursuant to
the Expense Reimbursement Agreement; provided, however, that in no event
shall the Non-Consummation Fee exceed $2,500,000, and in no event shall
the Termination Fee exceed $2,000,000.
5.8 COMMERCIALLY REASONABLE EFFORTS
Between the date of this Agreement and the Closing Date, Venturi and
Seller will use Commercially Reasonable Efforts to cause the conditions in
Sections 7 and 8 to be satisfied, provided, however, that neither (i) actions
taken by Venturi or Seller as permitted under Section 5.7 nor (ii) any decision,
or action based thereon, of Venturi permitted under the Merger Agreement not to
seek stockholder approval of the transactions contemplated by the Merger
Agreement shall constitute a violation of this Section 5.8.
5.9 [RESERVED]
5.10 DENVER OPERATIONS
On or before the Closing Date, the Company and its Subsidiaries shall have
discontinued, to the reasonable satisfaction of Buyer, the Business and all
operations with respect thereto to the extent conducted out of or in Denver,
Colorado.
5.11 WORKERS COMPENSATION
Seller and Venturi shall at all times from and after the date of this
Agreement: (i) maintain, or cause to be maintained, in effect all workers
compensation policies in effect as of the date of this Agreement covering
employees of the Business, including, without limitation, the AIG Workers
Compensation Policies, the CNA Workers Compensation Policies and the Hartford
Workers Compensation Policies; (ii) promptly pay or reimburse, or cause to be
paid or reimbursed, when due to each such applicable insurance company all
claims made in respect of such applicable contract; and (iii) maintain, or cause
to be maintained, in effect the CNA LCs and the Hartford LCs. Notwithstanding
the foregoing, effective simultaneously with the Closing or such later date as
Seller and Venturi may agree, Seller and Venturi shall cause the CNA Workers
Compensation Policies and the Hartford Workers Compensation Policies, and all
rights and obligations of Venturi and Seller thereunder, to be assigned or
otherwise transferred to, and assumed by, Buyer, upon which transfer and
assumption Venturi shall be permitted to cause the CNA LCs and the Hartford LCs,
as applicable, to be released or otherwise terminated. After the Closing, Seller
and Venturi shall promptly pay or cause to be paid to CNA Insurance Company and
Hartford Insurance Company (or their respective affiliates, as applicable), or
reimburse Buyer or the Company, or cause Buyer or the Company to be reimbursed,
for all payments made by Buyer or the Company to CNA Insurance Company and
Hartford Insurance Company (or their respective affiliates), as applicable, in
respect of, amounts due and owing under the CNA Workers Compensation Policies or
the Hartford Workers Compensation Policies, except for such amounts as are due
and owing with respect to the Commercial Staffing Portion of Historical Workers
Compensation Claims.
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5.12 DELIVERY OF APPLICABLE CONTRACTS
As soon as practicable, but in no event more than fourteen (14) days
following the date of the Agreement, Seller shall have delivered to Buyer true
and complete copies of each Material Contract.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE; POST-CLOSING COVENANTS OF BUYER
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will,
and will cause each of its Related Persons to, make all filings required by
Legal Requirements to be made by them to consummate the sale of the Shares as
contemplated by this Agreement. Between the date of this Agreement and the
Closing Date, Buyer will, and will cause each Related Person to, (i) cooperate
with Venturi and Seller with respect to all filings that Venturi or Seller is
required by Legal Requirements to make in connection with the sale of the Shares
as contemplated by this Agreement, and (ii) cooperate with Venturi and Seller in
obtaining all consents identified in Part 3.2 of the Disclosure Letter; provided
that this Agreement will not require Buyer to dispose of or make any change in
any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 COMMERCIALLY REASONABLE EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of
this Agreement and the Closing Date, Buyer will use Commercially Reasonable
Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
6.3 NOTIFICATION
Buyer shall promptly notify Venturi and Seller in writing if Buyer becomes
aware of any fact or condition that causes or constitutes a Breach of any of
Buyer's representations and warranties as of the date of this Agreement, or if
Buyer becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would reasonably be expected to cause or constitute a
Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition.
6.4 WORKERS COMPENSATION
Buyer shall, at all times from and after the Closing Date until such time
as the applicable workers compensation claims have been fully satisfied,
promptly pay, or cause to be paid, to or as directed by Venturi as and when due
all amounts, if any, due and payable under the AIG Workers Compensation Policies
and the California State Workers Compensation Program that are attributable to
the Commercial Staffing Portion of Historical Workers Compensation Claims.
6.5 VENTURI LEASE GUARANTIES
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As of the Closing, the Company and Buyer shall indemnify Venturi, Seller
and their Related Persons, and hold them harmless, from and against any loss,
liability, claim, damage or expense arising from or in connection with Venturi's
or Seller's obligations as a guarantor with respect to and in accordance with
the terms of the Venturi Lease Guarantees, except for losses, liabilities,
claims, damages or expenses to the extent arising from or related to a failure
by Venturi or Seller to properly notify or obtain requisite consent from any
lessor prior to the execution of the Agreement or the consummation of the
Contemplated Transactions. If requested by Venturi and permitted by its lenders
and the applicable lessor, Buyer shall, with respect to each Venturi Lease
Guarantee so requested by Venturi, provide a replacement guarantee in
substantially the form and substance of the Venturi Lease Guarantee that it
replaces.
6.6 RESTRUCTURING CHARGES
As of the Closing and to the extent it is not otherwise liable therefor,
the Company shall, and hereby does, and Buyer shall cause the Company to,
assume, perform and be responsible for liabilities and obligations of Venturi or
Seller classified as "accrued restructuring and rationalization charges" as
described in Note 6 to the March 28th Carve-Out Balance Sheet and shall
indemnify Venturi, Seller and their Related Persons, and hold them harmless,
from and against any such liabilities to the extent of the amount thereof
specified in the Closing Date Balance Sheet; provided, however, such
liabilities, individually and in the aggregate shall not exceed $750,000.00.
6.7 LICENSE AGREEMENT
The Buyer acknowledges and agrees that Venturi and Venturi's Subsidiaries
retain a royalty-free, worldwide, non-transferable (except to Related Persons of
Venturi) license and right to use the `Venturi' name and related marks for
transitional purposes for a term of six months commencing on the Closing Date,
and as of the Closing Date, the Buyer will cause the Company to grant to Venturi
and Venturi's Subsidiaries a royalty-free, worldwide, non-transferable (except
to Related Persons of Venturi) license and right to use the `Venturi' name and
related marks for transitional purposes for a term of six months commencing on
the Closing Date (the "License Agreement").
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing (or such earlier date, if any, as is specified), of each
of the following conditions (any of which may be waived by Buyer, in whole or in
part):
7.1 ACCURACY OF REPRESENTATIONS
(a) Except as contemplated or permitted by this Agreement, all of
Venturi's and Seller's representations and warranties in Article III of this
Agreement must be accurate in all material respects as of the Closing Date as if
made on the Closing Date, without giving effect to
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any Disclosure Letter Supplements. Notwithstanding the foregoing, those
representations and warranties expressly made as of a particular date must be
accurate in all material respects as of that particular date.
(b) Notwithstanding paragraph (a) of this Section 7.1, each of Venturi's
and Seller's representations and warranties herein that are expressly qualified
by "materiality" or constitute a breach only if they have a "Material Adverse
Effect" or otherwise expressly include a materiality qualifier must be accurate
in all respects as of the Closing Date as if made on the Closing Date, without
giving effect to any Disclosure Letter Supplements. Notwithstanding the
foregoing, those representations and warranties as of a particular date that
include such an express materiality qualifier must be accurate in all respects
as of that particular date.
7.2 PERFORMANCE OF VENTURI AND SELLER
(a) All of the covenants and obligations of each of Venturi and the
Seller that they are required to perform or to comply with pursuant to Article 5
(other than Section 5.4), Section 11.4 and Section 11.5 of this Agreement at or
prior to the Closing must have been duly performed and complied with in all
material respects.
(b) Each of the documents and other items required to be delivered, or
caused to have been delivered, by Venturi or Seller pursuant to Section 2.4 must
have been delivered, and Section 5.4 must have been performed and complied with
in all respects.
7.3 REQUIRED CONSENTS
Each Consent that Venturi, Seller, the Company or any of the Company's
Subsidiaries is required to obtain from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions that is identified in Part 7.3 of the
Disclosure Letter, and each other Consent that Venturi, Seller, the Company or
any of the Company's Subsidiaries is required to obtain from any Person for
which the failure to obtain would, individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect, must have been obtained and
must be in full force and effect.
7.4 OPINION OF COUNSEL TO SELLER, VENTURI, THE COMPANY AND COMPANY'S
SUBSIDIARIES
Buyer must have received a duly executed opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, P.A., as counsel to Seller, Venturi, the Company and the Company's
Subsidiaries, dated the Closing Date, in substantially the form of Exhibit 7.4.
7.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that prohibits the sale of the Shares by Seller to Buyer.
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7.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will materially contravene or conflict with or result in a material
violation of, any applicable Legal Requirement or Order.
7.7 TERMINATION OF CERTAIN EQUITY
All options to purchase equity in Venturi or Seller outstanding under the
2003 Equity Incentive Plan of Venturi and held by employees of the Company or
any of Company's Subsidiaries shall have vested, and each such employee shall
have a period of not less than ninety (90) days beginning on the Closing Date
within which to exercise all such options.
7.8 HCE PLAN
All obligations of Venturi, the Seller, the Company and/or Company's
Subsidiaries to employees of the Company or any of its Subsidiaries in respect
of the HCE Plan shall have been paid or otherwise funded in accordance with the
terms of the HCE Plan. Without limiting the foregoing, Venturi shall have caused
each account of each employee of the Company and its Subsidiaries in the HCE
Plan to have become fully vested and shall have caused each such employee to
have been paid (or shall have otherwise arranged for the prompt payment by
Venturi to each such employee of) his or her full balance therein in cash.
7.9 ESCROW AGREEMENT
Seller and Venturi shall have executed, and shall have caused the Escrow
Agent to execute, and delivered the Escrow Agreement to Buyer.
7.10 MERGER TRANSACTION
The transactions contemplated in the Merger Agreement shall have occurred
simultaneously with the Closing.
7.11 EMPLOYMENT AGREEMENT
Venturi shall have either (i) (A) assigned the Employment Agreement dated
October 1, 1996 between Venturi and ▇▇▇ ▇▇▇▇▇▇▇ to the Company and (B) amended
such Employment Agreement to provide that no severance payment is due upon a
change of control except in the event of a termination by the Company other than
for cause (as defined in such Employment Agreement) or a termination by ▇▇▇
▇▇▇▇▇▇▇ because of a requirement that she be based anywhere other than the
metropolitan area where she currently resides and works, in either case within
six months after a change of control; or (ii) paid any severance payment due to
▇▇▇ ▇▇▇▇▇▇▇ under such Employment Agreement in connection with the consummation
of the Contemplated Transactions.
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8. CONDITIONS PRECEDENT TO VENTURI'S AND SELLER'S OBLIGATION TO CLOSE
Seller's obligations to sell the Shares, and Seller's and Venturi's
obligations to take the other actions required to be taken by them at the
Closing, are subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Seller, in whole or in
part):
8.1 ACCURACY OF REPRESENTATIONS
Except as contemplated or permitted by this Agreement, all of Buyer's
representations and warranties in Article 4 of this Agreement must be accurate
in all material respects as of the Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to Article 6, Section 11.4 and Section 11.5
of this Agreement at or prior to the Closing must have been duly performed and
complied with in all material respects.
(b) Each of the documents and other items required to be delivered by
Buyer pursuant to Section 2.4 must have been delivered, and Buyer must have made
the cash payments required to be made by Buyer pursuant to Sections 2.4(b)(i)
and 2.4(c).
8.3 REQUIRED CONSENTS
Each of the Consents identified in Part 8.3 of the Disclosure Letter must
have been obtained and must be in full force and effect.
8.4 OPINION OF COUNSEL TO BUYER
Seller must have received a duly executed opinion of Squire, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ L.L.P., as counsel to Buyer, dated the Closing Date, in substantially
the form of Exhibit 8.4.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or
other Order that prohibits the sale of the Shares by Seller to Buyer.
8.6 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will materially contravene or conflict with or result in a material
violation of, any applicable Legal Requirement or Order.
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8.7 ESCROW AGREEMENT
Buyer shall have executed and delivered the Escrow Agreement to Seller.
8.8 MERGER TRANSACTION
The transactions contemplated in the Merger Agreement shall have occurred
simultaneously with the Closing.
8.9 SHAREHOLDER APPROVAL
Seller shall have received the Shareholder and Board Approval.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated, whether before or after Shareholder and Board Approval is obtained:
(a) (i) by Buyer if a material Breach of any provision of this Agreement
has been committed by Venturi or Seller and such Breach has not, by the time of
giving of such notice, been waived or cured (provided, however, to the extent
that such Breach would give rise to the failure of a condition set forth in
Section 7.1 or 7.2(a), if such Breach is capable of being cured, then Venturi or
Seller, as the case may be, shall have until the earlier of the Outside Closing
Date or the close of business of the fifth (5th) business day immediately after
written notice of such Breach has been given by Buyer to Seller or Venturi to
cure such Breach), or (ii) by Seller if a material Breach of any provision of
this Agreement has been committed by Buyer and such Breach has not, by the time
of giving of such notice, been waived or cured (provided, however, to the extent
that such Breach would give rise to the failure of a condition set forth in
Section 8.1 or 8.2(a), if such Breach is capable of being cured, then Buyer
shall have until the earlier of the Outside Closing Date or the close of
business of the fifth (5th) business day immediately after written notice of
such Breach has been given by Seller or Venturi to Buyer to cure such Breach);
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Outside Closing Date and Buyer has not waived such condition
on or before the Outside Closing Date or if satisfaction of such a condition is
or becomes impossible if Buyer has not waived such condition before notice of
termination is given; or (ii) by Seller, if any of the conditions in Article 8
has not been satisfied as of the Outside Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Seller
or Venturi to comply with their obligations under this Agreement) and Seller and
Venturi have not waived such condition before notice of termination is given;
(c) by mutual written consent of Buyer and Seller;
(d) by Venturi and Seller as provided in, and subject to, Section 5.7(d)
hereof;
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(e) by either Buyer or Seller if the Closing has not occurred (other
than through the failure of any party seeking to terminate this Agreement to
comply fully with its obligations under this Agreement) on or before the Outside
Closing Date; provided, however, that any such termination by either the Buyer
or the Seller under this clause (e) shall be accompanied by the payment of the
Non-Consummation Fee by Venturi to Buyer by wire transfer in immediately
available funds; or
(f) by either Buyer or Seller if the Merger Agreement has been
terminated for any reason.
9.2 EFFECT OF TERMINATION
(a) Except as otherwise expressly provided in this Agreement, each
party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise and the exercise of a right
of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties under
this Agreement will terminate, except that the obligations in Sections 11.1 and
11.3 will survive; provided, however, that if this Agreement is terminated by a
party because of the material Breach of the Agreement by the other party or
because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, then the terminating
party's right to pursue all legal remedies will survive such termination
unimpaired and, in addition to such rights, except as otherwise set forth in
Section 9.2(b), below, in the case of termination by any party, Buyer shall be
entitled to, and Venturi shall pay, or caused to be paid, to or as directed by
Buyer, in cash by wire transfer of immediately available funds to an account
designated by Buyer, the Non-Consummation Fee.
(b) (i) Buyer shall be entitled to, and Venturi shall pay, or caused to
be paid, to or as directed by Buyer, in cash by wire transfer of immediately
available funds to an account designated by Buyer, in lieu of the
Non-Consummation Fee, the Termination Fee in the case of termination of this
Agreement by Seller pursuant to Section 9.1(d) to the extent such termination is
also pursuant to Section 5.7(d)(ii)(B); and
(ii) Neither Venturi nor Seller shall have any obligation to Buyer
in the case of any termination of this Agreement by Seller pursuant to Section
9.1(a)(ii) hereof; provided that Buyer is not then entitled to terminate this
Agreement pursuant to Section 9.1(a)(i) hereof.
(c) The Confidentiality Agreement shall remain in full force and effect
and survive the termination of this Agreement.
9.3 EXPENSE REIMBURSEMENT AGREEMENT
The parties hereto hereby acknowledge and agree that the obligation of
Seller and Venturi under this Agreement to pay to Buyer the Buyer Termination
Expenses, the Non-Consummation Fee or the Termination Fee, as applicable, upon
termination of this Agreement
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supercedes Venturi's obligation to pay expenses under the Expense Reimbursement
Agreement, which is hereby terminated.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants and obligations in this
Agreement, the Disclosure Letter (as supplemented by any Disclosure Letter
Supplements), any Disclosure Letter Supplements, each certificate delivered
pursuant to Section 2.4(a)(iv), and any other certificate or document delivered
pursuant to this Agreement will, subject to the limitations specified in Section
10.4, survive the Closing. The right to indemnification, payment of Damages or
(subject to the last paragraph of Section 10.2) other remedy based on such
representations, warranties, covenants and obligations will not be affected by
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) other than through the Disclosure Letter at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages or other remedy based on such
representations, warranties, covenants and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND VENTURI
Subject to Section 10.4(a) and 10.5 hereof, Seller and Venturi shall,
jointly and severally, indemnify and hold harmless Buyer, the Company and
Company's Subsidiaries, and each of their respective Representatives, equity
holders, controlling persons and Related Persons (collectively with Buyer, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage or expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Seller or
Venturi in this Agreement, the Disclosure Letter (after giving effect to
Disclosure Letter Supplements to the extent, and only to the extent, that a
Disclosure Letter Supplement revised the Disclosure Letter with respect to an
event, condition or state of facts that arose or occurred either (i) after
execution of this Agreement or (ii) prior to execution of this Agreement but was
not actually known to Seller or Venturi prior to such execution), or any other
document or certificate delivered by Seller or Venturi pursuant to Section
2.4(a);
(b) any Breach by Seller or Venturi of their covenants or obligations in
this Agreement to the extent that such Breach has not been disclosed on the
certificate or certificates delivered by Venturi and Seller pursuant to Section
2.4(a)(iv);
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(c) any claim by any Person for payments alleged to be due and owing from the
Company or any of its Subsidiaries to or in respect of the HCE Plan or as a
result of any failure by Seller or Venturi to otherwise satisfy the conditions
specified in Section 7.8; or
(d) the failure to obtain any Consent that Venturi, Seller, the Company or any
of the Company's Subsidiaries is required to obtain from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
Notwithstanding anything in this Agreement to the contrary, for purposes
of determining Damages for which Seller and Venturi shall be obligated to
indemnify the Indemnified Persons pursuant to this Section 10.2 and Section
10.5, with respect to each representation and warranty made by Seller and/or
Venturi in Article III of this Agreement that is subject to a materiality
qualification (other than Sections 3.4, 3.9(a), 3.11 and 3.13), whether a
"Breach" of such representation or warranty shall be deemed to have occurred,
and the amount of Damages arising therefrom (including, without limitation, for
purposes of aggregating Damages to determine when the "Floor" (as defined in
Section 10.5) has been exceeded) shall be determined without taking such
materiality qualification into account.
From and after the Closing, the right to indemnification and other
rights under this Article 10 shall constitute, to the fullest extent permitted
by law, the Buyer's and the Seller's sole and exclusive remedies with respect to
any and all claims arising under or relating to this Agreement, any Agreement or
document executed and delivered pursuant to this Agreement, or the Contemplated
Transactions.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Subject to the last paragraph of Section 10.2, Section 10.4(b) and Section
10.6 hereof, Buyer will indemnify and hold harmless Seller, Venturi and each of
their respective Representatives, equity holders, controlling persons and
Related Persons, and will pay to or as directed by Seller, the amount of any
Damages arising, directly or indirectly, from or in connection with (a) any
Breach of any representation or warranty made by Buyer in this Agreement or in
any other document or certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on its
behalf) in connection with any of the Contemplated Transactions.
10.4 TIME LIMITATIONS
(a) Seller and Venturi shall be liable to Buyer and its Related Persons
for claims based upon (i) any representation or warranty (other than claims for
indemnification or reimbursement based upon a representation or warranty in
Sections 3.1(b), 3.2(a)(ii), 3.2(b)(i), 3.3(a), 3.10 or 3.20), any obligation
under Section 10.2(d) and any covenant or obligation to be performed and
complied with as a condition of the Closing (other than claims based upon the
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covenants and obligations to be performed and complied with under Section 5.11
and the indemnification obligation under clause (c) of Section 10.2) if Buyer
notifies Seller of such a claim on or before the date that is one (1) year after
the Closing Date, (ii) any representation or warranty in Section 3.10 if Buyer
notifies Seller of such a claim on or before expiration of any applicable
statute of limitation with respect to such claim, and (iii) any representation
or warranty in Sections 3.1(b), 3.2(a)(ii), 3.2(b)(i), 3.3(a) and 3.20 and any
covenant or obligation under Section 5.11 and any indemnification obligation
under clause (c) of Section 10.2 if Buyer at any time notifies Seller of such a
claim, in each case specifying the factual basis thereof in reasonable detail to
the extent then known by Buyer. Buyer will make Commercially Reasonable Efforts
to promptly notify Seller of claims based upon clause (ii) or clause (iii)
above; provided, however, any failure to so promptly notify Seller shall not
relieve Seller or Venturi of their obligation to pay Damages to Indemnified
Persons with respect thereto.
(b) Buyer shall be liable to Venturi, Seller and their Related Persons
for claims based upon (i) any representation or warranty (other than claims for
indemnification or reimbursement based upon a representation or warranty in
Sections 4.1 or 4.2) and with respect to any covenant or obligation to be
performed and complied with as a condition of the Closing (other than claims
based upon the covenants and obligations to be performed and complied with under
Sections 6.4, 6.5 and 6.6) if Seller notifies Buyer of such a claim on or before
the date that is one (1) year after the Closing Date, and (ii) any
representation or warranty in Sections 4.1 and 4.2 and any covenant or
obligation in Sections 6.4, 6.5 and 6.6 if Seller at any time notifies Buyer of
such a claim, in each case specifying the factual basis thereof in reasonable
detail to the extent then known by Seller.
10.5 LIMITATIONS ON AMOUNT -- SELLER AND VENTURI
Neither Seller nor Venturi shall have liability with respect to the
matters described in clause (a) of Section 10.2 or, except with respect to
Damages arising under Section 5.11, clause (b)of Section 10.2 or clause (d) of
Section 10.2 until the aggregate of all claims for Damages with respect to such
matters exceeds $200,000 (exclusive of attorneys' fees and legal expenses)
("Floor"), and then only for the amount of Damages in excess of $100,000;
provided, however, that such Floor shall not apply to matters arising in respect
of Sections 3.1(b), 3.2(a)(ii), 3.2(b)(i), 3.3(a), 3.10, 3.20 or 10.8. In
addition, neither Seller nor Venturi shall have liability with respect to the
matters described in clause (a) of Section 10.2, clause (b) of Section 10.2
(except with respect to Damages arising under Section 5.11), clause (d) of
Section 10.2 or Section 10.8 to the extent that the aggregate of such Damages
exceeds $5,000,000 ("Ceiling"); provided, however, that Damages arising from or
in connection with matters arising in respect of Sections 3.1(b), 3.2(a)(ii),
3.2(b)(i), 3.3(a) or 3.20 or to the obligation of Seller and Venturi to
indemnify Buyer for SUI Taxes and/or Unclaimed Property Taxes under Section
10.8(a)(iii) shall not be subject to such Ceiling, and shall not be aggregated
with any other Damages for purposes of determining when such Ceiling has been
exceeded for such other Damages.
In addition to the foregoing, Buyer, Venturi and Seller agree to the
following additional limitations on liability:
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(a) all Damages recoverable by an Indemnified Person shall be net of
insurance proceeds and any amounts such Indemnified Person either (i) recovers
from third parties, or (ii) which would reasonably be expected to be recovered
by such Indemnified Person as insurance proceeds provided such Indemnified
Person (A) had a valid claim, and (B) used commercially reasonable efforts to
collect amounts under all applicable insurance policies pursuant to which
Indemnified Person was entitled to payment;
(b) upon any payment of Damages to an Indemnified Person, the
Indemnifying party shall be subrogated to all rights of the Indemnified Person
with respect to the Damages to which such indemnification relates; provided,
however, that the Indemnifying party will only be subrogated to the extent of
any amount paid by it pursuant to this Agreement in connection with such
Damages; and provided further that no such right of subrogation will arise in
favor of an Indemnifying party if such right would give such Indemnifying party
the right to be reimbursed or further indemnified by the Company;
(c) the Indemnified Person shall take all reasonable steps to mitigate
all indemnifiable Damages upon and after becoming aware of any event that could
reasonably be expected to give rise to any Damages that are indemnifiable
hereunder; and
(d) notwithstanding any other provision in this Agreement to the
contrary, none of Venturi, Seller or Buyer shall be required to indemnify, hold
harmless or otherwise compensate any Indemnified Person for special, incidental
or consequential, or punitive damages and, the term "Damages" shall be deemed
not to include any such non-reimbursable damages; provided, however, that any
damages recovered or sought in any third-party claim against an Indemnified
Person shall not be excluded from Damages for purposes of this Section 10.5.
10.6 LIMITATIONS ON AMOUNT -- BUYER
Buyer shall have no liability with respect to the matters described in
clause (a) of Section 10.3 until the aggregate of all claims for Damages with
respect to such matters exceeds $100,000 (exclusive of attorneys' fees and legal
expenses), and then only to the amount of such excess; provided, however, the
foregoing limitations shall not apply to matters arising in respect of Sections
4.1 or 4.2 or to any Breach of any of Buyer's representations and warranties of
which Buyer had knowledge at any time prior to the date on which such
representation and warranty is made.
10.7 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2 or
Section 10.3 of notice of any claim or demand by any Person other than an
indemnified party, such indemnified party will, if a claim is to be made against
an indemnifying party under such Section, give notice to the indemnifying party
of the commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it may have
to any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnifying
party's failure to give such notice.
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(b) If any Proceeding referred to in Section 10.7(a) is brought against
an indemnified party and it gives notice to the indemnifying party of such
Proceeding, the indemnifying party will, unless the claim involves Taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless the indemnifying party is also a party to such Proceeding and joint
representation would be inappropriate due to a conflict of interest), to assume
the defense of such Proceeding with counsel reasonably satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses incurred with respect to the defense of such
Proceeding after such time as the Indemnifying party so assumes such defense. If
the indemnifying party assumes the defense of a Proceeding, (i) no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party's consent unless (A) there is no effect on any other claims
that may be made against the indemnified party, and (B) the sole relief provided
is monetary damages that are paid in full by the indemnifying party; and (ii)
the indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent.
(c) Notwithstanding the foregoing, if there is a reasonable probability
that a Proceeding would adversely affect an indemnified party other than as a
result of monetary damages for which it would be entitled to indemnification
under this Agreement, such indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise or settle such
Proceeding, but the indemnifying party will not be bound by any determination of
a Proceeding so defended or any compromise or settlement effected without its
consent. The indemnifying party may, at its expense, participate in such
Proceedings with counsel of its choice.
(d) Seller and Venturi hereby consent to the non-exclusive jurisdiction
of any court in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this Agreement
with respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Seller or Venturi with respect to such a claim anywhere
in the world.
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10.8 TAX MATTERS
(a) Venturi and Seller shall be jointly and severally liable for the
payment of, and will defend, indemnify and hold Buyer, Company, all of Company's
Subsidiaries and all of their affiliates harmless from and against any and all
Damages arising out of or related to, (i) any Taxes caused by or resulting from
the sale of the Shares (including all Taxes arising from any Section 338(h)(10)
Elections), (ii) any Taxes imposed on or incurred by Company or any of its
Subsidiaries arising out of the inclusion of Company in the consolidated group
of which Venturi is the common parent, or in any combined, consolidated, unitary
or similar group (a "Group") prior to the Closing Date, (iii) any Taxes imposed
on or incurred by Company or any of its Subsidiaries (or any Group with respect
to the taxable items of Company or any of its Subsidiaries) for any taxable
period ending on or before the Closing Date (or the portion, determined as
described in paragraph (b) of this Section, of any such Taxes for any taxable
period beginning on or before and ending after the Closing Date which is
allocable to the portion of such period occurring on or before the Closing Date
(the "Pre-Closing Period")), including, without limitation, all SUI Taxes and
all Unclaimed Property Taxes allocable to any Pre-Closing Period, provided that
Venturi and Seller shall only be liable for such Pre-Closing Period Taxes to the
extent such Taxes exceed the aggregate reserve for such Tax liability, if any,
shown on the Closing Date Balance Sheet; and (iv) any costs of investigation and
defense and reasonable attorneys' fees incurred by Buyer, Company, or any of
Company's Subsidiaries in connection with any audit or other proceeding by a
governmental authority relating to the Taxes described in this paragraph (a).
Buyer, Venturi, and Seller agree that neither the Closing Date Balance Sheet nor
the March 28th Carve-Out Balance Sheet shall contain any reserves relating to
the SUI Taxes and the Unclaimed Property Taxes.
(b) Whenever it is necessary for purposes of Section 10.8(a) to
determine the portion of any Taxes imposed on or incurred by Company and any of
its Subsidiaries (or any Group) for a taxable period beginning on or before and
ending after the Closing Date ("Straddle Period") that is allocable to the
Pre-Closing Period, the determination shall be made, in the case of Taxes that
are not measured by, or based upon, gross receipts or net income, on a per diem
basis, except any consequences of any Section 338(h)(10) Elections shall be
excluded, and, in the case of other Taxes, by assuming that the Pre-Closing
Period constitutes a separate taxable period of Company or any of its
Subsidiaries and by taking into account the actual taxable events occurring
during such period (except that exemptions, allowances and deductions for a
taxable period beginning on or before and ending after the Closing Date that are
calculated on an annual or periodic basis, such as the deduction for
depreciation, shall be apportioned to the Pre-Closing Period ratably on a per
diem basis and any consequences of any Section 338(h)(10) Elections shall be
excluded). All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company. In the event of any disagreement between Buyer and Venturi as to the
proper allocation of any item, Buyer and Venturi shall submit such disagreement
to a mutually-agreed upon public accounting firm whose decision as to the proper
allocation shall be binding on both Buyer and Venturi. The costs of such firm
shall be shared equally by Buyer and Venturi.
(c) Venturi and Seller will, to the extent permitted by applicable law,
elect with the relevant taxing authorities to close all taxable periods of
Company and each of its Subsidiaries as of the close of business on the Closing
Date.
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(d) Venturi, Seller and Buyer agree that any indemnification payments
made pursuant to this Section 10.8 will be treated by the parties on their
respective Tax Returns as an adjustment to the Purchase Price.
(e) The following provisions shall govern the allocation of
responsibility as between Buyer, Venturi and Seller for certain tax matters
following the Closing Date:
(i) Tax Periods Ending on or Before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and any of its Subsidiaries for all periods ending on or prior
to the Closing Date that are filed after the Closing Date, other than income Tax
Returns with respect to periods for which a consolidated, unitary or combined
income Tax Return of Venturi or Seller will include the operations of the
Company or any of its Subsidiaries. Buyer shall permit Venturi to review and
comment on each such Tax Return described in the preceding sentence prior to
filing. Buyer and Venturi also agree that any Tax Returns related to the SUI
Taxes and Unclaimed Property Taxes shall be prepared by Venturi and shall be
submitted to Buyer for its review and comment prior to filing. In the event that
Buyer and Venturi shall be unable to agree as to the proper reporting of any
item on any Tax Return described in this paragraph (i), Buyer and Venturi shall
submit such disagreement to a mutually-agreed upon public accounting firm whose
decision as to the proper reporting of such item shall be binding on both Buyer
and Venturi. The costs of such firm shall be shared equally by Buyer and
Venturi. Venturi or Seller shall pay to or as directed by Buyer Taxes of the
Company or any of its Subsidiaries with respect to such periods at least five
(5) days prior to the date on which such Taxes are required to be paid (or, if
such Taxes are then past due, immediately upon demand of Buyer) to the extent
such Taxes are not reflected in the reserve for Tax liability (excluding any
reserves for deferred taxes), if any, shown on the Closing Date Balance Sheet,
provided that all determinations as to the sufficiency of the reserve for Tax
liability will be made in the aggregate and not as to whether a reserve was
established for a particular Tax.
(ii) Tax Periods Beginning Before and Ending After the Closing Date.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company and any of its Subsidiaries for Tax periods that
begin before the Closing Date and end after the Closing Date, excluding any
income Tax Returns with respect to periods for which a consolidated, unitary or
combined income Tax Return of Venturi or Seller will include the operations of
the Company or any of its Subsidiaries. Venturi or Seller shall pay to Buyer at
least five (5) days prior to the date on which such Taxes are required to be
paid with respect to such periods an amount equal to the portion of such Taxes
that relates to the portion of such Taxable period ending on the Closing Date to
the extent such Taxes are not reflected in the reserve for Tax liability
(excluding any reserves for deferred taxes), if any, shown on the Closing Date
Balance Sheet provided that all determinations as to the sufficiency of the
reserve for Tax liability will be made in the aggregate and not as to whether a
reserve was established for a particular Tax. In the event of any disagreement
between Buyer and Venturi as to the proper reporting of any item on any Tax
Return governed by this paragraph (ii), Buyer and Venturi shall submit such
disagreement to a mutually-agreed upon public accounting firm whose decision as
to the proper reporting of such item shall be binding on both Buyer and Venturi.
The costs of such firm shall be shared equally by Buyer and Venturi.
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(iii) Buyer, Company, Venturi and Seller shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 10.8 and any audit,
litigation or other proceeding with respect to Taxes, including, without
limitation, SUI Taxes and Unclaimed Property Taxes. Such cooperation shall
include Venturi's, Seller's, Company's and Buyer's retention and (upon the
request of another party) the provision of records and information that are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. To the extent
the accounting books and records are not in the possession of Company or a
Subsidiary of Company, Venturi and Seller agree (A) to retain all books and
records with respect to Tax matters pertinent to the Company and any of its
Subsidiaries relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Buyer, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing authority,
and (B) to give Buyer reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if Buyer, Company or
any of Company's Subsidiaries so requests, Venturi and Seller shall allow Buyer,
Company or any of such Subsidiaries to take possession of such books and
records. To the extent the accounting books and records that are relevant to any
Pre-Closing Period, including without limitation any books and records that are
relevant to SUI Taxes or Unclaimed Property Taxes, are in the possession of
Company or a Subsidiary of Company, Buyer shall cause Company and such
Subsidiaries to retain all books and records with respect to such Tax matters
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Venturi
or Seller, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing authority.
(iv) Venturi and Seller further agree, upon request, to provide
Buyer with all information that is in their possession and that Buyer may be
required to report pursuant to Section 6043 of the IRC and all Treasury
Department Regulations promulgated thereunder.
(f) Notwithstanding any provisions to the contrary contained in this
Agreement, Buyer shall have the sole right to control and make all decisions
regarding the Company's and any of its Subsidiaries' interests in any Tax audit
or administrative or court proceeding relating to Taxes, including selection of
counsel and selection of a forum for such contest, provided, however, that in
the event such audit or proceeding relates to Taxes for which Venturi or Seller
is responsible and has agreed to indemnify Buyer pursuant to Section 10.8
hereof, including, without limitation, SUI Taxes and Unclaimed Property Taxes,
(A) Buyer, Venturi and Seller shall cooperate in the conduct of any audit or
proceeding relating to such period, (B) Buyer, Venturi, or Seller shall have the
right to participate in such audit or proceeding at their own expense, (C)
Seller or Venturi shall have the right to control and make all decisions
regarding the Company's and any of its Subsidiaries' interests in any such
proceeding, provided that neither Seller nor Venturi may enter into any
agreement with the relevant taxing authority pertaining to such Taxes if such
agreement could have an adverse effect on Buyer, Company, or any Subsidiary with
respect to any Tax period ending after the Closing Date, and (D) Buyer may,
without the written consent of Venturi or Seller, enter into an agreement with
respect to the
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settlement of any such proceeding provided that Buyer shall have agreed in
writing to forego any indemnification under this Agreement (or the Escrow
Agreement) with respect to such Taxes.
10.9 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel and accountants.
11.2 NOTICES
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt or, if such written confirmation is not
received, provided that a copy is mailed by registered mail, return receipt
requested), or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
Seller: PFI Corp.
c/o Venturi Partners, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Venturi: Venturi Partners, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
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Buyer; Compass CS Inc.
c/o CBS Personnel Services
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile No.: 513.361.1200
11.3 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York in Manhattan, or, if it has or
can acquire jurisdiction, in the United States District Court for the Southern
District of New York, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such action or
proceeding and waives any objection to venue laid therein. Process in any action
or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
11.4 SECTION 338(H)10 ELECTION
(a) Seller and Buyer shall make a timely, irrevocable and effective
election under Section 338(h)(10) of the IRC and any similar election under any
applicable state, local or foreign income Tax law (collectively, the "Section
338(h)(10) Elections") with respect to Buyer's purchase from Seller of the
shares of the Company and with respect to the stock of any Subsidiary for which
a Section 338(h)(10) Election may be made.
(b) To facilitate the Section 338(h)(10) Elections, Seller shall deliver
to Buyer, at least fifteen (15) days prior to the Closing, drafts of IRS Form
8023 and any similar forms under applicable state, local, or foreign income Tax
law (collectively, the "Forms"). Buyer shall review such Forms and provide any
proposed revisions to Seller at least five (5) days prior to the Closing. Buyer
and Seller agree to negotiate in good faith such proposed revisions and to
attempt to resolve any differences between the parties. The Forms, in the form
reasonably determined by Seller, shall be duly executed by an authorized person
for Seller and Buyer at the Closing. Seller shall duly and timely file the Forms
as prescribed by Treasury Regulation Section 1.338(h)(10)-1 or the corresponding
provisions of applicable state, local or foreign income Tax law.
(c) As soon as practicable after the Closing Date and at least thirty
(30) days prior to the due date and filing of IRS Form 8883 by either party,
Buyer shall provide Seller with a draft of IRS Form 8883 (including the
calculation and proposed allocation of the Aggregate Deemed
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Sales Price in a manner consistent with the requirements of Section 338 and the
Treasury Regulations thereunder). Seller shall review such Form 8883 and provide
any proposed revisions to Buyer at least ten (10) days prior to the due date of
such Form 8883 for either party. Buyer and Seller agree to negotiate in good
faith such proposed revisions and to attempt to resolve any differences between
the parties. In the event the parties reach agreement as to the information to
be reflected on such Form 8883, the Form shall be revised and timely filed by
each party as required by law. Each of Buyer and Seller shall report the
allocation of the Aggregate Deemed Sales Price (and any adjustments thereto) for
Tax purposes and file its Tax Returns (including the Form 8883) in a manner
consistent with any mutually-agreed allocations determined pursuant to this
Section 11.4(c). In the event the parties do not reach agreement on the
information to be reflected on such Form, each party shall provide to the other
party its final version of such Form and shall timely file its final version of
such Form in the manner required by law.
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power or
privilege, and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the Confidentiality
Agreement and other documents referred to in this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
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11.8 DISCLOSURE LETTER
(a) Seller and Venturi may, at their option, include in the Disclosure
Letter items that are not material in order to avoid any misunderstanding, and
any such inclusion, or any references to dollar amounts, shall not be deemed to
be an acknowledgment or representation that such items are material, to
establish any standard of materiality or to define further the meaning of such
terms for purposes of this Agreement. The disclosures in the Disclosure Letter,
and those in any Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly relate and
not to any other representation or warranty in this Agreement, except to the
extent that the relevance to such other representation and warranty is manifest
on the face of the Disclosure Letter.
(b) In the event of any inconsistency between the statements in the body
of this Agreement and those in the Disclosure Letter (other than an exception
expressly set forth as such in the Disclosure Letter with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
11.9 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without
the prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any Related Person of Buyer; provided, however,
that, unless Venturi and Seller have expressly agreed to release Buyer from its
obligations hereunder in connection with any such assignment, Buyer shall remain
primarily and fully liable for its obligations and liabilities under this
Agreement. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the parties. Nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement any legal or equitable right, remedy or claim under or with respect to
this Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
11.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
11.11 SECTION HEADINGS; CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
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11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of New York
without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.
11.14 CONFIDENTIALITY
Without limiting any rights or obligations under the Confidentiality
Agreement, between the date of this Agreement and the Closing Date, each of
Buyer, Venturi and Seller will maintain in confidence, and will cause their
respective directors, officers, employees, agents and advisors to maintain in
confidence, and not use to the detriment of another party or of the Company or
its Subsidiaries, all written, oral or other information obtained in confidence
from another party or from the Company or its Subsidiaries in connection with
this Agreement or the Contemplated Transactions, unless (a) such information is
already known to such party or to others not bound by a duty of confidentiality
or such information becomes publicly available through no fault of such party,
(b) the use of such information is necessary or appropriate in making any filing
or obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required by, or necessary or appropriate in connection with, legal proceedings.
Promptly upon the written request of another party, the requested party will
return or destroy as much of such written information as the other party may
reasonably request.
66-
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above.
Buyer: Seller:
COMPASS CS INC. PFI CORP.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------- ------------------------------
Printed Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: President Its: Chief Executive Officer
Venturi:
VENTURI PARTNERS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------
Printed Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Chief Executive Officer
67-
EXHIBIT 1(a)
BUYER TERMINATION EXPENSES
--------------------------
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DESCRIPTION AMOUNT
----------- ------
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Tax and accounting due diligence $175,000.00
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Integration planning $75,000.00
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Legal $600,000.00
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Investment banking $300,000.00
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Financing (commitment fees) $475,000.00
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Financing (closing fees) $940,000.00
-------------------------------------------------------------------------------
Financing (legal) $200,000.00
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Financing (other) $50,000.00
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Miscellaneous travel and other expenses $100,000.00
-----------
-------------------------------------------------------------------------------
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Total $2,915,000.00
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