1
Exhibit 2.04
STOCK PURCHASE AGREEMENT
Dated as of March 2, 1998
between
PURCHASER:
Corporate Staffing Resources, Inc.
AND
SELLERS:
▇▇▇▇▇▇▇▇▇▇ Family
Limited Partnership
2
TABLE OF CONTENTS
ARTICLE I................................................................................................1
1.1 Defined Terms..........................................................................1
ARTICLE II - PURCHASE AND SALE OF STOCK.................................................................11
2.1 Transfer of Stock..........................................................................11
2.2 Consideration. ...........................................................................11
2.3 Closing Payment...........................................................................11
2.4 Contingent Amounts........................................................................12
2.5 Post Closing Adjustments..................................................................14
2.6 Manner of Payment.........................................................................17
2.7 Allocation of Consideration. ..............................................................17
ARTICLE III - SELLERS' AGREEMENTS RESPECTING
POST-CLOSING COMPETITION...............................................................................17
3.1 Reasons For Agreements. ...................................................................17
3.2 The Sellers' Agreements. ..................................................................17
3.3 Interpretation and Remedies................................................................19
3.4 Definitions................................................................................20
3.5 Termination of Sellers' Agreements.........................................................20
ARTICLE IV - CLOSING....................................................................................20
4.1 Closing. .................................................................................20
4.2 Deliveries at Closing.....................................................................20
4.3 Other Closing Transactions................................................................21
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
THE SELLERS............................................................................................22
5.1 Organization and Good Standing.............................................................22
5.2 Authority; No Conflict.....................................................................22
5.3 Capitalization. ..........................................................................23
5.4 Financial Statements......................................................................24
5.5 Books and Records. .......................................................................24
5.6 Title to Properties: Encumbrances. .......................................................25
5.7 Condition and Sufficiency of Assets........................................................25
5.8 No Undisclosed Liabilities.................................................................25
5.9 Taxes......................................................................................25
5.10 No Material Adverse Change...............................................................27
5.11 Employee Benefits........................................................................27
5.12 Compliance with Legal Requirements; Governmental Authorizations..........................31
5.13 Legal Proceedings; Orders................................................................33
5.14 Absence of Certain Changes and Events....................................................34
5.15 Contracts; No Defaults...................................................................35
5.16 Insurance................................................................................38
3
5.17 Environmental Matters ...................................................................40
5.18 Labor Relations; Compliance: Employees...................................................41
5.19 Intellectual Property....................................................................42
5.20 Certain Payments.........................................................................43
5.21 No Other Agreements to Sell Assets or Capital Stock of the Subject Company. .............43
5.22 Relationships with Related Persons.......................................................43
5.23 Customers and Suppliers..................................................................44
5.24 Bank Accounts. ..........................................................................44
5.25 Brokers and Finders; Advisors............................................................44
5.26 Disclosure. .............................................................................44
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................................44
6.1 Organization of Purchaser.................................................................45
6.2 Corporate Authority and Ability...........................................................45
6.3 Authorization: No Conflict................................................................45
6.4 Proceedings...............................................................................46
6.5 Investment................................................................................46
6.6 Brokers or Finders........................................................................46
ARTICLE VII - ACTIONS OF THE SELLERS AND THE PURCHASER BEFORE
THE CLOSING DATE.......................................................................................46
7.1 Access and Investigation..................................................................46
7.2 Operation of Business.....................................................................46
7.3 Negative Covenants........................................................................47
7.4 Required Approvals........................................................................47
7.5 Notification..............................................................................47
7.6 No Negotiation............................................................................48
7.7 Best Efforts..............................................................................48
ARTICLE VIII - CONDITIONS PRECEDENT TO
PURCHASER'S OBLIGATION TO CLOSE.........................................................................48
8.1 Accuracy of Representations...............................................................48
8.2 Sellers' and Subject Companies' Performance...............................................48
8.3 Consents..................................................................................49
8.4 Additional Documents......................................................................49
8.5 No Proceedings............................................................................49
8.6 Financing.................................................................................49
8.7 No Prohibition............................................................................49
8.8 No Claim Regarding Stock Ownership or Sale Proceeds.......................................49
8.9 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Insurability...............................................................50
ARTICLE IX - CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE....................................................................................50
ii
4
9.1 Accuracy of Representations...............................................................50
9.2 The Purchaser's Performance...............................................................50
9.3 Consents..................................................................................50
9.4 Additional Documents......................................................................50
9.5 No Proceedings...........................................................................50
9.6 No Prohibition...........................................................................51
ARTICLE X - SELLERS' INDEMNIFICATION; REMEDIES..........................................................51
10.1 Survival of Representations. Etc.........................................................51
10.2 Indemnifications.........................................................................51
10.3 Tax......................................................................................55
ARTICLE XI - ADDITIONAL PURCHASER'S INDEMNIFICATION; REMEDIES...........................................57
11.1 The Indemnity............................................................................57
11.2 Notice and Cooperation...................................................................58
11.3 Seller's Claim for Indemnity; Payment....................................................58
ARTICLE XII - PURCHASER'S POST-CLOSING COVENANTS........................................................58
12.1 Subject Company Working Capital..........................................................58
12.2 Subject Company Name.....................................................................58
12.3 Purchaser's Existing California Business.................................................58
12.4 Separate Corporate Status. ..............................................................59
ARTICLE XIII - TERMINATION..............................................................................59
13.1 Termination Events.......................................................................59
13.2 Effect of Termination....................................................................59
ARTICLE XIV - MISCELLANEOUS.............................................................................60
14.1 Assignment..............................................................................60
14.2 Notices.................................................................................60
14.3 Choice of Law...........................................................................61
14.4 Entire Agreement: Amendments and Waivers................................................61
14.5 Multiple Counterparts...................................................................62
14.6 Expenses................................................................................62
14.7 Invalidity..............................................................................62
14.8 Titles..................................................................................62
14.9 Publicity...............................................................................62
14.10 Confidential Information................................................................62
14.11 Burden and Benefit......................................................................64
14.12 Service of Process; Consent to Jurisdiction.............................................64
14.13 Attorneys' Fees.........................................................................64
14.14 Limitation of Liability.................................................................65
14.15 Additional Survival.....................................................................65
iii
5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT dated as of March 2, 1998 (this
"Agreement"), is by and among Corporate Staffing Resources, Inc., a Delaware
corporation (the "Purchaser") and ▇▇▇▇▇▇▇▇▇▇ Family Limited Partnership, a
California limited partnership, ("Seller or "Sellers").
RECITALS
A. The Purchaser desires to purchase from the Sellers, and the
Sellers desire to sell to Purchaser all of the issued and outstanding capital
stock of Intranational Computer Consultants, a California corporation (the
"Subject Company") upon the terms and subject to the conditions contained herein
(the "Acquisition").
B. In connection with the Acquisition, the parties desire to
set forth certain agreements, representations, warranties and covenants made by
one or more parties to the other or others as an inducement to the consummation
of the Acquisition, upon the terms and subject to the conditions contained
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
ARTICLE I
1.1 Defined Terms. As used herein, the terms below shall have
the following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
"Accounts Receivable" shall have the meaning set forth in
Section 2.5(b).
"Acquisition" shall have the meaning set forth in recital A to
this Agreement.
"Advisors" shall have the meaning set forth in Section 7.1.
"Affiliate" shall have the meaning set forth in the Exchange
Act. Without limiting the foregoing, all directors and officers of a Person that
is a corporation and all managing members of a Person that is a limited
liability company, shall be deemed Affiliates of such Person for all purposes
hereunder.
"Agreement" shall mean this Stock Purchase Agreement.
6
"Applicable Contract" shall mean any Contract (a) under which
the Subject Company has acquired any rights, (b) under which the Subject Company
has become subject to any obligation or liability, or (c) by which the Subject
Company or any of the assets owned or used by it is bound.
"Balance Sheet" shall have the meaning set forth in Section
5.6.
"Best Efforts" shall mean the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible; provided, however, that an
obligation to use Best Efforts under this Agreement does not require the Person
subject to that obligation to take actions that would result in a Material
Adverse Change in the benefits to such Person of this Agreement and the
Transactions.
"Breach" shall mean and a breach of a representation,
warranty, covenant, obligation, or other provision of this Agreement or any
Transaction Documents will be deemed to have occurred if there is or has been
any inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
"CERCLA" shall mean the United States Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et. seq.,
as amended.
"Claim" shall have the meaning set forth in Section 10.2(d).
"Claim Notice" shall have the meaning set forth in Section
10.2(d).
"Cleanup" shall mean any investigation, cleanup, removal,
containment or other remediation or response actions.
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Balance Sheet" shall have the meaning set forth in
Section 2.5(a).
"Closing Balance Sheet Date" shall mean the date immediately
preceding the Closing Date.
"Closing Date" shall have the meaning set forth in Section 13.
l(d).
"Closing Payment" shall have the meaning set forth in Section
2.3.
"Confidential Information" shall have the meaning set forth in
Section 14.10(b).
"Consent" shall mean any approval, consent, ratification,
waiver, or other authorization (including any Governmental Authorization).
2
7
"Consideration" shall have the meaning set forth in Section
2.2.
"Contingent Amounts" shall have the meaning set forth in
Section 2.2.
"Contract" shall mean any agreement, contract, obligation,
promise, or undertaking (whether written or oral) that is legally binding.
"Copyrights" shall have the meaning set forth in Section
5.19(a).
"Covenant Payment" shall have the meaning set forth in Section
3.1.
"Damages" shall have the meaning set forth in Section 10.2(a).
"Disclosure Schedules" shall mean the schedules prepared and
delivered by the Sellers for and to the Purchaser and dated as of the date
hereof which set forth the exceptions to the representations and warranties
contained herein and certain other information called for by this Agreement.
Unless otherwise specified, each reference in this Agreement to any numbered
schedule is a reference to that numbered schedule which is included in the
Disclosure Schedules.
"EBIT" shall mean earnings before interest expense and tax
expenses determined in accordance with GAAP.
"Encumbrance" shall mean any charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership.
"Environment" shall mean soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwater, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life and any
other environmental medium or natural resource.
"Environmental. Health and Safety Liabilities" shall mean any
cost, damage, expense, Liability, obligation or other responsibility arising
from or under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any environmental, health or safety matters or conditions
(including on-site or off-site contamination, occupational safety and
health and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial or
3
8
inspection costs and expenses arising under any Environmental Law or
Occupational Safety and Health Law;
(c) financial responsibility under any Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective
action, including any Cleanup required by applicable Environmental Law
or Occupational Safety and Health Law (whether or not such Cleanup has
been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective, investigative or
remedial measures required under any Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial" and "response action" include
the types of activities covered by CERCLA.
"Environmental Law" shall mean all federal, state, district,
local and foreign laws, all rules or regulations promulgated thereunder and all
orders, consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the Environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including without limitation
(i) laws relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, materials, wastes or other substances into
the Environment and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of pollutants, contaminants, chemicals,
industrial materials, wastes or other substances. Environmental Laws shall
include, without limitation, CERCLA, the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as amended, the
Safe Drinking Water Act, as amended, the Clean Air Act, as amended, the
Occupational Safety and Health Act, as amended, the California Health & Safety
Code (Section 25100 et seq., 39000 et seq.) and the California Water Code
(Section 13000, et seq.) and all analogous laws promulgated or issued by any
state or other governmental authority.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"ERISA Affiliate" shall mean any other Person that, together
with the Subject Company, is or was required to be treated as a single employer
under IRC Section 414(b) or (c), and solely for the purposes of potential
liability under ERISA Section 302(c)(ii) and IRC Section 412(c)(ii) and the lien
created under ERISA Section 302(f) and IRC Section 412(n), under IRC Section
414(m) or (o).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
4
9
"Facilities" shall mean any real property, leaseholds or other
interests currently or formerly owned or operated by the Subject Company and any
buildings, plants, structures or equipment (including motor vehicles) currently
or formerly owned or operated by the Subject Company.
"Family" shall mean, with respect to any individual (i) the
individual, (i) 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.
"Financial Statements" shall have the meaning set forth in
Section 5.4.
"Fixed Amount" shall have the meaning set forth in Section
2.2.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Authorization" shall mean any approval, Consent,
license, permit, waiver or other authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"Governmental Body" shall mean any:
(a) nation, state, county, city, town, village, district or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official or
entity and any court or other tribunal); or
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or
taxing authority or power of any nature.
"Hazardous Activity" shall mean the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment or use
(including any withdrawal or other use of groundwater) of Hazardous Materials
in, on, under, about or from the Facilities or any part thereof into the
Environment and any other act, business, operation or thing that increases the
danger or risk of danger or poses an unreasonable risk of harm to Persons or
property on or off the Facilities or that may affect the value of the Facilities
or the Subject Company.
"Hazardous Materials" shall mean any waste or other substance
that is listed, defined, designated or classified as, or otherwise determined to
be, hazardous, radioactive or toxic or a
5
10
pollutant or a contaminant subject to regulation, control or remediation under
any Environmental Law (whether solids, liquids or gases), including any mixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor, polychlorinated biphenyls and
asbestos or asbestos-containing materials.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976 or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
"Information Technology Staffing Services Business" shall have
the meaning set forth in Section 3.4.
"Intellectual Property Assets" shall have the meaning set
forth in Section 5.19(a).
"IRC" shall mean the Internal Revenue Code of 1986, as
amended, or any successor law
"IRS" shall mean the United States Internal Revenue Service or
any successor agency.
"Knowledge" shall mean and an individual will be deemed to
have "Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual should be aware of such fact or other
matter.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director, executive officer, partner, executor or trustee of such
Person (or in any similar capacity) has, Knowledge of such fact or other matter.
"Knowledge of the Sellers" or other similar phrases shall mean
the Knowledge of the Sellers and the actual knowledge of any other executive
officer of the Subject Company.
"▇▇▇▇▇▇▇▇▇▇ Employment Agreement" shall have the meaning set
forth in Section 2.4(f).
"Legal Requirement" shall mean any federal, state, local,
municipal, foreign, international, multinational or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute or
treaty.
"Liability" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether known, unknown, accrued,
absolute, contingent, matured or unmatured.
6
11
"Marks" shall have the meaning set forth in Section 5.19(a).
"Material Adverse Effect" or "Material Adverse Change" shall
mean any significant and substantial adverse effect or change in the condition
(financial or other), business, results of operations, liabilities or operations
of any party, its business and/or assets or on the ability of such party or its
stockholders or shareholders, as the case may be, to consummate the
Transactions, or any event or condition which would, with the passage of time,
constitute a "Material Adverse Effect" or "Material Adverse Change."
"Material Interest" shall mean direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities
or other voting interests representing at least 10% of the outstanding voting
power of a Person or equity securities or other equity interests representing at
least 10% of the outstanding equity securities or equity interests in a Person.
"Multiemployer Plan" shall have the meaning set forth in ERISA
Section 3(37)(A).
"Noncompetition Period" shall have the meaning set forth in
Section 3.4.
"Occupational Safety and Health Law" shall mean any Legal
Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program designed to
provide safe and healthful working conditions.
"Order" shall mean any award, decision, injunction, judgment,
order, ruling, subpoena or verdict entered, issued, made or rendered by any
court, administrative agency or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" shall describe any action taken
by a Person if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be authorized by
the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"Organizational Documents" shall mean (a) the articles or
certificate of incorporation, all certificates of determination and designation,
and the bylaws of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership
7
12
agreement and the certificate or articles of limited partnership of a limited
partnership; (d) the operating agreement, limited liability company agreement
and the certificate or articles of organization or formation of a limited
liability company; (e) any charter or similar document adopted or filed in
connection with the creation, formation or organization of a Person; and (f) any
amendment to any of the foregoing.
"Other Benefit Obligations" shall mean all obligations,
arrangements or customary practices, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
present or former directors, employees or agents, other than obligations,
arrangements and practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not depend upon the
amount of service rendered, sabbatical policies, severance payment policies and
fringe benefits within the meaning of IRC Section 132.
"Patents" shall have the meaning set forth in Section 5.19(a).
"Pension Plan" shall have the meaning set forth in ERISA
Section 3(2)(A).
"Person" shall mean any individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union or
other entity or Governmental Body.
"Plan" shall have the meaning set forth in ERISA Section 3(3).
"Plan Sponsor" shall have the meaning set forth in ERISA
Section 3(16)(B).
"Post-Closing Partial Period" shall have the meaning set forth
in Section 10.3(b).
"Pre-Closing Partial Period" shall have the meaning set forth
in Section 10.3(a).
"Proceeding" shall mean any action, arbitration, audit,
hearing, investigation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"Proposed Acquisition Transaction" shall have the meaning set
forth in Section 7.6.
"Purchaser" shall have the meaning set forth in the first
paragraph of this Agreement.
"Purchaser Indemnified Parties" shall have the meaning set
forth in Section 10.2(b).
"Qualified Plan" shall mean any Plan that meets or purports to
meet the requirements of IRC Section 401(a).
8
13
"Related Person" shall mean 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
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director,
executive officer, partner, executor or trustee (or in a similar
capacity).
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, executive 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; and
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity).
"Release" shall mean any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping or other releasing into the
Environment, whether intentional or unintentional.
"Representative" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Seller Indemnified Parties' shall have the meaning set forth
in Section 10.2(a).
"Sellers" shall have the meaning set forth in the first
paragraph of this Agreement.
9
14
"Sellers' Accountant" shall have the meaning set forth in
Section 2.4(a).
"Sellers' Closing Documents" shall have the meaning set forth
in Section 5.2(a).
"Shareholders' Equity" shall have the meaning set forth in
Section 2.5(a).
"Stock" shall have the meaning set forth in Section 2.1.
"Straddle Period" shall have the meaning set forth in Section
10.3(b).
"Subject Company" shall have the meaning set forth in the
first paragraph of this Agreement.
"Subsidiary" shall mean, with respect to any Person (for the
purposes of this definition, the "Owner"), any corporation or other Person of
which securities or other interests having the power to elect a majority of that
corporation's or other Person's board of directors or similar governing body, or
otherwise having the power to direct the business and policies of that
corporation or other Person (other than securities or other interests having
such power only upon the happening of a contingency that has not occurred) are
held by the Owner or one or more of its Subsidiaries .
"Tax" or "Taxes" shall mean any federal, state, local, foreign
or other tax, levy, impost, fee, assessment or other governmental charge,
including without limitation income, estimated income, gross receipts, business,
occupation, franchise, property, payroll, personal property, sales, transfer,
use, employment, commercial rent, occupancy, franchise or withholding taxes, and
any premium, including without limitation, interest, penalties and additions in
connection therewith.
"Tax Return" shall mean any return (including any information
return), report, statement, schedule, notice, form or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of, or compliance with, any Legal
Requirement relating to any Tax.
"Territory" shall have the meaning set forth in Section 3.4.
"Threat of Release" shall mean a substantial likelihood of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"Threatened" shall describe any claim, Proceeding, dispute,
action or other matter if (i) any demand or statement has been made (orally or
in writing) with respect to such claim, Proceeding, dispute, action or other
matter, (ii) any notice has been given (orally or in writing) with respect
thereto or (iii) any other event has occurred or any other circumstances exist,
that would lead
10
15
a prudent Person to conclude that such a claim, Proceeding, dispute, action or
other matter is likely to be asserted, commenced, taken or otherwise pursued in
the future.
"Threshold" shall have the meaning set forth in Section
10.2(e).
"Title IV Plans" shall mean all Pension Plans that are subject
to regulation under Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other
than Multiemployer Plans.
"Trade Secrets" shall have the meaning set forth in Section
5.19(a).
"Transaction Documents" shall mean this Agreement, the
Employment Agreement, and all instruments executed, filed or otherwise prepared,
exchanged or delivered in accordance with this Agreement.
"Transactions" shall mean the Acquisition and the other
transactions contemplated by the Transaction Documents.
"Welfare Plan" shall have the meaning given in ERISA
Section 3(1).
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 Transfer of Stock.
Upon the terms and subject to the conditions set forth herein,
on the Closing Date each of the Sellers shall sell, convey, transfer,
assign and deliver to the Purchaser, and the Purchaser shall purchase
from the Sellers, all of the outstanding shares of capital stock of the
Subject Company (the "Stock"), which Stock is owned by each of the
Sellers in the amounts set forth next to the name of each such Seller
in Schedule 2.1.
2.2 Consideration. Upon the terms and subject to the
conditions set forth herein, in consideration for the transfer of the Stock
pursuant to Section 2.1, the Purchaser shall pay to the Sellers, at the times
hereafter set forth, the Closing Payment pursuant to Section 2.3, as adjusted
pursuant to Section 2.5 and the Contingent Amounts pursuant to Section 2.4. The
Closing Payment as adjusted pursuant to Section 2.5 is referred to herein as the
"Fixed Amount" and together with the Contingent Amounts, collectively referred
to as the "Consideration."
2.3 Closing Payment. On the Closing Date, the Purchaser shall
pay to the Sellers an aggregate amount of Five Million Four Hundred Thousand
Dollars ($5,400,000) in cash (the "Closing Payment").
2.4 Contingent Amounts.
11
16
(a) On or before the times hereinafter set forth, the
Purchaser shall pay to the Sellers the additional cash amounts
hereinafter described (the "Contingent Amounts"):
(i) An amount equal to six (6) multiplied by the
excess of (A) the Adjusted EBIT of the Subject Company for the
calendar year 1998 (the "1998 Adjusted EBIT") over (B) the
1997 Base; plus
(ii) An amount equal to six (6) multiplied by the
excess of (A) the Adjusted EBIT of the Subject Company for the
calendar year 1999 (the "1999 Adjusted EBIT") over (B) the
greater of [i] the 1997 Base or [ii] the 1998 Adjusted EBIT;
plus
(iii) An amount equal to six (6) multiplied by the
excess of (A) the Adjusted EBIT of the Subject Company for the
calendar year 2000 (the "2000 Adjusted EBIT") over (B) the
greater of [i] the 1997 Base or [ii] the 1998 Adjusted EBIT or
[iii] the 1999 Adjusted EBIT; provided, however, that the
aggregate of the Contingent Amounts shall not exceed Six
Million Dollars ($6,000,000).
(b) The "1997 Base" shall mean $875,000 unless the 1997
Adjusted EBIT of the Subject Company is less than $825,000 in which
event the "1997 Base" shall mean $875,000 less the amount by which
$825,000 exceeds 1997 Adjusted EBIT. "1997 Adjusted EBIT" shall mean
EBIT for 1997 adjusted as provided in Schedule 2.4(A) hereto. "Adjusted
EBIT" as used in determining the 1998 Annualized Adjusted EBIT, the
1999 Adjusted EBIT and the 2000 Adjusted EBIT shall mean the EBIT for
such period adjusted as provided in Schedule 2.4(B) hereto.
(c) As promptly as practicable after the end of each of the
calendar years 1998, 1999 and 2000 (but in no event more than sixty
(60) days after the year end) the Purchaser shall cause the Subject
Company to prepare and deliver to the Sellers an Adjusted EBIT
statement for the respective calendar year (the "Adjusted EBIT
Report"). Each Adjusted EBIT Report shall include an income statement
prepared in accordance with GAAP, a listing by item and amount of each
adjustment to EBIT in accordance with Schedule 2.4(B) hereof and the
Purchaser's determination of the amount of the Adjusted EBIT for the
applicable period. Each Adjusted EBIT Report shall be accompanied by a
certificate of the Chief Financial Officer of the Purchaser to the
effect that the Adjusted EBIT Report presents fairly in accordance with
GAAP the EBIT of the Subject Company for the period covered thereby and
properly and fully reflects each adjustment required to determine
Adjusted EBIT in accordance with Schedule 2.4(B) hereto. The Sellers
and a firm of independent public accountants designated by the Sellers
(the "Sellers' Accountant") will be entitled to reasonable access
during normal business hours to the relevant records and working papers
of the Subject Company and its accountants to aid in their review of
the Adjusted EBIT Report. The Sellers will be solely responsible for
all costs of the Sellers' Accountants. Each Adjusted EBIT Report shall
be deemed to be accepted by and shall be conclusive for the
12
17
purposes of determining the applicable Contingent Amount except to the
extent, if any, that the Sellers or the Sellers' Accountant shall have
delivered within thirty (30) days after the date on which the Adjusted
EBIT Report is delivered to Sellers, a written notice to the Purchaser
stating each and every item to which the Sellers take exception as not
being in accordance with GAAP or Schedule 2.4(B) hereto or as having
computational errors, specifying in reasonable detail the nature and
extent of any such exception (it being understood that any amounts not
disputed shall be paid promptly). If a change proposed by the Sellers
is disputed by the Purchaser, then the Purchaser and the Sellers shall
negotiate in good faith to resolve such dispute. If, after a period of
twenty (20) days following the date on which the Sellers give the
Purchaser notice of any such proposed change, any such proposed change
still remains disputed, then the Purchaser and the Sellers shall
together choose an independent firm of public accountants of nationally
recognized standing (the "Accounting Firm") to resolve any remaining
disputes. The Accounting Firm shall act as an arbitrator to determine,
based solely on presentations by the Sellers and the Purchaser, and not
by independent review, only those issues still in dispute. The decision
of the Accounting Firm shall be final and binding and shall be in
accordance with the provisions of this Section 2.4. All of the fees and
expenses of the Accounting Firm shall be paid by the Purchaser and the
Sellers based on the Accounting Firm's Adjusted EBIT determination in
relation to the Adjusted EBIT proposals submitted by the parties. For
purposes of illustration, if the Purchaser's submitted Adjusted EBIT is
$1,500,000, the Sellers' submitted Adjusted EBIT is $1,600,000 and the
Accounting Firm's determined Adjusted EBIT is $1,575,000, the Purchaser
shall pay 75% and the Sellers shall pay 25%.
(d) All payments of Contingent Amounts shall be made within
thirty (30) days following the applicable Adjusted EBIT Report Delivery
Date. The term "Adjusted EBIT Report Delivery Date" shall mean March 1
of the year in which the Adjusted EBIT Report is to be delivered as
provided in Section 2.4(c); provided, however, if any change to the
Adjusted EBIT Report is agreed to by the Purchaser and the Sellers in
accordance with this Section 2.4, then the date on which the Purchaser
and the Sellers agree in writing to such change shall be the Adjusted
EBIT Report Delivery Date; and, provided, further, that if any dispute
with respect to the Adjusted EBIT Report is resolved in accordance with
this Section 2.4, then the date on which the Accounting Firm delivers
its decision with respect to such dispute shall be the Adjusted EBIT
Report Delivery Date; provided, however, that any amounts not disputed
shall be paid promptly on March 31st.
(e) Any portion of any Contingent Amounts not paid by March 31
shall be payable with interest at the per annum rate of two percent
(2%) in excess of the prime rate published in the Wall Street Journal
money rates section accruing from March 31 of the year in which the
Adjusted EBIT Report is to be delivered to the date of payment together
with all of the Sellers' reasonable costs of collection, including
reasonable attorney's fees.
(f) After the Closing Date, Seller ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ will be
employed by the Subject Company pursuant to the Employment Agreement in
the form of Exhibit A hereto
13
18
(the "▇▇▇▇▇▇▇▇▇▇ Employment Agreement"). In the event the Subject
Company terminates the employment of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ other than
pursuant to Section 5(a)(i), (ii) or (iii) of the ▇▇▇▇▇▇▇▇▇▇ Employment
Agreement, the Purchaser shall pay to the Sellers as additional
Consideration and in lieu of any Contingent Amounts which would
otherwise have been payable with respect to the calendar year in which
employment terminated and each subsequent year the following:
(i) Six Million Dollars ($6,000,000), minus
(ii) all Contingent Amounts previously paid or
which have become payable to the Sellers.
Such amount, if any, shall be payable in equal cash
installments on the dates that the Contingent Amounts would
have been payable.
(g) In the event the Subject Company terminates the employment
of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ pursuant to Section 5(a)(i) of the ▇▇▇▇▇▇▇▇▇▇
Employment Agreement and the reason for termination is any of the
reasons set forth in subsections (A) or (B) of Section 5(a)(i) of the
▇▇▇▇▇▇▇▇▇▇ Employment Agreement, then all right of the Sellers to
receive Contingent Amounts with respect to the year in which employment
is terminated and each subsequent year shall terminate and the
Purchaser shall not be obligated to pay any Contingent Amounts with
respect to such years.
2.5 Post Closing Adjustments.
(a) Adjustments for 1997 Financial Results.
(i) On or before the date hereinafter provided, the
Purchaser shall pay to the Sellers the Adjustment Amount. The
"Adjustment Amount" shall mean:
(A) $500,000,
less
(B) an amount equal to 6.6 multiplied by the
excess, if any, of (A) $825,000 over (B) 1997
Adjusted EBIT,
plus
(C) the amount, if any, by which
Shareholders' Equity exceeds $550,000,
less
(D) the amount, if any, by which $550,000
exceeds Shareholders' Equity,
plus
14
19
(E) an amount equal to six percent (6%) per
annum on the sum of (A), (B), (C) and (D), and
accruing from the Closing Date until the date of
payment based upon a 365-day year.
The term "Shareholders' Equity" shall mean the amount
which the total assets of the Subject Company exceeds the
total Liabilities of the Subject Company, in each case as set
forth on the Closing Balance Sheet; provided, however, that if
any change to the Closing Balance Sheet is agreed to by the
Purchaser and the Sellers in accordance with Section
2.5(a)(ii) or any dispute between the Purchaser and the
Sellers with respect to the Closing Balance Sheet is resolved
in accordance with Section 2.5(a)(ii), then 'Shareholders'
Equity" shall be calculated after giving effect to any such
change or resolution.
(ii) As promptly as practicable after the Closing
Date (but in no event more than thirty (30) days after the
Closing Date, the Sellers shall deliver to the Purchaser (A)
an audited balance sheet of the Subject Company as of December
31, 1997 and the related audited statements of income, changes
in shareholders' equity, and cash flow for the fiscal year
then ended, together with the report thereon of ▇▇▇▇ ▇▇▇▇▇
LLP, independent certified public accountants, including the
notes thereto (the "1997 Financial Statements"), (B) the
Sellers' certificate of the amount of the 1997 Adjusted EBIT
listing by item and amount each adjustment to the 1997
Financial Statements EBIT in accordance with Schedule 2.4(A)
(the "1997 Adjusted EBIT Report") and (C) a compiled balance
sheet of the Subject Company as of the close of business on
the day immediately preceding the Closing Date, together with
the report thereon of ▇▇▇▇ ▇▇▇▇▇ LLP (the "Closing Balance
Sheet" and, together with the 1997 Financial Statements and
the 1997 Adjusted EBIT Report, collectively, the "Post-Closing
Financial Reports"). The 1997 Financial Statements and the
Closing Balance Sheet shall be prepared in accordance with
GAAP, applied on a basis consistent with the Financial
Statements and shall be accompanied by a certificate of the
Sellers to the effect that the 1997 Financial Statements and
the Closing Balance Sheet present fairly the financial
condition of the Subject Company for the period or as of the
date thereof. If GAAP requires expense accruals or other
accounting changes that are not consistent with prior
practices, both the beginning and ending balance sheet numbers
for the 1997 Financial Statements will changed in order not to
distort 1997 Adjusted EBIT. The Purchaser and a firm of
independent public accountants designated by the Purchaser
(the "Purchaser's Accountant") will be entitled to reasonable
access during normal business hours to the relevant records
and working papers of the Subject Company and its accountants
to aid in their review of the Post-Closing Financial Reports.
The Purchaser will be solely responsible for all costs of the
Purchaser's Accountants. The Post-Closing Financial Reports
shall be deemed to be accepted by and shall be conclusive for
the purposes of the Adjustment Amount described in Section
2.5(a)(i) hereof except to the extent, if any, that the
Purchaser or the Purchaser's Accountant shall have delivered,
within thirty
15
20
(30) days after the date on which the Post-Closing Financial
Reports are delivered to the Purchaser, a written notice to
the Sellers stating each and every item to which the Purchaser
takes exception as not being in accordance with GAAP or
Schedule 2.4(A) hereto or as having computational errors,
specifying in reasonable detail the nature and extent of any
such exception (it being understood that any portion of the
Adjustment Amount not disputed shall be paid promptly). If a
change proposed by the Purchaser is disputed by the Sellers,
then the Purchaser and the Sellers shall negotiate in good
faith to resolve such dispute. If, after a period of twenty
(20) days following the date on which the Purchaser gives the
Sellers notice of any such proposed change, any such proposed
change still remains disputed, then the Purchaser and the
Sellers shall together choose an independent firm of public
accountants of nationally recognized standing (the "Accounting
Firm") to resolve any remaining disputes. The Accounting Firm
shall act as an arbitrator to determine, based solely on
presentations by the Sellers and the Purchaser and not by
independent review, only those issues still in dispute. The
decision of the Accounting Firm shall be final and binding and
shall be in accordance with the provisions of this Section
2.5. All of the fees and expenses of the Accounting Firm shall
be paid by the Purchaser and the Sellers based on the
Accounting Firm's determination of the Adjustment Amount in
relation to the Adjustment Amount proposals submitted by the
parties. For purposes of illustration, if the Purchaser's
submitted Adjustment Amount is $300,000 and the Sellers'
submitted Adjustment Amount is $400,000 and the Accounting
Firm's determined Adjustment Amount is $375,000, the Purchaser
shall pay 75% and the Sellers shall pay 25%.
(iii) Any Adjustment Amount required to be paid to
the Sellers pursuant to this Section 2.5(a) shall be paid
within thirty (30) days of the Post-Closing Financial Reports
Delivery Date by wire transfer of immediately available funds
to the accounts previously designated by the Sellers. The term
"Post-Closing Financial Reports Delivery Date" shall mean the
date on which the Post-Closing Financial Reports are delivered
to the Purchaser pursuant to Section 2.5(a)(ii); provided,
however, that if any change to the Adjustment Amount is agreed
to by the Purchaser and the Sellers in accordance with Section
2.5(a)(ii), then the date on which the Purchaser and the
Sellers agree in writing to such change shall be the
Post-Closing Financial Reports Delivery Date; and provided,
further, that if any dispute with respect to the Adjustment
Amount is resolved in accordance with Section 2.5(a)(ii), then
the date on which the Accounting Firm delivers its decision
with respect to the Adjustment Amount shall be the
Post-Closing Financial Reports Delivery Date; it being
understood that any amounts not disputed shall be paid
promptly.
(iv) In the event that the Adjustment Amount as
determined pursuant to this Section 2.5(a) is a negative
amount, i.e., the sum of subsections (B), (C) and (D) of
Section 2.5(a)(i) exceed $500,000, the Adjustment Amount shall
be paid by the Sellers to the Purchaser within thirty (30)
days of the Post-Closing Financial Reports
16
21
Delivery Date by wire transfer of immediately available funds
to an account designated by the Purchaser.
(b) Accounts Receivable Adjustment. If the amount of the
Closing Date Accounts Receivable not collected by December 31, 1998
exceeds the Closing Date Reserve, the excess will be applied as a
reduction and setoff against the Contingent Amount payable to the
Sellers with respect to 1998 and the uncollected Closing Date Accounts
Receivable will be assigned by the Subject Company to the Sellers. If
the Closing Date Reserve exceeds the amount of the Closing Date
Accounts Receivable not collected by December 31, 1998, the excess will
be paid by the Purchaser to the Sellers on or before March 31, 1999.
The term "Closing Date Accounts Receivable" shall mean the accounts
receivable of the Subject Company included in the Closing Balance
Sheet. The term "Closing Date Reserve" shall mean the amount shown as
the reserve for bad debts on the Closing Balance Sheet which the
parties agree shall be $10,000.
2.6 Manner of Payment. All payments by the Purchaser to the
Sellers shall be in cash by wire transfer of immediately available funds to the
respective bank accounts designated by the Sellers in writing to the Purchaser.
2.7 Allocation of Consideration. The Consideration shall be
allocated among the Sellers as set forth in Schedule 2.7 hereto.
ARTICLE III
SELLERS' AGREEMENTS RESPECTING
POST-CLOSING COMPETITION
3.1 Reasons For Agreements. The Purchaser is making a
substantial investment pursuant to this Agreement in reliance upon the fact that
the knowledge and expertise developed by the Sellers in their management of the
business and affairs of the Subject Company will be preserved and will not be
used in competition with the Purchaser, the Subject Company or its Affiliates.
It is necessary for the protection of the Purchaser, the Subject Company and its
Affiliates that the Sellers provide the agreements and assurances set forth in
this Article III and the Sellers do so in consideration of the additional
payment by the Purchaser to the Sellers of One Hundred Thousand Dollars
($100,000) (the "Covenant Payment").
3.2 The Sellers' Agreements. The Sellers severally and
collectively agree that neither of the Sellers will, directly or indirectly,
except for the benefit of the Purchaser or its Affiliates, or with the consent
of the Purchaser, which consent may be granted or withheld at the Purchaser's
sole discretion:
(a) during the Noncompetition Period (as defined in Section
3.4 thereof), become a stockholder, partner, member, manager,
associate, employee, owner, agent, creditor,
17
22
independent contractor, co-venturer, a consultant or otherwise, or
encourage, counsel, advise or financially assist or support a spouse of
a Seller or any other member of the immediate family that resides with
him to be or become, or a Seller to himself be, or be interested in or
associated with any other Person, firm or business engaged in the
Information Technology Staffing Services Business in the Territory
(both as defined in Section 3.4 hereof); provided, however, that
nothing herein shall be construed to prohibit owning not more than five
percent (5%) of any class of securities issued by an entity in the
Information Technology Staffing Services Business which is subject to
the reporting requirements of the Exchange Act or traded in the
over-the-counter market; or
(b) during the Noncompetition Period, solicit, cause or
authorize, directly or indirectly, to be solicited for or on behalf of
such Seller or third parties, from parties who are, or within the
preceding three hundred sixty-five (365) days were, customers of the
Subject Company, any Information Technology Staffing Services Business
transacted by or with such customer by the Subject Company; or
(c) during the Noncompetition Period, solicit, cause or
authorize, directly or indirectly, to be solicited for or on behalf of
such Seller or third parties, any Information Technology Staffing
Services Business from any party who is then or was during the
preceding calendar year one of the fifty (50) largest customers of the
Purchaser and its Affiliates (determined on the basis of total revenues
from all services provided); or
(d) during the Noncompetition Period, in the Territory, accept
or cause or authorize, directly or indirectly, to be accepted for or on
behalf of such Seller or for third parties, any such Information
Technology Staffing Services Business from any such customers described
in (b) or (c) above; or
(e) during the Noncompetition Period, use, publish,
disseminate or otherwise disclose, directly or indirectly, any
information heretofore or hereafter acquired, developed or used by the
Subject Company relating to the business or the operations, employees
or customers of the Subject Company which constitutes proprietary or
confidential information of the Subject Company ("Confidential
Information"), including without limitation any Confidential
Information contained in any customer lists, mailing lists and sources
thereof, statistical data and compilations, patents, copyrights,
trademarks, trade names, inventions, formulae, methods, processes,
agreements, contracts, manuals or any other documents, and (2) from and
after the date hereof, use, publish, disseminate or otherwise disclose,
directly or indirectly, any information heretofore or hereafter
acquired, developed or used by the Purchaser which constitutes
Confidential Information, but excluding any Confidential Information
which has become part of common knowledge or understanding in the
staffing services business industry or otherwise in the public domain
(other than from disclosure by Sellers in violation of this Agreement);
provided, however, that this Section shall not be applicable to the
extent that any of the Sellers is required to testify in a judicial or
regulatory proceeding pursuant to the order of a judge or
administrative law judge after such Seller
18
23
requests that the confidentiality of such Confidential Information be
preserved, and in the event that the Sellers receive a subpoena or
other order to produce or testify as to Confidential Information, the
Sellers shall notify the Purchaser in order to provide the Purchaser
with an opportunity to quash at the Purchaser's expense; or
(f) during the Noncompetition Period,
(1) solicit, entice, persuade or induce, directly or
indirectly, any employee (or person who within the preceding
three hundred and sixty-five (365) days was an employee) or
staffing contractor of the Subject Company, to terminate his
or her employment, by, or contractual relationship with, such
Person or to refrain from extending or renewing the same (upon
the same or new terms) or to refrain from rendering services
to or for such Person or to become employed by or to enter
into contractual relations with any Persons other than such
Person or to enter into a relationship with a competitor of
the Subject Company;
(2) approach any such employee or staffing contractor
for any of the foregoing purposes, or
(3) authorize or approve or assist in the taking of
any such actions by any person other than the Subject Company,
the Purchaser or its Affiliates.
3.3 Interpretation and Remedies.
(a) The invalidity or non-enforceability of Section 3.2 in any
respect shall not affect the validity or enforceability of Section 3.2
in any other respect or of any other provisions of this Article III. In
the event that any provision of Section 3.2 shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the
geographic or business scope or the duration thereof, such invalidity
or unenforceability shall attach only to the scope or duration of such
provision and shall not affect or render invalid or unenforceable any
other provision of Section 3.2 and, to the fullest extent permitted by
law, this Section 3.2 shall be construed as if the geographic or
business scope or the duration of such provision had been more narrowly
drafted so as not to be invalid or unenforceable and further, to the
extent permitted by law, such geographic or business scope or the
duration thereof may be re-written by a court of competent jurisdiction
to make such sufficiently limited to be enforceable.
(b) The Sellers acknowledge that the Purchaser's remedy at law
for any breach of the provisions of Section 3.2 is and will be
insufficient and inadequate and that the Purchaser shall be entitled to
equitable relief, including by way of temporary restraining order,
temporary injunction, and permanent injunction, in addition to any
remedies the Purchaser may have at law. If either party files suit to
enforce or to enjoin the enforcement of any of the provisions of this
Section 3.2, the prevailing party shall be entitled to recover,
19
24
in addition to all other damages or remedies provided for herein, all
of its costs incurred in prosecuting or defending such suit, including
reasonable attorneys' fees.
3.4 Definitions. " Noncompetition Period" shall mean the period
commencing on the Closing Date and ending five (5) years after the Closing Date,
provided, however, that if a Seller violates any of the provisions of Section
3.2, the term of the Noncompetition Period shall be automatically extended for a
period of time equal to the period of the Seller's violation of any of the
provisions of Section 3.2.
"Information Technology Staffing Services Business" shall mean
(A) a firm which recruits, trains and/or tests employees or independent
contractors and assigns them to clients (i) to provide information technology
services for such client to support or supplement the client's work force in
work situations such as employee absences, temporary skill shortages, seasonal
workloads and special assignments and projects, (ii) to provide information
technology services for such client for short-term and long-term temporary
placement and temporary to permanent arrangements for the client to eventually
hire the service provider as its own employee, and (iii) to provide permanent
individual information technology employees of contractors for permanent
placement fees, or (B) any of the business activities described in (A).
"Territory" shall mean Alameda, Contra Costa, Napa, Marin, San
Francisco, Sacramento, San Mateo, Santa ▇▇▇▇▇ and Sonoma counties in the State
of California, and outside such counties, within a radius of fifty (50) miles
from any office operated during the Noncompetition Period by the Subject
Company.
3.5 Termination of Sellers' Agreements. If the Purchaser fails to pay
to the Sellers any of the Contingent Amounts on or before the date provided in
Section 2.4(d) or the Adjustment Amount on or before the date provided in
Section 2.5(a)(iii) and such failure is not cured by the Purchaser within
fifteen (15) days following the delivery by the Sellers to the Purchaser of
written demand specifying the amount due, then all of the agreements of the
Sellers set forth in this Article III and all of the agreements of Seller ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ set forth in Section 6 of the ▇▇▇▇▇▇▇▇▇▇ Employment Agreement shall
terminate and be of no further force or effect.
ARTICLE IV
CLOSING
4.1 Closing. Upon the terms and subject to the conditions set
forth herein, the closing of the Transactions (the "Closing") shall be held at
10:00 a.m. local time on the Closing Date at the offices of the Purchaser, ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
unless the parties hereto otherwise agree.
4.2 Deliveries at Closing.
20
25
(a) Consideration. The Purchaser will deliver the Closing
Payment (allocated among the Sellers as set forth in Schedule 2.7) to
each of the Sellers.
(b) The Purchaser will deliver the Covenant Payment to each of
the Sellers.
(c) Stock Certificates. At the Closing, the Sellers shall
deliver to the Purchaser certificates evidencing the Stock (duly
endorsed in blank for transfer or accompanied by stock powers duly
executed in blank).
(d) Purchaser Certificates. The Purchaser will furnish the
Sellers with such certificates of its officers and others to evidence
compliance with the conditions set forth in this Agreement as may be
reasonably requested by the Sellers, which shall include, but not be
limited to a certificate executed by the Secretary or an Assistant
Secretary of the Purchaser, certifying, as of the Closing Date, (A) a
true and complete copy of the Organizational Documents of the
Purchaser, including its articles of incorporation certified as of a
recent date by the Secretary of State of Delaware, (B) a true and
complete copy of the resolutions of the board of directors of the
Purchaser, authorizing the execution, delivery and performance of this
Agreement by the Purchaser, and the consummation of the transactions
contemplated hereby and (C) incumbency matters.
(e) Sellers' Certificates. The Sellers will furnish the
Purchaser with such certificates of the Sellers and the officers of the
Subject Company and others to evidence compliance with the conditions
set forth in this Agreement as may be reasonably requested by the
Purchaser, which shall include, but not be limited to:
(i) A certificate executed by the Secretary or an
Assistant Secretary of the Subject Company certifying as of
the Closing Date (A) a true and complete copy of the
Organizational Documents of the Subject Company, including its
articles of incorporation certified as of a recent date by the
Secretary of State of California and (B) incumbency matters;
(ii) A certificate of the appropriate Secretary of
State certifying the good standing of the Subject Company in
its state of incorporation and all states in which it is
qualified to do business; and
(iii) A certificate of each of the Sellers'
non-foreign status, pursuant to Treasury Regulation section
1.1445-2(b)(2).
4.3 Other Closing Transactions.
(a) Employment Agreement. At the Closing, the Subject Company
shall enter into the ▇▇▇▇▇▇▇▇▇▇ Employment Agreement with ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ in the form of Exhibit A hereto.
21
26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
Each of the Sellers hereby, jointly and severally, represents
and warrants to the Purchaser that the following representations and warranties
are, as of the date hereof, and will be, as of the Closing Date, true and
correct:
5.1 Organization and Good Standing.
(a) The Subject Company is duly organized, validly existing,
and in good standing under the laws of its jurisdiction of formation,
with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its obligations under
Contracts to which it is a party. The Subject Company is duly qualified
to do business and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the failure
to be so qualified or in good standing would not reasonably be expected
to have a Material Adverse Effect on the Subject Company. Schedule 5.1
contains a complete and accurate list of jurisdictions in which the
Subject Company is authorized to do business.
(b) Subsidiaries. The Subject Company has no Subsidiaries and,
except as otherwise set forth on Schedule 5.1, the Subject Company has
no direct or indirect stock or other equity or ownership interest
(whether controlling or not) in any corporation, association,
partnership, joint venture or other entity.
5.2 Authority; No Conflict.
(a) This Agreement and the other Transaction Documents to
which the Sellers or the Subject Company are a party (the "Sellers'
Closing Documents") have been duly executed and delivered by the
Sellers and the Subject Company, to the extent that they are a party
thereto, and constitute the legal, valid, and binding obligations of
the Sellers and/or the Subject Company, as the case may be, enforceable
against the Sellers and/or the Subject Company in accordance with their
respective terms, in each case except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization and
other similar laws affecting creditors' rights generally and (ii) the
general principles of equity, regardless of whether asserted in a
proceeding in equity or at law. The Sellers and the Subject Company
have all requisite power, authority and capacity to execute and deliver
this Agreement and/or the Sellers' Closing Documents and to perform
their respective obligations under this Agreement and the Sellers'
Closing Documents.
22
27
(b) Except as set forth in Schedule 5.2, neither the execution
and delivery of this Agreement and the Sellers' Closing Documents nor
the consummation or performance of any of the Transactions will,
directly or indirectly (with or without notice or lapse of time):
(i) contravene, conflict with or result in a
violation of (A) any provision of the Organizational Documents
of the Subject Company or (B) any resolution adopted by the
board of directors of the Subject Company or the shareholders
or other equity owners of the Subject Company;
(ii) contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Transactions or to exercise
any remedy or obtain any relief under, any Legal Requirement
or any Order to which the Subject Company or any of the assets
owned or used by the Subject Company, may be subject;
(iii) contravene, conflict with or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate or modify, any Governmental Authorization
that is held by the Subject Company or that otherwise relates
to the business of, or any of the assets owned or used by, the
Subject Company;
(iv) contravene, conflict with or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate or modify, any Applicable Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Subject Company,
except in the case of each of clauses (ii) through (v) above, for such
contraventions, conflicts, violations, Liabilities, reassessments, revaluations,
breaches or creations of Encumbrances which, individually and in the aggregate,
would not have a Material Adverse Effect on the Subject Company.
Except as set forth in Schedule 5.2, the Subject Company is
not, nor will be, required to give any notice to or obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Transactions, other than notices or
Consents the absence of which would not have a Material Adverse Effect on the
Subject Company.
5.3 Capitalization. Schedule 5.3 contains a complete and
accurate description of the capitalization of the Subject Company (including the
identity of each shareholder (or holder of other equity interest) of the Subject
Company and the number of shares (or other equity interests) held by
23
28
each such Person). The Sellers have, or will have at Closing, title to all of
the Stock, in each case, free and clear of all Encumbrances. All of the Stock is
and will be, as of the Closing Date, duly authorized, validly issued, fully paid
and non-assessable. Except as set forth on Schedule 5.3, there are no
outstanding subscriptions, calls, commitments, warrants or options for the
purchase of shares of any capital stock or other securities of the Subject
Company or any securities convertible into or exchangeable for shares of capital
stock or other securities issued by the Subject Company, or any other
commitments of any kind for the issuance of additional shares of capital stock
or other securities issued by the Subject Company. None of the outstanding
capital stock or equity interests or other securities of the Subject Company was
issued in violation of the Securities Act.
5.4 Financial Statements. The Sellers have delivered to the
Purchaser (a) a compiled balance sheet of the Subject Company as of December 31,
1995 and the related statement of income for the year then ended, together with
the report thereon of ▇▇▇▇▇▇ Accountancy Corp., independent certified public
accountants, (b) a reviewed balance sheet of the Subject Company as of December
31, 1996 and the related statements of income, changes in shareholders' equity
and cash flow for the year then ended, together with the report thereon of ▇▇▇▇
▇▇▇▇▇, LLP (including the notes thereto), and (c) an internally prepared
statement of normalized EBITDA (computed in the manner requested by the
Purchaser) for each month of 1997 (collectively, clauses (a), (b) and (c), above
are referred to herein as the "Financial Statements"). Except as provided in
Schedule 5.4, the Financial Statements fairly and accurately present the
financial condition and the results of operations, income, expenses, assets,
liabilities, changes in stockholders' equity, and cash flow of the Subject
Company as of the respective dates of, and for the periods referred to in, the
Financial Statements, all in accordance with GAAP and reflect the consistent
application of such accounting principles throughout the periods involved,
except that accrued commissions on the December 31, 1996 balance sheet are
understated by $61,500 and the compiled 1995 financial statements have certain
expenses recorded on a cash basis. No financial statements of any Person other
than the Subject Company are required by GAAP to be included in the Financial
Statements. The December 31, 1996 balance sheet and the income statement contain
accruals for, and pro rated anticipated expenses for, periodic and annual
bonuses, incentive compensation, vacation, "flex time" and other similar
benefits (based on then existing compensation arrangements and past practices).
5.5 Books and Records. The books of account, minute books,
stock record books, and other records of the Subject Company, all of which have
been made available to the Purchaser, are complete and correct and, in all
material respects, have been maintained in accordance with sound business
practices, including the maintenance of an adequate system of internal controls,
and, with respect to the books of account, fairly and accurately reflect the
income, expenses, assets and liabilities of the Subject Company. The minute
books of the Subject Company contain, in all material respects, accurate and
complete records of all meetings held of, and corporate action taken by, the
shareholders, the board of directors, and committees of the board of directors
of the Subject Company, and no meeting of any such shareholders, board of
directors or committee has been held for which minutes have not been prepared
and are not contained in such minute books. At the Closing, all of those books
and records will be in the possession of the Subject Company.
24
29
5.6 Title to Properties: Encumbrances. The Subject Company
does not own, and since its inception has not owned, any real property or any
interest, other than a leasehold interest, in any real property. Schedule 5.6
contains a complete and accurate list of all leasehold interests in real
property owned by the Subject Company. Schedule 5.6 lists and describes all real
property leased by any Subject Company. The Sellers have delivered a copy of all
such leases to the Purchaser and, to the Knowledge of the Sellers, all such
leases are legal, valid, binding, enforceable and in full force and effect, and
following the Closing will continue to be legal, valid, binding and enforceable
by the Subject Company and in full force and effect. There are no disputes, oral
agreements or forbearances in effect as to any such leases. The Subject Company
owns all the properties and assets (whether real, personal or mixed and whether
tangible or intangible) that it purports to own, including all of the properties
and assets reflected in the unaudited December 31, 1997 balance sheet provided
to the Purchaser (the "Balance Sheet') (except for personal property sold since
the date of the Balance Sheet in the Ordinary Course of Business), and all of
the properties and assets purchased or otherwise acquired by the Subject Company
since the date of the Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business),
which subsequently purchased or acquired properties and assets are listed in
Schedule 5.6. Except as set forth in Schedule 5.6, all material properties and
assets reflected in the Balance Sheet are free and clear of all Encumbrances,
except inchoate tax liens, liens for taxes not yet due and payable and liens not
material in amount.
5.7 Condition and Sufficiency of Assets. The buildings,
plants, structures and equipment which comprise the office space of the Subject
Company are in good operating condition and repair, except for normal wear and
tear and except where failure to be in such condition would not have a Material
Adverse Effect on the Subject Company. The building, plants, structures and
equipment which comprise the office space of the Subject Company are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. The building, plants, structures and equipment which comprise the office
space of the Subject Companies are sufficient for the continued conduct of the
business of the Subject Companies after the Closing in substantially the same
manner as conducted prior to the Closing.
5.8 No Undisclosed Liabilities. Except as set forth in
Schedule 5.8, the Subject Company has no Liabilities required to be disclosed
under GAAP except for Liabilities reflected or reserved against in the Balance
Sheet and Liabilities incurred in the Ordinary Course of Business since the date
thereof.
5.9 Taxes.
(a) Except as set forth in Schedule 5.9, there have been
properly completed and filed on a timely basis and in correct form all
Tax Returns required to be filed by Subject Company on or prior to the
date hereof. As of the time of filing, the foregoing Tax Returns
correctly reflected in all material respects the facts regarding the
income, business, assets, operations, activities, status or other
matters of the applicable entity or any other information
25
30
required to be shown thereon. In particular, the foregoing returns are
not subject to penalties under Section 6662 of the IRC, relating to
accuracy-related penalties (or any corresponding provision of the
state, local or foreign Tax law) or any predecessor provision of law.
Except as set forth in Schedule 5.9, an extension of time within which
to file any Tax Return that has not been filed has not been requested
or granted.
(b) With respect to all amounts in respect of Taxes imposed on
the Subject Company or for which the Subject Company is or could be
liable, whether to taxing authorities (as, for example, under law) or
to other Persons or entities (as, for example, under Tax allocation
agreements), with respect to all taxable periods or portions of periods
ending on or before the Closing, all applicable Tax laws and agreements
have been complied with in all material respects, and all such amounts
required to be paid by the Subject Company to taxing authorities or
others on or before the date hereof have been paid.
(c) No material issues have been raised (and are currently
pending) by any taxing authority in connection with any of the Tax
Returns of the Subject Company. No waiver of statute of limitation with
respect to any Tax Return has been given by or requested from the
Subject Company. Schedule 5.9 sets forth (i) the taxable years of the
Subject Company as to which the statutes of limitations with respect to
Taxes have not expired, and (ii) with respect to such taxable years,
(A) those years for which examinations have been completed, (B) those
years for which examinations are presently being conducted, and (C)
those years for which required Tax Returns have not yet been filed.
Except to the extent shown in Schedule 5.9, all deficiencies asserted
or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the Financial
Statements, or are being contested and an adequate reserve therefor has
been established and is fully reflected in the Financial Statements.
(d) There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of any of the Subject Companies.
(e) The Subject Company is not a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement.
(f) The Subject Company has never been a member of an
affiliated group of corporations, within the meaning of Section 1504 of
the IRC.
(g) The Subject Company has not filed a consent pursuant to
the collapsible corporation provisions of Section 341(f) of the IRC (or
any corresponding provision of state, local or foreign income Tax law)
or agreed to have Section 341(f)(2) of the IRC (or any corresponding
provision of state, local or foreign income Tax law) apply to any
disposition of any asset owned by it.
26
31
(h) None of the assets of the Subject Company is property that
the Subject Company is required to treat as being owned by any other
Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the IRC.
(i) None of the assets of the Subject Company directly or
indirectly secures any debt, the interest on which is Tax-exempt under
Section 103(a) of the IRC.
(j) None of the assets of the Subject Company is "tax-exempt
use property" within the meaning of Section 168(h) of the IRC.
(k) The Subject Company has not agreed to make nor is the
Subject Company required to make any adjustment under Section 481(a) of
the IRC by reason of a change in accounting method or otherwise.
(l) The Subject Company is not a party to any agreement,
Contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the IRC.
(m) No stockholder of the Subject Company is a Person other
than a United States Person within the meaning of the IRC.
(n) The Subject Company is not a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for federal and applicable state income Tax purposes.
(o) Except as set forth in Schedule 5.9, the unpaid Taxes of
the Subject Company does not exceed the reserve for Tax liability
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth or included in the
Balance Sheet, as adjusted for the passage of time through the Closing,
in accordance with the past custom and practice of the Subject Company.
5.10 No Material Adverse Change. Since the date of the Balance
Sheet, there has not been any Material Adverse Change in the business,
operations, properties, prospects, assets or financial condition of the Subject
Company, and, to the Knowledge of the Sellers, no event has occurred or
circumstance exists that may result in such a Material Adverse Change.
5.11 Employee Benefits.
(a) (i) Schedule 5.11 contains a complete and accurate list of
all Plans and Other Benefit Obligations of the Subject
Company, and identifies as such all Plans that are Qualified
Plans.
27
32
(ii) Schedule 5.11 contains a complete and accurate
list of (A) all ERISA Affiliates of the Subject Company, and
(B) all Plans of which any such ERISA Affiliate is or was a
Plan Sponsor, in which any such ERISA Affiliate participates
or has participated, or to which any such ERISA Affiliate
contributes or has contributed.
(iii) Schedule 5.11 sets forth the financial cost of
all obligations owed under any Plan of the Subject Company or
Other Benefit Obligation of the Subject Company that is not
subject to the disclosure and reporting requirements of ERISA.
(b) Except as provided in Schedule 5.11, the Sellers and the
Subject Company have delivered to the Purchaser:
(i) all documents that set forth the terms of each
Plan and Other Benefit Obligations of the Subject Company and
of any related trust, including (A) all plan descriptions and
summary plan descriptions of the Plans of the Subject Company
for which plan descriptions and summary plan descriptions are
required to be prepared, filed and distributed and (B) all
summaries and descriptions furnished to participants and
beneficiaries regarding the Plans and the Other Benefit
Obligations of the Subject Company for which a plan
description or summary plan description is not required;
(ii) all personnel and employment manuals and
policies of the Subject Company;
(iii) a written description of any Plan or Other
Benefit Obligation of the Subject Company that is not
otherwise in writing;
(iv) all registration statements filed with respect
to any Plan of the Subject Company;
(v) all insurance policies purchased by or to provide
benefits under any Plan of the Subject Company;
(vi) all contracts with third party administrators,
actuaries, investment managers, consultants and other
independent contractors that relate to any Plan or Other
Benefit Obligation of the Subject Company;
(vii) all reports submitted within the four years
preceding the date of this Agreement by third party
administrators, actuaries, investment managers, consultants or
other independent contractors with respect to any Plan or
Other Benefit Obligation of the Subject Company;
28
33
(viii) all notifications to employees of the Subject
Company of their rights under ERISA Section 601 et seq. and
IRC Section 4980B;
(ix) the Form 5500 filed with respect to each Plan of
the Subject Company for the most recent three plan years,
including all schedules thereto and the opinions of
independent accountants;
(x) all notices that were given by the Subject
Company or any ERISA Affiliate of the Subject Company or any
Plan of the Subject Company to the IRS or any participant or
beneficiary, pursuant to statute, within the four years
preceding the date of this Agreement, including notices that
are expressly mentioned elsewhere in this Section 5.11;
(xi) all notices that were given by the IRS or the
Department of Labor to the Subject Company, any of their ERISA
Affiliates or any Plan of the Subject Company within the four
years preceding the date of this Agreement; and
(xii) the most recent IRS determination letter for
each Qualified Plan which is a Plan of the Subject Company.
(c) Except as set forth in Schedule 5.11:
(i) The Subject Company has performed its obligations
in all material respects under all the Plans and Other Benefit
Obligation of the Subject Company. The Subject Company has
made appropriate entries in its financial records and
statements under GAAP for all obligations and liabilities
under such Plans and Other Benefit Obligations that have
accrued but are not due.
(ii) No statement, either written or, to the
Knowledge of the Sellers, oral, has been made by the Subject
Company to any Person with regard to any Plan or Other Benefit
Obligation that was not in accordance with the Plan or Other
Benefit Obligation and that could have an adverse economic
consequence to the Subject Company.
(iii) The Subject Company, with respect to all the
Plans and the Other Benefit Obligations of the Subject
Company, is, and each Plan and Other Benefit Obligation of the
Subject Company is in full compliance in all material respects
with ERISA, the IRC, and other applicable laws including the
provisions of such laws expressly mentioned in this Section 5.
11.
(1) No transaction prohibited by ERISA 406
and no "prohibited transaction" under IRC 4975(c) has
occurred with respect to any Plan of the Subject
Company.
29
34
(2) The Subject Company has no liability to
the IRS with respect to any Plan, including any
liability imposed by Chapter 43 of the IRC.
(3) The Subject Company has no liability
under ERISA Section 502.
(4) All filings required by ERISA and the
IRC as to each Plan of the Subject Company have been
timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have
been timely provided.
(5) All contributions and payments made or
accrued by the Subject Company and the ERISA
Affiliates of the Subject Company with respect to all
the Plans and Other Benefit Obligations of the
Subject Company are deductible under IRC Section 162
or 404. No amount, nor any asset of any Plan of the
Subject Company is subject to Tax as unrelated
business taxable income.
(iv) Neither the Subject Company nor any ERISA
Affiliate of the Subject Company sponsors or maintains,
previously sponsored or maintained, or has or had any
obligation to contribute to any Title IV Plan, Multiemployer
Plan or any Welfare Plan that provides or will provide
benefits described in Section 3(1) of ERISA to any former
employee or retiree of the Subject Company or any ERISA
Affiliate of the Subject Company, except as required under
Part 6 of Title I of ERISA and Section 4980B of the Code.
(v) Each Plan of the Subject Company which is not a
Multi-Employer Plan can be terminated within thirty days,
without payment of any additional contribution or amount and
without the vesting or acceleration of any benefits promised
by such Plan, other than vesting of any accrued benefits under
any Pension Plan.
(vi) To the Knowledge of the Sellers, no event has
occurred or circumstance exists that could result in a
material increase in premium costs of the Plans and Other
Benefit Obligations of the Subject Company that are insured or
a material increase in benefit costs of such Plans and Other
Benefit Obligations that are self-insured.
(vii) Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal
proceeding involving, any Plan or Other Benefit Obligation of
the Subject Company is pending or, to the Knowledge of the
Sellers, is Threatened.
30
35
(viii) Each Qualified Plan of the Subject Company is
qualified in form and operation under IRC Section 401(a); each
trust for each such Plan is exempt from federal income Tax
under IRC Section 501(a). No event has occurred or
circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan
or trust.
(ix) The Subject Company has complied with the
provisions of ERISA Section 601 et seq. and IRC Section 4980B.
(x) No payment that is owed or may become due to any
director, officer, employee or agent of the Subject Company
will be non-deductible to the Subject Company or subject to
Tax under IRC Section 280G or Section 4999; nor will the
Subject Company be required to "gross up" or otherwise
compensate any such Person because of the imposition of any
excise Tax on a payment to such Person.
(xi) Neither the execution of the Transaction
Documents nor the consummation of the Transactions will result
in the payment, vesting or acceleration of any benefit.
5.12 Compliance with Legal Requirements; Governmental
Authorizations.
(a) Except as set forth in Schedule 5.12:
(i) the Subject Company is, and at all times since
January 1, 1996 has been, in all material respects, in
compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
(ii) to the Knowledge of the Sellers, no event has
occurred or circumstance exists that (with or without notice
or lapse of time) (A) may constitute or result in a violation
by the Subject Company of, or a failure on the part of the
Subject Company to comply with, any Legal Requirement or (B)
may give rise to any obligation on the part of the Subject
Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
(iii) the Subject Company has not received, at any
time since January 1, 1996, any written or, to the Knowledge
of the Sellers, other notice or other communication from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible or potential material violation of,
or material failure to comply with, any Legal Requirement or
(B) any actual, alleged, possible or potential material
obligation on the part of the Subject Company to undertake, or
to bear all or any portion of the cost of, any remedial action
of any nature.
31
36
(b) Schedule 5.12 contains a complete and accurate list of
each material Governmental Authorization that is held by the Subject
Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Subject Company. Each Governmental
Authorization listed or required to be listed in Schedule 5.12 is valid
and in full force and effect. Except as set forth in Schedule 5.12:
(i) the Subject Company is, and at all times since
January 1, 1996, has been, in all material respects, in full
compliance with all of the terms and requirements of each
Governmental Authorization identified or required to be
identified in Schedule 5.12;
(ii) to the Knowledge of the Sellers, no event has
occurred or circumstance exists that may (with or without
notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization listed
or required to be listed in Schedule 5.12 or (B) result
directly or indirectly in the revocation, withdrawal,
suspension, cancellation or termination of, or any
modification to, any Governmental Authorization listed or
required to be listed in Schedule 5.12;
(iii) the Subject Company has not received, at any
time since January 1, 1996, any written or, to the Knowledge
of the Sellers, other notice or communication from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible or potential material violation of
or material failure to comply with any term or requirement of
any Governmental Authorization or (B) any actual, proposed,
possible or potential revocation, withdrawal, suspension,
cancellation, termination of or modification to any
Governmental Authorization; and
(iv) all material applications required to have been
filed for the renewal of the Governmental Authorizations
listed or required to be listed in Schedule 5.12 have been
duly filed on a timely basis with the appropriate Governmental
Bodies, and all other material filings required to have been
made with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Schedule 5.12
collectively constitute all of the material Governmental Authorizations
necessary to permit the Subject Company to lawfully conduct and operate its
business in the manner it currently conducts and operates such business and to
permit the Subject Company to own and use its assets in the manner in which it
currently owns and uses such assets.
32
37
5.13 Legal Proceedings; Orders.
(a) Except as set forth in Schedule 5.13, there is no pending
Proceeding:
(i) that, to the Knowledge of the Sellers, has been
commenced by or against the Subject Company or, to the
Knowledge of the Sellers, that otherwise relates to or may
affect the business of, or any of the assets owned or used by,
the Subject Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering
with, any of the Transactions.
To the Knowledge of the Sellers, (1) no such Proceeding has
been Threatened, and (2) no event has occurred or circumstance exists that may
give rise to or serve as a basis for the commencement of any such Proceeding.
The Sellers have delivered to the Purchaser copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed in
Schedule 5.13. To the Knowledge of the Sellers, the Proceedings listed in
Schedule 5.13 will not, individually or in the aggregate, have a Material
Adverse Effect on the business, operations, assets, condition or prospects of
the Subject Company.
(b) Except as set forth in Schedule 5.13:
(i) there is no Order to which the Subject Company or
any of the assets owned or used by any of the Subject
Companies, is subject;
(ii) none of the Sellers is subject to any Order that
relates to the business of, or any of the assets owned or used
by, the Subject Company; and
(iii) to the Knowledge of the Sellers, no officer,
director, agent or employee of the Subject Company is subject
to any Order that prohibits such officer, director, agent or
employee from engaging in or continuing any conduct, activity
or practice relating to the business of the Subject Company.
(c) Except as set forth in Schedule 5.13:
(i) the Subject Company is, and at all times since
January 1, 1995, has been, in full compliance with all of the
terms and requirements of each Order to which it, or any of
the assets owned or used by it, is or has been subject;
(ii) to the Knowledge of the Sellers, no event has
occurred or circumstance exists that may constitute or result
in (with or without notice or lapse of time) a violation of or
failure to comply with any term or requirement of any Order
33
38
to which the Subject Company or any of the assets owned or
used by the Subject Company, is subject; and
(iii) the Subject Company has not received, at any
time since January 1, 1995, any written or, to the Knowledge
of the Sellers, other notice or communication from any
Governmental Body or any other Person regarding any actual,
alleged, possible or potential material violation of, or
material failure to comply with, any term or requirement of
any Order to which the Subject Company or any of the assets
owned or used by the Subject Company, is or has been subject.
5.14 Absence of Certain Changes and Events.
Except as set forth in Schedule 5.14, since the date of the
Balance Sheet, the Subject Company has conducted its business only in the
Ordinary Course of Business and there has not been any:
(a) change in authorized or issued capital stock of, or other
equity interests in, the Subject Company; grant of any stock option or
right to purchase shares of capital stock, of or other equity interests
in, the Subject Company; issuance of any security convertible into such
capital stock or other equity interests; grant of any registration
rights; purchase, redemption, retirement or other acquisition by the
Subject Company of any shares of any such capital stock or other equity
interests; or declaration or payment of any dividend or other
distribution or payment in respect of shares of capital stock or other
equity interests;
(b) amendment to the Organizational Documents of the Subject
Company;
(c) payment or increase by the Subject Company of any bonuses,
salaries, or other compensation to any stockholder, director, officer
or (except in the Ordinary Course of Business) employee or entry into
any employment, severance or similar Contract with any director,
officer or (except in the Ordinary Course of Business) employee;
(d) adoption of, or increase in the payments to or benefits
under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement or other employee benefit plan for or
with any employees of the Subject Company;
(e) damage to or destruction or loss of any asset or property
of the Subject Company, whether or not covered by insurance, that would
have a Material Adverse Effect on the Subject Company;
(f) entry into, termination or acceleration of, or receipt of
notice of termination of (i) any material license, distributorship,
dealer, sales representative, joint venture, credit or similar
agreement or (ii) any Contract or transaction involving a Liability by
or to the
34
39
Subject Company of at least $10,000, except those entered into in the
Ordinary Course of Business;
(g) sale (other than sales in the Ordinary Course of
Business), lease or other disposition of any material asset or property
of the Subject Company or mortgage, pledge or imposition of any lien or
other Encumbrance on any material asset or property of the Subject
Company, including the sale, lease or other disposition of any of the
Intellectual Property Assets;
(h) delay or failure to repay when due any obligation,
including without limitation, accounts payable and accrued expenses,
except non-material obligations in the Ordinary Course of Business;
(i) accrual of any expenses except for such accruals in the
Ordinary Course of Business;
(j) capital expenditures in excess of $10,000;
(k) cancellation or waiver of any claims or rights with a
value to the Subject Company in excess of $10,000;
(l) any payment, discharge or satisfaction of any Liability by
the Subject Company, other than the payment, discharge or satisfaction
of Liabilities in the Ordinary Course of Business;
(m) incurrence of or increase in, any material Liability,
except in the Ordinary Course of Business, or any deferred payment of
or failure to pay when due, any material Liability;
(n) material change in the accounting methods used by the
Subject Company;
(o) material disagreement or dispute with any key employee of
the Subject Company with respect to compensation, equity ownership,
duties or authority; or
(p) agreement, whether oral or written, by the Subject Company
to do any of the foregoing.
5 . 15 Contracts; No Defaults.
(a) Schedule 5.15 contains a complete and accurate list, and
the Sellers have made available to the Purchaser true and complete
copies, of:
35
40
(i) each written Applicable Contract that involves
performance of services or delivery of goods by the Subject
Company for a fixed price or a fixed deliverable;
(ii) each written Applicable Contract that involves
performance of services or delivery of goods or materials to
the Subject Company for a fixed price in excess of $25,000;
(iii) each Applicable Contract that was not entered
into in the Ordinary Course of Business and that involves
expenditures of the Subject Company, individually or, for a
series of related Applicable Contracts, in the aggregate, in
excess of $10,000, or receipts of the Subject Company,
individually or, for a series of related Applicable Contracts,
in the aggregate, in excess of $20,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Applicable Contract of the Subject Company affecting the
ownership of, leasing of, title to, use of, or any leasehold
or other interest in, any real or personal property (except
personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of
less than $10,000 or with terms of less than one year);
(v) each licensing agreement or other Applicable
Contract of the Subject Company with respect to patents,
trademarks, copyrights or other intellectual property,
including agreements with current or former employees,
consultants or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract of the Subject Company to or with any
labor union or other employee representative of a group of
employees and each other written employment or consulting
agreement with any employees or consultants;
(vii) each joint venture, partnership and other
Applicable Contract of the Subject Company (however named)
involving a sharing of profits, losses, costs or liabilities
by the Subject Company with any other Person;
(viii) each Applicable Contract of the Subject
Company containing covenants that in any way purport to
restrict the business activity of the Subject Company or any
Affiliate of the Subject Company or limit the freedom of the
Subject Company or any Affiliate of the Subject Company to
engage in any line of business or to compete with any Person;
36
41
(ix) each Applicable Contract of the Subject Company
providing for payments to or by any Person based on sales,
purchases or profits, other than direct payments for goods and
compensation arrangements with employees;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Applicable Contract entered into other than
in the Ordinary Course of Business that contains or provides
for an express undertaking by the Subject Company to be
responsible for consequential damages;
(xii) each Applicable Contract of the Subject Company
for capital expenditures in excess of $10,000;
(xiii) each Applicable Contract which, to the
Knowledge of the Sellers, will result in a material loss to
the Subject Company;
(xiv) each Applicable Contract between the Subject
Company and its former or current stockholders, directors,
officers and employees (other than standard employment
agreements previously furnished to or approved by the
Purchaser);
(xv) each written warranty, guaranty, and or other
similar undertaking with respect to contractual performance
extended by the Subject Company other than in the Ordinary
Course of Business; and
(xvi) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Schedule 5.15 sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount of
the remaining commitment of the Subject Company under the Contracts, and the
place where details relating to the Contracts are located.
(b) Except as set forth in Schedule 5.15, to the Knowledge of
the Sellers, no officer, director, agent, employee, consultant or
contractor of the Subject Company is bound by any Contract that
purports to limit the ability of such officer, director, agent,
employee, consultant or contractor to (A) engage in or continue any
conduct, activity or practice relating to the business of the Subject
Company or (B) assign to the Subject Company or to any other Person any
rights to any invention, improvement or discovery.
(c) Except as set forth in Schedule 5.15, to the Knowledge of
the Sellers, each Contract identified or required to be identified in
Schedule 5.15 is in full force and effect and is valid and enforceable
in accordance with its terms.
(d) Except as set forth in Schedule 5.15:
37
42
(i) the Subject Company is in compliance with all
material terms and requirements of each material Contract
under which the Subject Company has any obligation or
Liability or by which the Subject Company or any of the assets
owned or used by the Subject Company is bound;
(ii) to the Knowledge of the Sellers, each other
Person that has any obligation or Liability under any material
Contract under which the Subject Company has any rights is in
compliance with all material terms and requirements of such
Contract;
(iii) to the Knowledge of the Sellers, no event has
occurred or circumstance exists that a reasonably prudent
person would conclude may contravene, conflict with, or result
in a violation or breach of, or give the Subject Company or
any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate or modify, any Applicable
Contract; and
(iv) the Subject Company has not given to or received
from any other Person, at any time since January 1, 1996, any
written or, to the Knowledge of the Sellers, other notice or
other communication regarding any actual, alleged, possible or
potential material violation or material breach of, or
material default under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or
payable to the Subject Company under current or completed Applicable
Contracts with any Person and no such Person has made written demand
for such renegotiation.
(f) The Applicable Contracts relating to the provision of
products or services by the Subject Company have been entered into in
the Ordinary Course of Business and, to the Knowledge of the Sellers,
have been entered into without the commission of any act alone or in
concert with any other Person, or any consideration having been paid or
promised, that is or would be in violation of any Legal Requirement.
5. 16 Insurance.
(a) The Subject Company has delivered to the Purchaser:
(i) a true and complete list of all policies of
insurance to which the Subject Company is a party or under
which the Subject Company or any director or officer of the
Subject Company, is or has been covered by the Subject Company
at any time within the three years preceding the date of this
Agreement; and
38
43
(ii) any statement by the auditor of the Financial
Statements with regard to the adequacy of such entity's
coverage or of the reserves for claims.
(b) Schedule 5.16 describes:
(i) any self-insurance arrangement by or affecting
the Subject Company, including any reserves established
thereunder; and
(ii) any contract or arrangement, other than a policy
of insurance, for the transfer or sharing of any risk by the
Subject Company normally covered by insurance.
(c) Schedule 5.16 sets forth, by year, for the current policy
year and each of the three preceding policy years:
(i) a summary of the loss experience under each
policy; and
(ii) a statement describing the loss experience for
all claims that were self-insured, including the number and
aggregate cost of such claims.
(d) Except as set forth in Schedule 5.16:
(i) All policies to which the Subject Company is a
party or that provide coverage to the Subject Company or any
director or officer of the Subject Company:
(l) to the Knowledge of the Sellers, are
valid, outstanding and enforceable;
(2) are sufficient for compliance with all
Legal Requirements and Contracts to which the Subject
Company is a party or by which it is bound;
(3) will continue in full force and effect
following the consummation of the Transactions; and
(4) do not provide for any retrospective
premium adjustment or other experienced-based
liability on the part of the Subject Company.
(ii) the Subject Company has not received (A) any
refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any insurance policy
is no longer in full force or effect or will not be renewed or
that the issuer of any policy is not willing or able to
perform its obligations thereunder.
39
44
(iii) To the Knowledge of the Sellers, the Subject
Company has given notice to the insurer of all claims that may
be insured thereby.
5 .17 Environmental Matters .
Except as set forth in Schedule 5.17:
(a) The Subject Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable
under, any Environmental Law, except where such noncompliance or
violations would not, individually or in the aggregate, have a Material
Adverse Effect on the Subject Company. To the Knowledge of the Sellers,
the Subject Company has no basis to expect, nor has it or any other
Person for whose conduct the Subject Company is or may be held to be
responsible received, any actual or Threatened order or written or
other notice or communication from (i) any Governmental Body or private
citizen acting in the public interest or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or Threatened obligation to undertake or bear the cost of any
Environmental, Health and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal or
mixed) in which the Subject Company has had an interest, or with
respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used or
processed by the Subject Company or any other Person for whose conduct
the Subject Company is or may be held responsible, or from which
Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled or received.
(b) There are no pending or, to the Knowledge of the Sellers,
Threatened claims, Encumbrances or other restrictions of any nature,
resulting from any Environmental, Health and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting (i) to the Knowledge of the Sellers, any of the Facilities or
(ii) any other properties and assets (whether real, personal or mixed)
in which the Subject Company has or had an interest.
(c) Neither the Subject Company nor, to the Knowledge of the
Sellers, any other Person for whose conduct the Subject Company is or
may be held responsible, has received any citation, directive, inquiry,
notice, Order, summons, warning or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual or
potential violation or failure to comply with any Environmental Law, or
of any alleged, actual or potential obligation to undertake or bear the
cost of any Environmental, Health and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether
real, personal or mixed) in which the Subject Company has or had an
interest, or with respect to any property or facility to which
Hazardous Materials generated, manufactured, refined, transferred,
imported, used or processed by the Subject Company or any other Person
for
40
45
whose conduct the Subject Company is or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed,
recycled or received.
(d) Neither the Subject Company nor, to the Knowledge of the
Sellers, any other Person for whose conduct the Subject Company is or
may be held responsible, has any Environmental, Health and Safety
Liabilities with respect to the Facilities or, to the Knowledge of the
Sellers, with respect to any other properties and assets (whether real,
personal or mixed) in which the Subject Company (or any predecessor),
has or had an interest, or at any property geologically or
hydrologically adjoining the Facilities or any such other property or
assets.
(e) To the Knowledge of the Sellers, there are no Hazardous
Materials present on or in the Environment at the Facilities or at any
geologically or hydrologically adjoining property, including any
Hazardous Materials contained in barrels, above or underground storage
tanks, landfills, land deposits, dumps, equipment (whether moveable or
fixed) or other containers, either temporary or permanent, and
deposited or located in land, water, dumps or any other part of the
Facilities or such adjoining property, or incorporated into any
structure therein or thereon. Neither the Subject Company, or, to the
Knowledge of the Sellers, any other Person, has permitted or conducted,
or is aware of, any Hazardous Activity conducted with respect to the
Facilities or any other properties or assets (whether real, personal or
mixed) in which the Subject Company has or had an interest.
(f) To the Knowledge of the Sellers, there has been no Release
or Threat of Release of any Hazardous Materials at or from the
Facilities.
(g) The Subject Company has delivered to the Purchaser true
and complete copies and results of any reports, studies, analyses,
tests or monitoring possessed or initiated by the Subject Company
pertaining to Hazardous Materials or Hazardous Activities in, on or
under the Facilities or concerning compliance by the Subject Company or
any other Person for whose conduct it is or may be held responsible
with Environmental Laws.
5.18 Labor Relations; Compliance: Employees. Since January 1,
1996, the Subject Company has not been nor is a party to any collective
bargaining or other labor Contract. Since January 1, 1996, there has not been,
there is not presently pending or existing, and, to the Knowledge of the
Sellers, there is not Threatened, (a) any strike, slowdown, picketing, work
stoppage or employee grievance process, (b) any Proceeding against or affecting
the Subject Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board,
the Equal Employment Opportunity Commission or any comparable Governmental Body,
organizational activity or other labor or employment dispute against or
affecting the Subject Company or its premises or (c) any application for
certification of a collective bargaining agent. No event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by the Subject Company, and
no such action is
41
46
contemplated by the Subject Company. Except as set forth in Schedule 5.18, the
Subject Company has complied in all respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health and plant
closing. Except as set forth in Schedule 5.18, the Subject Company is not liable
for the payment of any compensation, damages, taxes, fines, penalties or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements. Schedule 5.18 sets forth the names of all Persons employed
by the Subject Company who are expected to receive more than $50,000 annualized
cash compensation for the 1998 calendar year from the Subject Company (including
without limitation, salary, commission and bonus) and who are expected to be
employed by the Subject Company on the Closing Date. Except as set forth in
Schedule 5.18, the Subject Company has not entered into any severance or similar
arrangement in respect of any personnel that provides for any obligation
(absolute or contingent) of the Subject Company or any other Person to make any
payment to any such personnel following termination of employment.
5.19 Intellectual Property.
(a) Intellectual Property Assets. The term "Intellectual
Property Assets" includes:
(i) the name "Intranational Computer Consultants" and
all fictional business names, trade names, registered and
unregistered trademarks, service marks and applications owned
by, used by or licensed to the Subject Company (collectively,
"the Marks");
(ii) all of the patents, patent applications and
inventions and discoveries that may be patentable of the
Subject Company (collectively, "the Patents");
(iii) all of the copyright rights in both published
works and unpublished works of the Subject Company
(collectively, "the Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings and blue prints
owned, used or licensed by the Subject Company as licensee or
licensor (collectively, "the Trade Secrets").
(b) Agreements. Schedule 5.19 contains a complete and accurate
list and summary description, including any royalties paid or received
by the Subject Company, of all Contracts relating to the Intellectual
Property Assets to which the Subject Company is a party or by which the
Subject Company is bound, except for any license implied by the sale of
a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $1,000 under which the
Subject Company is the licensee. There are no outstanding and, to the
Knowledge of the Sellers, no Threatened disputes or disagreements with
respect to any such Contract.
42
47
(c) Know-How Necessary for the Business. Except as described
in Schedule 5.19, the Intellectual Property Assets are all those
necessary for the operation of the business of the Subject Company as
it is currently conducted. The Subject Company is the owner of such
right, title and interest in and to each of the Intellectual Property
Assets as is necessary to conduct the business of the Subject Company.
(d) Patents. The Subject Company has not been issued any
Patents and has no Patents pending and no Patents are necessary or
currently used by the Subject Company to conduct its business as it is
presently conducted. No process or know-how used by the Subject Company
is known to infringe or is alleged to infringe any patent or other
proprietary right of any other Person.
(e) Trademarks. The Subject Company has no Marks other than
its corporate name. To the knowledge of the Sellers, the corporate name
is not infringed or known to infringe any trade name of any third
party.
(f) Copyrights. The Subject Company has no copyrights.
(g) Trade Secrets. Except as set forth in Schedule 5.19, the
Subject Company has no Trade Secrets and no Trade Secrets are necessary
or currently used by the Subject Company to conduct its business as it
is presently conducted.
5.20 Certain Payments. Since January 1, 1996, neither the
Subject Company, nor any director, officer, agent or employee of the Subject
Company nor the Sellers has directly or indirectly, (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback or other payment to any
Person, private or public, regardless of form, whether in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Subject
Company or any Affiliate of the Subject Company or (iv) in violation of any
Legal Requirement or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Subject Company.
5.21 No Other Agreements to Sell Assets or Capital Stock of
the Subject Company. Neither the Subject Company, nor the Sellers have any
commitment or legal obligation, absolute or contingent, to any other Person or
firm, other than as contemplated by the Transactions, to sell, assign, transfer
or effect a sale of any of the assets (other than inventory and products in the
Ordinary Course of Business), to sell or effect a sale of the capital stock or
other equity interests of the Subject Company, to effect any merger,
consolidation, liquidation, dissolution or other reorganization of the Subject
Company, to enter into any agreement or cause the entering into of an agreement
with respect to any of the foregoing.
5.22 Relationships with Related Persons. Except as set forth
in Schedule 5.22, neither the Subject Company nor the Sellers has owned (of
record or as a beneficial owner) an equity
43
48
interest or any other financial or profit interest in a Person that has (i) had
business dealings or a material financial interest in any transaction with the
Subject Company other than business dealings or transactions conducted in the
Ordinary Course of Business with the Subject Company at substantially prevailing
market prices and on substantially prevailing market terms or (ii) engaged in a
business competing with the Subject Company with respect to any line of the
products or services of the Subject Company in any market presently served by
the Subject Company, except for less than one percent (1%) of the outstanding
capital stock of any such competing business that is publicly traded on any
recognized exchange or in the over-the-counter market. Except as set forth in
Schedule 5.22, no Related Person of the Subject Company is a party to any
Contract with, or has any claim or right against, the Subject Company.
5.23 Customers and Suppliers. Schedule 5.23 contains a
complete and accurate list of the five (5) largest suppliers of the Subject
Company (excluding staffing subcontractors) during the last fiscal year, and
those customers of the Subject Company which generated revenues in excess of
$250,000 for the Subject Company during the last fiscal year, showing the
approximate total purchases by the Subject Company from each such supplier
during such fiscal year and the total sales by the Subject Company to each such
customer during such fiscal year. Since the date of the Balance Sheet, there has
been no adverse change in the business relationship with any supplier or
customer named in Schedule 5.23 and no threat or indication that any such change
is reasonably foreseeable.
5.24 Bank Accounts. Schedule 5.24 sets forth an accurate and
complete list showing the name and address of each bank in which the Subject
Company has any account, safe deposit box, borrowing arrangement or certificate
of deposit, the number of any such account or any such box and the names of all
Persons authorized to draw thereon or to have access thereto.
5.25 Brokers and Finders; Advisors. Except for ▇▇▇▇ ▇▇▇▇▇▇▇▇ &
Co., neither the Sellers nor the Subject Company nor their respective agents
have incurred any obligation or Liability for brokerage or finders' fees or
agents' commissions or other similar payment in connection with this Agreement.
The Sellers agree to indemnify the Purchaser and the Subject Company against and
to hold the Purchaser and the Subject Company harmless from, any claims for
brokerage or similar commission or other compensation which may be made against
the Purchaser or the Subject Company by any third party in connection with the
Transactions, which claim is based upon such third party having acted as broker,
finder, investment banker, advisor, consultant or appraiser or in any similar
capacity on behalf of the Subject Company, the Sellers or any of their
respective Affiliates.
5.26 Disclosure. No representation or warranty of the Sellers
in this Agreement and no statement in the Disclosure Schedules omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
44
49
Purchaser hereby represents and warrants to the Sellers as
follows:
6.1 Organization of Purchaser. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full corporate power and corporate authority to own,
lease and operate its properties and to carry on its business in the manner in
which such business is now being conducted, to own the Stock being acquired in
the Acquisition pursuant to this Agreement and to enter into and perform its
obligations under this Agreement.
6.2 Corporate Authority and Ability. All requisite corporate
authorizations for the execution, delivery and performance by the Purchaser of
this Agreement and the consummation of the Transactions have been obtained. The
Purchaser has the financial ability to perform its obligations under this
Agreement.
6.3 Authorization: No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms. Upon the execution and delivery by the
Purchaser of the Transaction Documents to which it is a party, such
Transaction Documents will constitute the legal, valid and binding
obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, except where such
enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting creditors'
rights generally and (ii) the general principles of equity, regardless
of whether asserted in a proceeding in equity or at law. The Purchaser
has the absolute and unrestricted right, power, and authority to
execute and deliver this Agreement and the Transaction Documents to
which it is a party and to perform its obligations under this Agreement
and the Transaction Documents to which it is a party.
(b) Neither the execution and delivery of this Agreement by
the Purchaser nor the consummation or performance of any of the
Transactions by the Purchaser will give any Person the right to
prevent, delay, or otherwise interfere with any of the Transactions
pursuant to: (i) any provision of the Purchaser's Organizational
Documents; (ii) any resolution adopted by the board of directors or the
stockholders of the Purchaser; (iii) any Legal Requirement or Order to
which the Purchaser may be subject; or (iv) any Contract to which the
Purchaser is a party or by which the Purchaser may be bound, except in
the case of each of clauses (iii) and (iv) above, for such
contraventions, conflicts, violations, Liabilities, reassessments,
revaluations, breaches or creations of Encumbrances which, individually
and in the aggregate, would not have a Material Adverse Effect with
respect to the Purchaser. Except as set forth in Schedule 6.2, the
Purchaser is not and will not be required to obtain any Consent from
any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the
Transactions.
45
50
6.4 Proceedings. There is no pending Proceeding that has been
commenced against the Purchaser and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Transactions. To the Purchaser's knowledge, no such Proceeding has been
Threatened.
6.5 Investment. The Purchaser is purchasing the Stock for its
own account for investment, without a view to their distribution within the
meaning of Section 2(11) of the Securities Act.
6.6 Brokers or Finders. The Purchaser and its respective
officers and agents have incurred no obligation or Liability, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold Sellers harmless from any such
payment alleged to be due by or through the Purchaser as a result of the action
of the Purchaser or its respective officers or agents.
ARTICLE VII
ACTIONS OF THE SELLERS AND THE PURCHASER BEFORE
THE CLOSING DATE
Each of the Sellers and the Purchaser covenant and agree with
each other as follows:
7.1 Access and Investigation. Between the date of this
Agreement and the Closing, the Sellers will (a) afford the Purchaser and its
Representatives and prospective lenders and their Representatives (collectively,
"Advisors") full and free access to the Subject Company's personnel, properties,
Contracts, books and records and other documents and data, (b) furnish the
Purchaser and its Advisors with copies of all such Contracts, books and records
and other existing documents and data as they may reasonably request and (c)
furnish the Purchaser and its Advisors with such additional financial, operating
and other data and information as they may reasonably request.
7.2 Operation of Business. Between the date of this Agreement
and the Closing, the Sellers will cause the Subject Company to:
(a) conduct its business only in the Ordinary Course of
Business;
(b) use its Best Efforts to preserve intact its current
business organization, keep available the services of its current
officers, employees and agents and maintain the relations and good will
with its suppliers, customers, landlords, creditors, employees, agents
and others having business relationships with it;
(c) confer with the Purchaser and its Advisors concerning
operational matters of a material nature; and
46
51
(d) otherwise report periodically to the Purchaser concerning
the status of its business, operations and finances.
7.3 Negative Covenants.
(a) Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing, the Subject Company
and the Sellers will not, without the prior consent of the Purchaser,
take any affirmative action or fail to take any reasonable action
within its control, as a result of which any of the changes or events
listed in Section 5.14 is likely to occur.
7.4 Required Approvals.
As promptly as practicable after the date of this Agreement,
each party will make all filings required by Legal Requirements to be made by it
in order to consummate the Transactions (including all filings under the HSR
Act, if any). Between the date of this Agreement and the Closing, the parties
will (a) cooperate with respect to all filings that they may elect to make or
may be required by Legal Requirements to make in connection with the
Transactions and (b) cooperate in obtaining all consents identified in Schedules
5.2 or 6.2 (including taking all actions requested to cause early termination of
any applicable waiting period under the HSR Act).
7.5 Notification.
Between the date of this Agreement and the Closing, each party to this Agreement
will promptly notify each other party hereto in writing if such party becomes
aware of any fact or condition that causes or constitutes a Breach of any of its
representations and warranties as of the date of this Agreement, or if such
party becomes aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a Breach of any such representation or warranty
had such representation or warranty been made as of the time of occurrence or
discovery of such fact or condition; provided, however, that such disclosure
shall not be deemed to cure any Breach of a representation or warranty. Should
any such fact or condition require any change in the Disclosure Schedules if
such Schedules were dated the date of the occurrence or discovery of any such
fact or condition, the discovering party will promptly deliver to each other
party a supplement to the Disclosure Schedules specifying such change. During
the same period, each party to this Agreement will promptly notify each other
party hereto of the occurrence of any Breach of any covenant or agreement by
such party in this Article VII or of the occurrence of any event that may make
the satisfaction of the conditions in Articles VIII and IX impossible or
unlikely; provided, however, that such disclosure shall not be deemed to cure
any Breach of a covenant or agreement or to satisfy a condition. Each party to
this Agreement shall promptly notify each other party hereto of any default, the
threat or commencement of any Proceeding or any development that occurs before
the Closing that could in any way materially affect such party, the business or
assets of such party or the ability of such party to consummate the
Transactions.
47
52
7.6 No Negotiation.
Until sixty (60) days from the date hereof or unless this
Agreement is earlier terminated pursuant to Article XI, neither the Subject
Company nor the Sellers nor any of their respective Representatives will
directly or indirectly solicit, initiate or encourage any inquiries or proposals
from, discuss or negotiate with, provide any non-public information to or
consider the merits of any unsolicited inquiries or proposals from, any Person
(other than the Purchaser) relating to any transaction involving the sale of all
or a substantial portion of its business or assets of the Subject Company or any
of its capital stock or other equity interests or any merger, consolidation,
business combination or similar transaction involving the Subject Company (each
such transaction referred to herein as a "Proposed Acquisition Transaction").
The Subject Company and the Sellers will immediately notify the Purchaser if any
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made or any information is requested with respect to any Proposed Acquisition
Transaction and notify the Purchaser of the terms of any proposal which they or
their respective Representatives may receive in respect of any such Proposed
Acquisition Transaction, including without limitation the identity of the
prospective purchaser or soliciting party. The Subject Company and the Sellers
shall also provide the Purchaser with a copy of any offer.
7.7 Best Efforts.
Between the date of this Agreement and the Closing, each of
the parties to this Agreement will use its Best Efforts to cause the conditions
in Articles VIII and IX to be satisfied.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The Purchaser's obligation to pay the Consideration and to
take the other actions required to be taken by the Purchaser at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Purchaser, in whole or
in part):
8.1 Accuracy of Representations. All of the representations
and warranties of the Sellers in this Agreement (considered collectively) and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing as if made on the
Closing without giving effect to any supplement to the Disclosure Schedules.
8.2 Sellers' and Subject Companies' Performance.
(a) All of the covenants and obligations that the Sellers and
the Subject Company are required to perform or to comply with pursuant
to this Agreement at or prior to the
48
53
Closing (considered collectively) and each of these covenants and
obligations (considered individually), must have been performed and
complied with in all material respects.
(b) The Sellers and the Subject Company must have delivered
each of the documents required to be delivered by the Sellers and the
Subject Company pursuant to Section 4.2.
8.3 Consents. Each of the Consents identified in Schedule 5.2
must have been obtained and must be in full force and effect.
8.4 Additional Documents.
Sellers must have delivered to the Purchaser such documents as
the Purchaser may reasonably request for the purpose of (i) evidencing the
accuracy of any representation or warranty of the Sellers, (ii) evidencing the
performance by the Subject Company and the Sellers, or the compliance by the
Subject Company and the Sellers with, any covenant or obligation required to be
performed or complied with by the Subject Company and the Sellers, (iii)
evidencing the satisfaction of any condition referred to in this Article VIII or
(iv) otherwise facilitating the consummation of any of the Transactions.
8.5 No Proceedings. Since the date of this Agreement, there
must not have been commenced or Threatened against the Purchaser or against any
Person affiliated with the Purchaser, any Proceeding (a).involving any challenge
to, or seeking damages or other relief in connection with, any of the
Transactions or (b) that may have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the Transactions.
8.6 Financing. The Purchaser shall have secured the financing
required to consummate the Acquisition and the other Transactions, upon terms
and subject to conditions reasonably satisfactory to them.
8.7 No Prohibition. Neither the consummation nor the
performance of any of the Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause the Purchaser to suffer any material
adverse consequence under, (a) any applicable Legal Requirement, including the
HSR Act or (b) any Legal Requirement that has been published, introduced, or
otherwise formally proposed by or before any Governmental Body.
8.8 No Claim Regarding Stock Ownership or Sale Proceeds. There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, the Subject Company, or (b) is entitled to all
or any portion of the Consideration payable for the Stock.
49
54
8.9 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Insurability. The Purchaser shall be
satisfied from the reports and results of physical examinations of ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ of the insurability of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ for life insurance purposes at
customary rates for healthy non-smokers of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇'▇ age.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE
The Sellers' obligation to sell the Stock in exchange for the
Consideration and to take the other actions required to be taken by the Sellers
at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by the Sellers, in
whole or in part):
9.1 Accuracy of Representations. All of the representations
and warranties of the Purchaser in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement,
and must be accurate in all material respects as of the Closing as if made on
the Closing, without giving effect to any supplement to the Disclosure
Schedules.
9.2 The Purchaser's Performance.
(a) All of the covenants and obligations that the Purchaser is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered by the Purchaser
pursuant to Section 4.2 must have been delivered.
9.3 Consents. Each of the Consents identified in Schedule 6.2
must have been obtained and must be in full force and effect.
9.4 Additional Documents.
The Purchaser must have delivered to the Sellers such
documents as the Sellers may reasonably request for the purpose of (i)
evidencing the accuracy of any of Purchaser's representations and warranties,
(ii) evidencing the performance by the Purchaser of, or the compliance by the
Purchaser with, any covenant or obligation required to be performed or complied
with by the Purchaser, (iii) evidencing the satisfaction of any condition
referred to in this Article IX or (iv) otherwise facilitating the consummation
or performance of any of the Transactions.
9.5 No Proceedings. Since the date of this Agreement, there
must not have been commenced or Threatened against the Sellers or the Subject
Company any proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with, any of the Transactions or
50
55
(b) that may have the effect of preventing, delaying, making illegal or
otherwise interfering with any of the Transactions.
9.6 No Prohibition. Neither the consummation nor the
performance of any of the Transactions will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause the Sellers to suffer any material
adverse consequence under, (a) any applicable Legal Requirement, including the
HSR Act and federal and state securities laws or (b) any Legal Requirement that
has been published, introduced, or otherwise formally proposed by or before any
Governmental Body.
ARTICLE X
SELLERS' INDEMNIFICATION; REMEDIES
10.1 Survival of Representations. Etc. The representations and
warranties of the Sellers and the Purchaser contained herein shall survive until
two (2) years after the Closing; provided, however, that the representations and
warranties contained in Section 5.9, Section 5.11 with respect to ERISA plans
and Section 5.17 shall continue to survive until sixty (60) days after the
expiration of the applicable statute of limitations (giving effect to any waiver
or extension thereof). The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants and obligations will
not be affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation; provided, however, that any party to this
Agreement who has Knowledge on or prior to the Closing Date of an inaccuracy or
Breach of a representation, warranty, covenant or obligation of any other party
to this Agreement shall notify such other party of such inaccuracy or Breach
prior to the Closing hereunder. A failure to provide the notice required by the
foregoing sentence shall preclude the party with such Knowledge from making a
claim for indemnification, Damages or other remedy for such inaccuracy or
Breach.
10.2 Indemnifications.
(a) By the Sellers. The Sellers shall indemnify, save and hold
harmless the Purchaser and its Affiliates and Subsidiaries and each of
their respective Representatives (individually, a "Seller Indemnified
Party", and collectively, the "Seller Indemnified Parties"), from and
against any and all costs, losses, Liabilities, obligations, damages,
lawsuits, deficiencies, claims, demands and expenses (whether or not
arising out of third-party claims), including without limitation losses
in connection with workers compensation claims, interest, penalties,
costs of mitigation, losses in connection with any Environmental Law
(including without limitation any clean-up, remedial correction or
responsive action), damages to the Environment, reasonable attorneys'
fees and all amounts
51
56
paid in investigation, defense or settlement of any of the foregoing
(herein, "Damages"), incurred in connection with, arising out of,
resulting from or incident to (i) any Breach of any representation or
warranty made by the Sellers in this Agreement; (ii) any Breach of any
covenant or agreement made by the Sellers in this Agreement or any
certificate delivered by the Seller at the Closing; or (iii) any
services provided by the Subject Company prior to the Closing to the
extent not reserved on the Closing Balance Sheet or covered by
insurance..
The term "Damages" as used in this Section 10.2 is not limited
to matters asserted by third parties against any indemnified party, but includes
Damages incurred or sustained by an indemnified party in the absence of third
party claims. Payments by any indemnified party of amounts for which such
indemnified party is indemnified hereunder shall not be a condition precedent to
recovery. The rights and remedies provided in this Article X and Article XI
shall be exclusive as to any Damages incurred by a party under this Agreement;
provided, however, that nothing herein shall preclude a party from exercising
its rights under this Agreement and applicable law to such equitable remedies,
including without limitation specific performance and injunctions.
(b) By Purchaser. Purchaser shall indemnify, save and hold
harmless the Sellers and their respective Affiliates and
Representatives (the "Purchaser Indemnified Parties") from and against
any and all Damages incurred in connection with, arising out of,
resulting from or incident to (i) any Breach of any representation or
warranty made by the Purchaser in this Agreement; (ii) any Breach of
any covenant or agreement made by the Purchaser in this Agreement; or
(iii) failure of Purchaser or Subject Company to pay the Liabilities of
the Subject Company as they become due.
(c) Cooperation. An indemnified party under this Agreement
shall cooperate in all reasonable respects with the indemnifying party
and its Representatives (including without limitation their attorneys)
in the investigation, trial and defense of such lawsuit or action and
any appeal arising therefrom; provided, however, that the indemnified
party may, at its own cost, participate in negotiations, arbitrations
and the investigation, trial and defense of such lawsuit or action and
any appeal arising therefrom. The parties shall cooperate with each
other in any notifications to insurers.
(d) Defense of Claims. If a claim for Damages (a "Claim") is
to be made by an indemnified party hereunder against the indemnifying
party, the indemnified party shall give written notice (a "Claim
Notice") to the indemnifying party as soon as practicable after the
indemnified party becomes aware of any fact, condition or event which
may give rise to Damages for which indemnification may be sought under
this Section 10.2. If any lawsuit or enforcement action is filed
against an indemnified party, written notice thereof shall be given to
the indemnifying party as promptly as practicable (and in any event
within fifteen (15) calendar days after the service of the citation or
summons). The failure of any indemnified party to give timely notice
hereunder shall not affect rights to indemnification hereunder, except
to the extent that the indemnifying party have been damaged by such
failure. After such notice, if the indemnifying party shall acknowledge
in writing to the
52
57
indemnified party that the indemnifying party shall be obligated under
the terms of their indemnity hereunder in connection with such lawsuit
or action, then the indemnifying party shall be entitled, if they so
elect at their own cost, risk and expense, (i) to take control of the
defense and investigation of such lawsuit or action, (ii) to employ and
engage attorneys of their own choice, but, in any event, reasonably
acceptable to the indemnified party, to handle and defend the same
unless the named parties to such action or proceeding (including any
impleaded parties) include both the indemnifying party and the
indemnified party and the indemnified party has been advised in writing
by counsel that there may be one or more legal defenses available to
such indemnified party that are different from or additional to those
available to the indemnifying party, in which event the indemnified
party shall be entitled, at the indemnifying party's cost, risk and
expense, to separate counsel of its own choosing and (iii) to
compromise or settle such lawsuit or action, which compromise or
settlement shall be made only with the written consent of the
indemnified party, such consent not to be unreasonably withheld.
If the indemnifying party fails to assume the defense of such
lawsuit or action within fifteen (15) calendar days after receipt of the Claim
Notice, the indemnified party against which such lawsuit or action has been
asserted will (upon delivering notice to such effect to the indemnifying party)
have the right to undertake, at the indemnifying party's cost and expense, the
defense, compromise or settlement of such lawsuit or action on behalf of and for
the account and risk of the indemnifying party; provided, however, that such
lawsuit or action shall not be compromised or settled without the written
consent of the indemnifying party, which consent shall not be unreasonably
withheld. If the indemnified party settles or compromises such lawsuit or action
without the prior written consent of the indemnifying party, the indemnifying
party will bear no liability hereunder for or with respect to such lawsuit or
action. In the event the indemnified party assumes the defense of the lawsuit or
action, the indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or settlement. The
indemnifying party shall be liable for any settlement of any action effected
pursuant to and in accordance with this Section 10.2 and for any final judgment
(subject to any right of appeal) and the indemnifying party agrees to indemnify
and hold harmless an indemnified party from and against any Damages by reason of
such settlement or Judgment.
(e) Limitation on Indemnity/Commitments.
(i) The indemnification obligation of the
indemnifying party and the Purchaser with respect to any
Breach of any representation or warranty pursuant to Section
10.2(a)(i), (a)(iii) or (b)(i) shall be limited to Claims for
Damages made prior to the last date of survival thereof
referred to in Section 10.1. The indemnification obligation of
the indemnifying party with respect to any Breach of any
covenant or agreement pursuant to Section 10.2(a)(ii), (b)(ii)
or (b)(iii) shall survive indefinitely subject to the terms of
this Agreement.
53
58
(ii) Except as provided in Section 10.2(e)(iii), the
Seller Indemnified Parties may not recover Damages from the
indemnifying party pursuant to Section 10.2(a)(i) and (iii)
until the aggregate amount of Damages relating to such Claims
for which the Seller Indemnified Parties, in the aggregate,
are entitled to indemnification under Section 10.2(a)(i) and
(iii) exceeds One Hundred Thousand Dollars ($100,000) (the
"Threshold"); provided, however, in the event that the
aggregate amount of Damages for which the Seller Indemnified
Parties are seeking indemnification under Section 10.2(a)(i)
exceeds such amount, the Seller Indemnified Parties may
recover the full amount of such Damages; provided, further,
however, that the maximum aggregate amount of such Damages for
which the Sellers shall be liable shall not exceed Three
Million Dollars ($3,000,000). The Seller Indemnified Parties
shall have the right to make a Claim hereunder prior to the
time at which the Threshold that is applicable to Claims under
Section 10.2(a)(i) and (iii) has been surpassed for the
purpose of asserting such Claim within the relevant survival
period of the applicable indemnification obligation and any
such Claim made within such period shall, to the extent such
Threshold ultimately is met, survive until its final
resolution.
(iii) The Threshold and maximum damages limitations in Section
10.2(e)(ii) shall not apply to any Damages incurred in connection with,
arising out of or resulting from any Breach of any representation or
warranty made by the Sellers in Section 5.3, 5.9, 5.11 with respect to
ERISA plans, and 5.17.
(iv) The Purchaser Indemnified Parties may not recover Damages
from the Purchaser pursuant to Section 10.2(b)(i) until the aggregate
amount of Damages relating to such Claims for which the Purchaser
Indemnified Parties, in the aggregate, are entitled to indemnification
under Section 10.2(b)(i) exceeds the Threshold; provided, however, in
the event that the aggregate amount of Damages for which the Purchaser
Indemnified Parties are seeking indemnification under Section
10.2(b)(i) exceeds such amount, the Purchaser Indemnified Parties may
recover the full amount of such Damages; provided, further, however,
that the maximum aggregate amount of Damages for which the Purchaser
shall be liable pursuant to Section 10.2(b)(i) shall not exceed Two
Million Dollars ($2,000,000). The Purchaser Indemnified Parties shall
have the right to make a Claim hereunder prior to the time at which the
Threshold that is applicable to Claims under Section 10.2(b)(i) has
been surpassed for the purpose of asserting such Claim within the
relevant survival period of the applicable indemnification obligation
and any such Claim made within such period shall, to the extent such
Threshold ultimately is met, survive until its final resolution.
(v) Neither (a) the termination of the representations or
warranties contained herein, nor (b) the expiration of the
indemnification obligations described above, will affect the rights of
an indemnified party in respect of any Claim made by such indemnified
party received by the Sellers prior to the expiration of the applicable
survival period provided herein.
54
59
(f) Representatives. No individual Representative of any party
shall be personally liable for any Damages under the provisions
contained in this Section 10.2 (except to the extent any such Person is
party hereto in his or her individual capacity). Nothing herein shall
relieve either party of any Liability to make any payment expressly
required to be made by such party pursuant to this Agreement.
10.3 Tax.
(a) Tax Indemnification. Except for Taxes that are reserved
for on the Closing Balance Sheet, the Sellers shall be responsible for
and pay and shall jointly and severally indemnify and hold harmless the
Purchaser and the Subject Company (and each of their respective
affiliates, successors and assigns) from and against (i) all Taxes
imposed on the Subject Company, or for which the Subject Company is
liable, with respect to (A) all periods ending on or prior to the
Closing Balance Sheet Date or (B) any period beginning before the
Closing Balance Sheet Date and ending after the Closing Balance Sheet
Date, but only with respect to the portion of such period up to and
including the Closing Balance Sheet Date (such portion, a "Pre-Closing
Partial Period"), and (ii) a prorata portion of any costs or expenses
incurred by the Subject Company with respect to the Taxes indemnified
hereunder. For purposes of this Section 10.3(a), Taxes shall include
the amount of Taxes which would have been paid but for the application
of any credit or net operating or capital loss deduction attributable
to any period (or portion thereof) ending after the Closing Balance
Sheet Date, but shall not include amounts which would have been paid
but for the application of any credit or net operating or capital loss
deductions attributable to any period (or portion thereof) ending on or
before the Closing Balance Sheet Date.
(b) Straddle Periods. Any Taxes with respect to the Subject
Company that relate to a Tax period beginning on or before the Closing
Balance Sheet Date and ending after the Closing Balance Sheet Date (a
"Straddle Period") shall be apportioned between the Pre-Closing Partial
Period and the portion of such Straddle Period beginning on the Closing
Date (the "Post-Closing Partial Period"), as determined from the books
and records of the Subject Company during the portion of such period
ending on the Closing Balance Sheet Date and the portion of such period
beginning on the day following the Closing Balance Sheet Date
consistent with the past practices of the Subject Company. The
Purchaser shall cause the Subject Company to file any Tax Returns for
any Straddle Period, and the Purchaser shall pay all Taxes shown as due
on any such Tax Returns. The Sellers shall pay the Purchaser all such
Taxes apportioned to the Pre-Closing Partial Period (to the extent not
paid by the Subject Company prior to the Closing Balance Sheet Date or
accrued or otherwise reflected as a Liability on the Closing Balance
Sheet) due pursuant to the filing of any such Tax Returns under the
provisions of this Section 10.3(b) within fifteen (15) business days of
receipt of notice of such filing by the Purchaser, which notice shall
set forth in reasonable detail the calculations regarding the Sellers'
share of such Taxes.
55
60
(c) Refunds. The Purchaser agrees to assign and promptly remit
(and to cause the Subject Company to assign and promptly remit) all
refunds (including interest thereon) net of any Tax effect to the
Purchaser or the Subject Company, received by the Purchaser or the
Subject Company of any Taxes attributable to any period on or prior to
the Closing Balance Sheet Date; provided, however, that the Purchaser
shall be entitled to the portion of any refund resulting from a
carryback (including carrybacks to periods ending on or prior to the
Closing Date) of a net operating loss, net capital loss, Tax credit or
similar item sustained or arising in any period ending after the
Closing Date or in any Post-Closing Partial Period.
(d) Tax Returns for Pre-Closing Periods. The Sellers shall
prepare or cause to be prepared, and timely file or cause to be filed,
all Tax Returns (except for any 1998 partial year Tax Return for the
Subject Companies arising from an election of the Purchaser ) of the
Subject Company for all taxable periods of the Subject Company ending
on or prior to the Closing Balance Sheet Date and shall pay or cause to
be paid all Taxes due with respect to such Tax Returns (to the extent
not paid by the Subject Company prior to the Closing Date or accrued or
otherwise reflected as a Liability on the Closing Balance Sheet). With
respect to any Tax Return of the Subject Company for a 1998 partial
year period ending on or prior to the Closing Balance Sheet Date,
Sellers shall pay or cause to be paid all taxes due with respect to
such period as determined from the books and records of the Subject
Company for such period (to the extent not paid by the Subject Company
prior to the Closing Date or accrued or otherwise reflected as a
Liability on the Closing Balance Sheet). With respect to any such Tax
Returns required to be filed by the Sellers and not required to be
filed before the Closing Date, the Sellers shall provide the Purchaser
and its authorized Representatives with copies of any such completed
Tax Return at least ten (10) business days prior to the due date for
filing of such Tax Return and the Purchaser and its Representatives
shall have the right to review such Tax Return prior to the filing of
such Tax Return. Sellers and the Purchaser agree to consult and resolve
in good faith any issues arising as a result of such review.
(e) Other Matters. The Purchaser shall promptly notify the
Sellers in writing upon receipt by the Purchaser or any Affiliate of
the Purchaser of notice of (i) any pending or threatened federal,
state, local or foreign Tax audits or assessments of the Subject
Company and (ii) any pending or threatened federal, state, local or
foreign Tax audits or assessments of the Purchaser or any Affiliate of
the Purchaser which may affect the Tax Liabilities of the Subject
Company with respect to any period ending on or before the Closing
Date, or any Pre-Closing Partial Period. The Sellers shall promptly
notify the Purchaser in writing upon receipt by the Sellers or any
affiliate of the Sellers of notice of any pending or threatened
federal, state, local or foreign Tax audits or assessments relating to
the income, properties or operations of the Subject Company.
The Purchaser and the Sellers shall cooperate with each other
in the conduct of any audit or other proceedings involving the Subject Company
for periods beginning before the Closing Date and each may participate at its
own expense, provided that the Sellers shall have the right to
56
61
control the conduct of any such audit or proceeding for which the Sellers (i)
agree that any resulting Tax is covered by the indemnity provided in Section
10.3(a) of this Agreement and (ii) demonstrate to the Purchaser their ability to
make such indemnity payment. Notwithstanding the foregoing, neither the
Purchaser nor the Sellers may settle or otherwise resolve any such claim, suit
or proceeding without the consent of the other party, such consent not to be
unreasonably withheld.
After the Closing Date, the Purchaser and the Sellers shall
make available to the other, as reasonably requested, all information, records
or documents relating to Tax liabilities or potential Tax liabilities of the
Subject Company and shall preserve all such information, records and documents
until the expiration of any applicable statute of limitations, including
extensions thereof, or such other period as required by law. The Purchaser and
the Sellers shall, if possible, make available to each other as reasonably
requested by the Purchaser or the Sellers, as the case may be, personnel
responsible for preparing or maintaining information, records and documents, in
connection with Tax matters. In case at any time after the Closing Date any
further action is necessary to carry out the purposes of this Agreement, the
parties hereto shall take all such reasonably necessary action.
All sales, value added, use, state or local transfer and gains
Taxes, registration, stamp and similar Taxes imposed in connection with the
Transactions shall be borne equally by the Purchaser, on the one hand, and the
Sellers, on the other hand.
Any payments made to the Sellers, the Subject Company or the
Purchaser pursuant to this Article X shall constitute an adjustment of the
Consideration for Tax purposes and shall be treated as such by the Purchaser and
the Sellers on their Tax Returns to the extent permitted by law.
All Tax sharing or similar agreements, if any, to which the
Subject Company is a party will be canceled at or prior to the Closing and
neither the Purchaser nor the Subject Company shall have any obligation under
any such agreement.
ARTICLE XI
ADDITIONAL PURCHASER'S INDEMNIFICATION; REMEDIES
11.1 The Indemnity. The Purchaser and the Sellers believe that the
Contingent Amounts constitute payment for the sale of a capital asset and not
compensation to ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ for the performance of services for
federal, state and local income tax purposes and shall report the entire
Consideration as payment for the sale of a capital asset and not as compensation
for the performance of services for all federal, state and local income tax
purposes. The Purchaser shall indemnify, save and hold harmless ▇▇▇▇ AND ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ from and against any and all additional federal, state and local
income taxes, including interest, assessed against ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as
a result of a determination by IRS or a state tax authority that any Contingent
Amount, or portion thereof, received by the Sellers constitutes compensation for
the performance of services and not gain from the sale of a capital asset
57
62
("Compensation Income Taxes"). Such indemnification payment shall be grossed-up
to account for the fact that the indemnification payment itself is taxable (the
"Gross-Up Amount").
11.2 Notice and Cooperation. Sellers shall promptly notify the
Purchaser in writing upon receipt by ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ of notice of any
pending or threatened federal, state or local Tax Audits or assessments of the
Sellers. The Purchaser and the Sellers shall cooperate with each other in the
conduct of any such audit with respect to any issue of Compensation Income Taxes
asserted by the auditing authority.
11.3 Seller's Claim for Indemnity; Payment. The Sellers shall promptly
notify the Purchaser in writing upon receipt by ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ of any
assessment of Compensation Income Taxes and will consult with the Purchaser with
regard to any mutually agreeable strategy for negotiation or appeal of such
assessment. Upon receipt from ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ of an assessment of
Compensation Income Taxes and a written acknowledgment, acceptance or consent to
such assessment by ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ on applicable forms of the
assessing authority, the Purchaser shall within 10 business days thereafter pay
to ▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in cash by wire transfer of immediately available
funds the amount of the Compensation Income Taxes and the Gross-Up Amount, and
the Purchaser and the Sellers shall thereafter report the Contingent Amounts for
tax purposes in accordance with the assessment.
ARTICLE XII
PURCHASER'S POST-CLOSING COVENANTS
The Purchaser covenants and agrees with the Sellers as
follows:
12.1 Subject Company Working Capital. After the Closing and
prior to December 31, 2000, the Purchaser will cause the Subject Company to
maintain or will provide for the benefit of the Subject Company working capital
and credit facilities sufficient to pay as and when they become due (a) all of
the Liabilities of the Subject Company incurred in the Ordinary Course of
Business other than Liabilities for capital expenditures and (b) Liabilities of
the Subject Company for capital expenditures in an individual amount not
exceeding $10,000 and in the aggregate amount not exceeding $50,000 in any
12-month period and any additional mutually agreed upon between the Purchaser
and the Sellers.
12.2 Subject Company Name. During the 12-month period after
the Closing, the Subject Company shall conduct its business solely and
exclusively under the name "Intranational Computer Consultants." During the
period thereafter through December 31, 2000, the Subject Company may conduct the
business under any name that includes as a part thereof or otherwise refers to
the name "Intranational Computer Consultants."
58
63
12.3 Purchaser's Existing California Business. The Purchaser
currently has on-site offices at client GE Capital in San Francisco and
Sacramento, California (the "Existing Business"). The Subject Company will
assume responsibilities with respect to the Existing Business and/or receive
earnings with respect to the Existing Business to the extent, if any, as shall
be mutually agreed in writing by the Purchaser and the Sellers.
12.4 Separate Corporate Status. The Purchaser will maintain
the separate corporate existence of the Subject Company until December 31, 2000
and will not sell, transfer or dispose of any of the assets or business of the
Subject Company prior to December 31, 2000 except in the Ordinary Course of
Business or transfer any of the employees of the Subject Company.
ARTICLE XIII
TERMINATION
13.1 Termination Events.
This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by the Sellers, on the one hand, or by the Purchaser on
the other hand, if a Breach of any provision of this Agreement has been
committed by the other party or its Affiliates and such Breach has not
been expressly waived in writing;
(b) (i) by the Purchaser if any of the conditions in Article
VIII has not been satisfied as of the Closing or if satisfaction of
such a condition is or becomes impossible (other than through the
failure of the Purchaser to comply with their respective obligations
under this Agreement) and the Purchaser has not expressly waived such
condition in writing on or before the Closing; or (ii) by the Sellers,
if any of the conditions in Article IX has not been satisfied as of the
Closing or if satisfaction of such a condition is or becomes impossible
(other than through the failure of the Sellers or the Subject Company
to comply with its obligations under this Agreement) and the Sellers
have not expressly waived such condition in writing on or before the
Closing;
(c) by mutual consent of Purchaser and the Sellers; or
(d) by either the Purchaser or the Sellers if the Closing has
not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before March 2, 1998 (the "Closing Date"), or
such later date as the Parties may agree upon.
13.2 Effect of Termination.
59
64
Each party's right of termination under Section 13.1 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 13.1, all further obligations
of the Parties under this Agreement will terminate, except that the obligations
in Sections 14.6, 14.9 and 14.10 will survive; provided, however, that if this
Agreement is terminated by a party because of the Breach of this Agreement by
the other party or because one or more of the conditions to the terminating
party's obligations under this Agreement is not satisfied as a result of the
other party's failure to comply with its obligations under this Agreement, the
terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
ARTICLE XIV
MISCELLANEOUS
14.1 Assignment. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned by any party without the prior written
consent of the other party; except that the Purchaser may, without such consent,
assign all such rights to any lender as collateral security and assign all such
rights and obligations to a wholly owned Subsidiary (or a partnership controlled
by the Purchaser) or Subsidiaries of the Purchaser or to a successor in interest
to the Purchaser which shall assume all obligations and Liabilities of the
Purchaser, as the case may be, under this Agreement; provided, however, that no
such assignment shall relieve the Purchaser of any obligation or liability under
this Agreement. Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
14.2 Notices. All notices, requests, demands and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy, electronic or
digital transmission method; the day after it is sent, if sent for next day
delivery to a domestic address by recognized overnight delivery service (e.g.,
Federal Express); and upon receipt, if sent by certified or registered mail,
return receipt requested. In each case notice shall be sent to:
If to the Purchaser, addressed to such Purchaser at:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Corporate Staffing Resources, Inc.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
60
65
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to either of the Sellers, addressed to such Seller at:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ Tufts Cole & Black, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
14.3 Choice of Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware (without
giving effect to its choice of law principles), except with respect to matters
of law concerning the internal corporate affairs of any corporate entity which
is a party to or the subject of this Agreement, and as to those matters the law
of the jurisdiction under which the respective entity derives its powers shall
govern.
14.4 Entire Agreement: Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto (including the Disclosure
Schedule and the other agreements referred to herein), constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. This Agreement may not be amended
except in an instrument in writing signed on behalf of each of the parties
hereto. No amendment, supplement, modification or waiver of this Agreement shall
be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute
61
66
a waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
14.5 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
14.6 Expenses. Each party to this Agreement will bear its
respective expenses incurred in connection with the preparation, execution and
performance of this Agreement and the Transactions (it being understood that in
the event of termination of this Agreement, the obligation of each party to pay
its own expenses will be subject to any rights of such party arising from a
breach of this Agreement by the other party); provided, however, that the
Purchaser will pay for the expense of the audit of the financial statements of
the Subject Company for the 12-month period ended December 31, 1997, in an
amount not exceeding $25,000, irrespective of whether the Transactions are
closed or terminated pursuant to the terms of Section 13.1.
14.7 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
14.8 Titles. The titles, captions or headings of the Articles
and Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
14.9 Publicity. Except as required by law, none of the
Purchaser, the Subject Company nor the Sellers shall issue any press release or
make any public statement regarding this Agreement and the Transactions, without
prior written approval of the other parties; provided, however, that in the case
of announcements, statements, acknowledgments or revelations which either party
is required by law to make, issue or release, the making, issuing or releasing
of any such announcement, statement, acknowledgment or revelation by the party
so required to do so by law shall not constitute a breach of this Agreement if
such party shall have given not less than two (2) calendar days prior notice to
the other party, and shall have attempted, to the extent reasonably possible, to
clear such announcement, statement, acknowledgment or revelation with the other
party. Each party hereto agrees that it will not unreasonably withhold any such
consent or clearance. The Purchaser may, without the consent of the Sellers,
issue or make an appropriate press release or public announcement after the
Closing.
14.10 Confidential Information.
(a) No Disclosure. The parties acknowledge that the
Transaction described herein is of a confidential nature and shall not
be disclosed except to consultants, advisors
62
67
and Affiliates or as required by law, until such time as the parties
make a public announcement regarding the Transaction as provided in
Section 14.9.
(b) Preservation of Confidentiality. In connection with the
negotiation of this Agreement, the preparation for the consummation of
the Transactions, and the performance of obligations hereunder, the
Purchaser acknowledges that it will have access to confidential and
proprietary information relating to the Subject Company and the Sellers
acknowledge that they will have access to confidential information
relating to the Purchaser and its Affiliates, in each case, including
technical or marketing information, ideas, methods, developments,
inventions, improvements, business plans, trade secrets, scientific or
statistical data, diagrams, drawings, specifications or other
proprietary information relating thereto, together with all analyses,
compilations, studies or other documents, records or data prepared by
the Sellers and the Subject Company or the Purchaser, as the case may
be, or their respective Representatives or Affiliates, which contain or
otherwise reflect or are generated from such information ("Confidential
Information"). The term "Confidential Information" does not include
information received by one party in connection with the Transactions
which (i) is or becomes generally available to the public other than as
a result of a disclosure by such party or its Representatives, (ii) was
within such party's possession prior to its being furnished to such
party by or on behalf of the other party in connection with the
Transactions, provided that the source of such information was not
known by such party to be bound by a confidentiality agreement with or
other contractual, legal or fiduciary obligation of confidentiality to
the other party or any other Person with respect to such information or
(iii) becomes available to such party on a non-confidential basis from
a source other than the other party or any of their respective
Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person
with respect to such information.
(c) Each party shall treat all Confidential Information of the
other party as confidential, preserve the confidentiality thereof and
not disclose any such Confidential Information, except to its
Representatives and Affiliates who need to know such Confidential
Information in connection with the Transactions. Each party shall use
all reasonable efforts to cause its Representatives to treat all such
Confidential Information of the other party as confidential, preserve
the confidentiality thereof and not disclose any such Confidential
Information. Each party shall be responsible for any breach of this
Agreement by any of its Representatives. If, however, Confidential
Information is disclosed, the party responsible for such disclosure
shall immediately notify the other party in writing and take all
reasonable steps required to prevent further disclosure.
(d) Until the Closing or the termination of this Agreement,
all Confidential Information shall remain the property of the party who
originally possessed such information. In the event of the termination
of this Agreement for any reason whatsoever, each party shall, and
shall cause its Representatives to, return to the other party all
Confidential Information
63
68
(including all copies, summaries and extracts thereof) furnished to
such party by the other party in connection with the Transactions.
(e) If one party or any of its Representatives or Affiliates
is requested or required (by oral questions, interrogatories, requests
for information or documents in legal proceedings, subpoena, civil
investigative demand or other similar process) or is required by
operation of law to disclose any Confidential Information, such party
shall provide the other party with prompt written notice of such
request or requirement, which notice shall, if practicable, be at least
forty-eight (48) hours prior to making such disclosure, so that the
other party may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this Agreement. If, in
the absence of a protective order or other remedy or the receipt of
such a waiver, such party or any of its Representatives are
nonetheless, in the opinion of counsel, legally compelled to disclose
Confidential Information, then such party may disclose that portion of
the Confidential Information which such counsel advises is legally
required to be disclosed, provided that such party uses its reasonable
efforts to preserve the confidentiality of the Confidential
Information, whereupon such disclosure shall not constitute a breach of
this Agreement.
14.11 Burden and Benefit. This Agreement shall be binding upon
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. There are no third party beneficiaries of this
Agreement; provided, however, that any Person that is not a party to this
Agreement but, by the terms of Section 10.2, is entitled to indemnification,
shall be considered a third party beneficiary of this Agreement, with full
rights of enforcement as though such Person was a signatory to this Agreement.
14.12 Service of Process; Consent to Jurisdiction.
(a) Service of Process. Each of the parties hereto irrevocably
consents to the service of any process, pleading, notices or other
papers in connection with a legal proceeding by the mailing of copies
thereof by registered, certified or first class mail, postage prepaid,
to such party at such party's address set forth herein, or by any other
method provided or permitted under Delaware law.
(b) Consent and Jurisdiction. Each party hereto irrevocably
and unconditionally (i) agrees that any suit, action or other legal
proceeding arising out of this Agreement may be brought in the United
States District Court for the Northern District of Indiana or the
United States District Court for the Northern District of California;
(ii) consents to the jurisdiction of either such court in any such
suit, action or proceeding; and (iii) waives any objection which such
party may have to the laying of venue of any such suit, action or
proceeding in either such court.
14.13 Attorneys' Fees. If any party to this Agreement brings
an action to enforce its rights under this Agreement, the prevailing party shall
be entitled to recover its costs and expenses,
64
69
including without limitation reasonable attorneys' fees, incurred in connection
with such action, including any appeal of such action.
14.14 Limitation of Liability. Notwithstanding anything to the
contrary in this Agreement, in no event shall any party hereto be liable for any
incidental or consequential damages occasioned by any failure to perform or the
breach of any obligation under this Agreement, except as provided in Section
2.4.
14.15 Additional Survival. In addition to the survival of
representations and warranties and other provisions referenced in Section 10.1
and 10.2 of this Agreement, which shall survive pursuant to the terms of such
Section, the obligations of the Sellers and the Purchaser contained in Sections
4.2, 14.6, 14.9 and 14.10 and in Article II, III, subject to the provisions of
Section 3.5, X and XI of this Agreement shall survive the Closing Date
indefinitely.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
PURCHASER:
Corporate Staffing Resources, Inc.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Chairman of the Board & Chief Executive
Officer
and
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President, CFO and Assistant Secretary
SELLERS:
▇▇▇▇▇▇▇▇▇▇ Family Limited Partnership
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, its General Partner
65