EXHIBIT 2.1
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PURCHASE AGREEMENT
BY AND BETWEEN
STAFFMARK, INC.
AND
▇▇▇▇▇▇▇▇ GROUP, INC.
DATED AS OF MAY 16, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Definitions............................................................................... 2
Section 1.2 Other Definitional Provisions............................................................. 11
Section 1.3 Cross Reference of Other Definitions...................................................... 11
ARTICLE II
PURCHASE AND SALE; CLOSING
Section 2.1 Purchase and Sale of the Newcos' Membership Interests..................................... 13
Section 2.2 Closing Transactions...................................................................... 13
ARTICLE III
CONDITIONS TO CLOSING
Section 3.1 Conditions to Purchaser's Obligations..................................................... 15
Section 3.2 Conditions to the Seller's Obligation..................................................... 18
ARTICLE IV
COVENANTS PRIOR TO CLOSING
Section 4.1 Affirmative Covenants of the Seller....................................................... 19
Section 4.2 Negative Covenants of the Seller.......................................................... 22
Section 4.3 No Solicitation of Competing Transaction.................................................. 24
Section 4.4 Covenants of the Purchaser................................................................ 26
Section 4.5 Mutual Covenants of the Parties........................................................... 26
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Section 5.1 Organization and Corporate Power.......................................................... 28
Section 5.2 Authorization of Transactions............................................................. 29
Section 5.3 Capitalization............................................................................ 30
Section 5.4 Absence of Conflicts...................................................................... 30
Section 5.5 Financial Statements and Related Matters; SEC Reports..................................... 31
Section 5.6 Absence of Undisclosed Liabilities........................................................ 32
Section 5.7 Absence of Certain Developments........................................................... 32
Section 5.8 Assets.................................................................................... 34
Section 5.9 Title to Properties....................................................................... 34
Section 5.10 Taxes..................................................................................... 35
Section 5.11 Proprietary Rights........................................................................ 37
Section 5.12 Contracts and Commitments................................................................. 39
Section 5.13 Litigation; Proceedings................................................................... 41
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Section 5.14 Brokerage.............................................................................. 42
Section 5.15 Governmental Licenses and Permits...................................................... 42
Section 5.16 Employees.............................................................................. 42
Section 5.17 Employee Benefit Matters............................................................... 43
Section 5.18 Insurance.............................................................................. 45
Section 5.19 Officers and Directors; Bank Accounts.................................................. 45
Section 5.20 Affiliate Transactions................................................................. 45
Section 5.21 Compliance with Laws................................................................... 46
Section 5.22 Environmental Matters.................................................................. 46
Section 5.23 Disclosure; Information Supplied....................................................... 48
Section 5.24 Year 2000.............................................................................. 48
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 6.1 Organization and Corporate Power....................................................... 50
Section 6.2 Authorization of Transaction........................................................... 50
Section 6.3 No Violation........................................................................... 50
Section 6.4 Governmental Authorities and Consents.................................................. 50
Section 6.5 Litigation............................................................................. 50
Section 6.6 Brokerage.............................................................................. 50
Section 6.7 Disclosure; Information Supplied....................................................... 51
Section 6.8 Funds.................................................................................. 51
Section 6.9 Beneficial Ownership of Seller Common Stock............................................ 51
ARTICLE VII
TERMINATION
Section 7.1 Termination............................................................................ 51
Section 7.2 Effect of Termination; Termination Fee................................................. 53
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
Section 8.1 Survival............................................................................... 53
Section 8.2 Indemnification........................................................................ 53
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.1 Continuing Assistance.................................................................. 58
Section 9.2 Tax Matters............................................................................ 59
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Section 9.3 Press Releases and Announcements....................................................... 62
Section 9.4 Further Transfers...................................................................... 63
Section 9.5 Specific Performance................................................................... 63
Section 9.6 Transition Assistance.................................................................. 63
Section 9.7 Expenses............................................................................... 63
Section 9.8 Allocation of the Cash Purchase Price.................................................. 63
Section 9.9 Books and Records...................................................................... 64
Section 9.10 Noncompetition, Nonsolicitation and Confidentiality.................................... 64
Section 9.11 Employees.............................................................................. 66
Section 9.12 Seller's Name Change................................................................... 68
Section 9.13 Third Party Consents................................................................... 69
Section 9.14 Bulk Sales Law......................................................................... 69
Section 9.15 Workers' Compensation Actuarial Studies................................................ 69
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendment and Waiver................................................................... 70
Section 10.2 Notices................................................................................ 70
Section 10.3 Binding Agreement; Assignment.......................................................... 71
Section 10.4 Severability........................................................................... 71
Section 10.5 No Strict Construction................................................................. 72
Section 10.6 Captions............................................................................... 72
Section 10.7 Entire Agreement....................................................................... 72
Section 10.8 Counterparts........................................................................... 72
Section 10.9 Governing Law.......................................................................... 72
Section 10.10 Parties in Interest.................................................................... 72
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INDEX OF SCHEDULES
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Acquired Companies Schedule
Organization Schedule
Non-Acquired Companies Schedule
Conflicts Schedule
Financial Statements Schedule
Receivables Schedule
Undisclosed Liabilities Schedule
Developments Schedule
Assets Schedule
Leases Schedule
Taxes Schedule
Proprietary Rights Schedule
Contracts Schedule
Litigation Schedule
Brokerage Schedule
Permits Schedule
Employees Schedule
Benefit Plans Schedule
Insurance Schedule
Officers, Directors and Bank Accounts Schedule
Affiliated Transactions Schedule
Compliance Schedule
Environmental Schedule
Executive Employee Schedule
Seller Employee Schedule
INDEX OF EXHIBITS
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Exhibit A-1 Form of Waiver and Amendment
Exhibit A-2 Form of Amendment
Exhibit B Financing Commitment Letters
Exhibit C Form of Opinion of the Seller's Counsel
Exhibit D Form of the Newco Contribution Agreement(s)
Exhibit E Form of the Transition Services Agreement
Exhibit F Form of Opinion of the Seller's Special Delaware Counsel
Exhibit G Form of Noncompete Assignment
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, dated as of May 16, 2000 (this
"Agreement"), is made by and between StaffMark, Inc., a Delaware corporation
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(the "Seller"), and ▇▇▇▇▇▇▇▇ Group, Inc., an Arkansas corporation (the
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"Purchaser"). The Seller and the Purchaser are referred to herein collectively
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as the " Parties" and, individually, as a " Party." Certain capitalized terms
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used herein but not otherwise defined shall have the meanings ascribed to such
terms in Article I below.
WHEREAS, the Seller, through its commercial staffing
subsidiaries is engaged in the business of providing diversified
temporary staffing services to businesses, professional organizations,
governmental agencies and service organizations;
WHEREAS, prior to the Closing Date, the Seller shall form the
Newcos and, as of the Closing Date, shall own directly or indirectly
100% of the issued and outstanding membership interests of the Newcos
and, prior to the Closing Date, the Seller shall contribute to one or
more of the Newcos the issued and outstanding Capital Stock of certain
companies such that, as of the Closing Date, one or more of the Newcos
shall own directly or indirectly 100% of the issued and outstanding
Capital Stock of each of the companies listed on the Acquired Companies
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Schedule (other than SMRC, Inc.), whereupon, the Seller shall cause
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each of the Acquired Companies (other than SMRC, Inc.) that is an
entity taxed as a corporation for U.S. federal income tax purposes to
convert or merge into an entity that for U.S. federal income tax
purposes is either taxable as a partnership or is treated as a
disregarded entity and whereupon the Seller shall cause SMRC, Inc. to
transfer all of its assets and liabilities to one or more of the Newcos
and may cause certain Acquired Companies to transfer intangible assets
to one or more of the Newcos with the Seller also contributing to one
or more of the Newcos all other assets used in its Commercial Staffing
Business and one or more of the Newcos shall also assume the
liabilities and obligations of the Seller relating to its Commercial
Staffing Business set forth in the Newco Contribution Agreement(s),
subject to the terms and conditions set forth in this Agreement;
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, the Purchaser desires to acquire from the
Seller and the Seller's board of directors deems it expedient and for
the best interests of the Seller, to sell to the Purchaser, subject to
the terms and conditions set forth herein, all of the Seller's
membership interests of the Newcos, which, as of the Closing Date,
shall own all of the Seller's interests in all of the Seller's and the
Acquired Companies' business, properties and assets (including, without
limitation, all of the issued and outstanding Capital Stock of the
Acquired Companies (other than SMRC, Inc.) as set forth on the
Organization Schedule attached hereto and the Capital Stock of all
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successor entities thereto (the "Acquired Stock"), but excluding the
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Excluded Assets (including, without limitation, the Capital Stock of
all the subsidiaries of the Seller listed on the Non-Acquired Companies
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Schedule, and all of the business, properties and assets of the
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Non-Acquired Companies)) of its Commercial Staffing Business
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(collectively, the "Acquired Business"); and
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WHEREAS, the Purchaser's and the Seller's respective boards of
directors have approved the transactions contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual representations, warranties, and covenants which are to be made
and performed by the respective Parties, the Parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the following terms have
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the meanings set forth below:
"Acquired Companies" means, collectively, the Newcos and all
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of the entities and each of their respective Subsidiaries (both direct and
indirect) of the Seller listed on the Acquired Companies Schedule and their
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respective successors; provided, however, that although SMRC, Inc. is not
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included on such schedule, it shall be deemed to be included on such schedule
solely for purposes of Articles IV, V and VIII and Section 9.2 (but not as to
any Cash Purchase Price allocation matters under Section 9.2 or the Agreement).
"Affiliate" of any Person means any other Person controlling,
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controlled by or under common control with such first Person, where "control"
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means the possession, directly or indirectly, of the power to direct the
management and policies of a Person whether through the ownership of voting
securities or otherwise.
"Affiliated Group" means an affiliated group as defined in
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Section 1504 of the Code (or any similar combined, consolidated or unitary group
defined under state, local or foreign income Tax law).
"Agreement" means this Purchase Agreement, including all
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Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Associate" shall have the meaning ascribed to such term in
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Rule 12b-2 of the rules promulgated under the Exchange Act.
"Assumed Liabilities" shall have the meaning set forth in the
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Newco Contribution Agreement(s).
"Assumed Residual Liabilities" shall have the meaning set
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forth in the Newco Contribution Agreement(s).
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"business day" means a day other than a Saturday, Sunday or other day
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on which commercial banks are authorized or required to be closed under the laws
of the United States.
"Capital Stock" means (i) in the case of a corporation, any and all
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shares of capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other equivalents
(however designated) of capital stock, (iii) in the case of a partnership or
limited liability company, any and all partnership or membership interests
(whether general or limited), (iv) in any case, any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, and
(v) in any case, any right to acquire any of the foregoing.
"CERCLA" means the Comprehensive Environmental Response, Compensation
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and Liability Act, 42 U.S.C.ss.9601 et seq., as amended, and any similar or
implementing state or local law.
"Closing Sales" means the amount equal to the actual sales of the
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Acquired Business for the ninety-one (91) day period ending on and including the
Closing Date. The Parties acknowledge that the Seller will use the following
periods and interim periods in the calculation defined herein (it being
understood, however, that the Purchaser will not be bound by the amounts set
forth in the reports described below): (A) to the extent one or more full fiscal
month income statement(s) is available within this ninety-one (91) day period,
then the amount of sales reflected on such income statements will be utilized
for that or those four or five week periods, as applicable, in this calculation,
(B) to the extent that a monthly income statement is not available for a portion
of the ninety-one (91) day period, then the amounts reflected on the Weekly
Sales and Analysis Reports for sales will be utilized for these weekly periods
in this calculation and (C) for all days within the ninety-one (91) day period
that do not fit within (A) or (B) above, then the amount of sales for any such
day will be equal to the aggregate sales amount reflected in the Weekly Sales
and Analysis Report for the week in which such day is included divided by five
(5).
"Code" means the United States Internal Revenue Code of 1986, as
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amended.
"Collective Expiration Date" means the date any of the following
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transactions are consummated: (i) any tender or exchange offer involving more
than fifty percent (50%) of the Seller's outstanding equity securities, or any
merger, consolidation, amalgamation, reorganization or any other business
combination regardless of the form or type involving more than fifty percent
(50%) of the Seller's outstanding equity securities to a Person that is not an
Affiliate or an Associate of the Seller; and (ii) the sale of substantially all
of the Capital Stock of the Non-Acquired Companies that comprise the
Professional/IT Segment or a sale of substantially all of the assets of the
Professional/IT Segment or a combination thereof that results in the disposition
by the Seller of substantially all of the Professional/IT Segment to a Person
that is not an Affiliate or an Associate of the Seller.
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"Commercial Staffing Business" means the temporary staffing
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and/or permanent placement of employees in clerical, administrative,
outsourcing, call center, computer training and light industrial areas, as well
as the operation of commercial training centers for basic computer skills, and
all other business activities performed in the Ordinary Course of Business by
the Acquired Business prior to the Closing Date, other than information
technology staffing and business solutions, clinical trials support staffing,
finance and accounting staffing and permanent placement, staffing of legal
resources, resource solutions on-site vendor management and consulting, and e-
solutions.
"Credit Facility" means collectively, (i) the Third Amended
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and Restated Credit Agreement, by and among Seller, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, PLC, ▇▇▇▇▇▇
▇▇▇▇▇▇▇ Tristar PTY Ltd, The First National Bank of Chicago, Mercantile Bank
National Association, Bank of America National Trust and Savings Association,
Credit Lyonnais New York Branch, Fleet National Bank and First Union National
Bank, dated January 20, 1999, as amended, and (ii) the Line of Credit Agreement,
dated April 7, 2000, by and among the Seller and Firstar Bank, N.A.
"DGCL" means the Delaware General Corporation Law, as amended.
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"Environmental Affiliates" of any Person means, with respect
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to any particular matter, all other Persons whose liabilities or obligations
with respect to that particular matter have been assumed by, or are otherwise
deemed by law to be those of, such first Person.
"Environmental and Safety Requirements" means all federal,
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state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
relating to public health and safety, worker health and safety and pollution or
protection of human health or the environment, including without limitation,
ambient air, surface water, ground water, land surface or subsurface strata, and
natural resources and including all such standards of conduct and bases of
obligations relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, emission, release, threatened release, control, or
cleanup of Materials of Environmental Concern.
"Environmental Claim" means any claim, action, cause of
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action, investigation or notice (written or oral) by any person or entity
alleging potential liability (including, without limitation, potential liability
for investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or release into the
environment, of any Material of Environmental Concern at any location, whether
or not owned or operated by Seller or any Acquired Company or (b) circumstances
forming the basis of any violation, or alleged violation, of any Environmental
Law.
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"Environmental Lien" means any Lien, whether recorded or
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unrecorded, in favor of any governmental entity or any department, agency or
political subdivision thereof relating to any liability of the Seller, any
Acquired Company, any other Subsidiary of the Seller or any Environmental
Affiliate of any such Person arising under any Environmental and Safety
Requirement.
"E-Solutions Segment" means the Seller's Edgewater Technology, Inc.
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Subsidiary and all newly created entities and all entities acquired by the
Seller or by any Non-Acquired Company that operate in the line of business
currently operated in by Edgewater Technology, Inc. in the Ordinary Course of
Business or as proposed to be conducted by Edgewater Technology, Inc. in the
press release issued by the Seller on April 27, 2000.
"Estimated Expense" means the total costs associated with
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workers' compensation claims, on a nominal basis, occurring between April 1,
1999 and March 31, 2000, as finally determined in accordance with the procedures
in Section 9.15, to the extent applicable. Total costs will be calculated as the
sum of: (x) the difference between the low-value loss, allocated loss adjustment
expense and third party claim administration fees reserve estimates at March 31,
2000 and April 1, 1999, plus (y) the amount of loss, allocated loss adjustment
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expense and third party claim administration fees paid during the period April
1, 1999 to March 31, 2000, plus (z) the amount of any premiums relating to the
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company's workers' compensation insurance programs that were expensed during
this period. The reserve amounts referenced in clause (x) in the preceding
sentence will include case reserves and IBNR (which includes adjustments for
claims incurred but not yet reported and for inadequate case reserves).
"Exchange Act" means the Securities Exchange Act of 1934, as
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amended, and the rules and regulations promulgated thereunder.
"Excluded Assets" shall have the meaning set forth in the
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Newco Contribution Agreement(s).
"Excluded Liabilities" shall have the meaning set forth in the
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Newco Contribution Agreement(s).
"Expiration Event Date" means the date of consummation of the
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sale, transfer, disposition, merger, consolidation, recapitalization,
amalgamation, exchange offer, stock purchase, asset purchase, initial public
offering, flotation or any other form of transaction where the Seller disposes
of all of the Capital Stock or all or substantially all of the assets of (A) the
E-Solutions Segment and/or (B) any or all of the following platforms within the
Professional/IT Segment: (i) IntelliMark; (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; (iii) ClinForce;
and/or (iv) Strategic Legal Resources to a Person that is not an Affiliate or an
Associate of the Seller.
"GAAP" means, at any given time, generally accepted accounting
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principles of the United States, consistently applied.
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"HQ Landlord" means ▇▇▇▇▇▇ Investments II, LLC, an Arkansas
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limited liability company.
"Health Plan" means that certain health and welfare Plan to be
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implemented by the Seller for the Seller's Subsidiaries' U.S. employees on or
around June 1, 2000.
"HQ Lease" means that certain Commercial Lease Agreement With
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Option To Renew and Right of First Refusal, dated as of July 1, 1999, by and
between ▇▇▇▇▇▇ Investments II, LLC and StaffMark, Inc.
"Indebtedness" of any Person means, without duplication: (a)
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indebtedness for borrowed money or for the deferred purchase price of property
or services (other than customary payables incurred in the Ordinary Course of
Business which do not relate to purchase money indebtedness, the expenses
related to the transactions contemplated by this Agreement and borrowings of the
Seller and/or the Acquired Companies under the Credit Facility) in respect of
which such person is liable, contingently or otherwise, as obligor or otherwise
(including, without limitation, any earn-out obligations), and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of an
agreement to repurchase or reimburse (other than guarantees which do not relate
to borrowed money); (c) obligations under capitalized leases (excluding those of
the Non-Acquired Companies) in respect of which such Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or in respect of
which obligations such Person assures a creditor against loss; (d) any other
indebtedness that is evidenced by a note, bond, debenture or similar instrument,
(e) all obligations in respect of acceptances issued or created, and (f) all
liabilities secured by any Lien except Permitted Encumbrances on any property
owned by such Person.
"Insider" means, (i) any executive officer of the Seller or any of its
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Subsidiaries, (ii) any stockholder owning beneficially 5% or more of the Capital
Stock of the Seller (excluding any Person not otherwise referenced in clauses
(i), (iii), (iv) or (v) hereof that has filed, with respect to the Seller, a
beneficial ownership report on Schedule 13G under the Exchange Act), (iii) any
partner of the Seller or any of its Subsidiaries, (iv) any Affiliate of the
Seller or any of its Subsidiaries, or (v) any spouse or descendant (natural or
adopted) of any such individual, or any entity in which any such Person owns a
controlling interest.
"knowledge" and "aware" and terms of similar import mean, with respect
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to the Seller or any of the Acquired Companies, the information that the
officers, executive officers or directors of the Seller and each of the Acquired
Companies (a list of which is set forth in Section 1.1 of the Disclosure
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Schedule) knew or should have known with respect to the particular matter in
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question.
"Leasehold Improvements" shall mean all buildings, structures,
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improvements and fixtures located on any leased real property of the Acquired
Business which are owned by
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the Seller or any of its Subsidiaries, regardless of whether the same are
subject to reversion to the landlord or other third party upon termination or
expiration of the Lease for such leased real property.
"Licenses" means all permits, licenses, franchises, certificates,
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approvals, consents and other authorizations of third parties or foreign,
federal, state or local governments or other similar rights.
"Liens" means any mortgage, pledge, security interest, encumbrance,
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obligation, understanding, option, claim, proxy, voting trust or agreement, lien
or charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof), any sale of
receivables with recourse against the Seller or any Affiliate, any filing or
agreement to file a financing statement as debtor under the UCC or any similar
statute other than to reflect ownership by a third party of property leased to
the Seller or any of its Subsidiaries under a lease which is not in the nature
of a conditional sale or title retention agreement or any other restriction on
title or transfer.
"Loss" means any liability, demand, claim, action, cause of action,
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cost, damage, deficiency, Tax, penalty, fine, judgment, settlement or other loss
or expense actually incurred and reasonably documented, whether or not arising
out of a third party claim, including all interest, penalties, reasonable
attorneys' fees and expenses, reasonable accountants' fees and expenses and all
amounts paid or incurred in connection with any such action, demand, proceeding,
investigation, preservation or enforcement of rights to indemnification, or
claim (including any governmental entity or any department, agency or political
subdivision thereof) and the investigation, defense or settlement of any of the
foregoing.
"Material Adverse Effect" means any material adverse effect on the
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business, financial condition, operations or results of operations, of the
Acquired Business (including, without limitation, the Acquired Companies and the
Residual Acquired Commercial Assets), taken as a whole.
"Materials of Environmental Concern" means any hazardous materials,
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substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or by-products, asbestos or
asbestos-containing materials, polychlorinated biphenyls (PCBs), noise, lead or
lead-based paints or materials, radon, radiation, or the preservation of the
environment or mitigation of adverse effects thereon.
"Net Working Capital" means as the close of business on the Closing
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Date the difference of: (x) the sum of the amounts of the following current
asset accounts of the Acquired Business: (A) Cash accounts, (B) Cash clearing,
(C) Restricted cash, (D) Accounts receivable, (E) Prepaid expense, and (F) Other
current assets minus (y) the sum of the amounts of the following current
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liability accounts of the Acquired Business: (A) Payroll and related liabilities
and (B) Accounts Payable and Other Accrued liabilities; provided, however, that
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the foregoing
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calculation shall exclude as of the Closing Date all: (1) amounts
from Commercial Reclassifications as such term is referenced on the Latest
Balance Sheet; (2) amounts relating to the Residual Acquired Commercial Assets
and (3) amounts relating to the Residual Assumed Liabilities.
"Newcos" means the limited liability companies of the Seller which
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will collectively receive the Acquired Business pursuant to the Newco
Contribution Agreement(s).
"Newco Membership Interests" means the membership interests of any of
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the Newcos.
"Non-Acquired Companies" means collectively all of the entities and
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each of their respective Subsidiaries (both direct and indirect) of the Seller
listed on the Non-Acquired Companies Schedule.
"Non-Compete Assignment" means an assignment in the form of Exhibit G
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attached hereto.
"NY Landlord" means ▇▇▇▇▇▇ ▇. Day Realty Corp.
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"NY Lease" means the Lease Agreement dated February 2000
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between the Seller and ▇▇▇▇▇▇ ▇. Day Realty Corp.
"Ordinary Course of Business" means the ordinary course of the
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Seller's (but only with respect to the Residual Acquired Commercial Assets) or
any of the Acquired Companies' businesses, in each case consistent with past
practice (including, without limitation, with respect to collection of accounts
receivable, purchases of inventory and supplies, repairs and maintenance,
payment of accounts payable and accrued expenses, levels of capital expenditures
and operation of cash management practices generally).
"Permitted Encumbrances" shall mean: (A) statutory liens for current
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taxes or other governmental charges with respect to such property not yet due
and payable or the amount or validity of which is being contested in good faith
by appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, which reserves are included in the Acquired Business; (B)
mechanics, carriers, workers, repairers and similar statutory liens arising or
incurred in the Ordinary Course of Business for amounts which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect; (C)
zoning, entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over such property which are not
violated by the current use and operation of such property; and (D) covenants,
conditions, restrictions, easements and other matters of record affecting title
to such property which do not unreasonably interfere with the current use,
occupancy, or value, or the marketability of title, of such property; (E) other
Liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money; (F)
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Liens resulting from the failure to obtain the consent of a third party in
respect of the assignment of or conveyance of any rights under any Unassigned
Contract in connection with the transactions contemplated by this Agreement; (G)
pledges or deposits in connection with or to secure workmen's compensation,
unemployment insurance pension or other employee benefits; (H) any Lien
renewing, extending or refunding any Lien permitted hereunder; (I) Liens and
imperfections of title the existence of which would not materially affect the
use, value, or marketability of title of the property subject thereto; and (J)
from the date hereof and continuing until immediately prior to the Closing,
liens on the Seller's assets or the pledge of common stock of the Seller's
Subsidiaries and/or guarantees of the Seller's Subsidiaries, in each case in
connection with the Credit Facility, so long as all such liens, pledges and/or
guarantees relating to the Acquired Business and the Residual Acquired
Commercial Assets are released or terminated at the Closing.
"Person" means an individual, a partnership, a corporation, an
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association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization, a governmental entity or any
department, agency or political subdivision thereof and any other entity.
"Professional/IT Segment" means (1) all of the Non-Acquired Companies,
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(2) any newly created and/or acquired entities that are owned by any Non-
Acquired Company, (3) a combination of the Non-Acquired Companies or any Non-
Acquired Company owned or operated by the Seller or (4) any entity created or
acquired by the Seller to operate along with any of the Non-Acquired Companies,
in each case that operates in any of the following business platforms as
currently operated by the Seller in the Ordinary Course of Business: (i)
IntelliMark; (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; (iii) ClinForce; and/or (iv) Strategic Legal
Resources, but excluding, for all purposes of this definition, the E-Solutions
Segment.
"Proprietary Rights" means as to the Acquired Business any and all (i)
------------------
patents, patent applications, patent disclosures, as well as any reissues,
continuations, continuations-in-part, divisions, extensions and reexaminations
thereof, (ii) trademarks, service marks, trade dress, trade names, logos and
corporate names, and registrations and applications for registration thereof,
together with all of the goodwill associated therewith, (iii) copyrights
(registered or unregistered) and copyrightable works and registrations and
applications for registration thereof, (iv) Internet domain names and web sites,
(v) computer software, data, data bases and documentation thereof, (vi) trade
secrets and other confidential information (including, without limitation,
formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, financial and marketing plans, and customer and supplier lists and
information), and (vii) license agreements related thereto.
"Release" has the meaning set forth in CERCLA.
-------
9
"Residual Acquired Commercial Assets" shall have the meaning set forth
-----------------------------------
in the Newco Contribution Agreement(s).
"SEC" means the Securities and Exchange Commission of the United
---
States.
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Seller Employment Agreements" means the employment, severance or
----------------------------
change in control agreements between the Seller, or in certain cases between
certain Acquired Companies or their predecessors, and each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇.
"Subsidiary" means, with respect to any Person, any corporation a
----------
majority of the total voting power of shares of stock of which is entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or any partnership, limited liability
company, association or other business entity a majority of the partnership or
other similar ownership interest of which is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that
Person or a combination thereof. For purposes of this definition, a Person is
deemed to have a majority ownership interest in a partnership, limited liability
company, association or other business entity if such Person is allocated a
majority of the gains or losses of such partnership, limited liability company,
association or other business entity or is or controls the managing director or
general partner of such partnership, limited liability company, association or
other business entity.
"Tax Returns" means returns, declarations, reports, claims for refund,
-----------
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Taxes" means any federal, state, local, or foreign income, gross
-----
receipts, sales, use, employment, franchise, profits, property or other taxes,
stamp taxes and duties, assessments or charges of any kind whatsoever (whether
payable directly or by withholding), together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
"Transaction Documents" means this Agreement, and all other
---------------------
agreements, instruments, certificates and other documents to be entered into or
delivered by any Party in connection with the transactions contemplated to be
consummated pursuant to this Agreement.
10
"Transition Services Agreement" means that certain agreement by and
-----------------------------
among the Seller and the Purchaser dated as of the Closing Date with respect to
services relating to certain of the Residual Acquired Commercial Assets for a
period of time following the Closing Date, in the form attached hereto as
Exhibit F, including the Annexes negotiated and agreed to pursuant to Section
-------
4.5.
---
"Treasury Regulations" means the United States Treasury Regulations
--------------------
promulgated pursuant to the Code.
"UCC" means the Uniform Commercial Code.
---
"Waiver" means a waiver and amendment in the form of: Exhibit A-1
------ -----------
attached hereto for ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇▇; and Exhibit A-2 for ▇▇▇▇▇ ▇▇▇▇▇▇▇.
-----------
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting Terms. Accounting terms which are not otherwise
----------------
defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of an accounting term that is defined in this
Agreement is inconsistent with the meaning of such term under GAAP, the
definition set forth in this Agreement will control.
(b) "Hereof," etc. The terms "hereof," "herein" and "hereunder" and
------------
terms of similar import are references to this Agreement as a whole and not to
any particular provision of this Agreement. Section, clause, Schedule and
Exhibit references contained in this Agreement are references to Sections,
clauses, Schedules and Exhibits in or to this Agreement, unless otherwise
specified.
(c) Successor Laws. Any reference to any particular Code section or
--------------
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
Section 1.3 Cross Reference of Other Definitions. Each capitalized term
------------------------------------
listed below is defined in the corresponding Section of this Agreement:
Term Section
---------------------- -------
Acquired Business Recitals
Acquired Newco(s) Section 4.1(n)
Acquired Stock Recitals
Aon Section 9.15
Assigned HQ Lease Section 3.1(i)
Assumed Plans Section 9.11(d)
Benefit Plans Section 5.17(a)
11
Cash Purchase Price Section 2.1
Closing Section 2.2(a)
Closing Balance Sheet Section 2.3(a)
Closing Date Section 2.2(a)
Closing Transactions Section 2.2(b)
COBRA Section 5.17(a)
Commitment Letters Section 6.8
Company Retirement Plans Section 5.17(a)
Confidential Information Section 9.10(c)
Confidentiality Agreement Section 10.7
Continuing Employees Section 9.11(a)
Determination Date Section 2.3(b)
Disclosure Document Section 4.5(b)
ERISA Section 5.17(a)
Exclusivity Period Section 4.3
Executive Employees Section 9.11(a)
Financial Statements Section 5.5(a)
Frozen Company Retirement Plans Section 5.17(a)
HSR Act Section 3.1(c)
Indemnified Party Section 8.2(d)
Indemnifying Party Section 8.2(d)
Latest Balance Sheet Section 5.5(a)
Leases Section 5.9(b)
▇▇▇▇▇▇ Section 9.15
Net Working Capital Adjustment Amount Section 2.3(c)
New ▇▇▇▇▇▇ Study Section 9.15
Newco Contribution Agreement(s) Section 3.1(f)
Other Entity Section 9.2(e)
Other Transactions Section 4.3(b)
Participants Section 9.11(e)
Party Preface
Parties Preface
Purchaser Preface
Purchaser 401(k) Plans Section 9.11(e)
Purchaser Material Adverse Effect Section 3.2(a)
Purchaser Nonqualified Plan Section 9.11(g)
Purchaser Parties Section 8.2(a)
Purchase Price Allocation Section 9.8
Referee Section 2.3(b)
Representation and Warranty Survival Term Section 8.1
Reorganization Mergers Section 4.1(n)
Required Approval Section 4.3(d)
Retained Employees Section 9.11(a)
12
Retirement Plans Section 5.17(a)
Seller Preface
Seller 401(k) Plan Section 9.11(e)
Seller Nonqualified Plan Section 9.11(g)
Seller Parties Section 8.2(b)
Seller Reports Section 5.5(c)
SMRC Liabilities Section 3.1(g)
Takeover Proposal Section 4.3(b)
Takeover Proposal Interest Section 4.3(a)
Third Firm Section 9.15
Third Party Claim Section 8.2(d)
Transfer Date Section 9.11(e)
Trigger Event Section 7.2(b)
Unassigned Contracts Section 9.13
WARN Section 5.16
Workers' Comp Adjustment Section 9.15
ARTICLE II
PURCHASE AND SALE; CLOSING
Section 2.1 Purchase and Sale of the Newcos' Membership Interests. On the
-----------------------------------------------------
basis of the representations, warranties, covenants, and agreements set forth
herein, and subject to the satisfaction or waiver of the conditions set forth
herein and the terms hereof, at the Closing, the Purchaser shall purchase from
the Seller, and the Seller shall sell and transfer to the Purchaser one hundred
percent (100%) of the directly owned Newcos' Membership Interests, and to the
extent that any of the Newcos is/are indirectly owned by the Seller, the Seller
shall cause the sale of such Newco's Newco Membership Interests, with such sales
representing all of the issued and outstanding Newco Membership Interests of the
Newcos, free and clear of any Liens, for an aggregate cash purchase price (the
"Cash Purchase Price") equal to (i) $196,300,000, minus (ii) any positive
-------------------
Workers' Comp Adjustment, or plus the integral value of any negative Workers'
Comp Adjustment, as applicable; provided, however, that the Cash Purchase Price
-------- -------
shall in no event exceed $202,000,000.
Section 2.2 Closing Transactions.
--------------------
(a) Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
-------
▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
commencing at 10:00 a.m. on the first Wednesday that is at least two business
days following the satisfaction or waiver of all conditions to the obligations
of the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself), or at such other place or on such other date as may be mutually
agreeable to the Purchaser and the Seller. The date and time of the Closing are
herein referred to as the "Closing Date."
------------
13
(b) Closing Transactions. Subject to the conditions set forth in this
--------------------
Agreement, the Parties shall consummate the following transactions (the "Closing
-------
Transactions") at the Closing:
------------
(i) The Purchaser shall pay an aggregate amount in cash equal
the Cash Purchase Price by wire transfer of immediately available funds to
the account or accounts designated by the Seller (which may include
accounts of SMRC, Inc.);
(ii) The Seller shall deliver or cause to be delivered, as
applicable, to the Purchaser, free and clear of any Liens, certificates in
such denominations as the Purchaser may request representing all of the
Newcos' Membership Interests; and
(iii) the Seller and the Purchaser, as applicable, shall deliver
the opinions, the certificates and other documents and instruments required
to be delivered by or on behalf of such Party under Article III.
Section 2.3 Post-Closing Purchase Price Adjustment.
--------------------------------------
(a) Closing Balance Sheet; Net Working Capital Adjustment. As soon as
-----------------------------------------------------
reasonably practicable following the Closing Date, and in any event within
seventy-five (75) days thereafter, the Purchaser shall cause the Newcos to
prepare and deliver to the Seller (i) a combined balance sheet of the Acquired
Business as of the close of business on the Closing Date (the "Closing Balance
---------------
Sheet"), (ii) a calculation of the Net Working Capital and (iii) a calculation
-----
of the Closing Sales. The Closing Balance Sheet shall be prepared in accordance
with GAAP (but shall not include any "write-up" of assets as a result of the
transactions contemplated hereby).
(b) Disputes. If the Seller disagrees with the calculation of the Net
--------
Working Capital or the Closing Sales, it shall notify the Purchaser of such
disagreement in writing within ten (10) business days after its receipt of the
Closing Balance Sheet and the calculation of the Net Working Capital and the
Closing Sales, which notice shall set forth in detail the particulars of such
disagreement. In the event that the Seller does not provide such a notice of
disagreement within such ten (10) day period, the Seller shall be deemed to have
accepted calculation of the Net Working Capital and the Closing Sales delivered
by the Newcos, which shall be final, binding and conclusive for all purposes
hereunder. In the event any such notice of disagreement is timely provided by
the Seller, the Purchaser and the Seller shall use their reasonable best efforts
for a period of thirty (30) days (or such longer period as they may mutually
agree) to resolve any disagreements with respect to the calculation of the Net
Working Capital and the Closing Sales. If, at the end of such period, they are
unable to resolve such disagreements, then the parties shall mutually designate
an independent accounting firm of recognized national standing other than ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP (the "Referee") to resolve any remaining disagreements. The Referee
-------
shall determine as promptly as practicable, but in any event within
14
thirty (30) days of the date on which such dispute is referred to the Referee,
based solely on written submissions forwarded by the Purchaser and the Seller to
the Referee within ten (10) days following the Referee's selection, whether the
Closing Balance Sheet was prepared in accordance with GAAP and (only with
respect to the remaining disagreements submitted to the Referee) whether and to
what extent, if any, the Net Working Capital and the Closing Sales
determinations require adjustment. The Parties shall share equally the fees and
expenses of the Referee. The determinations of the Referee shall be final,
conclusive and binding on the Parties. The date on which the Net Working Capital
and the Closing Sales are finally determined in accordance with this Section
2.3(c) is referred as to the "Determination Date."
------------------
(c) Payment. The "Net Working Capital Adjustment Amount" shall mean
------- -------------------------------------
(i) thirty-three and two-tenths of a percent (33.2%) of the Closing Sales, minus
(ii) the Net Working Capital. If the Net Working Capital Adjustment Amount is
greater than zero, then within five (5) days after the Determination Date the
Seller shall pay to the Purchaser an amount equal to the Net Working Capital
Adjustment Amount, together with interest thereon at the rate of interest
charged pursuant to the revolving credit facility entered into on or about the
Closing Date in connection with the financing of the transactions contemplated
by this Agreement, calculated from the Closing Date to the date of payment. If
the Net Working Capital Adjustment is equal to or less than zero, then no
payment shall be due by the Seller to the Purchaser.
ARTICLE III
CONDITIONS TO CLOSING
Section 3.1 Conditions to Purchaser's Obligations. The obligations of the
-------------------------------------
Purchaser to consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver of the following conditions as of the
Closing Date:
(a) The representations and warranties set forth in Article V hereof
shall be true and correct in all respects (but without regard to any materiality
qualifications or references to Material Adverse Effect contained in any
specific representation or warranty) as of the Closing Date of this Agreement,
except (x) for changes permitted by the terms of this Agreement; (y) that the
accuracy of representations and warranties that by their terms speak as of the
date of this Agreement or some earlier date will be determined as of such
specified date; and (z) where any such failure of the representations and
warranties, in the aggregate, to be true and correct in all respects would not
have a Material Adverse Effect;
(b) The Seller shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement on or prior to the Closing;
(c) The applicable waiting periods, if any, under the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as amended (the "HSR Act") shall have
-------
expired or been terminated and any other governmental filings, authorizations
and approvals that are required for
15
the consummation of the Closing Transactions (the "Required Approvals") shall
------------------
have been obtained, except where the failure to obtain such Required Approvals
are not reasonably likely to have a Material Adverse Effect;
(d) No order issued pursuant to any action, suit, statute, rule or
proceeding shall have been entered or enforced, and shall continue to be in
force and effect, by any court or other tribunal or any government body or
authority which prohibits the consummation of the closing of the transactions
contemplated hereby on substantially all of the terms contemplated herein;
(e) Each of the Acquired Companies (other than SMRC, Inc.) that is an
entity that is taxed as a corporation for U.S. federal income tax purposes shall
have been converted, through a merger or series of mergers or other
transactions, in form and substance reasonably satisfactory to the Purchaser,
into an entity that for U.S. federal income tax purposes is either taxable as a
partnership or is treated as a disregarded entity, provided, however, that the
-------- -------
cost for converting, merging or other similar transactions will be paid by the
Purchaser or the Newcos following the Closing;
(f) The Seller shall have formed the Newcos as direct or indirect
wholly owned Subsidiaries of the Seller and shall have contributed to one or
more of the Newcos pursuant to the Newco Contribution Agreement attached as
Exhibit D hereto or substantially similar agreements depending on the number of
the Newcos (collectively, the "Newco Contribution Agreement(s)") all of the
-------------------------------
Residual Acquired Commercial Assets free and clear of all Liens, other than
Permitted Encumbrances; all of the Capital Stock of the Acquired Companies
(other than the Newcos and SMRC, Inc.) free and clear of all Liens; (iii) cause
the transfer of intangible assets of certain of the Acquired Companies and SMRC,
Inc. to one or more of the Newcos; and (iv) one or more of the Newcos shall have
assumed all of the Assumed Residual Liabilities or other liabilities from other
Acquired Companies relating to the transfer of such intangible assets of the
Acquired Companies and SMRC, Inc., if applicable, by appropriate instrument or
document pursuant to the Newco Contribution Agreement(s);
(g) Except as otherwise specified in writing by the Purchaser to the
Seller prior to the Closing Date, all of the directors of each Acquired Company
shall have delivered resignation letters and such resignations shall be
effective as of the Closing Date;
(h) No intercompany obligations shall exist between any Acquired
Company (including any of the Newcos), on the one hand, and the Seller or any
Affiliate of Seller (excluding any other Acquired Company), on the other hand
(other than as specifically set forth in the Newco Contribution Agreement(s),
the Transition Services Agreement or this Agreement);
(i) The consent of the HQ Landlord to each of (1) the amendment of
the HQ Lease into two separate leases, one of which shall be solely for the
property located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ on substantially the same economic and
non-economic terms as the HQ Lease (the "Assigned HQ Lease"), and the other of
-----------------
which shall be solely for the property located at ▇▇▇ ▇▇▇▇
▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, pursuant to which the HQ Landlord and the Seller shall agree that
the Purchaser, the Acquired Companies and their respective Affiliates have no
further obligation following the Closing, and (2) the assignment of the Assigned
HQ Lease to a Newco shall have been obtained;
(j) On or prior to the Closing Date, the Seller shall have delivered
to the Purchaser all of the following:
(i) a certificate from the Seller in a form reasonably
satisfactory to the Purchaser, dated the Closing Date, stating that the
preconditions specified in Sections 3.1(a), (b) and (d) through (j) have
------------------- - -
been satisfied;
(ii) copies of resolutions, certified by the Secretary of the
Seller and of the Seller's board of directors approving the transactions
contemplated by this Agreement;
(iii) certificates of the Secretary of State of the State of
Delaware and all other states where the Seller is or any of the Acquired
Companies are required to be qualified to do business providing that the
Seller and/or such Acquired Company is in good standing, except where any
failure to be so qualified to do business, individually or in the
aggregate, would not give rise to a Material Adverse Effect;
(iv) a copy of the certificate of incorporation or equivalent
governing document for each Acquired Company, certified by the appropriate
authority in the jurisdiction in which such entity was incorporated or
organized;
(v) a copy of the bylaws or equivalent governing document for
each Acquired Company, certified by an officer of such Acquired Company;
(vi) all stock certificates and other instruments evidencing
ownership of each of the Acquired Companies;
(vii) all minutes books, stock books, ledgers and registers,
corporate seals and other corporate records relating to the organization,
ownership and maintenance of each Acquired Company;
(viii) all of the Waivers, each duly executed by the respective
person set forth in the definition of "Waiver";
(ix) a copy of the Noncompete Assignment duly executed by ▇▇▇▇▇
▇. ▇▇▇▇▇▇; and
(x) such other documents or instruments as the Purchaser may
reasonably request to effect the transactions contemplated hereby;
17
(k) The Seller shall have caused a transfer of sponsorship of the
Frozen Company Retirement Plans from each of the Acquired Companies to the
Seller;
(l) The Seller shall have properly merged the Company Retirement
Plans (other than the Frozen Company Retirement Plans and the HR America 401(k)
Salary Reduction Plan) into the Seller 401(k) Plan, and the Seller shall have
caused an assumption by the Seller 401(k) Plan of all plan assets and plan
liabilities of the Company Retirement Plans (other than the Frozen Company
Retirement Plans and the HR America 401(k) Salary Reduction Plan);
(m) The aggregate cash proceeds from senior and subordinated debt
lenders and equity investors (to fund the Cash Purchase Price) shall have been
funded in the amounts and subject to the terms and conditions set forth in the
Commitment Letters attached hereto collectively as Exhibit B;
(n) The Newcos shall have received an executed original of the
Transition Services Agreement from the Seller;
(o) The Purchaser shall have received an opinion substantially in the
form attached as Exhibit C hereto, dated the Closing Date, of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ LLP, or other outside counsel of the Seller reasonably satisfactory to
the Purchaser; and
(p) At the sole cost of the Seller, all previous assignments and
other prior transfers and/or acquisitions of all patented, pending, and
registered material Proprietary Rights which are included in the Residual
Acquired Commercial Assets shall have been submitted for recordation such that
when recorded, title to each such item shall be in the name of one of the Newcos
or an appropriate Acquired Company.
Any condition specified in this Section 3.1 may be waived only by the Purchaser
-----------
in its sole discretion; provided that no such waiver shall be effective against
--------
the Purchaser unless it is set forth in a writing executed by the Purchaser.
Section 3.2 Conditions to the Sellers Obligation. The obligation of the
------------------------------------
Seller to consummate the transactions contemplated by this Agreement is subject
to the satisfaction or waiver of the following conditions as of the Closing
Date:
(a) The representations and warranties set forth in Article VI shall
be true and correct in all respects (but without regard to any materiality
qualifications or references contained in any specific representation or
warranty) as of the Closing Date, except (x) for changes permitted by the terms
of this Agreement; (y) that the accuracy of representations and warranties that
by their terms speak as of the date of this Agreement or some earlier date will
be determined as of such specified date; and (z) where any such failure of the
representations and warranties, in the aggregate, to be true and correct in all
respects would not have a material adverse effect on
18
the business, financial condition, operations or results of operations of the
Purchaser, taken as a whole (a "Purchaser Material Adverse Effect");
---------------------------------
(b) The Purchaser shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
or them under this Agreement on or prior to the Closing;
(c) The applicable waiting periods, if any, under the HSR Act shall
have expired or been terminated and the Required Approvals shall have been
obtained, except where the failure to obtain such Required Approvals are not
reasonably likely to have a Purchaser Material Adverse Effect;
(d) No order issued pursuant to any action, suit, statute, rule or
proceeding shall have been entered or enforced, and shall continue to be in
force and effect, by any court or other tribunal or any government body or
authority which prohibits the consummation of the closing of the transactions
contemplated hereby on substantially all of the terms contemplated herein; and
(e) On or prior to the Closing Date, the Purchaser shall have
delivered to the Seller a certificate from the Purchaser in a form reasonably
satisfactory to the Seller, dated the Closing Date, stating that the
preconditions specified in Sections 3.2(a) and (b) have been satisfied.
--------------- ---
Any condition specified in this Section 3.2 may be waived by the Seller in its
-----------
sole discretion; provided that no such waiver shall be effective unless it is
--------
set forth in a writing executed by the Seller.
ARTICLE IV
COVENANTS PRIOR TO CLOSING
Section 4.1 Affirmative Covenants of the Seller. The Seller covenants and
-----------------------------------
agrees that, from the date of this Agreement and until the Closing or the date,
if any, on which this Agreement is earlier terminated pursuant to Section 7.1
-----------
hereof, unless the Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, the Seller shall with respect to the Residual
Acquired Commercial Assets and shall cause each of the Acquired Companies to:
(a) conduct the business and operations of the Acquired Business only
in the Ordinary Course of Business;
(b) keep in full force and effect the corporate existence of the
Acquired Companies and all rights, franchises and material Proprietary Rights
relating or pertaining to the Acquired Business and use its reasonable best
efforts to cause its current insurance (or reinsurance) policies not to be
canceled or terminated or any of the coverage thereunder to lapse;
19
(c) use its reasonable best efforts to keep the business
organizations and properties of the Acquired Companies intact in the Ordinary
Course of Business, including business operations, physical facilities, working
conditions and employees and relationships with lessors, licensors, suppliers
and customers and others having business relations with it, except as pursuant
to the Reorganization Mergers;
(d) maintain the material assets of the Acquired Companies in such
ordinary repair, order and condition (normal wear and tear excepted) consistent
with historical needs, replace in accordance with reasonable business practices
its inoperable, worn out or obsolete assets with assets of good quality
consistent with prudent practices and current needs and, in the event of a
casualty, loss or damage to any of such assets or properties prior to the
Closing Date (whether or not such casualty, loss or damage is covered by
insurance), either repair or replace such damaged property or use the proceeds
of such insurance in such other manner as mutually agreed upon by the Seller and
the Purchaser;
(e) encourage all key employees of the Acquired Business to continue
their employment with the Purchaser or its Subsidiaries after the Closing;
(f) maintain the books, accounts and records of the Acquired Business
in accordance with past custom and practice as used in the preparation of their
financial statements;
(g) promptly (once the Seller obtains knowledge thereof) inform the
Purchaser in writing of any material variances from the representations and
warranties contained in Article IV hereof or any material breach of any covenant
hereunder by the Seller;
(h) cooperate with the Purchaser and use reasonable best efforts to
cause the conditions to the Purchaser's obligations to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all Required Approvals necessary to consummate the transactions
contemplated hereby (including, without limitation, all approvals under the HSR
Act));
(i) maintain the existence of and protect all of the material
governmental permits, licenses, approvals and other authorizations of the
Acquired Business;
(j) comply in all material respects with all applicable laws,
ordinances, and regulations in the operation of the Acquired Business;
(k) cooperate with and assist in a commercially reasonable manner the
Purchaser in its investigation of the business, assets and properties of the
Acquired Business and permit the Purchaser and its employees, agents,
accounting, legal and other authorized representatives, upon reasonable notice
and at reasonable hours, to (i) have reasonable access to the premises, books
and records of the Seller (but only with respect to the Residual Acquired
20
Commercial Assets or the Acquired Companies) and/or any of the Acquired
Companies, (ii) visit and inspect any of the properties of the Seller (but only
with respect to the Residual Acquired Commercial Assets) and/or any of the
Acquired Companies, (iii) discuss the affairs, finances and accounts of the
Seller (but only with respect to the Residual Acquired Commercial Assets) and/or
any of the Acquired Companies with the officers, partners, key employees and
independent accountants of the Seller and of the Acquired Companies and (iv)
discuss (provided that such discussions only occur with the involvement,
presence or prior consent of a senior executive of the Seller or applicable
Acquired Company) the affairs and accounts of the Seller (but only with respect
to the Residual Acquired Commercial Assets) and/or any of the Acquired Companies
with its key customers, key sales representatives and key suppliers, but in all
cases in clauses (i)-(iv) above, only to the extent such discussions are
reasonable and do not have any purpose of altering or interfering with the
relationships, status or affairs of the Seller or any Acquired Company, as
applicable, with such customers, sales representatives or suppliers prior to the
Closing;
(l) cooperate with and assist in a commercially reasonable manner the
Purchaser in its development of integration and transition plans in connection
with the transactions contemplated hereby (including, without limitation, at the
direction of the Purchaser, assigning or otherwise transferring, immediately
prior to the Closing, any properties, assets, interests, rights, liabilities
and/or obligations relating to the Acquired Business, any Acquired Company or
any Residual Acquired Commercial Asset to any other Acquired Company so long as
such transfers (i) are solely to give effect to the proper allocation of such
properties, assets, interests, rights, liabilities and/or obligations in
accordance with Section 9.8 and (ii) do not cause any material burden or expense
-----------
on the Seller; provided that nothing in this Section 4.1(l) shall in any way
-------- --------------
eliminate, modify or affect any other obligations of the Seller or the Acquired
Companies hereunder (including, without limitation, any obligations of the
Seller or the Acquired Companies pursuant to Section 4.2 hereof));
-----------
(m) use reasonable best efforts to cause each employee listed in the
definition of the term "Waiver" to sign the form of Waiver specified for such
employee in such definition;
(n) take all actions necessary to convert each of the Acquired
Companies (other than SMRC, Inc.) that is an entity taxed as a corporation for
U.S. federal income tax purposes into an entity that for U.S. federal income tax
purposes is either taxable as a partnership or is treated as a disregarded
entity (each, an "Acquired Newco" and collectively the "Acquired Newcos"),
--------------
whether by merger or series of mergers or other transactions, in form and
substance reasonably satisfactory to the Purchaser, prior to the Closing (the
"Reorganization Mergers");
----------------------
(o) transfer the Residual Acquired Commercial Assets and the Acquired
Stock (other than the Capital Stock of the Newcos and SMRC, Inc.) to the Newcos,
or to any other appropriate Acquired Company, transfer the intangible assets of
certain of the Acquired Companies and SMRC, Inc. to one or more of the Newcos,
prior to the Closing pursuant to the Newco Contribution Agreement(s) and ensure
that, other than as specifically set forth in the
21
Newco Contribution Agreement(s), the Transition Services Agreement or this
Agreement, no intercompany obligations or contractual arrangements or
understandings between any Acquired Company (including the Newcos) on the one
hand, and the Seller or any Affiliate of Seller (excluding any Acquired
Company), on the other hand;
(p) obtain the consent of the HQ Landlord to (1) the amendment of
the HQ Lease into two separate leases as detailed in Section 3.1(l), and (2) the
assignment of the Assigned HQ Lease to one of the Newcos; and
(q) use its reasonable best efforts to obtain an executed Noncompete
Assignment from each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
Section 4.2 Negative Covenants of the Seller. The Seller covenants and
--------------------------------
agrees that, from the date of this Agreement and until the Closing or the date,
if any, on which this Agreement is earlier terminated pursuant to Section 7.1
-----------
hereof, unless the Purchaser otherwise agrees in writing and except as expressly
contemplated by this Agreement, the Seller shall not with respect to the
Residual Acquired Commercial Assets and shall use its commercially reasonable
best efforts to cause each of the Acquired Companies to not:
(a) take any action that would require disclosure under Section 5.7
-----------
hereof;
(b) make any loans, enter into any transaction with any Insider or
make or grant any increase in any employee's, director's or officer's
compensation (other than normal recurring increases in wages to employees who
are not officers or directors) outside of the Ordinary Course of Business or
make or grant any increase in any employee benefit plan (except for the Health
Plan), incentive arrangement or other benefit covering any of the employees of
the Acquired Business outside of the Ordinary Course of Business; provided,
--------
however, that it is agreed that any amendment of the Seller Employment
-------
Agreements or the entry by the Seller or any Acquired Company into any similar
agreement or arrangement shall be deemed an action outside of the Ordinary
Course of Business;
(c) except for Seller's new proposed Health Plan, establish or,
except in the Ordinary Course of Business, contribute to any pension,
retirement, profit sharing or stock bonus plan or multiemployer plan covering
the employees of the Seller or any of the Acquired Companies;
(d) except as specifically contemplated by this Agreement, enter
into any contract, agreement or transaction, or make any loans, advances or
capital contributions to, or investments in, any Person other than in the
Ordinary Course of Business and at arm's length, with unaffiliated Persons;
22
(e) settle or compromise any material Tax liability with respect to
the Acquired Business or any Acquired Company and not make any material Tax
election affecting the Acquired Business;
(f) (i) amend the articles of incorporation or by-laws or similar
organizational documents of any Acquired Company, (ii) issue, sell, transfer,
pledge, dispose of or encumber any shares of any class or series of the Capital
Stock of any Acquired Company or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of any class or series of such Capital Stock, (iii) declare, set
aside or pay (except in connection with its financing activities in the Ordinary
Course of Business) any dividend or other distribution payable in cash, stock or
property with respect to any shares of any class or series of the Capital Stock
of any Acquired Company; (iv) split, combine or reclassify any shares of any
class or series of the Capital Stock of any Acquired Company; (v) redeem,
purchase or otherwise acquire directly or indirectly any shares of any class or
series of the Capital Stock of any Acquired Company, or any instrument or
security which consists of or includes a right to acquire such shares; provided,
--------
however, that nothing in this Section 7.1(f) shall prohibit pledges of Capital
------- --------------
Stock under the Credit Facility in the Ordinary Course of Business, which
pledges are terminated at or upon the Closing;
(g) cause any properties, assets, rights or interests related
primarily to the Acquired Business prior to the date hereof to become primarily
used by or primarily related to Seller or any Subsidiary of Seller (excluding
the Acquired Companies), unless effected pursuant to an arm's length written
contract, subject to the prior written consent of the Purchaser; or
(h) except in the Ordinary Course of Business, permit any insurance
policy naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without prior written notice to the Purchaser;
(i) adopt a plan of complete or partial liquidation, dissolution,
redemption, consolidation, restructuring, recapitalization or other
reorganization involving the Acquired Business;
(j) take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions set forth in Article III
not being satisfied, or would make any representation or warranty of the Seller
contained herein (other than representations and warranties which address
matters only at a certain date or dates) inaccurate in any material respect at,
or as of any time prior to, the Closing Date, or that would materially impair
the ability of the Seller or the Purchaser to consummate the transactions
contemplated by this Agreement in accordance with the terms hereof or materially
delay such consummation;
(k) make any capital expenditures or commitments for capital
expenditures in excess of $150,000; or
23
(l) enter into an agreement, contract, commitment or arrangement to
do any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Section 4.3 No Solicitation of Competing Transaction.
----------------------------------------
(a) from the date of this Agreement until and including the
thirtieth (30th) day thereafter (the "Exclusivity Period"), and only for the
------------------
duration of the Exclusivity Period, the Seller (and its Subsidiaries and
Affiliates) will not, and the Seller (and its Subsidiaries and Affiliates) will
use their reasonable best efforts to ensure that their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents do not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to knowingly facilitate the making of, any offer or proposal
which constitutes or is reasonably likely to lead to any Takeover Proposal of
the Seller or an inquiry with respect thereto, (ii) cause the Seller to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement with respect to any Takeover Proposal for the Seller, or
(iii) in the event of an unsolicited Takeover Proposal for the Seller, engage in
negotiations or discussions with, or provide any information or data to, any
Person (other than the Purchaser or any of its Affiliates or representatives)
relating to any Takeover Proposal. The Seller agrees that it will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any Takeover
Proposal Interest during the Exclusivity Period. The Seller agrees that it will
take the necessary steps to promptly inform the individuals or entities referred
to in the first sentence hereof of the obligations undertaken in this Section
-------
4.3. The Seller agrees that it shall keep the Purchaser informed, on a current
---
basis, of the status and terms of any Takeover Proposal Interest during the
Exclusivity Period. At any time prior to the earlier of the Closing and the
termination of this Agreement, the Seller shall notify the Purchaser as promptly
as practicable, and in any event not later than the next day, of any inquiries,
expressions of interest, proposals or offers received by the Seller or any of
the Seller's representatives relating to any Takeover Proposal (a "Takeover
--------
Proposal Interest") indicating, in connection with such notice, the name of the
-----------------
Person indicating such Takeover Proposal Interest and the material terms and
conditions of any proposals or offers. Notwithstanding any other provision of
this Agreement, until the earlier of (x) the Closing Date and (y) the
termination of this Agreement pursuant to Section 7.1, the Seller (and its
-----------
Subsidiaries or Affiliates) shall not engage in negotiations or discussions
with, or provide any information or data to any Person (other than the Purchaser
or any of its Affiliates or representatives) with respect to any proposal or
offer to acquire any part of the assets or Capital Stock of all or any of the
Acquired Companies or all or any part of the assets comprising the Acquired
Business; provided however, that if Seller engages in negotiations or
-------- -------
discussions with, or provides any information or data to any Person relating to
any Takeover Proposal following the Exclusivity Period, the Seller will enter
into a confidentiality agreement with such Person, in form and substance
reasonably acceptable to the Purchaser, with respect to the Acquired Business
prior to providing any Confidential Information.
24
(b) As used in this Agreement, "Takeover Proposal" when used in
-----------------
connection with the Seller shall mean (1) any tender or exchange offer involving
a majority of the Capital Stock of the Seller, (2) any proposal for a merger,
consolidation or other business combination concerning the Seller, (3) any
proposal or offer to acquire in any manner, directly or indirectly, any part of
the assets or Capital Stock comprising the Acquired Business, and (4) any
proposal or offer with respect to any recapitalization or restructuring
concerning the Seller or any proposal or offer with respect to any other
transaction similar to any of the foregoing; provided, however that the term
-------- -------
"Takeover Proposal" shall not include a proposal to divest or sell any or all of
the Non-Acquired Companies or Excluded Assets, which proposal does not include
any part of the Acquired Business (excluding any part of the Acquired Business,
the sale or other transfer of which remains the subject of a pending third party
consent or governmental consent following the Exclusivity Period) (collectively,
"Other Transactions").
------------------
(c) Nothing contained in this Agreement shall prevent the Seller or
its Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rule 14e-9 or complying with Rule 14e-2(a) promulgated under the
Exchange Act.
(d) In the event that any of the Transaction Documents or any of the
transactions contemplated by this Agreement are required to be submitted to the
stockholders of the Seller for their approval (a "Required Approval"), the
-----------------
Seller's Board of Directors shall recommend to the Seller's stockholders that
such stockholders approve such Transaction Documents and transactions and
neither the Seller's Board of Directors nor any committee thereof shall
withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify,
in a manner adverse to the Purchaser, the approval or recommendation of the
Seller's Board of Directors or such committee of the transactions contemplated
hereby that constitute a part of the transactions subject to a Required
Approval. The Parties hereby agree that Seller's receipt from its special
Delaware counsel of an opinion expressed substantially in the form of Exhibit F
hereto shall obviate the need for a Required Approval for purposes of this
Agreement, subject to the Seller's compliance with all relevant provisions of
this Agreement.
(e) Nothing in this Section 4.3 shall: (i) permit the Seller to
-----------
terminate this Agreement other than pursuant to Section 7.1 of this Agreement;
-----------
or (ii) affect any other material obligation of the Seller under this Agreement.
It is expressly acknowledged and agreed that, even in the event that a Takeover
Proposal concerning the Seller is consummated, the Seller or any successor
entity that may result from the consummation of a Takeover Proposal shall be
required to assume or continue to remain obligated by the terms of this
Agreement. Prior to entering into any agreement with respect to a Takeover
Proposal concerning the Seller, the Seller agrees that any other party to any
such agreement shall execute an instrument, in form and substance reasonably
satisfactory to the Purchaser, pursuant to which such party or parties agree to
be bound by the terms of this Agreement, including, without limitation, the
provisions of Section 7.2.
-----------
25
(f) Immediately prior to the Closing, the Seller shall cause: (i) all
intercompany accounts that exist immediately prior to the Closing between any
Acquired Company, on the one hand, and the Seller or any Non-Acquired Company,
on the other hand; and (ii) at the request of the Purchaser, any intercompany
accounts between the Acquired Companies that exist immediately prior to the
Closing, to be canceled, contributed and/or liquidated on terms reasonably
satisfactory to the Purchaser without any post-Closing payment or obligation on
the part of the Seller and/or the Non-Acquired Companies.
(g) Prior to the Closing, the Seller shall have assigned to one or
more of the Acquired Companies (as identified in the reasonable discretion of
the Purchaser) its interest in all of the customer contracts with respect to the
Acquired Business to which the Seller is a party.
Section 4.4 Covenants of the Purchaser. Prior to the Closing, the
--------------------------
Purchaser shall:
(a) promptly (once it obtains knowledge thereof) inform the Seller in
writing of any material variances from the representations and warranties
contained in Article VI or any material breach of any covenant hereunder by the
Purchaser;
(b) cooperate with the Seller and use its reasonable best efforts to
cause the conditions to the Seller's obligation to close to be satisfied
(including, without limitation, the execution and delivery of all agreements
contemplated hereunder to be so executed and delivered and the making and
obtaining of all third party and governmental filings, authorizations,
approvals, consents, releases and terminations); and
(c) cooperate with the Seller and use its reasonable best efforts to
obtain all Required Approvals necessary to consummate the transactions
contemplated hereby (including, without limitation, using reasonable best
efforts to make an initial filing for approval under the HSR Act within five (5)
business days after the date hereof).
Section 4.5 Mutual Covenants of the Parties. The Parties hereto agree
-------------------------------
that:
(a) subject to the terms and conditions of this Agreement, each Party
will use its reasonable best efforts to take, or cause to be taken, all action
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement. In connection with, and without limiting the foregoing, each
Party shall (a) use its reasonable best efforts to take all action necessary to
render true and correct in all material respects as of the Closing Date its
representations and warranties contained in this Agreement, (b) refrain from
taking any action that would render any such representation or warranty untrue
or incorrect in any material respect as of such time, (c) perform or cause to be
satisfied each agreement, covenant or condition to be performed or satisfied by
it in all material respects and (d) use its reasonable best efforts to satisfy
the other Party's conditions to closing as set forth in Section 3.1 with respect
-----------
to the Purchaser and in Section 3.2 with respect to the Seller. The Seller and
-----------
the Purchaser shall each furnish to one another and to
26
one another's counsel all such information as may be required in order to
accomplish the foregoing actions;
(b) each Party shall cooperate with one another to the extent
required by applicable law as determined in good faith after consultation with
counsel whose views on the subject shall not be unreasonable: (i) in connection
with the preparation of a proxy statement and any other disclosure document
specifically related to the transactions contemplated by this Agreement and
filed after the date hereof pursuant to the Securities Act, the Exchange Act or
any state securities law (collectively, a "Disclosure Document"), and the
-------------------
filing with and the clearing by the SEC of a Disclosure Document; (ii) in
determining whether any other action by or in respect of, or filing with, any
governmental entity or any department, agency or political subdivision thereof
(including in connection with the HSR Act), or any actions, consents, approvals
or waivers are required to be obtained from parties to any material contracts in
connection with the consummation of the transactions contemplated by this
Agreement; and (iii) in timely seeking to obtain any such actions, consents,
approvals or waivers or timely making any such filings, or furnishing
information required in connection therewith or with any other Disclosure
Document;
(c) the Seller, on the one hand, and the Purchaser, on the other
hand, shall promptly notify the other of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
entity or any department, agency or political subdivision thereof in
connection with the transactions contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, threatened in writing against, relating to or involving
or otherwise affecting the Seller or any Acquired Company, on the one
hand, or the Purchaser, on the other hand, which relate to the
consummation of the transactions contemplated by this Agreement; and
(iv) any action, event or occurrence that would constitute a
breach of any representation, warranty, covenant or agreement of such
Person set forth in this Agreement.
(d) to the extent required by applicable law as determined in good
faith after consultation with counsel whose views on the subject shall not be
unreasonable, as soon as practicable following the date of this Agreement, the
Seller shall prepare and file with the SEC any required Disclosure Document and
the Seller shall use its best efforts to have any required
27
Disclosure Document approved by the SEC for distribution to the Seller's
stockholders. The Seller shall use its reasonable best efforts to cause any
required Disclosure Document to be mailed to its stockholders as promptly as
practicable after all unresolved disclosure issues have been resolved to the
reasonable satisfaction of the Seller and the SEC has indicated it has no
further comments concerning any Disclosure Document. No filing of, or amendment
or supplement to, any required Disclosure Document will be made by the Seller
without providing the Purchaser the reasonable opportunity to review and comment
thereon. The Seller shall advise the Purchaser promptly after receiving notice
thereof, of the time when the SEC has indicated it has no further comments
concerning any required Disclosure Document. If at any time prior to the
Closing, any information relating to the Seller, any Acquired Company or the
Purchaser, or any of their respective Affiliates, officers or directors, should
be discovered by the Seller or the Purchaser which should be set forth in an
amendment or supplement to any required Disclosure Document, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact required or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, the Party which
discovers such information shall promptly notify the other Parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed by the Seller with the SEC and, to the extent required by law,
disseminated by the Seller to the stockholders of the Seller; and
(e) the Seller, on the one hand, and the Purchaser, on the other
hand, shall use their reasonable best efforts to negotiate and agree to the
Annexes to the Transition Services Agreement, including the fully burdened cost
of the services set forth therein (which shall be the price charged to Horizant
(as defined therein)) pursuant to such agreement, provided that no services
--------
shall be set forth therein unless such services can be performed solely with the
assets comprising the Acquired Business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As a material inducement to the Purchaser to enter into this
Agreement, the Seller hereby represents and warrants as of the date of this
Agreement that:
Section 5.1 Organization and Corporate Power.
--------------------------------
(a) The "Organization Schedule" attached hereto contains a complete
---------------------
and accurate list of the Seller (but only with respect to the Residual Acquired
Commercial Assets) and each Acquired Company of its name, its jurisdiction of
incorporation or organization, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
or equity holder and the number of shares or other equity interests held by
each), determined as of the date hereof. Except as set forth on the Organization
------------
Schedule, neither the Seller (but only with respect to the Residual Acquired
--------
Commercial Assets) nor any Acquired Company owns or holds the right to acquire
any Capital Stock in any other Person.
28
(b) The Seller and each Acquired Company is a company duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation or organization, with full organizational power and authority to
conduct the business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all of its obligations
under the contracts to which it is a party or otherwise bound. The Seller (but
only with respect to the Residual Acquired Commercial Assets) and each Acquired
Company is duly qualified to do business as a foreign company 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 duly qualified or licensed and in good standing would not
individually or in the aggregate have a Material Adverse Effect.
(c) The Seller has delivered to the Purchaser correct and complete
copies of the certificate of incorporation and by-laws (or equivalent governing
documents) of the Seller and each Acquired Company, which documents reflect all
amendments made thereto at any time before the date hereof. Correct and complete
copies of the minute books containing the complete and correct records of all of
the meetings of, and other actions taken or approved by, the stockholders and
board of directors (or equivalent parties), the stock certificate books, and the
stock record books of the Acquired Companies have been furnished to the
Purchaser. Neither the Seller nor any Acquired Company is in default under or in
violation of any provision of its certificate of incorporation or by-laws (or
equivalent governing documents).
Section 5.2 Authorization of Transactions. The Seller and each Acquired
-----------------------------
Company has all requisite corporate power and authority to execute and deliver
the Transaction Documents to which it is a party and, subject to any required
approval of the Seller's stockholders, if any, to consummate the transactions
contemplated hereby and thereby and to carry out their obligations hereunder and
thereunder. The board of directors of the Seller has duly approved the
Transaction Documents to which the Seller is a party and has duly authorized the
execution and delivery of the Transaction Documents to which it is a party and
the consummation of the transactions contemplated thereby. Except for any
required adoption by the Seller's stockholders of the transactions contemplated
hereby, if any, no other corporate proceedings on the part of the Seller or any
Acquired Company is necessary to approve and authorize the execution and
delivery of the Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby. No adoption or approval
by the Seller's stockholders of the transactions contemplated hereby shall be
required unless the Seller agrees to or does sell, transfer, assign or otherwise
dispose of a material portion of the Excluded Assets (including the Capital
Stock of any of the Non-Acquired Companies). All Transaction Documents to which
the Seller or any Acquired Company is a party have been duly executed and
delivered by the Seller and constitute the valid and binding agreements of the
Seller and/or such Acquired Company, enforceable against the Seller and/or such
Acquired Company in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
29
or other laws of general application affecting enforcement of creditors' rights,
and as limited by general principles of equity that restrict the availability of
equitable remedies.
Section 5.3 Capitalization. The authorized Capital Stock of each Acquired
--------------
Company consists of the number and type of shares or other interests (and par
values) set forth opposite such Acquired Company's name on the Organization
------------
Schedule. Except as set forth on the Organization Schedule, all of the issued
-------- ---------------------
and outstanding Capital Stock of the Acquired Companies have been duly
authorized, are validly issued, fully paid and nonassessable, and are held of
record and owned beneficially by the Persons and in the manner described on the
Organization Schedule, free and clear of all Liens, and are not subject to, nor
---------------------
were they issued in violation of, any preemptive rights or rights of first
refusal. Except as set forth on the Organization Schedule, there are no
---------------------
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights, or other agreements or commitments to
which any Acquired Company is a party or which are binding upon any Acquired
Company providing for the issuance, disposition, or acquisition of any Acquired
Company's Capital Stock (other than this Agreement). Other than as set forth on
the Organization Schedule, there are no outstanding or authorized stock
---------------------
appreciation, phantom stock, or similar rights with respect to any Acquired
Company. There are no voting trusts, proxies, or any other agreements or
understandings with respect to the voting of the Capital Stock of any Acquired
Company. No Acquired Company is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any of its Capital
Stock.
Section 5.4 Absence of Conflicts. Except as set forth on the "Conflicts
-------------------- ---------
Schedule" attached hereto, the execution, delivery and performance of the
--------
Transaction Documents and the consummation of the transactions contemplated
thereby by the Seller and/or any Acquired Company do not and shall not (a)
conflict with or result in any breach of any of the terms, conditions or
provisions of, (b) constitute a default under, (c) result in a violation of, (d)
give any third party the right to modify, terminate or accelerate any obligation
under, (e) result in the creation of any Lien upon the Capital Stock or assets
of the Seller (in respect to the Seller, only if such Lien would restrict the
ability of the Seller to perform its obligations under this Agreement) or any
Acquired Company (including, without limitation, the Acquired Stock and the
Residual Acquired Commercial Assets) by any Person other than the Purchaser
pursuant to, or (f) require any authorization, consent, approval, exemption or
other action by or notice or declaration to, or filing with, any court or
administrative or other governmental body or agency under; (1) the certificate
of incorporation or by-laws (or equivalent governing documents) of the Seller or
any of the Acquired Companies; (2) any material indenture, mortgage, lease, loan
agreement, contract or other agreement or instrument to which the Seller or any
of the Acquired Companies is bound or affected; (3) any material law, statute,
rule or regulation to which the Seller or any of the Acquired Companies is
subject (except in connection with the applicable requirements of the HSR Act,
the DGCL, the Exchange Act, including, without limitation, the filing with and
clearing by the SEC of any required Disclosure Document, if any, and the NASDAQ
Stock Market); or (4) any judgment, order or decree to which the Seller or any
Acquired Company is subject.
30
Section 5.5 Financial Statements and Related Matters; SEC Reports.
-----------------------------------------------------
(a) Financial Statements. Attached hereto as the "Financial
-------------------- ---------
Statements Schedule" are copies of: (i) unaudited consolidated balance sheet as
-------------------
of March 31, 2000 (the "Latest Balance Sheet") and the related statements of
--------------------
income for the three (3) months then-ended for the Acquired Business and (ii)
audited consolidated balance sheets and statements of income and cash flows for
the fiscal years ended December 31, 1999, 1998 and 1997 for the Seller and its
Subsidiaries. Except as set forth on the Financial Statements Schedule, each of
-----------------------------
the foregoing financial statements (including in all cases the notes thereto, if
any) (the "Financial Statements") is accurate and complete in all material
--------------------
respects, is consistent with the Seller's and its Subsidiaries' books and
records (which, in turn, are accurate and complete in all material respects and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal accounting controls), presents
fairly the Seller's and its Subsidiaries' financial condition and results of
operations as of the times and for the periods referred to therein, and has been
prepared in accordance with GAAP, subject in the case of unaudited financial
statements to changes resulting from normal year-end adjustments (which are not
expected to be material individually or in the aggregate) and to the absence of
footnote disclosure.
(b) Receivables. Except as set forth on the "Receivables
----------- -----------
Schedule," the notes and accounts receivable of the Acquired Business
--------
(including, without limitation, the notes and accounts receivable of the Seller
with respect to the Residual Acquired Commercial Assets and of each Acquired
Company) are not subject to any valid counterclaims or rights of set off, and
are valid and current receivables at the aggregate amount recorded on the
Seller's and the Acquired Companies' books and records as of the date hereof,
net of an amount of allowances for doubtful accounts which relate to those
receivables computed in a manner consistent with GAAP and the accounting
practices used in the preparation of the Latest Balance Sheet, and were incurred
in the Ordinary Course of Business. Except as set forth on the Receivables
-----------
Schedule, the Seller has no knowledge of any facts that would cause it to
--------
believe that any material account receivable of the Acquired Business will not
be collected in full, net of any amount of allowances for doubtful accounts
stated on the Latest Balance Sheet which relate to those receivables.
(c) SEC Reports. The Seller has previously furnished to the
-----------
Purchaser copies of all forms, reports and documents required to be filed by it
with the SEC pursuant to the Securities Act and the Exchange Act (collectively,
the "Seller Reports"), and none of the information contained in the Seller
--------------
Reports with respect to the Seller (but only with respect to the Residual
Acquired Commercial Assets) or the Acquired Companies, including, without
limitation, any financial statements or schedules included therein, at the time
filed, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
31
Section 5.6 Absence of Undisclosed Liabilities. Except as set forth on
----------------------------------
the "Undisclosed Liabilities Schedule," neither the Seller (with respect to the
--------------------------------
Residual Acquired Commercial Assets) nor any Acquired Company has any material
obligations or liabilities (whether accrued, absolute, contingent, unliquidated,
or otherwise, whether or not known, whether due or to become due, and regardless
of when asserted) relating to, arising out of or resulting from the Acquired
Business except: (i) obligations under executory contracts or commitments
described on the "Contracts Schedule," or under executory contracts or
------------------
commitments not required to be disclosed thereon (but not liabilities for
breaches thereof); (ii) liabilities reflected on the liabilities side of the
Latest Balance Sheet, (iii) liabilities which have arisen after the date of the
Latest Balance Sheet in the Ordinary Course of Business or otherwise in
accordance with the terms and conditions of this Agreement (none of which is a
material liability for breach of contract, breach of warranty, tort, or
infringement or a claim or lawsuit or an Environmental Claim) and (iv)
liabilities specifically identified and disclosed elsewhere in this Agreement or
the Schedules hereto. Except as set forth on the Undisclosed Liabilities
-----------------------
Schedule, all referral fees and commissions due to employees for all periods
--------
ending prior to the Closing Date have been properly paid or accrued on the
Latest Balance Sheet or if such amount or amounts have not been paid or accrued
because they relate to a period subsequent to March 31, 2000, such referral fees
and commissions due to employees for the subsequent period are representative of
such amounts in the Ordinary Course of Business.
Section 5.7 Absence of Certain Developments. Except as set forth on
-------------------------------
the attached "Developments Schedule," since March 31, 2000, neither the Seller
---------------------
(with respect only to the Acquired Business) nor any of the Acquired Companies
has:
(a) suffered any change that has had or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;
(b) subjected or permitted to be subjected any portion of its
properties or assets to any Lien (other than Permitted Encumbrances);
(c) sold, leased, assigned, or transferred to a third party a
portion of its assets (including, without limitation, assets and Capital Stock
of the Acquired Companies and the Residual Acquired Commercial Assets), or
canceled without fair consideration any debts or claims owing from a third party
to or held by it;
(d) sold, assigned, licensed or transferred (including, without
limitation, transfers to the Seller or any Insider) any material Proprietary
Rights owned by, issued to, or licensed to the Seller or any Acquired Company or
disclosed any confidential information (other than pursuant to agreements
requiring the disclosure to maintain the confidentiality of and preserving all
rights of the Seller and any Acquired Company in such confidential information)
or, to the Seller's knowledge, received any confidential information of any
third party in violation of any obligation of confidentiality;
32
(e) entered into, amended or terminated any material lease,
contract, agreement or commitment, or taken any other action or entered into any
other material transaction other than in the Ordinary Course of Business;
(f) entered into any other material transaction, or materially
changed any business practice other than in the Ordinary Course of Business;
(g) declared, set aside or paid outside of the Ordinary Course
of Business any dividends or made any other distributions (whether in cash or in
kind) with respect to any shares (or other interests) of the Capital Stock of
any Acquired Company;
(h) issued, sold or transferred any shares (or other interests)
of its Capital Stock (including, without limitation, any securities convertible,
exchangeable or exercisable into its Capital Stock, or warrants, options or
other rights to acquire its Capital stock and excluding any issuances of the
Seller's capital stock in accordance with the Seller's Amended and Restated
Stock Option Plan, the Seller's 1999 Employee Stock Purchase Plan and/or the
Seller's 1999 UK Sharesave Plan);
(i) incurred or become subject to any material liabilities
outside of the Ordinary Course of Business;
(j) conducted its cash management customs and practices other
than in the Ordinary Course of Business (including, without limitation, with
respect to collection of accounts receivable, purchases of inventory and
supplies, repairs and maintenance, payment of accounts payable and accrued
expenses, levels of capital expenditures and operation of cash management
practices generally);
(k) made any capital expenditures or commitments for capital
expenditures outside of the Ordinary Course of Business;
(l) made any change in its accounting methods, made any material
Tax election affecting the Acquired Business or settled or compromised any
material Tax liability with respect to the Acquired Business or any Acquired
Company;
(m) made or committed to make any payments or other transfers in
connection with, or in contemplation of, the transactions contemplated by this
Agreement or the other Transaction Documents; or
(n) paid, discharged or satisfied any claim, liability or
obligation (whether absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the Ordinary Course of Business of
liabilities and obligations reflected or reserved against in the Latest Balance
Sheet or incurred in the Ordinary Course of Business;
33
(o) sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible), except
in the Ordinary Course of Business;
(p) granted any increase in the compensation payable or to
become payable to (i) any of its officers, directors, unless such increase is
customary on a periodic basis or required by agreement or understanding or (ii)
any of its employees or consultants unless such increase is in the Ordinary
Course of Business or required by agreement or understanding;
(q) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
officers or directors or Insiders or any Affiliate or Associate of any of the
foregoing except for directors' fees and compensation to officers at rates not
exceeding the rates of such fees and compensation paid during the year ended
December 31, 1999; or
(r) committed, in writing or otherwise, to do any of the
foregoing.
Section 5.8 Assets. Except as set forth on the attached "Assets
------ ------
Schedule," the Seller and each of the Acquired Companies have good and
--------
marketable title to, or a valid leasehold interest in, the material personal
properties and assets used in the operation of the Acquired Business, located on
their premises or shown on the Latest Balance Sheet or acquired thereafter,
except for personal properties and assets disposed of in the Ordinary Course of
Business since the date of the Latest Balance Sheet. All such assets are free
and clear of all Liens other than Permitted Encumbrances. Except as described on
the Assets Schedule, the Seller's and each of the Acquired Companies' equipment
---------------
and other tangible assets are in reasonable operating condition and are fit for
use in the Ordinary Course of Business (ordinary wear and tear excepted). The
Seller and each of the Acquired Companies owns or leases all machinery,
equipment, and other tangible assets reasonably necessary for the conduct of the
Acquired Business as presently conducted. The Residual Acquired Commercial
Assets together with the assets, properties, rights and other interests of the
Acquired Companies being acquired by the Purchaser pursuant to this Agreement
(through their respective purchases of the Acquired Stock) constitute all of the
assets and rights reasonably necessary for the conduct of the Acquired Business
as it is presently conducted.
Section 5.9 Title to Properties.
-------------------
(a) Owned Properties. Except as disclosed on the Leases
---------------- ------
Schedule, neither the Seller nor any Acquired Company currently owns any real
--------
property, and neither the Seller nor any Acquired Company holds any options or
contractual obligations to purchase or acquire any interest in real property.
(b) Leased Properties. The "Leases Schedule" sets forth a list
----------------- ---------------
of (i) all of the leases and subleases relating primarily to the Acquired
Business (including, without limitation,
34
all amendments, extensions, renewals, guaranties and other agreements with
respect thereto) for which each lease results in an annualized base rent of
$30,000 or more or relating to a regional accounting center (collectively, the
"Leases") and (ii) as to each material Lease, whether consent of any Person is
------
required to convey a valid leasehold interest in connection with the
transactions contemplated by this Agreement. Except as set forth on the attached
Leases Schedule, the Seller or an Acquired Company holds a valid and existing
---------------
leasehold or subleasehold interest under each of the Leases, free and clear of
all Liens other than Permitted Encumbrances. The Seller has delivered to the
Purchaser true, correct, complete and accurate copies of each written Lease,
except as set forth on the Leases Schedule. With respect to each Lease, except
---------------
as set forth on the Leases Schedule: (i) the Lease is legal, valid, binding,
---------------
enforceable and in full force and effect; (ii) the Lease will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms immediately following the Closing; (iii) neither the Seller nor any
Acquired Company, nor to the knowledge of the Seller, any other party to the
Lease is in material breach or default, and no event has occurred which, with or
without notice or lapse of time or both, would constitute such a material breach
or default under the Lease; (iv) no party to the Lease has repudiated any
material provision thereof; (v) there are no material written disputes, oral
agreements, or forbearance programs in effect as to the Lease; (vi) the Lease
has not been modified in any material respect, except to the extent that such
material modifications are disclosed by the documents delivered to the
Purchaser; and (vii) neither the Seller nor any Acquired Company has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the Lease, except for such assignments, transfers, conveyances, mortgages, deeds
in trust and encumbrances that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(c) Leasehold Improvements. Except as set forth on the Leases
---------------------- ------
Schedule, the Seller or an Acquired Company has good title to the Leasehold
--------
Improvements, which shall be free and clear of all Liens as of the Closing Date,
except Permitted Encumbrances (but only those of the type set forth in clauses
(A)-(D) of the definition of Permitted Encumbrances contained in Article I).
Section 5.10 Taxes. Except as set forth on the attached "Taxes
----- -----
Schedule":
--------
(a) the Seller has, with respect to the Residual Acquired
Commercial Assets and for the benefit of and with respect to each Acquired
Company, taken all necessary action to timely file (or cause to be timely filed)
all material Tax Returns which were required to be filed by them prior to the
date hereof and will do so for all material Tax Returns required to be filed
prior to the Closing, and all such Tax Returns are and will be true, complete
and accurate in all material respects and have been or will be prepared in
material compliance with applicable law;
(b) all material Taxes due and payable have been paid by the
Seller (with respect to the Acquired Business) or each such Acquired Company or
will be paid by the appropriate due date and no material amount of such Taxes
are delinquent;
35
(c) the amount accrued as a liability for Taxes on the Latest
Balance Sheet (excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shall be sufficient to pay in
full all Taxes for taxable periods (or portions thereof) ending on or before the
date of the Latest Balance Sheet, whether or not such Taxes are due on or before
such date and, since the date of the Latest Balance Sheet, neither the Seller
nor any of the Acquired Companies has incurred any liability for Taxes other
than in the Ordinary Course of Business;
(d) no deficiency for any material amount of Tax which has not
been resolved has been asserted or assessed in writing by a taxing authority
against the Seller or any of the Acquired Companies, and the Seller has no
knowledge that any such written assessment or asserted Tax liability shall be
made;
(e) there is no material action, suit, taxing authority
proceeding or audit now in progress, pending or, to the knowledge of the Seller,
threatened in writing against or with respect to the Seller (with respect to the
Acquired Business) or any of the Acquired Companies;
(f) neither the Seller nor any of the Acquired Companies has (A)
waived any statute of limitations, (B) agreed to any extension of the period for
assessment or collection or (C) executed or filed any power of attorney, in each
case with respect to any Taxes, which waiver, agreement or power of attorney is
currently in force;
(g) except for the Affiliated Group of which the Seller is the
common parent, neither the Seller nor any of the Acquired Companies has been a
member of an Affiliated Group and neither the Seller nor any of its Subsidiaries
has any liability for Taxes of any Person other than the Seller or its
Subsidiaries under Treasury Regulations Section 1.1502-6 or any similar
provision of local, state or foreign Tax law;
(h) neither the Seller nor any of the Acquired Companies is a
party to or bound by any Tax allocation, sharing, indemnity or similar agreement
or arrangement with any Person with respect to the Acquired Business and neither
the Seller nor any of its Subsidiaries has current or potential contractual
obligation to indemnify any other Person with respect to Taxes regarding the
Acquired Business;
(i) neither the Seller nor any of the Acquired Companies has
any obligation to make any payment that could be non-deductible under Section
280G of the Code (or any corresponding provision of state, local or foreign Tax
law);
(j) no unresolved written claim has been made and delivered by
a taxing authority in a jurisdiction where the Seller (with respect to the
Acquired Business) or any of the Acquired Companies does not pay Taxes or file
Tax Returns that the Seller or any Acquired Company is or may be subject to
material Taxes assessed by such jurisdiction;
36
(k) the Seller and each of the Acquired Companies have withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party relating to the Acquired Business, except for immaterial amounts
with respect to employees and independent contractors;
(l) there are no Liens (other than Permitted Encumbrances) for
Taxes upon any property or assets of Seller or any of the Acquired Companies,
except for Liens for Taxes not yet due or being contested in good faith and for
which adequate reserves have been established in accordance with GAAP;
(m) the Taxes Schedule contains a list of states, territories
--------------
and jurisdictions (whether foreign or domestic) in which the Seller and/or each
of the Acquired Companies is required to file Tax Returns relating to the
Acquired Business; and
(n) neither the Seller nor any of the Acquired Companies will
be required to include any material amount in taxable income for any taxable
period (or portion thereof) ending after the Closing Date that is attributable
to any taxable period (or portion thereof) ending on or before the Closing Date
as a result of (i) any change in method of accounting for a taxable period
ending on or prior to the Closing Date, (ii) any "closing agreement," as
described in Section 7121 of the Code (or any corresponding provision of state,
local or foreign income Tax law), entered into on or before the Closing Date,
(iii) any installment sale made on or before the Closing Date, or (iv) any
deferred intercompany gain described in Treasury Regulation Section 1.15102-13
or any excess loss account described in Treasury Regulation Sections 1.1502-19
and 1.1502-32 (or any corresponding or similar provision or administrative rule
of federal, state, local or foreign income tax law) arising on or before the
Closing Date.
Section 5.11 Proprietary Rights.
------------------
(a) The "Proprietary Rights Schedule" attached hereto contains
---------------------------
a complete and accurate list of all patented, pending and registered Proprietary
Rights and all other material Proprietary Rights owned (which owned Proprietary
Rights are separately identified as such) and licensed or used by the Seller
(with respect to the Residual Acquired Commercial Assets) or any of the Acquired
Companies, including all: (i) patented and registered Proprietary Rights owned
or used by the Seller with respect to the Acquired Business or any of the
Acquired Companies; (ii) pending patent applications and applications for
registrations of all other Proprietary Rights filed by or on behalf of or owned
by the Seller with respect to the Acquired Business or any of the Acquired
Companies; (iii) material unregistered trade names, Internet domain names, web
sites and corporate names owned or used by the Seller with respect to the
Acquired Business or any of the Acquired Companies; and (iv) material
unregistered trademarks, service marks and logos and the computer software owned
or used by the Seller with respect to the Acquired Business or any of the
Acquired Companies. Except as to licenses and agreements contained in customer
contracts or entered into in connection therewith in the Ordinary Course of
Business that grant customers confidentiality rights and the right to use or
assign rights in the work
37
product of Seller's or the Acquired Companies' employees resulting from such
employees' service engagement with such customers, (x) neither the Seller nor
any of the Acquired Companies is in breach, violation, or default, and to
Seller's knowledge, no other party is in material breach, violation, or default,
of any license or other agreement concerning Proprietary Rights to which Seller
or any of the Acquired Companies is a party; (y) there are no material
royalties, honoraria, fees, or other payments payable by Seller or any of the
Acquired Companies to any person by reason of ownership, use, licensure, or sale
of any Proprietary Rights; and (z) neither the Seller nor any of the Acquired
Companies has entered into or is otherwise bound by any consent, forbearance to
▇▇▇, or settlement agreement which materially limits the Seller's rights to use,
sell, or license any of the Proprietary Rights set forth in the Proprietary
Rights Schedule. The Proprietary Rights Schedule contains a complete and
---------------------------
accurate list of all material licenses and other rights granted by the Seller or
any of the Acquired Companies to any third party, or granted by any third party
to the Seller or any of the Acquired Companies with respect to any Proprietary
Rights, in each case identifying the subject Proprietary Rights. Except as set
forth on the Proprietary Rights Schedule, the Seller and the Acquired Companies
---------------------------
are the sole and exclusive owners, free of all Liens, of all right, title and
interest to, or have the right to use pursuant to a valid and enforceable
license, all of the Proprietary Rights set forth on the Proprietary Rights
------------------
Schedule, which constitute all of the Proprietary Rights reasonably necessary
--------
for the operation of the Acquired Business as presently conducted. Except as set
forth on the Proprietary Rights Schedule, the loss or expiration of any
---------------------------
Proprietary Rights or related group of Proprietary Rights owned or used by the
Seller or any of the Acquired Companies has not had a Material Adverse Effect on
the Acquired Business and such a loss or expiration of Proprietary Rights is not
pending or, to the knowledge of the Seller, threatened. The Proprietary Rights
listed on the Proprietary Rights Schedule, along with all other Proprietary
---------------------------
Rights being transferred to, or acquired by, the Newcos pursuant to this
Agreement, constitute all Proprietary Rights (without giving effect to the terms
"as to the Acquired Business" in the definition of such term) reasonably
necessary to operate the Acquired Business.
(b) Except as set forth on the Proprietary Rights Schedule,
---------------------------
(i) all of the Proprietary Rights owned or used by the Seller with respect to
the Acquired Business or by any of the Acquired Companies are valid and
enforceable and have not been misused, and no claim by any third party
contesting the validity, enforceability, use or ownership of any such
Proprietary Rights has been made, is currently outstanding or has been
threatened in writing, and, to the Seller's knowledge, there are no grounds for
the same; (ii) neither the Seller nor any of the Acquired Companies has received
any written notices of invalidity, infringement or misappropriation from any
third party with respect to any such Proprietary Rights; (iii) to the Seller's
knowledge, neither the Seller nor any of the Acquired Companies has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Proprietary Rights of any third parties; and (iv) to the knowledge of the
Seller, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Proprietary Rights of the Seller or the
Acquired Companies.
38
(c) The transactions contemplated by this Agreement shall have
no Material Adverse Effect on the Seller's or any of the Acquired Companies'
rights, title and interest in and to, or ability to use, any of the respective
Proprietary Rights as used in the operation of the Acquired Business as
presently conducted. Except as set forth on the Proprietary Rights Schedule, the
---------------------------
Seller and each of the Acquired Companies has taken all necessary actions to
maintain and protect their respective material Proprietary Rights and shall
continue to maintain and protect those rights prior to the Closing so as to not
materially and adversely affect the validity or enforcement of such Proprietary
Rights. To the knowledge of the Seller, the owners of any Proprietary Rights
that are licensed to the Seller or any Acquired Company (other than third party
off-the-shelf computer software) have taken all necessary actions to maintain
and protect such Proprietary Rights.
Section 5.12 Contracts and Commitments.
-------------------------
(a) Except as specifically contemplated by this Agreement and
except as set forth on the "Contracts Schedule" attached hereto, neither the
------------------
Seller (with respect to the Residual Acquired Commercial Assets) nor any of the
Acquired Companies is a party to or bound by any:
(i) collective bargaining agreement or contract with
any labor union or any bonus, pension, profit sharing, retirement or
any other form of deferred compensation plan or any stock purchase,
stock option, hospitalization insurance or similar plan or practice,
whether formal or informal;
(ii) contract for the employment of any officer,
individual employee or other person on a full-time, part-time or
consulting basis providing annual compensation in excess of $150,000;
(iii) change of control severance agreement or similar
arrangement;
(iv) agreement or indenture relating to the borrowing of
money or other Indebtedness or to mortgaging, pledging or otherwise
placing a Lien on any of its assets;
(v) contract under which the Seller or any of the
Acquired Companies has advanced or loaned any other Person amounts in
the aggregate exceeding $100,000, other than trade credit extended in
the Ordinary Course of Business;
(vi) agreement with respect to the lending or investing
of funds;
(vii) guaranty of any obligation, other than endorsements
made for collection and guarantees of obligations of an Acquired
Company pursuant to any Lease;
(viii) management, consulting, advertising, marketing,
promotion, technical services, advisory or other contract or other
similar arrangement relating to the
39
design, marketing, promotion, management or operation of the Acquired
Business involving payments in excess of $200,000 per year;
(ix) outstanding powers of attorney executed on behalf of
the Seller or any Acquired Company;
(x) lease or agreement under which it is lessee of, or
holds or operates, any personal property owned by any other Person
calling for payments in excess of $100,000 annually;
(xi) lease or agreement under which it is lessor of or
permits any third party to hold or operate any property, real or
personal, owned or controlled by it and calling for payments in excess
of $100,000 per year;
(xii) any agreement or group of related agreements with
the same Person for the purchase of products or services under which
the annual expense of such products and services has a price in excess
of $200,000 (other than agreements with any independent consultant or
employee of the Acquired Business who provides services for fees to
customers of the Acquired Business (a "Consultant"));
----------
(xiii) contract or group of related contracts with the same
party continuing over a period of more than six months from the date
or dates thereof, not terminable by it on 180 days or less notice
without penalties and involving more than $250,000;
(xiv) non-competition or other, similar agreements
imposing material restrictions on the ability of the Seller (as to the
Acquired Business) or any Acquired Company to conduct business anywhere
in the world; or
(xv) other agreement material to the Acquired Business
(whether or not entered into in the Ordinary Course of Business).
(b) The Contracts Schedule contains a complete and accurate
------------------
list of the contracts, agreements or other arrangements with the top twenty-five
(25) customers of the Seller with respect to the Acquired Business and the
Acquired Companies, with such top customers determined based upon annual
revenues with respect to such customers for the fiscal year ended 1999.
(c) Except as disclosed on the Contracts Schedule, (i) no
------------------
contract on the Contracts Schedule and no other material contract or commitment
------------------
has been materially breached or canceled by the other party and the Seller has
no knowledge of any anticipated material breach by any other party to any
contract set forth on the Contracts Schedule, (ii) no material customer or
------------------
material supplier has indicated in writing or, to the Seller's knowledge, orally
to the Seller that
40
it intends to stop or decrease the rate of business done with the Seller or any
of the Acquired Companies (other than as a result of routine fluctuations that
are customary in the Ordinary Course of Business), and no such material supplier
has indicated in writing or orally that it desires to renegotiate its contract
or current arrangement with the Seller or any of the Acquired Companies, (iii)
the Seller and each of the Acquired Companies have performed all of the material
obligations required to be performed by them in connection with material
contracts (including, but not limited to, all contracts set forth on the
Contracts Schedule) or commitments and are not in material default (whereby such
------------------
default is continuing and has not been cured) under or in material breach of any
material contract or commitment, and no event has occurred which, with the
passage of time or the giving of notice or both, would result in such a
continuing material default or material breach thereunder, (iv) neither the
Seller nor any of the Acquired Companies has any present expectation or
intention of not fully performing any material obligation pursuant to any
material contract or commitment including, without limitation, any contract set
forth on the Contracts Schedule, and (v) each material agreement including,
------------------
without limitation, any contract set forth on the Contracts Schedule is legal,
------------------
valid, binding, enforceable and in full force and effect and will continue as
such immediately following the consummation of the transactions contemplated
hereby.
(d) Except as set forth on the Contracts Schedule, the Seller has
------------------
provided the Purchaser with a true, correct, complete and accurate copy or
description of all written contracts which are required to be disclosed on the
Contracts Schedule, in each case together with all amendments, waivers or other
------------------
changes thereto (all of which are disclosed on the Contracts Schedule).
------------------
Section 5.13 Litigation; Proceedings. Except as set forth on the
-----------------------
"Litigation Schedule" attached hereto, there are no material actions, suits,
-------------------
complaints, charges in writing, proceedings, orders, investigations or claims
pending or, to the knowledge of the Seller, threatened against or affecting the
Seller (with respect to the Residual Acquired Commercial Assets), any of the
Acquired Companies, any of the officers, directors or key employees of the
Seller or any of the Acquired Companies (with respect to the Acquired Business
and its proposed business activities) or concerning the transactions
contemplated by this Agreement at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality
(including, without limitation, any actions, suits, complaints, charges,
proceedings or investigations with respect to the transactions contemplated by
this Agreement). Except as set forth on the Litigation Schedule, neither the
-------------------
Seller (with respect to the Residual Acquired Commercial Assets) nor any of the
Acquired Companies is subject to any material grievance arbitration proceedings
under collective bargaining agreements or otherwise or, to the knowledge of the
Seller, any governmental investigations or inquiries. Except as set forth on the
Litigation Schedule, neither the Seller (with respect to the Residual Acquired
-------------------
Commercial Assets) nor any of the Acquired Companies is subject to any material
judgment, injunction, order or decree of any court or other governmental agency
(or settlement enforceable therein).
Section 5.14 Brokerage. Except as set forth on the "Brokerage Schedule"
--------- ------------------
attached hereto, there are no claims for brokerage commissions, finders' fees or
similar compensation in
41
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Seller, any of its
Subsidiaries or any stockholder of the Seller.
Section 5.15 Governmental Licenses and Permits. The "Permits Schedule"
--------------------------------- ----------------
attached hereto contains a listing and summary description of all material
Licenses used in the conduct of the Acquired Business as presently conducted
(including, without limitation, material Licenses owned or possessed by the
Seller with respect to the Residual Acquired Commercial Assets and material
Licenses owned or possessed by any of the Acquired Companies). Except as
indicated on the Permits Schedule, the Seller and the Acquired Companies own or
----------------
possess all right, title and interest in and to all of the material Licenses
that are necessary to conduct, own or operate the Acquired Business as presently
conducted, owned or operated. The Seller and each of the Acquired Companies are
in compliance with the terms and conditions of such material Licenses and have
received no notices that they are in violation of any of the terms or conditions
of such material Licenses. The Seller and each of the Acquired Companies have
taken all necessary action to maintain such material Licenses. No loss or
expiration of any such material License is threatened (in writing) or pending
other than expiration in accordance with the terms thereof. Except as indicated
on the Permits Schedule, all of the Licenses are in full force and shall survive
----------------
the transactions contemplated hereby.
Section 5.16 Employees. Except as set forth on the "Employees Schedule"
--------- ------------------
attached hereto, to the knowledge of the Seller, no key executive employee and
no group of key internal employees or independent contractors of any of the
Acquired Companies has any plans to terminate his, her or its employment or
relationship as an independent contractor with any of the Acquired Companies
other than in the Ordinary Course of Business. Except as set forth on the
Employees Schedule and the Litigation Schedule, the Seller with respect to
------------------ -------------------
employees of the Acquired Business and each of the Acquired Companies has
materially complied and remain in material compliance with all applicable laws
relating to the employment of personnel and labor, health and safety, and wages
and hours. Except as set forth on the Litigation Schedule, neither the Seller
-------------------
nor any of the Acquired Companies is a party to or bound by any collective
bargaining agreement concerning the Acquired Business, nor has such party
experienced any material strikes, grievances, unfair labor practices claims or
other material employee or labor disputes. Except as set forth on the Litigation
----------
Schedule, to the knowledge of the Seller, neither the Seller (with respect to
--------
employees of the Acquired Business) nor any of the Acquired Companies has
engaged in any unfair labor practice. Except as set forth on the Litigation
Schedule, the Seller has no knowledge of any organizational effort presently
being made or which has been threatened in writing by or on behalf of any labor
union with respect to any employees of the Seller or any of the Acquired
Companies. Except as set forth on the Litigation Schedule, neither the Seller
-------------------
nor any of the Acquired Companies has received notice of any charge or complaint
threatened or pending before the Equal Employment Opportunity Commission, or any
other governmental agency, court or other tribunal regarding an unlawful
employment practice. Except as set forth on the Employees Schedule, neither the
------------------
Seller nor any of the Acquired Companies has implemented any plant closing or
mass layoff of employees as those terms are
42
defined in the Worker Adjustment Retraining and Notification Act of 1988, as
amended ("WARN"), or any similar state or local law or regulation, and no
----
layoffs that could implicate such laws or regulations will have been implemented
before Closing without advance notification to the Purchaser.
Section 5.17 Employee Benefit Matters.
------------------------
(a) Except as set forth on the "Benefit Plans Schedule" attached
----------------------
hereto, with respect to current or former employees of the Seller and each of
the Acquired Companies, neither the Seller nor any of its Subsidiaries maintains
or contributes to or has any material actual or potential liability with respect
to any (i) deferred compensation or bonus or retirement plans or arrangements,
(ii) qualified or nonqualified defined contribution or defined benefit plans or
arrangements which are employee pension benefit plans (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (the "Retirement Plans"), or (iii) employee welfare benefit plans,
----- ----------------
(as defined in Section 3(1) of ERISA), stock option or stock purchase plans, or
material fringe benefit plans or programs whether in writing or oral and whether
or not terminated. Neither the Seller nor any of its Subsidiaries has ever
contributed to any multiemployer pension plan (as defined in Section 3(37) of
ERISA), and neither the Seller nor any of its Subsidiaries has ever maintained
or contributed to any defined benefit plan (as defined in Section 3(35) of
ERISA). The plans and other arrangements, programs and agreements referred to in
the preceding two sentences are referred to collectively as the "Benefit Plans."
-------------
Except as set forth on the Benefit Plans Schedule, neither the Seller nor any of
----------------------
its Subsidiaries maintains or contributes to any Benefit Plan which provides
health, accident or life insurance benefits to former employees, their spouses
or dependents, other than in accordance with Section 4980B of the Code
("COBRA"). Each Retirement Plan other than the Seller 401(k) Plan (the "Company
----- -------
Retirement Plans") and each Company Retirement Plan that has been frozen (the
----------------
"Frozen Company Retirement Plans") has been clearly labeled as such on the
-------------------------------
Benefits Plans Schedule.
(b) Except as set forth on the Benefit Plans Schedule, and except for
----------------------
any Benefit Plan listed on the Retained Plans Schedule, each Benefit Plan (and
-----------------------
each related trust and insurance contract) set forth on the Benefit Plans
-------------
Schedule (i) complies in form and in operation in all material respects with the
--------
requirements of applicable laws and regulations, including ERISA and the Code
and the nondiscrimination rules thereof, (ii) has received or will have received
all contributions, premiums or payments which are due on or before the Closing
Date, and (iii) with respect to each Benefit Plan which is intended to be
qualified under section 401(a) of the Code, has been amended on a timely basis
in compliance with the Code and has either received from the Internal Revenue
Service a favorable determination letter which considers the terms of such
Benefit Plan as amended or is within the remedial amendment period for obtaining
such letter.
(c) Except as set forth on the Benefit Plans Schedule, and except for
----------------------
any Plan listed on the Retained Plans Schedule, all required reports and
-----------------------
descriptions (including Form 5500
43
Annual Reports, Summary Annual Reports and Summary Plan Descriptions) with
respect to the Benefit Plans set forth on the Benefit Plans Schedule have been
----------------------
properly and timely filed with the appropriate government agency and distributed
to participants as required. The Seller and each of its Subsidiaries have
complied in all material respects with the requirements of COBRA.
(d) Except as set forth on the Benefit Plans Schedule, and except for
----------------------
any Plan listed on the Retained Plans Schedule, with respect to each Benefit
-----------------------
Plan set forth on the Benefit Plans Schedule, (i) there have been no material
----------------------
non-exempt prohibited transactions as defined in Section 406 of ERISA or Section
4975 of the Code, (ii) no fiduciary (as defined in Section 3(21) of ERISA) has
any liability for breach of fiduciary duty or any other failure to act or comply
in connection with the administration or investment of the assets of such
Benefit Plans, and (iii) no actions, investigations, suits or claims with
respect to the assets thereof (other than routine claims for benefits) are
pending and the Seller does not have knowledge of any facts which would give
rise to or could reasonably be expected to give rise to any such actions, suits
or claims.
(e) Except as set forth on the Benefit Plans Schedule, the Seller has
----------------------
made available to the Purchaser true, correct, complete and accurate copies of
(i) the plan documents, summary plan descriptions and summaries of material
modifications and other material employee communications, (ii) the Form 5500
Annual Report (including all schedules and other attachments) for the most
recent three years, (iii) all related trust agreements, insurance contracts or
other funding agreements which implement such plans and (iv) all contracts
relating to each such plan, including, without limitation, service provider
agreements, insurance contracts, investment management agreements and
recordkeeping agreements.
(f) Except as set forth on the Benefit Plans Schedule, neither the
----------------------
Seller nor any of its Subsidiaries has incurred or has any reason to expect that
it will incur, any liability to the Pension Benefit Guaranty Corporation (other
than routine premium payments) or otherwise under Title IV of ERISA (including
any withdrawal liability) or under the Code with respect to any employee pension
benefit plan (as defined in Section 3(2) of ERISA) that the Seller or any member
of its "controlled group" (within the meaning of Code Section 414) maintains or
ever has maintained or to which any of them contributes, ever has contributed or
ever has been required to contribute to.
(g) Neither Seller nor any of the Acquired Companies maintains or
ever has maintained a Benefit Plan that is subject to Title IV of ERISA.
(h) Except as set forth on the Benefit Plans Schedule, each
----------------------
individual who has received compensation for the performance of services on
behalf of the Seller or any Acquired Company has been properly classified as an
employee or independent contractor in accordance with applicable laws.
44
(i) Neither the Seller (as to the Acquired Business) nor any of the
Acquired Companies maintain any Benefit Plan which provides benefits to any
employee or former employee (or to their beneficiaries or dependents) employed
outside the United States.
Section 5.18 Insurance. The "Insurance Schedule" attached hereto lists and
--------- ------------------
briefly describes each insurance policy maintained by the Seller or any of its
Subsidiaries with respect to any of the properties and assets used in or related
to the conduct of the Acquired Business as presently conducted, together with a
claims history for the past one year. Except as reflected on the Insurance
---------
Schedule, all of such insurance policies are in full force and effect, and
--------
neither the Seller nor any of its Subsidiaries is in material default under any
such insurance policies and neither the Seller nor any of the Acquired Companies
has been denied insurance coverage or has received written notice of
cancellation or termination. Such policies provide adequate insurance coverage
for the assets and operations of the Acquired Business and will remain in full
force and effect through the Closing Date and will continue to provide coverage
for claims made after the Closing Date with respect to occurrences on or before
the Closing Date. Except as set forth on the Insurance Schedule, no further
costs, charges or premiums (including but not limited to letter of credit
obligations) shall be due with respect to such policies on or after the Closing
Date with respect to coverage on or before the Closing Date. Neither the Seller
nor any Acquired Company has been refused any insurance with respect to the
assets or operations of the Acquired Business, nor has its coverage been
limited, by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance during the last five years. Except as set
forth on the Insurance Schedule, neither the Seller nor any of the Acquired
------------------
Companies has any self-insurance or co-insurance programs.
Section 5.19 Officers and Directors; Bank Accounts. The "Officers,
------------------------------------- --------
Directors and Bank Accounts Schedule" attached hereto lists all officers and
------------------------------------
directors of each of the Acquired Companies, and all bank accounts, safety
deposit boxes and lock boxes (designating each authorized signatory with respect
thereto) for each of the Acquired Companies.
Section 5.20 Affiliate Transactions. Except as disclosed on the "Affiliated
---------------------- ----------
Transactions Schedule" attached hereto, neither the Seller nor any of the Non-
---------------------
Acquired Companies is a party to any agreement, contract, commitment or
transaction (1) with any of the Acquired Companies or (2) with respect to any of
the Residual Acquired Commercial Assets or (3) concerning any interest in any
property, real or personal or mixed, tangible or intangible, used in or
pertaining to the Acquired Business.
Section 5.21 Compliance with Laws. Except as set forth on the Compliance
-------------------- ----------
Schedule attached hereto, the Seller with respect to the Residual Acquired
--------
Commercial Assets, each of the Acquired Companies and the business, services and
operations of the Acquired Business has complied in all material respects with
and are in material compliance with all applicable laws, regulations and
ordinances of foreign, federal, state and local governments and all agencies
thereof which are applicable to the Acquired Business or which the Acquired
Business may otherwise be subject, and no material claim, action or assertion
has been received by the Seller
45
or, to the Seller's knowledge, threatened against the Seller or any Acquired
Company or has been filed against the Seller with respect to the Residual
Acquired Commercial Assets or any of the Acquired Companies alleging a material
violation of any such laws or regulations, and neither the Seller with respect
to the Residual Acquired Commercial Assets or the business, services and
operations of the Acquired Business nor any of the Acquired Companies has
received written notice of any such violations. As to the Acquired Business
only, neither the Seller nor any Insider, any Acquired Company or any Affiliate
of the Seller nor any current director, officer, agent, employee or other Person
acting on behalf of the Seller or any Insider, the Seller, any Acquired Company
or any Affiliate of the Seller, has offered, given, accepted or received any
unlawful contribution, payment, gift, kickback, expenditure or other item of
value.
Section 5.22 Environmental Matters. Except as set forth on the
---------------------
"Environmental Schedule" attached hereto:
----------------------
(a) The Seller with respect to the Residual Acquired Commercial
Assets and each of the Acquired Companies has materially complied with and is
currently in compliance in all material respects with Environmental and Safety
Requirements, and neither the Seller nor any of the Acquired Companies has
received any oral or written notice, report or information regarding any
Environmental Claims or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) or any corrective, investigatory or remedial
obligations arising under Environmental and Safety Requirements which relate to
the Seller or any of the Acquired Companies or any of their respective
properties or facilities.
(b) Without limiting the generality of the foregoing, the Seller with
respect to the Residual Acquired Commercial Assets and each of the Acquired
Companies has obtained and complied in all material respects with, and are
currently in compliance in all material respects with, all permits, licenses and
other authorizations that may be required pursuant to any Environmental and
Safety Requirements for the occupancy of properties or facilities or the
operation of the Acquired Business.
(c) Neither this Agreement nor the other Transaction Documents, nor
the consummation of the transactions contemplated hereby or thereby, shall
impose any obligations on the Seller or any of the Acquired Companies for (i)
site investigation or cleanup, (ii) notification to or consent of any government
agencies or third parties under any Environmental and Safety Requirements
(including, without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations), or (iii) to record or
deliver to any Person any disclosure document or statement pertaining to
material environmental matters.
(d) None of the following exists at any property or facility owned,
occupied or operated by the Seller with respect to the Residual Acquired
Commercial Assets or any of the Acquired Companies: (i) underground storage
tanks or surface impoundments; (ii) asbestos-
46
containing material in any form or condition; (iii) materials or equipment
containing polychlorinated biphenyls; or (iv) landfills.
(e) To the knowledge of the Seller, neither the Seller with respect
to the Residual Acquired Commercial Assets nor any of the Acquired Companies has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled or Released any substance (including, without limitation,
any hazardous substance) or owned, occupied or operated any facility or
property, so as to give rise to any past or present material Environmental
Claims or liabilities of the Seller or any of the Acquired Companies for
response costs, natural resource damages or attorneys' fees pursuant to CERCLA
or any other Environmental and Safety Requirements.
(f) Without limiting the generality of the foregoing, no facts,
events or conditions relating to the past or present properties, facilities or
operations of any of the Acquired Companies or the Seller with respect to the
Residual Acquired Commercial Assets shall prevent, hinder or limit continued
material compliance with Environmental and Safety Requirements, give rise to any
material corrective, investigatory or remedial obligations pursuant to
Environmental and Safety Requirements or give rise to any other material
Environmental Claims or material liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental and Safety
Requirements, including, without limitation, those material liabilities relating
to onsite or offsite Releases or threatened Releases of hazardous materials,
substances or wastes, personal injury, property damage or natural resources
damage.
(g) Neither the Seller with respect to the Residual Acquired
Commercial Assets nor any Acquired Company has, either expressly or by operation
of law, assumed or undertaken any material liability or corrective investigatory
or remedial obligation of any other Person relating to any Environmental and
Safety Requirements.
(h) No material Environmental Lien has attached to any property
owned, leased or operated by any of the Acquired Companies or the Seller with
respect to the Residual Acquired Commercial Assets.
(i) The Seller or any of the Acquired Companies have provided to the
Purchaser all assessments, reports, data, results of investigations or audits,
and other information that is in the possession of or reasonably available to
Seller or any of the Acquired Companies regarding environmental matters
pertaining to, or the environmental condition of, the Acquired Business, or the
material compliance (or material noncompliance) by Seller as to the Acquired
Business or any of the Acquired Companies as to any Environmental and Safety
Requirements.
Section 5.23 Disclosure; Information Supplied. None of the information
--------------------------------
supplied or to be supplied by the Seller to the Purchaser contained or will
contain, at the date delivered, any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
47
they were made, not misleading. No representation or warranty by the Seller in
this Agreement and no statement contained in any document (including financial
statements and the attached disclosure schedules), certificate, or other writing
furnished or to be furnished by the Seller to the Purchaser pursuant to the
provisions hereof or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of material fact or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. None of the information supplied by the Seller or any
Acquired Company for inclusion or incorporation by reference in any Disclosure
Document, if any, will, at the date it is first mailed to the stockholders of
the Seller or at the time of any related stockholders meeting (as supplemented
if necessary), contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Disclosure Document, if any, will comply as to form in
all material respects with the requirements of the Exchange Act, except that no
representation or warranty is made by the Seller with respect to statements made
or incorporated by reference therein based on information supplied in writing by
the Purchaser specifically for inclusion or incorporation by reference in such
Disclosure Document.
Section 5.24 Year 2000. To the knowledge of the Seller, none of the
---------
material computer software, computer firmware, computer hardware (whether
general or special purpose) or other similar or related items of automated,
computerized or software systems that is used, relied on (directly or
indirectly), created, developed, marketed, sold, licensed or otherwise provided
by the Seller with respect to the Residual Acquired Commercial Assets or any
Acquired Company has or will cease to function, generate incorrect data or
produce incorrect results when processing, providing or receiving (i) date-
related data from, into and between the twentieth and twenty-first centuries or
(ii) date-related data in connection with any valid date in the twentieth or
twenty-first centuries.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants to the Seller that:
Section 6.1 Organization and Corporate Power. The Purchaser is a
--------------------------------
corporation or a limited liability company incorporated or duly organized,
validly existing and in good standing under the laws of the State of Arkansas
with full power and authority to enter into this Agreement and the other
agreements contemplated hereby to which the Purchaser is a party and to perform
each such obligation hereunder and thereunder.
Section 6.2 Authorization of Transaction. The execution, delivery and
----------------------------
performance of this Agreement and the other agreements contemplated hereby to
which the Purchaser is a
48
party have been duly and validly authorized by all requisite organizational
action on the part of the Purchaser, and no other organizational proceedings on
their part are necessary to authorize the execution, delivery or performance of
this Agreement. This Agreement constitutes, and each of the other agreements
contemplated hereby to which the Purchaser is a party shall when executed
constitute, a valid and binding obligation of the Purchaser, enforceable in
accordance with their terms.
Section 6.3 No Violation. The Purchaser is not subject to or obligated
------------
under its certificate of incorporation or by-laws (or equivalent governing
documents) or any applicable material law, rule or regulation of any
governmental authority, or any agreement or instrument, or any license,
franchise or permit, or any order, writ, injunction or decree, that would be
breached or violated by the Purchaser's execution, delivery or performance of
this Agreement and the other agreements contemplated hereby to which the
Purchaser is a party.
Section 6.4 Governmental Authorities and Consents. The Purchaser is not
--------------------------------------
required to submit any notice, report or other filing (except in connection with
the applicable requirements of the HSR Act) with any governmental authority in
connection with the execution or delivery by the Purchaser of this Agreement or
the other agreements contemplated hereby to which the Purchaser is a party or
the consummation of the transactions contemplated hereby or thereby. No consent,
approval or authorization of any governmental or regulatory authority (except in
connection with the applicable requirements of the HSR Act) or any other party
or person is required to be obtained by the Purchaser in connection with its
execution, delivery and performance of this Agreement and the other agreements
contemplated hereby to which the Purchaser is a party or the transactions
contemplated hereby or thereby.
Section 6.5 Litigation. There are no material actions, suits, proceedings
----------
or orders pending or, to the Purchaser's knowledge, threatened against or
affecting the Purchaser at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, that would adversely affect the
Purchaser's performance under this Agreement or the other agreements
contemplated hereby to which the Purchaser is a party or the consummation of the
transactions contemplated hereby or thereby.
Section 6.6 Brokerage. Except as set forth on the Brokerage Schedule, there
--------- ------------------
are no claims for brokerage commissions, finders' fees or similar compensation
in connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Purchaser.
Section 6.7 Disclosure; Information Supplied. None of the information
--------------------------------
supplied or to be supplied by the Purchaser to the Seller contained or will
contain, at the date delivered, any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. No representation or warranty by the Purchaser in
this
49
Agreement and no statement contained in any document, certificate, or other
writing furnished or to be furnished by the Purchaser to the Seller pursuant to
the provisions hereof or in connection with the transactions contemplated by
this Agreement, contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading. None of the information supplied by the Purchaser for
inclusion or incorporation by reference in any Disclosure Document, if any,
will, at the date it is first mailed to the stockholders of the Seller or at the
time of any related stockholders meeting (as supplemented if necessary) contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 6.8 Funds. As of the Closing Date, subject to satisfaction of the
-----
conditions set forth in Section 3.1(m), the Purchaser shall have funds
sufficient to pay the Cash Purchase Price and to complete the transactions
contemplated by this Agreement.
Section 6.9 Beneficial Ownership of Seller Common Stock. As of the date
-------------------------------------------
hereof, the Purchaser and all of its Affiliates individually or collectively do
not beneficially own (as such term is defined and interpreted pursuant to Rule
13d-3 under the Exchange Act) 5% or more of the Seller Common Stock outstanding
as of the date hereof.
ARTICLE VII
TERMINATION
Section 7.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Closing:
(a) by mutual written consent of the Seller and the Purchaser;
(b) by the Seller or the Purchaser, if the Closing has not occurred
on or prior to October 31, 2000; provided, however, that neither the Purchaser
-------- -------
nor the Seller shall be entitled to terminate this Agreement pursuant to this
Section 7.1(b) if such Party's failure to fulfill any of its obligations in any
--------------
material respect under this Agreement has prevented the consummation of the
transactions contemplated hereby at or prior to such time.
(c) by the Seller or the Purchaser, if there shall be any law or
regulation enacted or adopted in final form that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining the Seller or the Purchaser from
consummating the transactions contemplated hereby is entered and such judgment,
injunction, order or decree shall have become final and non-appealable;
50
(d) by the Seller (subject to the Seller's compliance with
Section 7.2(b)) or the Purchaser, if the transactions contemplated hereby are
required to be approved by the stockholders of the Seller, and either (i) such
transactions are not properly approved at any stockholders' meeting of the
Seller or any adjournment or postponement thereof by the requisite affirmative
vote of the holders of the outstanding shares of the Seller Common Stock for any
reason whatsoever or (ii) a vote to approve or reject the transactions
contemplated hereby at any such stockholders' meeting or adjournment or
postponement thereof referenced in clause (i) does not take place prior to
October 30, 2000;
(e) by the Purchaser, upon breach of any material
representation, warranty or covenant on the part of the Seller set forth in this
Agreement, or if any representation or warranty of the Seller shall have become
untrue, in either case such that it appears reasonably likely that either
Section 3.1(a) or Section 3.1(b) would not be satisfied;)
-------------- --------------
(f) by the Seller, upon breach of any material representation,
warranty, covenant or agreement on the part of the Purchaser set forth in this
Agreement, or if any representation or warranty of the Purchaser shall have
become untrue, in either case such that it appears reasonably likely that either
Section 3.2(a) or Section 3.2(b) would not be satisfied.
-------------- --------------
(g) by the Purchaser, if the Seller's Board of Directors shall
have (i) failed to include in a Disclosure Document its recommendation without
modification or qualification that such stockholders approve this Agreement and
the transactions contemplated hereby, or (ii) withdrawn, modified or qualified
such recommendation in a manner adverse to the interests of the Purchaser; or
(h) by the Purchaser or the Seller if the Workers' Comp
Adjustment results in a Cash Purchase Price less than $185,000,000, provided,
--------
however, that the Purchaser may, at its option, determine that the Cash Purchase
-------
Price set forth in Section 2.1 shall nevertheless be $185,000,000,
notwithstanding the actual amount of the Workers' Comp Adjustment that would
have caused the Cash Purchase Price to be less than $185,000,000, in which case
the Seller shall not have the right to terminate under this Section 7.1(h).
--------------
Such right of termination shall be exercised by written notice of termination
given by the terminating Party to the other Parties hereto in the manner
hereinafter provided.
Section 7.2 Effect of Termination; Termination Fee.
--------------------------------------
(a) Each Party's right of termination under Section 7.1 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 7.1, all further obligations of
the parties under this agreement will terminate, except that the obligations in
Section 7.2(b) and Section 9.7 will survive; provided, however, that if this
-------------- ----------- -------- -------
Agreement is terminated by a Party because of the breach of the Agreement by the
other Party or
51
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.
(b) If the Seller or the Purchaser shall have terminated this
Agreement pursuant to clause (d) or (g) of Section 7.1 (each such termination, a
-----------
"Trigger Event"), then the Seller shall promptly, but in no event not later than
-------------
simultaneously with a Trigger Event, pay to the Purchaser a termination fee of
$6,000,000 payable in same day funds.
(c) Notwithstanding the occurrence of any termination
referenced in clause (a) above, no such termination shall have any effect upon
the Confidentiality Agreement referenced in Section 10.7 hereof, which letter
agreement shall remain in full force and effect following any such termination
subject to its terms.
ARTICLE VIII
INDEMNIFICATION AND RELATED MATTERS
Section 8.1 Survival. The representations and warranties contained
--------
herein shall survive until the earlier of: (i) the date of issuance of the audit
opinion by the Seller's independent public accountants of the audit of the
financial statements of the Seller in respect of its fiscal year ending December
31, 2000; (ii) the date upon which the Seller sells, transfers or otherwise
disposes of substantially all of the assets of its Professional/IT Segment; or
(iii) March 31, 2001, and shall terminate on the earliest such date (the
"Representation and Warranty Survival Term"). The covenants of the Seller that
-----------------------------------------
survive the Closing shall terminate in accordance with their terms.
Section 8.2 Indemnification.
---------------
(a) The Seller shall indemnify the Newcos, the Purchaser and
each of their respective officers, directors, stockholders, employees, agents,
representatives, Affiliates, successors and assigns (collectively, the
"Purchaser Parties") and hold each of them harmless from and against and pay on
-----------------
behalf of or reimburse such Purchaser Parties in respect of the entirety of any
Losses the Purchaser Parties may suffer, sustain or become subject to, with
respect to any claim for indemnification resulting from, arising out of,
relating to, in the nature of, or caused by:
(i) any Excluded Asset;
(ii) any Excluded Liability;
(iii) any breach by the Seller of any of the Seller's
representations and warranties contained in or made by or pursuant to
this Agreement; provided, however,
-------- -------
52
that a claim or claims, if any, for Losses under this clause (iii) must
be made prior to ten (10) business days after the expiration of the
Representation and Warranty Survival Term;
(iv) any breach by the Seller of any covenant of the
Seller in this Agreement that survives the Closing other than the
matters in Section 9.2 of this Agreement which are covered by separate
indemnities of the parties; provided, however, that a claim or claims,
-------- -------
if any, for Losses under this clause (iv) must be made prior to thirty
(30) days following the expiration of the applicable post-closing
covenant.
(v) any withdrawal liability to which the Purchaser
Parties become liable arising solely as a result of any complete or
partial withdrawal from any multi-employer plan (as defined in Section
3(37) or Section 4001(a)(3) of ERISA or Section 414(f) of the Code) by
any entity comprising the Acquired Business or any Person that is or at
any time within the five-year period prior to the date of this
Agreement was under common control (within the meaning of subsections
414(b), (c), (m) or (o) of the Code) with the Seller and any breach of
the representations and warranties set forth in Section 5.17; provided,
--------
however, that any claim or claims, if any, for Losses under this clause
-------
(v) must be made within 30 days after the expiration of any applicable
statute of limitations;
(vi) any of the events, circumstances or conditions
related to the matters set forth in Section 5.21, any pollution or
threat to human health or the environment that (A) is related to the
Acquired Business (or any other prior owner's or operator's)
management, use, control, ownership or operation of the properties of
the Acquired Business prior to the Closing, including all on-site and
off-site activities involving Materials of Environmental Concern, and
(B) occurred, existed, arises out of conditions or circumstances that
occurred or existed, or was caused on or before the Closing Date; or
any Environmental Claim against any entity comprising the Acquired
Business or any Person whose liability for such Environmental Claim any
entity comprising the Acquired Business has assumed or retained either
contractually or by operation of law; provided, however, that any claim
-------- -------
or claims, if any, for Losses under this clause (vi) must be made
within 30 days after the expiration of any applicable statute of
limitations;
(vii) any and all liability for bonuses granted, but
not yet paid, to employees, officers or directors of the Acquired
Business (including but not limited to all Continuing Employees, and
all Executive Employees) prior to the Closing, but only to the extent
that (a) the liability for any such bonuses has not been reflected in
the Financial Statements or the Latest Balance Sheet or (b) such
bonuses have been granted since the date of the Latest Balance Sheet
outside the Ordinary Course of Business (in each case whether any such
bonuses are payable in stock, cash or any combination thereof); and
53
(viii) Losses relating to the failure of the Seller
to obtain the consent of the NY Landlord to the assignment of the NY
Lease from the Seller to one of the Newcos (or any other Acquired
Company designated by the Purchaser to the Seller in writing) effective
upon the Closing Date (or any costs or liabilities incurred by any
Acquired Company in connection with obtaining such consent, it being
understood that Seller shall not, without the Purchaser's prior written
consent, agree to any amendment or modification to the NY Lease in
connection with obtaining such consent);
provided, however, the Seller shall not be obligated to indemnify the Purchaser
-------- -------
Parties pursuant to this Section 8.2(a) (1) unless the aggregate amount to which
--------------
the Purchaser Parties have the right to be indemnified exceeds $700,000,
whereupon the Seller shall be obligated to indemnify the Purchaser Parties for
all Losses sustained by the Purchaser Parties (provided, however, that this
-------- -------
clause (1) shall not apply to indemnification obligations arising under Section
--- -------
8.2(a)(i), (ii), (vii) or (viii)) or (2) to the extent that the Seller's
---------------------------------
aggregate indemnification obligations pursuant to this Section 8.2(a) exceed the
--------------
Cash Purchase Price, and provided further, that as to the Purchaser, the
----------------
Seller's indemnity in this Article VIII shall relate only to the matters in
Sections 5.1, 5.2, 5.3, 5.4, 5.23 and 9.10 of this Agreement and the matters
referenced in Item 2.1(e)(ii) of the Newco Contribution Agreement(s),
notwithstanding all of the matters referenced in this Section 8.2(a).
(b) The Purchaser shall cause the Newcos to indemnify (but in
no event will this covenant of the Purchaser require the Purchaser to satisfy
any indemnification obligation or payment responsibility or any other financial
commitment on behalf of the Newcos regarding any such matters) the Seller and
its officers, directors, stockholders, employees, agents, representatives,
Affiliates, successors and assigns (collectively, the "Seller Parties") and hold
--------------
each of them harmless from and against and pay on behalf of or reimburse such
Seller Parties in respect of the entirety of any Losses the Seller Parties may
suffer, sustain or become subject to, with respect to any claim for
indemnification resulting from, arising out of, relating to, in the nature of,
or caused by any liability, claim and/or obligation caused by, resulting from,
arising out of or related to any Assumed Liability; provided, however, the
-------- -------
Purchaser shall not be obligated to cause the Newcos to indemnify the Seller
Parties pursuant to this Section 8.2(b) (x) unless the aggregate amount to which
--------------
the Seller Parties have the right to be indemnified exceeds $700,000, whereupon
the Purchaser shall be obligated to cause the Newcos to indemnify the Seller
Parties for all Losses sustained by the Seller Parties or (y) to the extent that
the aggregate indemnification obligations pursuant to this Section 8.2(a) exceed
--------------
the Cash Purchase Price.
(c) If the Seller is required to make payments to the
Purchaser pursuant to Section 8.2(a) with respect to Losses, then the Seller
shall be entitled to receive from the Purchaser, with respect to such Losses,
(i) the amount of any net Tax benefit actually realized by the Purchaser as a
result of such Losses in a jurisdiction in which a Section 338 Election is not
recognized, (ii) any insurance proceeds and any indemnity, contribution or other
similar payment recoverable by the Purchaser or any Affiliate from any third
party, and (iii) any adjustments made pursuant to Section 9.15, provided,
--------
however, that the amount to be paid by the Purchaser
-------
54
to the Seller with respect to any particular Losses shall not exceed the amount
paid by the Seller to the Purchaser with respect to the same Losses. No payment
required to be made by the Seller pursuant to Section 8.2(a) may be withheld or
delayed for any reason, including the fact that Tax Returns for such taxable
year have not yet been prepared. For purposes of clause (i) of the first
sentence of this Section 8.2(c), if a payment is made by the Seller in
accordance with this Section 8.2 and subsequently (a) a net Tax benefit is
actually realized by the Purchaser (including, for this purpose, any Subsidiary
or Affiliate of the Purchaser or any Subsidiary of such Affiliate, if any such
entity files a consolidated, combined or unitary tax return with the Purchaser)
as a result of such payment and (b) such Tax benefit has not previously reduced
any indemnification obligation of Seller or been otherwise paid to Seller
pursuant to this Agreement, then the Purchaser (or the Subsidiary or Affiliate
of the Purchaser or the Subsidiary of any such Affiliate, if such other entity
actually realized the Tax benefit at issue) shall pay to the Seller within 30
days of the filing date of the tax return actually realizing such Tax benefit
the amount of such Tax benefit, provided that, such Tax benefit will be treated
--------
as having been utilized only when it is actually realized on a tax return filed
with a governmental authority and only after all other Tax credits, losses,
deductions and other attributes available in such taxable year have been fully
utilized and provided further that, to the extent that such Tax benefit is
----------------
reversed in any Tax audit or other administrative or judicial proceeding, upon
20 days' written notice, the Seller shall repay the amount of the Tax benefit
previously paid to it pursuant to this Section 8.2(c) plus any additional
amounts assessed by the applicable governmental authorities. To the extent a
payment by the Seller pursuant to this Section 8.2 is recharacterized by any
governmental authority as an amount other than an adjustment to the Cash
Purchase Price, then upon 20 days' written notice, the Seller shall pay the
Purchaser such additional amounts as are necessary so that the net amount
received by the Purchaser, after deducting all Taxes assessed with respect to
the payments hereunder, is no less than the amount that the Purchaser would have
received had such Taxes not been imposed.
(d) If an entity having a right to indemnification hereunder
seeks indemnification under this Article VIII, such entity (the "Indemnified
-----------
Party") shall give written notice to the other entity from which the Indemnified
-----
Party is entitled to indemnification (the "Indemnifying Party") after receiving
------------------
written notice of any action, lawsuit, proceeding, investigation or other claim
against it (if by a third party) (a "Third Party Claim") or discovering the
-----------------
liability, obligation or facts giving rise to such claim for indemnification,
describing in detail the facts and circumstances with respect to the subject
matter of the claim, the amount thereof (if known and quantifiable), and the
basis thereof; provided, however, that the failure to so notify the Indemnifying
-------- -------
Party shall not relieve the Indemnifying Party of its or his obligations
hereunder except to the extent such failure shall have materially prejudiced the
Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article VIII, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving
55
rise to the Indemnified Party's claim for indemnification at its expense, and at
its option (subject to the limitations set forth below) shall be entitled to
appoint lead counsel of such defense with reputable counsel reasonably
acceptable to the Indemnified Party; provided, however, that, as a condition
-------- -------
precedent to the Indemnifying Party's right to assume control of such defense,
it must first:
(i) enter into an agreement with the Indemnified
Party (in form and substance reasonably satisfactory to the Indemnified
Party) pursuant to which the Indemnifying Party agrees to be fully
responsible for all Losses relating to such claims and to provide full
indemnification to the Indemnified Party for all Losses relating to
such claim; and
(ii) unconditionally guarantee the payment and
performance of any Loss or other obligation which may arise with
respect to such claim or the facts giving rise to such claim for
indemnification; and
(iii) furnish the Indemnified Party with reasonable
evidence that the Indemnifying Party is and will be able to satisfy any
such Loss;
and provided, further; that the Indemnifying Party shall not have the right to
-------- -------
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party, if the claim which the Indemnifying Party
seeks to assume control (i) seeks non-monetary relief, (ii) involves criminal or
quasi-criminal allegations, (iii) involves a claim as to which the Indemnified
Party reasonably believes an adverse determination would be materially
detrimental to or materially injure the Indemnified Party's reputation or future
business prospects, or (iv) involves a claim which, upon petition by the
Indemnified Party, the appropriate court, arbitral or other tribunal, agency or
administrator rules that the Indemnifying Party failed or is failing to
vigorously prosecute or defend or (v) involves one or more defenses that are
available to the Indemnified Party which are, or may be in conflict with,
defenses raised or proposed to be raised by the Indemnifying Party and which
counsel to the Indemnified Party reasonably concludes involves a conflict of
interest between the Indemnified and Indemnifying Parties.
If the Indemnifying Party is permitted to assume and control the defense and
elects to do so, the Indemnified Party shall have the right to employ counsel
separate from counsel employed by the Indemnifying Party in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the expense of the Indemnified
Party unless (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, or (ii) the Indemnified Party has been advised by
counsel that a reasonable likelihood exists of a conflict of interest between
the Indemnified Party and the Indemnifying Party, in which case the fees and
expenses of such counsel shall be borne by the Indemnifying Party.
56
If the Indemnifying Party shall control the defense of any such claim pursuant
to this Section 8.2(d) or Section 9.2(i), the Indemnifying Party shall, before
entering into any settlement of a claim or ceasing to defend such claim, (i)
provide that such settlement agreement expressly and unconditionally releases,
to the reasonable satisfaction of the Indemnified Party, the Indemnified Party
from all Losses and other obligations with respect to such claim, without
prejudice, and (ii) obtain the prior written consent of the Indemnified Party
(which shall not be unreasonably withheld) if pursuant to or as a result of such
settlement or cessation, injunctive or other equitable relief will be imposed
against the Indemnified Party or any sanction of the Indemnified Party by any
court, tribunal, agency or other governmental body is reasonably likely or
foreseeable.
(e) The Indemnifying Party shall reimburse the Indemnified
Party for any Loss in immediately available funds promptly after the Indemnified
Party provides the Indemnifying Party with written notice of a claim hereunder
and the Parties reasonably agree that there is a reasonable basis for such
claim.
(f) Amounts paid to or on behalf of the Seller, the Purchaser
or any of the Newcos as indemnification pursuant to Article VIII shall be
treated as adjustments to the Cash Purchase Price hereunder.
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.1 Continuing Assistance. Subsequent to the Closing, the
---------------------
Seller and the Purchaser (at their own cost) shall assist each other (including
making records available) in the preparation of their respective Tax Returns and
the filing and execution of Tax elections, if required, as well as any audits or
litigation that might ensue as a result of the filing thereof, to the extent
that such assistance is reasonably requested.
Section 9.2 Tax Matters.
-----------
(a) Seller Tax Indemnity. From and after the Closing Date, the
--------------------
Seller agrees to indemnify, without any gross-up for Taxes, the Purchaser, the
Newcos, and each Acquired Company and their respective Affiliates against: (i)
all Taxes imposed on the Seller or any member of an Affiliated Group with which
the Seller files a consolidated or combined income Tax Return (other than the
Acquired Companies), with respect to any taxable period that ends on or before
the Closing Date or includes the Closing Date, including any liability arising
under Treasury Regulations Section 1.1502-6, and (ii) all Taxes imposed on any
Acquired Company with respect to any taxable period or portion thereof that ends
on or before the Closing Date; provided, however, that no indemnity shall be
-------- -------
provided under this Agreement for any Taxes resulting from (x) a reduction in
any net operating loss, capital loss or Tax credit carryover allocable to any
Acquired Company or (y) any transaction of any Acquired Company occurring
57
after the Closing. Any indemnity payment made hereunder by the Seller to the
Purchaser shall, in accordance with Section 9.2(l)(i), be treated as an
adjustment to the Cash Purchase Price for tax purposes.
(b) Purchaser Tax Indemnity. From and after the Closing Date,
-----------------------
the Purchaser shall cause the Newcos (but in no event will Purchaser's covenant
to require the Newcos to satisfy this indemnification obligation require any
financial payment, commitment or other obligation by the Purchaser for the
Newcos' obligations under this Section 9.2(b)) and the Acquired Newcos to
---------------
indemnify, without any gross-up for Taxes, the Seller and its affiliates against
all Taxes imposed on or with respect to such Acquired Companies and the Acquired
Newcos that are not subject to indemnification pursuant to Section 9.2(a),
including, but not limited to, Taxes resulting from any transaction of any such
Acquired Company or Acquired Newco occurring after the Closing Date. Any
indemnity payment made hereunder by the Newcos or the Acquired Newcos to the
Seller shall, in accordance with Section 9.2(l)(i), be treated as an adjustment
to the Cash Purchase Price for Tax purposes.
(c) Tax Indemnity Payments. Payment by the indemnitor of any
----------------------
amount due under this Section 9.2 shall be made within ten (10) days following
written notice by the indemnitee that payment of such amounts to the appropriate
Tax authority is due, provided that the indemnitor shall not be required to make
any payment earlier than two days before it is due to the appropriate Tax
authority. In the case of a Tax that is contested in accordance with the
provisions of Section 9.2(h), payment of the Tax to the appropriate Tax
authority will not be considered to be due earlier than the date a final
determination to such effect is made by the appropriate Taxing authority or a
court.
(d) Tax Period Indemnity. For purposes of this Section 9.2, in
--------------------
the case of any Tax that is imposed on a periodic basis and is payable for a
period that begins before the Closing Date and ends after the Closing Date, the
portion of such Taxes payable for the period ending on the Closing Date shall be
(i) in the case of any such Tax other than a Tax based upon or measured by
income, the amount of such Tax for the entire period multiplied by a fraction,
the numerator of which is the number of days in the period ending on the Closing
Date and the denominator of which is the number of days in the entire period and
(ii) in the case of any such Tax based upon or measured by income, the amount
which would be payable if the taxable year ended on the Closing Date. Any credit
shall be prorated based upon the fraction employed in clause (i) of the next
preceding sentence.
(e) Other Entities. Notwithstanding anything in Section
--------------
9.2(a)-(d) to the contrary, if any Acquired Company is included in a
consolidated, combined or unitary Tax Return or report, then neither the
Purchaser nor the Seller nor any of their Affiliates shall be responsible to the
other in respect of any Tax imposed on or measured by the income, property or
business activities of any entity other than any Acquired Company ("Other
-----
Entity").
------
58
(f) Tax Refunds. The Purchaser shall promptly pay to the
-----------
Seller any refund or credit (including any interest paid or credited with
respect thereto) received by the Purchaser or any Acquired Company of Taxes: (i)
relating to taxable periods or portions thereof ending on or before the Closing
Date; or (ii) attributable to an amount paid by the Seller under Section 9.2(a)
hereof. The Purchaser shall, if the Seller so requests and at the Seller's
expense, cause the relevant entity to file for and obtain any refund to which
the Seller is entitled under this Section 9.2(f), provided that such claim for
refund would not reasonably have a material adverse effect on Taxes of the
Purchaser or any Acquired Company. The Purchaser shall permit the Seller to
control (at the Seller's expense) the prosecution of any such refund claim, and
shall cause the relevant entity to authorize by appropriate power of attorney
such persons as the Seller shall designate to represent such entity with respect
to such refund claim.
(g) Contests. After the Closing Date, the Purchaser shall
--------
promptly notify the Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on the Purchaser
or any Acquired Company which, if determined adversely to the taxpayer or after
the lapse of time would be grounds for indemnification under Section 9.2(a) or
(b). Such notice shall contain factual information (to the extent known to the
Purchaser or any Acquired Company) describing the asserted Tax liability in
reasonable detail and shall include copies of any notice or other document
received from any taxing authority in respect of any such asserted Tax
liability. If the Purchaser fails to give the Seller prompt notice of an
asserted Tax liability as required by this Section 9.2(g), then, if the Seller
is precluded by the failure to give prompt notice from contesting the asserted
Tax liability in both the administrative and judicial forums, then the Seller
shall not have any obligation to indemnify for any loss arising out of such
asserted Tax liability.
(h) Tax Contest Administration. The Seller may elect to
--------------------------
direct, through tax counsel of its own choosing and at its own expense, any
audit, claim for refund and administrative or judicial proceeding involving any
asserted liability with respect to which indemnity may be sought under Section
9.2(a) or (b) (any such audit, claim for refund or proceeding relating to an
asserted Tax liability is referred to herein as a "Contest"). If the Seller
-------
elects to direct a Contest, it shall within thirty (30) calendar days of receipt
of the notice of asserted Tax liability notify the Purchaser of its intent to do
so, and the Purchaser shall cooperate and shall cause each Acquired Company or
its respective successor or successors to cooperate, at the Seller's expense, in
each phase of such Contest. If the Seller elects not to direct the Contest,
fails to notify the Purchaser of its election as herein provided or contests its
obligation to indemnify under Section 9.2(a), the Purchaser or any Acquired
Company may pay, compromise or contest, at its own expense, such asserted Tax
liability. In any event, the Seller may participate, at its own expense, in the
Contest. If the Seller chooses to direct the Contest, the Purchaser shall
promptly empower and shall cause the Acquired Companies or their respective
successors promptly to empower (by power of attorney and such other
documentation as may be necessary and appropriate) such representatives of the
Seller as it may designate to represent the Purchaser or the Acquired Companies
or their respective successors in the Contest insofar as the
59
Contest involves an asserted Tax liability for which the Seller would be liable
under Section 9.2(a).
(i) Preparation of Tax Returns. The Seller shall prepare and
--------------------------
file any Tax Returns and schedules relating to the Acquired Companies for the
period ending on or before the Closing Date. Such Tax Returns and schedules
shall be prepared on a basis consistent with those prepared for prior tax years
unless a different treatment of any item is required by an intervening change in
law. The Purchaser shall prepare or cause each Acquired Company to prepare any
Tax Return relating to such Acquired Company for any period ending after the
Closing Date (whether or not such period begins before the Closing Date), and
the Seller shall remit to the Purchaser any amounts shown to be due on any such
Tax Return for which the Seller is liable pursuant to this Agreement no later
than 45 days after the Purchaser has notified the Seller of the amount of such
liability.
(j) Cooperation and Exchange of Information. The Seller and
---------------------------------------
the Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Tax Return,
amended Tax Return or claim or refund, determining a liability for Taxes or a
right to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax Returns or portions thereof, together with
accompanying schedules and related work papers and documents reining to rulings
or other determinations by taxing authorities. Each party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each party will retain all Tax
Returns, schedules and work papers and all material records or other documents
relating to Tax matters of the Acquired Companies for the taxable period first
ending after the Closing Date and for all prior taxable periods until the later
of: (i) the expiration of the statute of limitations of the taxable periods to
which such Tax Returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of such extensions
for the respective Tax periods; or (ii) eight (8) years following the due date
(without extension) for such Tax Returns. Any information obtained under this
Section 9.2(j) shall be kept confidential, except as may be otherwise necessary
in connection with the filing of Tax Returns or claims for refund or in
conducting an audit or other judicial or administrative proceeding.
(k) Conveyance Taxes. The Purchaser agrees to assume and pay
----------------
all liability for all sales, use, transfer, stamp, stock transfer, real property
transfer and similar Taxes incurred solely as a result of the Closing
Transactions contemplated hereby.
(l) Miscellaneous Tax Items. The Parties agree as follows with
-----------------------
respect to the following miscellaneous Tax matters:
60
(i) Except to the extent required by law, the parties
agree to treat all payments made under this Section 9.2 as adjustments
to the Cash Purchase Price for Tax purposes;
(ii) Except as expressly provided otherwise and except
with respect to the representations and warranties contained in Section
5.10 of this Agreement and the general allocation provisions in Section
9.8 shall be the sole provision governing Tax matters and indemnities
therefor under this Agreement;
(iii) For purposes of this Section 9.2 all references
to the Purchaser, the Seller and the Acquired Companies include
successors; and
(iv) The covenants and agreements of the parties
hereto contained in this Section 9.2 shall survive the Closing and
shall remain in full force and effect until the expiration of all
statutes of limitations with respect to any Taxes that would be
indemnifiable by the Seller under Section 9.2(a) of this Agreement or
by the Purchaser under Section 9.2(b) of this Agreement.
Section 9.3 Press Releases and Announcements. Prior to the Closing
--------------------------------
Date, no press releases related to the matters subject to this Agreement and the
transactions contemplated herein, or other similar announcements to the
employees, customers or suppliers of the Seller or any Acquired Company, shall
be issued without the mutual approval of the Seller and the Purchaser, except
for any public disclosure which any Party in good faith believes is required by
applicable law or regulation or any listing agreement with the Nasdaq Stock
Market or any national securities exchange (in which case such disclosure shall
be prepared jointly by the Seller and the Purchaser). For a period of six months
after the Closing Date, no press releases limited to the matters subject to this
Agreement and the transactions contemplated herein, or other announcements to
the employees, customers or suppliers of any Acquired Company shall be issued
without the Purchaser's prior written consent (which shall not be unreasonably
withheld), except for any public disclosure which any Party in good faith
believes is required by law or regulation or any listing agreement with the
Nasdaq Stock Market or any national securities exchange (in which case such
disclosure shall be prepared jointly by the Seller and the Purchaser).
Section 9.4 Further Transfers. Each Party shall execute and deliver
-----------------
such further instruments of conveyance and transfer and take such commercially
reasonable additional action as any other Party may reasonably request to
effect, consummate, confirm or evidence the transfer and the consummation of the
transactions contemplated hereby.
Section 9.5 Specific Performance. The Seller acknowledges that the
--------------------
Acquired Business is unique and recognizes and affirms that if any of the
provisions of this Agreement are not performed in accordance with their
specified terms or are otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to
61
determine, and that the Purchaser shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or equity.
Section 9.6 Transition Assistance. The Seller shall not in any
---------------------
manner take any action prior to the Closing Date (provided that nothing in this
Section 9.6 shall modify or eliminate any of the Seller's obligation under
-----------
Section 9.10) that is designed or intended to have the effect of discouraging
------------
customers, suppliers, lessors, licensors or other business associates of the
Seller with respect to the Residual Acquired Commercial Assets or any of the
Acquired Companies from maintaining substantially similar business relationships
with the Purchaser and the Acquired Companies after the Closing Date as existed
with the Seller and/or the Acquired Companies prior to the Closing Date.
Section 9.7 Expenses. Except as provided in Section 7.2(b) hereof,
-------- --------------
the Parties shall pay their own costs and expenses relating to this Agreement
and the transactions contemplated hereby. The Seller shall bear and pay all
costs and expenses incurred in connection with (i) the filing, printing and
mailing of a required Disclosure Document, if any (including the SEC filing
fees, if any) and (ii) all brokerage fees charged by Credit Suisse First Boston
Corporation. Following the Closing Date, the Purchaser shall cause the Newcos,
without any obligation or responsibility on the part of the Seller, to bear and
pay (i) all costs and expenses with respect to any filings by the Purchaser
pursuant to the HSR Act, and (ii) all costs and expenses of the Purchaser.
Section 9.8 Allocation of the Cash Purchase Price. The allocation
-------------------------------------
of the Cash Purchase Price, the Assumed Liabilities and the covenant not to
compete among the Newcos shall be determined by the parties reasonably and in
good faith prior to the Closing (the "Initial Allocation"). The Initial
------------------
Allocation for each of the Newcos shall be among the assets of each of the
Newcos and the assets of each of the Newco's Subsidiaries based upon the fair
value of the assets of each of the Newcos and the fair market value of the
assets of each of the Newco's Subsidiaries. Within 60 days following the Closing
Date, the purchase price allocation (the "Purchase Price Allocation") shall be
-------------------------
determined by the Purchaser and the Seller reasonably and in good faith, and
such Purchase Price Allocation shall be used by the Parties in preparing (a) a
Form 8594, Asset Acquisition Statement, for each of the Purchaser, the Newcos
and the Seller, and (b) all Tax Returns. Each of the Purchaser, the Newcos and
the Seller shall file Form 8594, prepared in accordance with this Section, with
its federal income Tax Return for its Tax period (including the Closing Date).
Section 9.9 Books and Records. Unless otherwise consented to in
-----------------
writing by the Seller or the Purchaser, the Purchaser and the Seller will not,
for a period of five (5) years following the date hereof, destroy, alter or
otherwise dispose of any of the books and records of the Seller acquired by the
Purchaser hereunder or retained by the Seller without first offering to
surrender to the Seller or the Purchaser (as the case may be) such books and
records, or any portion thereof, of which the Seller or the Purchaser may intend
to destroy, alter or dispose of. The Purchaser and the Seller will allow each
other Party's representatives, attorneys and
62
accountants access to such books and records, upon reasonable request during
such Party's normal business hours, for the purpose of examining and copying the
same in connection with any matter whether or not related to or arising out of
this Agreement or the transactions contemplated hereby.
Section 9.10 Noncompetition, Nonsolicitation and Confidentiality.
---------------------------------------------------
(a) Noncompetition. During the period beginning on the
--------------
Closing Date and ending on the earlier of: (x) the fifth anniversary of the
Closing Date; (y) any Expiration Event Date, but only as to the particular
Professional/IT Segment platform or platforms and/or E-Solutions Segment
involved in an Expiration Event Date transaction; or (z) the Collective
Expiration Date (the "Noncompete Period"), the Seller shall not, directly or
-----------------
indirectly, anywhere in North America, (i) engage in the Commercial Staffing
Business or (ii) own, manage, operate, finance, control or participate in the
ownership, management, operation, financing or control of, or be connected as
partner, agent, representative, consultant or otherwise with, any business or
enterprise that engages in the Commercial Staffing Business; provided, however,
-------- -------
that any one or all of the following items shall in no way breach, violate or
otherwise in any manner conflict with the noncompetition covenant in the
preceding clause: (A) the operation by the Seller directly or indirectly of all
or a portion of the Professional/IT Segment and/or the E-Solutions Segment in
the Ordinary Course of Business; (B) the ownership of not more than five percent
(5%) of any class of securities of any corporation which engages in the
Commercial Staffing Business and has a class of securities registered pursuant
to the Exchange Act; or (C) the acquisition of any Person, a de minimis portion
of which (the "Competing Portion") engages in the Commercial Staffing Business,
-----------------
or the operation of the Competing Portion on a temporary basis, so long as the
Seller divests, or transfers the Competing Portion to an unaffiliated third
party or ceases to operate the Competing Portion as soon as commercially
practicable, but in no event less than six (6) months following acquisition of
such Person.
(b) Nonsolicitation. During the Noncompete Period, the
---------------
Seller shall not, and shall not cause or permit any of the Non-Acquired
Companies to, directly or indirectly, (i) induce or attempt to induce any
employee of any Acquired Company to leave the employ of such Acquired Company,
or in any way interfere with the relationship between any Acquired Company or
any of their employees, (ii) hire any person who is then an employee of any
Acquired Company or was an employee of any of the Acquired Companies at any time
during the one (1) year period immediately preceding the Closing, or (iii)
induce or attempt to induce (including, without limitation, by soliciting
business from or performing services for) any customer, supplier, licensee,
licensor, franchisee or other business relation of any Acquired Company to cease
doing business with the Acquired Company, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and such Person; provided, however, that nothing in this Agreement shall
restrict in any manner the ability of the Seller, the Non-Acquired Companies or
any Subsidiary of the Non-Acquired Companies or the Seller to solicit customers,
suppliers, licensees, licensors or other business relations of the Acquired
Business in connection with operating the business of the Non-Acquired
Companies, as
63
such businesses have been conducted historically and as of the Closing Date in
the Professional/IT Segment and/or the E-Solutions Segment so long as such
operations do not include expansion into the Commercial Staffing Business.
(c) Confidentiality. The Seller shall, and shall cause its
---------------
Affiliates to, treat and hold as confidential any information concerning the
business and affairs of the Acquired Business that is not available to the
public as of the date of this Agreement or hereafter through no breach of this
covenant by Seller (the "Confidential Information"), refrain from using any of
------------------------
the Confidential Information to the competitive disadvantage of the Acquired
Business or its owners, except in connection with this Agreement, and deliver
promptly to the Purchaser or destroy, at the request and option of the
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in Seller's possession or under Seller's control. In the
event that the Seller or any of its Affiliates is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, the Seller shall, and shall cause such
Affiliate to, notify the Purchaser promptly of the request or requirement so
that the Purchaser may seek an appropriate protective order at the Purchaser's
expense or waive compliance with the provisions of this Section 9.10(c). If, in
--------------
the absence of a protective order or the receipt of a waiver hereunder, the
Seller or any of its Affiliates is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Seller or such Affiliate may disclose the Confidential Information
to the tribunal; provided, however, that such disclosing Person shall use his or
-------- -------
its reasonable best efforts to obtain, at the expense and request of the
Purchaser, an order or other assurance that confidential treatment shall be
accorded to such expense and portion of the Confidential Information required to
be disclosed as the Purchaser shall designate.
(d) Trade Names; Etc. The Seller shall not, and shall not
----------------
cause or permit any of its Affiliates to, use the "StaffMark" trade name or
trademark or any other trade name, logo or Internet domain name used by the
Seller or any of the Acquired Companies in the operation of the Acquired
Business, or any trade name, trademark, logo or Internet domain name confusingly
similar to any of the foregoing, in any manner anywhere in the world after the
Closing.
(e) Remedy for Breach. Seller agrees that if a court of
-----------------
competent jurisdiction determines that the length of time or any other
restriction, or portion thereof, set forth in this Section 9.10 is overly
------------
restrictive and unenforceable, the court may reduce or modify such restrictions
to those which it deems reasonable and enforceable under the circumstances, and
as so reduced or modified, the Parties agree that the restrictions of this
Section 9.10 shall remain in full force and effect. The Seller acknowledges and
------------
agrees that in the event of any breach by the Seller or any of its Affiliates of
any of the provisions of this Section 9.10, monetary damages shall not
------------
constitute a sufficient remedy. Consequently, in the event of any such breach,
the Purchaser, and/or its successors or assigns may, in addition to other rights
and remedies existing in their favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the
64
provisions hereof, in each case without the requirement of posting a bond or
proving actual damages.
Section 9.11 Employees.
---------
(a) Except for the employees who are party to the Seller
Employment Agreements (collectively, the "Executive Employees") whose employment
-------------------
shall be governed by the terms thereof or any written amendment thereto or
waiver thereof, certain employees of the Seller listed on the Excluded Employee
-----------------
Schedule (as may be amended prior to the Closing by written notice by the
--------
Purchaser to the Seller pursuant to the terms hereof), and the employees of the
Non-Acquired Companies, the Purchaser will cause one or more of the Newcos to
offer at-will employment to all active full-time employees of the Seller as of
the Closing Date who perform services primarily for the benefit of the Acquired
Business (which employees are listed on the Seller Employee Schedule (as may be
------------------------
amended prior to the Closing by written notice by the Purchaser to the Seller
pursuant to the terms hereof)) on terms and conditions which, in the aggregate,
are substantially equivalent to those applicable to such persons' terms and
conditions of employment with the Seller immediately prior to the Closing Date.
Employees who accept Newco's offer of employment are referred to as "Continuing
----------
Employees." The Purchaser shall have no liability for any current or former
---------
employee of the Non-Acquired Companies, or any current employee of the Seller
other than the Executive Employees and the Continuing Employees (collectively,
the "Retained Employees"), whether or not such liability arises under a Benefit
------------------
Plan. Nothing in this Section 9.11 shall obligate the Purchaser to continue to
------------
employ any Continuing Employee for any period of time.
(b) The Purchaser shall cause one or more of the Newcos to
assume all obligations under the Seller Employment Agreements with respect to
each of the Executive Employees, as modified by the Waivers.
(c) Effective as of the Closing, the Newcos will be solely
responsible in respect of the Continuing Employees, for all amounts that have
accrued prior to, on or after the Closing Date on account of (i) wages and
bonuses, (ii) workers' compensation claims and Benefit Plans payments, (iii)
vacation pay, sick leave pay, and floating holiday pay, and (iv) any severance
payments for terminations of employment of any Continuing Employee by the
Purchaser. The Seller shall be solely responsible for complying with the Workers
Adjustment and Retraining Notification Act of 1988 ("WARN") and any other
----
similar state or local statute in connection with any termination of employees
of the Seller prior to or on the Closing Date; provided, however, that the
-------- -------
Purchaser shall cause the Newcos to indemnify Seller for any payments to
Continuing Employees that are required under WARN in the event that the
Purchaser or any of the Acquired Companies terminate such Continuing Employees
on or after the Closing Date.
(d) Effective as of the Closing Date, the Purchaser shall
cause one or more of the Newcos to assume sponsorship of all Benefit Plans
listed on the "Assumed Plans Schedule"
----------------------
65
(the "Assumed Plans") and the Seller shall retain sponsorship of all Benefit
-------------
Plans listed on the "Retained Plans Schedule." Effective as of the Closing, the
-----------------------
Seller shall take all such action as may be necessary to cause all Retained
Employees to cease participation in the Assumed Plans. Such Newco or Newcos
shall be responsible for, and the Purchaser shall cause Such Newco or Newcos to
indemnify the Seller for, any and all liabilities which arise in connection with
any Assumed Plan, including COBRA obligations; provided, however, that the
-------- -------
Seller shall indemnify such Newco or Newcos for any liability or obligation
arising out of or relating to Retained Employees, Retained Plans or any
obligation payable to Retained Employees under any Assumed Plan.
(e) Effective as of the Closing Date, the Purchaser shall
cause one or more of the Newcos to adopt and maintain one or more defined
contribution plans (the "Purchaser 401(k) Plans") intended to be qualified under
----------------
Section 401(k) of the Code. In accordance with the applicable provisions of
Section 414(l) of the Code, the Seller shall cause the assets and liabilities of
the StaffMark 401(k) Savings Plan (the "Seller 401(k) Plan") attributable to the
------------------
accounts (whether or not vested) of each participant who is an employee of an
Acquired Company, a Continuing Employee or an Executive Employee (the
"Participants") to be transferred by the trustee of the Seller 401(k) Plan to
------------
the trustee of the Purchaser 401(k) Plans. Such transfer of assets shall be in
cash (but shall include any promissory notes or other evidences of indebtedness
with respect to outstanding loans, and may, with the Purchaser's consent,
include other in kind assets), and shall be made as of and as soon as
practicable after a valuation date under the Seller 401(k) Plan occurring
immediately following the Closing Date, or as of such later valuation date as
may be mutually selected by the Purchaser and the Seller. Such transfer shall
account appropriately for earnings during the period from the applicable
valuation date to the actual date of transfer (the "Transfer Date"). From the
-------------
Closing Date until the Transfer Date, the Purchaser shall cause such Newco or
Newcos to make continuous payroll deductions each pay period from the pay of
each participant who has a loan(s) outstanding from the Seller 401(k) Plan of
amounts sufficient to pay the installment payments of principal and interest on
each such loan as required by the promissory note or other evidence of
indebtedness relating to such loan. The Purchaser shall cause such Newco or
Newcos to pay such deducted amounts to the trustee of the Seller 401(k) Plan who
shall accept such payments for a credit against such loans. The Purchaser shall
cause such Newco or Newcos to provide any information necessary to the trustee
to process such payment. On or prior to the Closing Date, the Seller shall make
on behalf of all Participants a contribution to the Seller 401(k) Plan of the
amounts of any salary reduction, matching, and profit sharing contributions
attributable to or payable on account of any such Participant for any pay date
occurring on or prior to the Closing Date. As of the Closing Date, the Seller
shall amend the Seller 401(k) Plan to exclude Participants from Seller 401(k)
Plan participation.
(f) With respect to the Frozen Company Retirement Plans
which have been assumed by the Seller in Section 3.1(l), after the Closing (i)
--------------
the Seller shall take all steps necessary to promptly notify participants of
their right to receive a distribution of their account balance under the Frozen
Company Retirement Plans, (ii) the Seller shall terminate the Frozen
66
Company Retirement Plans effective before or promptly after the first
anniversary of the Closing Date and shall distribute any remaining assets to
participants as soon as administratively feasible thereafter, provided, however,
-------- -------
that, unless otherwise agreed to by the Purchaser, (a) the Seller shall take no
action that would result in scrutiny of the Frozen Company Retirement Plans by
any governmental agency, (b) if any such Frozen Company Retirement Plan is
audited by any government agency, the Purchaser shall have the right to
participate in any negotiations and approve any settlements, and (c) the Seller
shall use its best efforts to defend any action or audit.
(g) Unless the Parties agree in writing prior to the
Closing Date, effective as of the Closing Date, the Purchaser shall have caused
one or more of the Newcos to have adopted a nonqualified deferred compensation
plan and trust (the "Purchaser Nonqualified Plan") that does not reduce the
---------------------------
right of a participant (or beneficiary) to a distribution to which he or she is
entitled in accordance with the provisions of the StaffMark Nonqualified
Deferred Compensation Plan (the "Seller Nonqualified Plan"), and, as soon as
------------------------
administratively feasible thereafter, the Seller shall cause the assets and
liabilities of the Seller Nonqualified Plan attributable to the accounts of each
participant who is not a Retained Employee as of Closing to be transferred by
the trustee of the Seller Nonqualified Plan to the trustee of the Purchaser
Nonqualified Plan. Such transfer of assets shall be in cash.
(h) Service Credit. The appropriate Newco or Newcos shall
--------------
cause all Benefit Plans that cover Continuing Employees and/or employees of each
Acquired Company after the Closing to recognize service credit for all purposes
(including, but not limited to participation, vacation accrual and entitlement,
vesting and benefit accrual) in respect of Continuing Employee or an employee of
an Acquired Company; provided, however, that service credit for benefit accrual
-------- -------
will be recognized only to the extent that (i) the Purchaser or an appropriate
trustee of the Purchaser has received as of the Closing assets equal to the
present value of the benefits so accrued, and (ii) liabilities related to such
benefit accrual have been properly reflected on the Latest Balance Sheet.
Section 9.12 Seller's Name Change. As soon as practicable after the
--------------------
Closing, the Seller will change (a) its corporate name to a name which is not
(and which is not confusingly similar to) "StaffMark, Inc.," and (b) the name of
each Subsidiary of the Seller that is not an Acquired Company to a name that
does not contain the word, or any word confusingly similar to, "StaffMark," it
being the intent of the Parties that, from and after the Closing, the Purchaser
(and/or its designee) will have the sole right as against the Seller and all
other Persons to conduct business under such name and that the Purchaser (and/or
its designee) will commence doing so at the time of the Closing.
Section 9.13 Third Party Consents. Seller shall use all commercially
--------------------
reasonable efforts prior to the Closing Date to transfer or otherwise assign its
interest in any instrument, contract, lease, license, permit or other agreement
or arrangement of the Seller which is related to the Acquired Business but is
not permitted to be assigned in connection with a transaction of the type
contemplated by this Agreement without the consent of the other party or parties
thereto
67
(collectively, the "Unassigned Contracts"). The beneficial interest in and to
--------------------
each Unassigned Contract shall in any event pass to the Newcos at the Closing,
and the Seller covenants and agrees to cooperate with the Purchaser in any
lawful and economically feasible arrangement to provide the Newcos with the
Seller's entire interest in the benefits under each of the Unassigned Contracts
and regardless of the status of any pending transfer or consent request, the
Purchaser agrees to cause the Newcos to accept the burdens and perform the
obligations under each such Unassigned Contract.
Section 9.14 Bulk Sales Law. The Seller will bear any loss,
--------------
liability, obligation or cost suffered by the Seller or the Purchaser as a
result of the Seller's noncompliance with any provision of any bulk sales law
which is applicable to the transfer of the Residual Acquired Commercial Assets
pursuant to this Agreement, and the Seller will indemnify the Purchaser against
any such loss, liability, obligation or cost.
Section 9.15 Workers' Compensation Actuarial Studies. The Seller has
---------------------------------------
commissioned or shall commission ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Inc. ("Mercer") to deliver
to the Seller who will then provide to the Purchaser and Aon Risk Services, Inc.
("Aon"), as soon as practical and in any event no more than ten business days
after the date hereof, written actuarial studies determining the Estimated
Expense, together with all related workpapers (the "New Mercer Study").
Following delivery of the New Mercer Study to the Purchaser, the Seller shall
provide the Purchaser and Aon with all information, and access to all documents,
records, and officers and directors of the Seller and all of the Acquired
Companies requested by Aon and all other information and documents relevant to
such study. If the Purchaser agrees with the Estimated Expense determined by the
New Mercer Study, then the Estimated Expense shall be as so determined. If the
Purchaser disagrees with the New Mercer Study's determination of the Estimated
Expense, then (a) the Purchaser shall notify the Seller within seven business
days of receipt of the New Mercer Study, (b) the Purchaser and the Seller shall
cause Mercer and Aon to mutually designate a third actuarial firm (the "Third
Firm"), and (c) the Purchaser and the Seller shall use their reasonable best
efforts to cause the Third Firm to determine within seven business days the
Estimated Expense, which estimate shall be determinative. The term "Workers Comp
Adjustment" shall mean the product of (x) 5.7 times (y) the difference of (A)
the Estimated Expense minus (B) $12,649,000. All costs and expenses incurred in
connection with the engagement of Mercer, Aon (but as to Aon, only the expenses
relating to the review of the New Mercer Study), and the Third Firm shall be
borne equally by the Seller and the Purchaser.
ARTICLE X
MISCELLANEOUS
Section 10.1 Amendment and Waiver. This Agreement may be amended and
--------------------
any provision of this Agreement may be waived; provided, however, that any such
-------- -------
amendment or waiver shall be binding upon a Party only if such amendment or
waiver is set forth in a writing executed by the Purchaser and the Seller,
except as set forth in Section 9.11(a). No course of
---------------
68
dealing between or among any persons having any interest in this Agreement shall
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any Party under or by reason of this Agreement.
Section 10.2 Notices. All notices, demands and other communications
-------
given or delivered under this Agreement shall be in writing and shall be deemed
to have been given when personally delivered, mailed by first class mail (return
receipt requested) or delivered by express courier service or telecopied (with
hard copy to follow). Notices, demands and communications to the Parties shall,
unless another address is specified in writing, be sent to the following address
or facsimile number:
Notices to the Seller before the Closing: with a copy to:
---------------------------------------- --------------
StaffMark, Inc. ▇▇▇▇▇▇ Godward LLP ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ One Freedom Square
Fayetteville, Arkansas 72703 Reston Town Center
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 11951 Freedom Drive
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Attention ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
and a copy to:
-------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to the Seller after the Closing: with a copy to:
--------------------------------------- --------------
Horizant, Inc. ▇▇▇▇▇▇ Godward LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ One Freedom Square
Fayetteville, Arkansas 72703 Reston Town Center
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
69
and a copy to:
-------------
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ 72201-
3699 Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to the Purchaser: with a copy to:
------------------------ --------------
▇▇▇▇▇▇▇▇ Group, Inc. Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ Four Embarcadero Center, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 10.3 Binding Agreement; Assignment. This Agreement and all
-----------------------------
of the provisions hereof shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns; provided,
--------
however, that neither this Agreement nor any of the rights, interests or
-------
obligations hereunder may be assigned (i) by the Seller, in whole or in part,
without the prior written consent of the Purchaser or (ii) by the Purchaser, in
whole or in part, except to any Affiliate of the Purchaser or to any lender
under the senior credit facility contemplated by the applicable Commitment
Letter, without the prior written consent of the Seller.
Section 10.4 Severability. Whenever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
Section 10.5 No Strict Construction. The language used in this
----------------------
Agreement shall be deemed to be the language chosen by the Parties to express
their mutual intent, and no rule of strict construction shall be applied against
any Person.
Section 10.6 Captions. The captions used in this Agreement are for
--------
convenience of reference only and do not constitute a part of this Agreement and
shall not be deemed to limit, characterize or in any way affect any provision of
this Agreement, and all provisions of this Agreement shall be enforced and
construed as if no caption had been used in this Agreement.
70
Section 10.7 Entire Agreement. This Agreement and the documents
----------------
referred to herein contain the entire agreement between the Parties and
supersede any prior understandings, agreements or representations by or between
the Parties, written or oral, which may have related to the subject matter of
the transactions contemplated by this Agreement in any way, except that the
provisions of a letter agreement dated September 23, 1999 by and among the
Seller and Affiliates of Fremont Partners, L.P. as adopted and confirmed by
certain other Affiliates or investors of Fremont Partners, L.P. and the
Purchaser by letter agreement (the adoption and confirmation in such letter
being only as to the September 23, 1999 letter) dated April 5, 2000 (the
"Confidentiality Agreement"), and which shall remain in effect except to the
-------------------------
extent expressly superseded by the terms of this Agreement while in effect.
Section 10.8 Counterparts. This Agreement may be executed in
------------
multiple counterparts, each of which shall be deemed an original but all of
which taken together shall constitute one and the same instrument.
Section 10.9 Governing Law. All questions concerning the
-------------
construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of Delaware,
without giving effect to any choice of law or conflict of law provision (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Section 10.10 Parties in Interest. Except with respect to Sections
-------------------
7.2(b) and (c), 8.2 and 9.7, nothing in this Agreement, express or implied, is
intended to confer on any person other than the Parties, the Newcos and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
* * * * *
71
IN WITNESS WHEREOF, the Parties hereto have executed this Purchase
Agreement as of the date first written above.
STAFFMARK, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: ________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman & Chief Executive Officer
▇▇▇▇▇▇▇▇ GROUP, INC.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Jr.
By: ________________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Jr.
Vice President
SIGNATURE PAGE TO PURCHASE AGREEMENT