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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): SEPTEMBER 18, 1996
CORESTAFF, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction
of incorporation)
0-26970 76-0407849
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(Commission (IRS Employer I.D. Number)
File Number)
4400 POST OAK PARKWAY, SUITE 1130
HOUSTON, TEXAS 77027-3413
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(Address of principal executive offices) (Zip Code)
(713) 961-3633
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(Registrant's telephone number,
including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 18, 1996, pursuant to the terms of the Stock Purchase
Agreement by and among COREStaff, Inc. ("COREStaff"), On-Line Resources, Inc.
("On-Line"), and Nalluru C. Murthy and Canan Gurman (the "On-Line
Stockholders"), COREStaff purchased all of the issued and outstanding capital
stock of On-Line for $17.6 million in cash, subject to certain post-closing
adjustments, and the assumption of certain liabilities. The purchase price for
On-Line was determined as a result of direct negotiations with the On-Line
Stockholders.
On-Line is headquartered in Orlando, Florida and provides information
technology services in San Francisco, California; Portland, Oregon; Cedar
Rapids, Iowa; Jackson, Mississippi; and Seattle, Washington. On-Line is now a
wholly-owned subsidiary of COREStaff.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
As of the date of filing this Current Report on Form 8-K, the
financial statements required by this Item 7(a) are not
available. In accordance with Item 7(a)(4) of the Form 8-K,
such financial statements will be filed no later than December
2, 1996.
(b) Pro Forma Financial Information
As of the date of filing this Current Report on Form 8-K, the
pro forma financial information required by this Item 7(b) is
not available. In accordance with Item 7(b) of Form 8-K, such
financial statements will be filed no later than December 2,
1996.
(c) Exhibits
10.1 Stock Purchase Agreement dated September 10, 1996,
among COREStaff, On-Line Resources, Inc., Nalluru C.
Murthy and Canan Gurman.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CORESTAFF, INC.
(Registrant)
Dated: September 20, 1996 By: /s/ EDWARD L. PIERCE
----------------------------------------
Edward L. Pierce
Chief Financial Officer, Senior Vice
President and Assistant Secretary
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INDEX TO EXHIBITS
Exhibit No. Description
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10.1 Stock Purchase Agreement dated September 10, 1996, among
COREStaff, On-Line Resources, Inc., Nalluru C. Murthy and
Canan Gurman
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
the 10th day of September, 1996, by and among CORESTAFF, INC., a Delaware
corporation (the "BUYER"), and ON-LINE RESOURCES, INC., a Florida corporation
("ON- LINE"), and NALLURU C. MURTHY and CANAN GURMAN (individually a "SELLER,"
or collectively, the "SELLERS"). The Buyer and the Sellers are referred to
collectively herein as the "PARTIES."
The Sellers in the aggregate own all of the outstanding capital stock
of On-Line.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of the
outstanding capital stock of On-Line.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACTUAL KNOWLEDGE" means actual knowledge of the Sellers,
without independent inquiry of any third party.
"ADJUSTED NET WORTH OF ON-LINE" means total assets of On-Line
(excluding $116,361.55) minus total liabilities of On-Line as of the Closing
Date, determined in accordance with generally accepted accounting principles
and on the accrual method of accounting.
"ADJUSTED NET WORTH DEFICIENCY" means the amount, if any, by
which the Adjusted Net Worth of On-Line is less than $3,572,439.55 as of the
Closing.
"ADVERSE CONSEQUENCES" means all charges, complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions, penalties, fines, costs, amounts
paid in settlement (subject to Section 8(d) hereof), liabilities, obligations,
taxes, liens, losses, expenses, and fees, including all reasonable attorneys'
fees and court costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Sec. 1504 (or any similar group defined under a similar
provision of state, local or foreign law).
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"APPLICABLE RATE" means the announced prime rate in effect
from time to time at Texas Commerce Bank, National Association plus 2% per
annum.
"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CLOSING" has the meaning set forth in Section 2(d) below.
"CLOSING DATE" has the meaning set forth in Section 2(d)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all confidential information
and trade secrets of On-Line including, without limitation, the identity, lists
or descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information; contract proposals, or
bidding information; business plans and training and operations methods and
manuals; personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth
in Code Sec. 1563.
"CUSTOMER CONTRACT OR AGREEMENT" means any agreement whereby
On-Line provides contract computer support services to a third party.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"DISAGREEMENT NOTICE" has the meaning set forth in Section
2(c) below.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4
below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
Material fringe benefit plan or program; in each case, which On-Line maintains
or to which it contributes for the benefit of any former or current employee of
On-Line.
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"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(2); in each case, which On- Line maintains or to which it
contributes for the benefit of any former or current employee of On-Line.
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(1); in each case, which On- Line maintains or to which it
contributes for the benefit of any former or current employee of On-Line.
"E&Y DETERMINATION" has the meaning set forth in Section 2(c)
below.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINAL COMPUTATION" has the meaning set forth in Section 2(c)
below.
"FINAL COMPUTATION EXPENSE" has the meaning set forth in
Section 2(c) below.
"FINANCIAL STATEMENT" has the meaning set forth in Section
4(e) below.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"GROSS PROFIT MARGIN" means the gross profit of On-Line as
customarily set forth on the Financial Statements.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d)
below.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service
marks, trade dress, logos, trade names, and corporate names and registrations
and applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) computer software, data and
documentation, (d) to the extent legally protectable, trade secrets and
confidential business information, know-how, proposals, technical data,
copyrightable works, financial, marketing, and business data, pricing and cost
information, business and marketing plans, and customer lists and
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information), (e) to the extent legally protectable, other proprietary rights,
and (f) copies and tangible embodiments thereof (in whatever form or medium).
"JOINT AND SEVERAL" has the meaning set forth in Section 10(a)
below.
"KNOWLEDGE" means actual knowledge after reasonable
investigation and inquiry, which inquiry shall include an inquiry of the
employees of On-Line with responsibility for the matters in question.
"LIABILITY" means any liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
"MATERIAL" has the meaning set forth in Section 4 below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained
within the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in Section 4(e) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in
Section 4(e) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in
Section 4(e) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec.
3(37).
"NET WORKING CAPITAL" means total current assets of On-Line
less total current liabilities and any long-term debt of On-Line, determined in
accordance with generally accepted accounting principles and on the accrual
method of accounting.
"ON-LINE" has the meaning set forth in the preface above.
"ON-LINE SHARES" means any share of the Common Stock of
On-Line, $0.01 par value.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
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"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2(b)
below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec.
4043.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security
interest, encumbrance, charge, or other lien, other than (a) mechanics',
materialmen's and similar liens, (b) liens for Taxes not yet due and payable
(or for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings), (c) liens arising under workers' compensation, unemployment
insurance, social security, retirement, and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit, (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"SELLERS" has the meaning set forth in the preface above.
"SEVERAL" has the meaning set forth in Section 10(a) below.
"SUBSIDIARY" means any corporation with respect to which
another specified corporation has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"TAKEOVER" means any offer, proposal for a merger,
consolidation or other business combination involving On-Line, or any proposal
or offer to acquire in any manner a substantial equity interest in, or a
substantial portion of the assets of On-Line, other than pursuant to the
transactions contemplated by this Agreement.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
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2. PURCHASE AND SALE OF ON-LINE'S SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Sellers,
and Sellers agree to sell to the Buyer, all of his, her or its respective
On-Line Shares for the consideration specified below in this Section 2.
(b) PURCHASE PRICE. The Buyer agrees to pay to the
Sellers the sum of $17,621,509.25 in cash (the "PURCHASE PRICE") for the
On-Line Shares to be purchased pursuant to the terms hereof. The Purchase
Price shall be paid by Buyer to Sellers at the Closing by wire transfer of
immediately available funds to an account or accounts designated by Sellers.
The Purchase Price shall be allocated among the Sellers in proportion to their
respective holdings of On- Line Shares as set forth in Section 4(b) of the
Disclosure Schedule.
(c) PURCHASE PRICE ADJUSTMENT. The Purchase Price shall
be adjusted at the Closing or within ninety (90) days from the Closing Date in
the event and only in the event there is an Adjusted Net Worth Deficiency, the
Purchase Price shall be decreased on a dollar-for-dollar basis by the amount of
the Adjusted Net Worth Deficiency.
In the event the Parties in good faith are unable to agree on
or calculate the Adjusted Net Worth Deficiency within thirty (30) days
following the Closing Date, the Adjusted Net Worth Deficiency shall be
determined subsequent to the Closing by Ernst & Young, L.L.P. in accordance
with this Agreement (at the sole expense of the Buyer) (the "E&Y
DETERMINATION"). If, within fourteen (14) days after receipt of the E&Y
Determination, the Sellers deliver written notice to Buyer that the Sellers
disagree with the E&Y Determination (the "DISAGREEMENT NOTICE"), then the
Sellers and Buyer shall attempt in good faith to mutually determine the correct
amount of the Adjusted Net Worth Deficiency within fourteen (14) days after
Sellers deliver the Disagreement Notice to Buyer. If the Sellers and Buyer
cannot in good faith mutually determine the amount of the Adjusted Net Worth
Deficiency within such fourteen (14) day period, then Sellers will select
another "Big 6") accounting firm reasonably satisfactory to the Buyer to
compute the Adjusted Net Worth Deficiency (the "FINAL COMPUTATION"). The Final
Computation shall be final, conclusive and binding on the Parties. The Sellers
shall reimburse the Buyer for the Adjusted Net Worth Deficiency, if any, within
ten (10) days of the same being determined as provided by this Section 2(c).
The Sellers shall pay the expense of the Final Computation
(the "FINAL COMPUTATION EXPENSE") unless the Adjusted Net Worth Deficiency
determined pursuant to the Final Computation differs by more than ten percent
(10%) from the E&Y Determination, in which Buyer shall pay the entire amount of
the Final Computation Expense. If the Sellers do not timely deliver the
Disagreement Notice to Buyer, the Sellers shall be deemed to agree with and
accept the E&Y Determination, which shall be final and conclusive against Buyer
and the Sellers.
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(d) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of Buyer, in Houston, Texas, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
as set forth in Section 7 below or on such other date and/or place as the Buyer
and the Sellers may mutually determine (the "CLOSING DATE"); provided, however,
that the Closing Date shall be no later than September 30, 1996.
(e) DELIVERIES AT THE CLOSING. At the Closing, (i) the
Sellers will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 7(a) below, (ii) the Buyer will deliver to the
Sellers the various certificates, instruments, and documents referred to in
Section 7(b) below, (iii) the Sellers will deliver to the Buyer stock
certificates representing all of his, her or its On-Line Shares, endorsed in
blank or accompanied by duly executed assignment documents, and (iv) the Buyer
will deliver to the Sellers the consideration specified in Section 2(b) above
as may be adjusted pursuant to the terms set forth in Section 2(c) above.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each
of the Sellers Severally represents and warrants to the Buyer that the
statements contained in this Section 3(a) are correct and complete as of the
date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this Section 3(a)) with respect to himself or
herself, except as set forth in Annex II attached hereto.
(i) AUTHORIZATION OF TRANSACTION. Each Seller
has full power and authority to execute and deliver this Agreement and
to perform his, her or its obligations hereunder and this Agreement
has been duly executed and delivered by the Sellers. This Agreement
constitutes the valid and legally binding obligation of each of the
Sellers, enforceable in accordance with its terms and conditions.
None of the Sellers need give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and
the delivery of this Agreement by the Sellers, nor the consummation of
the transactions contemplated hereby by the Sellers, will (A) violate
any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government,
governmental agency, or court to which any of the Sellers are subject,
or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any part the right to
accelerate, terminate, modify, or cancel, or require any notice under
any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement
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to which any of the Sellers are a party or by which he, she or it is
bound or to which any of his, her or its assets are subject and which
has a Material adverse effect on On-Line or Sellers.
(iii) BROKER'S FEES. The Sellers have no Liability
or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement
for which the Buyer could become liable or obligated.
(iv) ON-LINE SHARES. Each of the Sellers holds of
record and owns beneficially the number of On-Line Shares set forth
next to his, her or its name in Section 4(b) of the Disclosure
Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws),
claims, Taxes, Security Interests, options, warrants, rights,
contracts, calls, commitments, equities, and demands. None of the
Sellers are a party to any option, warrant, right, contract, call,
put, or other agreement or commitment providing for the disposition or
acquisition of any capital stock of On-Line (other than this
Agreement). None of the Sellers are a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting
of any capital stock of On-Line.
(b) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
Buyer represents and warrants to the Sellers that the statements contained in
this Section 3(b) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(b)), except as set forth in Annex III attached
hereto.
(i) ORGANIZATION OF THE BUYER. The Buyer is a
corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has
full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its
obligations hereunder and this Agreement has been duly executed and
delivered by the Buyer. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance
with its terms and conditions. The Buyer need not give any notice to,
make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(iii) NONCONTRAVENTION. Neither the execution and
the delivery of this Agreement by the Buyer, nor the consummation of
the transactions contemplated hereby by the Buyer, will (A) violate
any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge, or other restriction of any government,
governmental agency, or court to
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which the Buyer is subject or any provision of its charter or bylaws
or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which the
Buyer is a party or by which it is bound or to which any of its assets
is subject and which has a Material adverse effect on the Buyer.
(iv) BROKERS' FEES. Except as set forth in
Section 6(j) hereof, the Buyer has no Liability or Obligation to pay
any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement for which any
Seller could become liable or obligated.
(v) INVESTMENT. The Buyer is not acquiring the
On-Line Shares with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act.
(vi) SOPHISTICATION. Buyer is sophisticated in
financial matters and is able to evaluate the risks and benefits of
the investment in the On-Line Shares.
(vii) INFORMATION. Buyer confirms that the Sellers
have made available to Buyer and its representatives and agents the
opportunity to ask questions of the officers of On-Line and to acquire
such additional information about the business and the financial
condition of On-Line as Buyer has requested.
4. REPRESENTATIONS AND WARRANTIES CONCERNING ON-LINE. Each of
the Sellers Jointly and Severally represents and warrants to the Buyer that the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date
of this Agreement throughout this Section 4), except as set forth in the
disclosure schedule delivered by the Sellers to the Buyer and initialed by the
Parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule may be updated
one or more times prior to the Closing Date and any updated Disclosure Schedule
shall be delivered at or before the Closing. An updated Disclosure Schedule
shall only be deemed to modify a representation and/or warranty made as of the
date of this Agreement in the event, and only in the event, that Sellers acted
in good faith and used their best efforts when preparing the original
Disclosure Schedule delivered to Buyer on the date of execution of this
Agreement. In the event any such updated Disclosure Schedule indicates a
material change from information previously provided to the Buyer, Buyer shall
be entitled to terminate this Agreement notwithstanding any other provision
contained in this Agreement (without any liability whatsoever to the Sellers)
by written notice delivered to the Sellers following receipt of such updated
Disclosure Schedule. An event or matter will not be deemed to be "MATERIAL,"
to have a "MATERIAL" effect, to cause a "MATERIAL" change in or in respect of,
to have a "MATERIAL" adverse effect or to be "MATERIALLY" affected unless the
loss that may reasonably be expected to occur to
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On-Line with respect to such event or matter, when taken together with all
other related losses that may reasonably be expected to occur to On-Line as a
result of such event or matter, would exceed $20,000 in the aggregate or unless
such event or matter constitutes a criminal violation of law. For purposes of
this paragraph, the word "LOSS" shall mean any and all direct or indirect
payments, obligations, assessments, losses, losses of income, liabilities,
costs and expenses paid or incurred, or reasonably likely to be paid or
incurred, or diminutions in value or reduction in benefits or rights of any
kind or character (whether or not known or asserted before the date of this
Agreement, fixed or unfixed, conditional or unconditional, choate or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise) that are reasonably expected to occur, including without
limitation, penalties, interest on any amount payable to a third party as a
result of the foregoing, and any legal or other expenses reasonably expected to
be incurred in connection with defending any demands, claims, actions or causes
of action that, if adversely determined, could reasonably be expected to result
in losses, and all amounts paid in settlement of claims or actions; provided,
however, that losses shall be net of any insurance proceeds entitled to be
received from a nonaffiliated insurance company on account of such loss (after
taking into account any cost incurred in obtaining such proceeds). A Customer
Contract or Agreement is "MATERIAL" if during the calendar years 1995 or 1996
such Customer Contract or Agreement produced $30,000 of Gross Profit Margin
less any bad debt specifically related to such Customer Contract or Agreement.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein, however, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself, or unless
the exception thereto would be apparent upon reading such document, without
reference to facts outside the "four corners" of such document). The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 4.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER.
On-Line is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation. On-Line is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification, except in those jurisdictions in
which the failure to be so qualified would not Materially adversely affect the
operations of On-Line. On-Line has full corporate power and authority to carry
on the businesses in which it is engaged and to own and use the properties
owned and used by it. Section 4(a) of the Disclosure Schedule lists the
directors and officers of On-Line. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of On-Line (as amended to
date). The minute books containing the records of meetings and/or resolutions
of the stockholders, the board of directors, and any committees of the board of
directors, the stock certificate books, and the stock record books of On-Line
are correct and complete. On-Line is not in default under or in violation of
any provision of its charter or bylaws.
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(b) CAPITALIZATION. The entire authorized capital stock
of On-Line consists of 1,000,000 On-Line Shares, of which 1,000,000 On-Line
Shares are issued and outstanding and no On-Line Shares are held in treasury.
All of the issued and outstanding On-Line Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Sellers as set forth in Section 4(b) of the Disclosure Schedule.
There are no outstanding or authorized options, warrants, rights, contracts,
calls, puts, rights to subscribe, conversion rights, or other agreements or
commitments to which On-Line is a party or which are binding upon On-Line
providing for the issuance, disposition, or acquisition of any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock, or similar rights with respect to On-Line. There are no voting trusts,
proxies, or any other agreements or understandings with respect to the voting
of the capital stock of On-Line.
(c) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge, or other restriction of any
government, governmental agency, or court to which On-Line is subject or any
provision of the charter or bylaws of On-Line or (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any part the right to accelerate, terminate, modify, or cancel, or require
any notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest, or other arrangement to which On-Line is a
party or by which it is bound or to which any of its assets are subject (or
result in the imposition of any Security Interest upon any of its assets) which
would have an adverse affect on On-Line. On-Line does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
(d) SUBSIDIARIES. Section 4(d) of the Disclosure
Schedule sets forth for each Subsidiary of On-Line (i) its name and
jurisdiction of incorporation, (ii) the number of shares of authorized capital
stock of each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, and (iv) the number
of shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each Subsidiary of On-Line has been duly
authorized and are validly issued, fully paid, and nonassessable. On-Line
and/or its Subsidiaries holds of record and owns beneficially all of the
outstanding shares of any Subsidiary of On-Line, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), claims, Taxes, Security Interests, options, warrants,
rights, contracts, calls, commitments, equities, and demands. There are no
outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights, or other agreements or commitments to
which On-Line is a party or which are binding on it providing for the issuance,
disposition, or acquisition of any capital stock of any Subsidiary of On-Line.
There are no outstanding stock appreciation, phantom stock, or similar rights
with respect to any Subsidiary of
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On-Line. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any
Subsidiary of On-Line. On-Line does not control directly or indirectly or have
any direct or indirect equity participation in any corporation, partnership,
trust, or other business association which is not a Subsidiary of On-Line.
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit B
are the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) audited (to the extent prepared for any given year) and
unaudited balance sheets and statements of income, changes in stockholder's
equity, and cash flow as of and for the fiscal years ended on or about December
31, 1992, 1993, 1994 and 1995 (the "MOST RECENT FISCAL YEAR END") for On-Line;
and (ii) unaudited balance sheets and statement of income, changes in
stockholders' equity, and cash flow (the "MOST RECENT FINANCIAL STATEMENTS") as
of and for the seven (7) months ended on or about July 31, 1996 (the "MOST
RECENT FISCAL MONTH END") for On-Line. Except as set forth on Section 4(e) of
the Disclosure Schedule, the Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, are correct and complete, and are consistent with the books
and records of On-Line (which books and records are correct and complete in all
Material respects); subject to the absence of footnote disclosure, and in the
case of the interim financial statements, to normal end-of-period adjustments
that, both individually and in the aggregate, will not have a Material adverse
effect on On-Line.
(f) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END.
Since the Most Recent Fiscal Year End, there has not been any adverse change in
the assets, Liabilities, business, financial condition, operations, results or
operations, or future prospects of On-Line. Without limiting the generality of
the foregoing, since that date:
(i) On-Line has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(ii) On-Line has not entered into any contract,
lease, sublease, license or sublicense (or series or related
contracts, leases, subleases, licenses and sublicenses) either
involving more than $15,000 or outside the Ordinary Course of
Business;
(iii) On-Line has not accelerated, terminated,
modified, or canceled any contract, Customer Contract or Agreement,
lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses) involving more
than $15,000 to which On-Line is a party or by which it is bound;
(iv) no party has notified On-Line of any
acceleration, termination, modification or cancellation of any
contract, Material Customer Contract or Agreement, lease, sublease,
license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses) involving more than $15,000
(other than a Material Customer Contract or Agreement) to which
On-Line is a party or by which it is bound;
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<PAGE> 13
(v) On-Line has not imposed any Security Interest
upon any of its assets, tangible or intangible;
(vi) On-Line has not made any capital expenditure
(or series of related capital expenditures) either involving more than
$20,000 singly or $100,000 in the aggregate, or outside the Ordinary
Course of Business;
(vii) On-Line has not made any capital investment
in, any loan to, or any acquisition of the securities or assets of any
other person (or series of related capital investments, loans, and
acquisitions) either involving more than $15,000 or outside the
Ordinary Course of Business;
(viii) On-Line has not created, incurred, assumed,
or guaranteed any indebtedness (including capitalized lease
obligations) either involving more than $15,000 singly or $50,000 in
the aggregate or outside the Ordinary Course of Business;
(ix) On-Line has not delayed or postponed (beyond
its normal practice) the payment of accounts payable and other
Liabilities;
(x) On-Line has not canceled, compromised,
waived, or released any right or claim (or series of related rights
and claims) either involving more than $15,000 or outside the Ordinary
Course of Business;
(xi) On-Line has not granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
(xii) there has been no change made or authorized
in the charter or bylaws of On-Line;
(xiii) On-Line has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion or exercise) any of its capital stock;
(xiv) Except for distributions to the Sellers to
pay their respective Tax liabilities, On- Line has not declared, set
aside, or paid any dividend or distribution with respect to its
capital stock nor redeemed, purchased, or otherwise acquired any of
its capital stock;
(xv) On-Line has not experienced any damage,
destruction or loss involving more than $15,000 (whether or not
covered by insurance) to its property;
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<PAGE> 14
(xvi) On-Line has not made any loan to, or entered
into any other transaction involving more than $15,000 with, any of
its directors, officers, and employees outside the Ordinary Course of
Business giving rise to any claim or right on its part against the
person or on the part of the person against it;
(xvii) On-Line has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement with any
full-time staff employee;
(xviii) On-Line has not granted an increase outside
the Ordinary Course of Business in the base compensation of any of its
directors, officers, and/or full-time staff employees;
(xix) On-Line has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance,
(G) severance, or (H) other plan, contract or commitment for any of
its directors, officers, and employees, or modified or terminated any
existing such plan, contract or commitment;
(xx) On-Line has not made any other change in
employment terms for any of its directors, officers, and/or full-time
staff employees;
(xxi) On-Line has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(xxii) there has not been any other occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving On-Line; and
(xxiii) On-Line has not committed to any of the
foregoing.
(g) UNDISCLOSED LIABILITIES. On-Line does not have any
Liability (and there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against it
giving rise to any Liability) which is individually in excess of $5,000, except
for (i) Liabilities set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto), and (ii) Liabilities which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of Business (none
of which relates to any breach of contract, breach of warranty, tort,
infringement, or violation of law or arose out of any charge, complaint,
action, suit, proceedings, hearing, investigation, claim, or demand).
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<PAGE> 15
(h) TAX MATTERS.
(i) On-Line has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in
all respects. Except for Taxes not yet due and payable, all Taxes
owed by On-Line (whether or not shown on any Tax Return) have been
paid. On-Line is currently not the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been
received by On-Line from an authority in a jurisdiction where On-Line
does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the
assets of On-Line that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) On-Line has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or
other third party and On-Line has properly reflected the status of all
employees and independent contractors in connection therewith as
required by applicable Tax law and the Fair Labor Standards Act of
1938, as amended, and the rules and regulations promulgated
thereunder.
(iii) No Seller or director or officer (or employee
responsible for Tax matters) of On-Line expects any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability
of On-Line either (A) claimed or raised by any authority in writing or
(B) as to which any of the Sellers and the directors and officers (and
employees responsible for Tax matters) of On-Line has Knowledge based
upon personal contact with any agent of such authority. Section 4(h)
of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to On-Line for taxable
periods ended on or after December 31, 1991, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. The Sellers have delivered to the
Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against
or agreed to by On-Line since December 31, 1989.
(iv) On-Line has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(v) The unpaid Taxes of On-Line do not exceed the
reserve for Tax Liability set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past
custom and practice of On-Line in filing its Tax Returns.
(i) TANGIBLE ASSETS. On-Line owns or leases all tangible
assets necessary for the conduct of its businesses as presently conducted and
as presently proposed to be conducted. Each such tangible asset is free from
Material defects, has been maintained in accordance with
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<PAGE> 16
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear).
(j) OWNED REAL PROPERTY. On-Line does not own nor does it
have any interest in any real property or improvements thereon (other than the
leases disclosed in Section 4(l) of the Disclosure Schedule, and the leasehold
improvements relating to the same) nor does On-Line have any options,
agreements or contracts under which it has the right or obligation to acquire
any interest in any real property or improvements (other than as disclosed in
Section 4(l) of the Disclosure Schedule).
(k) INTELLECTUAL PROPERTY.
(i) Pursuant to license, sublicense, agreement or
permission, On-Line owns or has the right to use all Intellectual
Property necessary for the operation of the businesses of On-Line
presently conducted. Each item of Intellectual Property owned or used
by On-Line immediately prior to the Closing hereunder will be owned or
available for use by On-Line on identical terms and conditions
immediately subsequent to the Closing hereunder. On-Line has taken all
necessary action to protect each item of Intellectual Property that it
owns or uses in the jurisdiction in which it currently operates its
businesses.
(ii) On-Line has not interfered with, infringed
upon, misappropriated, or violated any Intellectual Property rights of
third parties, and none of the Sellers and the directors and officers
(and employees with responsibility for Intellectual Property matters)
of On-Line, has ever received any charge, complaint, claim, or notice
alleging any such interference, infringement, misappropriation, or
violation. To the Knowledge of the Sellers and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of On-Line, no third party has interfered with, infringed
upon, misappropriated, or violated any Intellectual Property rights of
On-Line.
(iii) Section 4(k) of the Disclosure Schedule
identifies each trademark, tradename, service mark, trade secret and
copyright registration which has been issued to On-Line, and
identifies each license, agreement, or other permission which On-Line
has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Sellers shall deliver to
the Buyer prior to the Closing correct and complete copies of all such
trademark, tradename, service mark, trade secret and copyright
registrations, applications, licenses, agreements, and permissions (as
amended to date), and have made available to the Buyer correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item. With
respect to each item of Intellectual Property that On-Line owns:
(A) to the Knowledge of the Sellers and
the directors and officers (and employees with responsibility
for Intellectual Property matters) of On-Line, the identified
owner possesses all right, title, and interest in and to the
item;
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<PAGE> 17
(B) the item is not subject to any
outstanding judgment, order, decree, stipulation, injunction,
or charge;
(C) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is
pending or, to the Knowledge of the Sellers and the directors
and officers (and employees with responsibility for
Intellectual Property matters) of On-Line, is threatened which
challenges the legality, validity, enforceability, use, or
ownership of the item; and
(D) to the Knowledge of the Sellers and
the directors and officers (and employees with responsibility
for Intellectual Property matters) of On-Line, On-Line has
never agreed to indemnify any person or entity for or against
any interference, infringement, misappropriation, or other
conflict with respect to the item.
(iv) Section 4(k) of the Disclosure Schedule also
identifies each item of Intellectual Property that any third party
owns and that On-Line uses pursuant to license, sublicense, agreement,
or permission (other than "off-the-shelf" computer software that has
not been customized for its use). The Sellers have supplied the Buyer
with correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
such item of used Intellectual Property and the "off the shelf"
computer software:
(A) the license, sublicense, agreement,
or permission covering the item is, to the Knowledge of the
Sellers and the directors and officers (and employees with
responsibility for Intellectual Property matters) of On-Line,
legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement,
or permission will continue to be, to the Knowledge of the
Sellers and the directors and officers (and employees with
responsibility for Intellectual Property matters) of On-Line,
legal, valid, binding, enforceable, and in full force and
effect on identical terms following the Closing;
(C) to the Knowledge of the Sellers and
the directors and officers (and employees with responsibility
for Intellectual Property matters) of On-Line, no party to the
license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse
of time would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
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<PAGE> 18
(D) to the Knowledge of the Sellers and
the directors and officers (and employees with responsibility
for Intellectual Property matters) no party to the license,
sublicense, agreement, or permission has repudiated any
provision thereof;
(E) to the Knowledge of the Sellers and
the directors and officers (and employees with responsibility
for Intellectual Property matters) of On-Line, the underlying
item of Intellectual Property is not subject to any
outstanding judgment, order, decree, stipulation, injunction,
or charge;
(F) to the Knowledge of the Sellers and
the directors and officers (and employees with responsibility
for Intellectual Property matters) of On-Line, no charge,
complaint, action, suit, proceedings, hearing, investigation,
claim or demand is pending or is threatened which challenges
the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(G) On-Line has not granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(l) REAL PROPERTY LEASES. Section 4(l) of the Disclosure
Schedule lists and describes briefly all real property leased or subleased to
On-Line. The Sellers have delivered to the Buyer correct and complete copies
of the leases and subleases listed in Section 4(l) of the Disclosure Schedule
(as amended to date). With respect to each lease and sublease listed in
Section 4(l) of the Disclosure Schedule to the Knowledge of the Sellers and the
directors and officers (and employees with responsibility for real property
lease matters) of On-Line:
(i) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the Closing;
(iii) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) no party to the lease or sublease has
repudiated any provision thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
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<PAGE> 19
(vi) to the Knowledge of the Sellers and the
directors and officers (and employees with responsibility for real
property lease matters)with respect to each sublease, the
representations and warranties set forth in subsections (i) through
(v) above are true and correct with respect to the underlying lease;
(vii) On-Line has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold; and
(viii) all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including
licenses and permits) required on the part of On-Line and to the
Sellers Knowledge, any other party, in connection with the operation
thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
(m) CONTRACTS. Section 4(m) of the Disclosure Schedule
lists the following contracts, agreements, Customer Contracts or Agreements,
and other written arrangements to which On-Line is a party:
(i) any written arrangement (or group of related
written arrangements) for the lease of personal property from or to
third parties providing for lease payments in excess of $25,000 per
annum;
(ii) any written arrangement (or group of related
written arrangements) for the purchase or sale of supplies, products,
or other personal property or for the furnishing or receipt of
services which either calls for performance over a period of more than
one year or involves more than the sum of $25,000;
(iii) any written arrangement concerning a
partnership or joint venture;
(iv) any written arrangement (or group of related
written arrangements) under which it has created, incurred, assumed,
or guaranteed (or may create, incur, assume, or guarantee)
indebtedness (including capitalized lease obligations) involving more
than $25,000 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(v) any written arrangement concerning
confidentiality or noncompetition;
(vi) any written arrangement involving Sellers and
his, her or its Affiliates;
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<PAGE> 20
(vii) any written arrangement with any of its
directors, officers, and employees in the nature of a collective
bargaining agreement, and with regard to full-time staff employees in
the nature of an employment agreement, or severance agreement;
(viii) any written arrangement under which the
consequences of a default or termination could have a Material adverse
effect on the assets, Liabilities, business, financial condition,
operations, results of operations, or future prospects of On-Line;
(ix) any written Customer Contract or Agreement; or
(x) any other written arrangement (or group of
related written arrangements) either involving more than $25,000 or
not entered into in the Ordinary Course of Business.
The Sellers have delivered to the Buyer a correct and complete
copy of each written arrangement listed in Section 4(m) of the Disclosure
Schedule (as amended to date). With respect to each written Material Customer
Contract or Agreement so listed: (A) the written arrangement is legal, valid,
binding, enforceable, and in full force and effect, except that the Sellers do
not have any Actual Knowledge that such arrangements are valid, binding and
enforceable against any third party; (B) the written arrangement will continue
to be legal, valid, binding, enforceable and in full force and effect on
identical terms following the Closing except that the Sellers do not have any
Actual Knowledge that such arrangement, will continue to be valid, binding and
enforceable against any third party; (C) to the Actual Knowledge of the Sellers
and the directors and officers (and employees with responsibility for Customer
Contracts or Agreements) of On-Line, no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. With respect to each other written arrangement listed in
Section 4(m) of the Disclosure Schedule (as amended to date), to the Knowledge
of the Sellers and the directors and officers (and employees with
responsibility for contracts, agreements and other written arrangements) of
On-Line: (A) the written arrangement is legal, valid, binding, enforceable, and
in full force and effect, except that the Sellers do not have any Actual
Knowledge that such arrangements are valid, binding and enforceable against any
third party; (B) the written arrangement will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing, except that the Sellers do not have any Actual Knowledge that such
arrangements are valid, binding and enforceable against any third party; (C) to
the Actual Knowledge of the Sellers no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. On-Line is not a party to any verbal contract, agreement,
or other arrangement which, if reduced to written form, would be required to be
listed in Section 4(m) of the Disclosure Schedule under the terms of this
Section 4(m). No unfilled Material Customer Contract or Agreement obligating
On-Line to perform services will result in a loss to On-Line upon completion of
performance. No customer which accounts for more than
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<PAGE> 21
$75,000 of the annualized revenues of the On-Line has indicated within the past
year that it will stop, or decrease the rate of, buying services from it.
(n) NOTES AND ACCOUNTS RECEIVABLE. All notes and
accounts receivable of On-Line are reflected properly on its books and records,
are valid receivables subject to no setoffs or counterclaims, are presently
current and collectible, and will be collected in accordance with their terms
at their recorded amounts, subject only to the reserve for bad debts set forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
as adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of On-Line.
(o) POWERS OF ATTORNEY. There are no outstanding powers
of attorney executed on behalf of On-Line.
(p) INSURANCE. Section 4(p) of the Disclosure Schedule
sets forth the following information with respect to each insurance policy
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which On-Line has
been a party, a named insured, or otherwise the beneficiary of coverage at any
time within the past five (5) years:
(i) the name, address, and telephone number of
the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the amount of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
With respect to each such insurance policy which is currently
in effect, for which a claim is currently pending, or under which a claim may
still be made, to the Knowledge of the Sellers and the directors and officers
(and employees responsible for insurance matters) of On-Line: (A) the policy is
legal, valid, binding, and enforceable and in full force and effect; (B) the
policy will continue to be legal, valid, binding, and enforceable and in full
force and effect on identical terms following the Closing Date; (C) neither
On-Line nor any other party to the policy is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, modification, or acceleration, under
the policy; and (D) no party to the policy has repudiated any provision
thereof. On-Line has been covered during the past five (5) years by insurance
in scope and amount customary and reasonable for the businesses in which it has
engaged
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<PAGE> 22
during the aforementioned period. Section 4(p) of the Disclosure Schedule
describes any self-insurance arrangements affecting On-Line.
(q) LITIGATION. Section 4(q) of the Disclosure Schedule
sets forth each instance in which On-Line (i) is subject to any unsatisfied
judgment, order, decree, stipulation or injunction or (ii) is a party or, to
the Knowledge of the Sellers and the directors and officers (and employees with
responsibility for litigation matters) of On-Line, is threatened to be made a
party to any complaint, action, suit, proceeding, hearing, or investigation of
or in any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. Except as set
forth on Section 4(q) of the Disclosure Schedule, none of the Sellers and the
directors and officers (and employees with responsibility for litigation
matters) of On-Line has any reason to believe that any such complaint, action,
suit, proceeding, hearing, or investigation may be brought or threatened
against On-Line.
(r) EMPLOYEES. Section 4(r) of the Disclosure Schedule
lists all non-temporary employees and officers of On-Line on the date hereof
along with the amount of the current annual salaries and total compensation
paid or due for services to each non-temporary employee or officer from January
1, 1995 to December 31, 1995 and a full and complete description of any
commitments to such non-temporary employees and officers with respect to
compensation payable thereafter. To the Knowledge of the Sellers and the
directors and officers (and employees with responsibility for employment
matters) of On-Line, no key employee or group of employees has any plans to
terminate employment with On- Line. On-Line is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. On-Line has not committed any unfair labor practice. None of the
Sellers and the directors and officers (and employees with responsibility for
employment matters) of On-Line, has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to full-time staff employees of On-Line.
(s) EMPLOYEE BENEFITS. Section 4(s) of the Disclosure
Schedule lists all Employee Benefit Plans that On-Line maintains or to which
On-Line contributes for the benefit of any current or former employee of
On-Line.
(i) Each Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all
respects with the applicable requirements of ERISA and the Code.
(ii) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's
and Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each Employee Benefit Plan. The
requirements of Part 6 of Subtitle B of Title I of ERISA have been met
with respect to each Employee Welfare Benefit Plan.
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<PAGE> 23
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice of
On-Line. All premiums or other payments for all periods ending on or
before the Closing Date have been paid or reserved for with respect to
each Employee Welfare Benefit Plan.
(iv) Each Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Code Sec. 401(a) and has
received, within the last two years, a favorable determination letter
from the Internal Revenue Service.
(v) The market value of assets under each
Employee Pension Benefit Plan (other than any Multiemployer Plan)
equals or exceeds the present value of Liabilities thereunder
(determined on a plan termination basis). No Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to
which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any Employee Pension Benefit Plan
(other than any Multiemployer Plan) has been instituted or, to the
Knowledge of the Sellers and the directors and officers (and employees
with responsibility for employee benefits matters) of On-Line,
threatened.
(vi) There have been no non-exempt Prohibited
Transactions with respect to any Employee Benefit Plan. To the
Knowledge of the Sellers and the directors and officers (and employees
with responsibility for employee benefits matters), no Fiduciary has
any Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the
assets of any Employee Benefit Plans. No charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand with
respect to the administration or the investment of the assets of any
Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the Knowledge of the Sellers and the directors and
officers (and employees with responsibility for employee benefits
matters) of On-Line, threatened. None of the Sellers and the
directors and officers (and employees with responsibility for employee
benefits matters) of On-Line has any Knowledge of any Basis for any
such charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand.
(vii) Section 4(s) of the Disclosure Schedule shall
set forth correct and complete copies of (A) the plan documents and
summary plan descriptions, (B) the most recent determination letter
received from the Internal Revenue Service, (C) the most recent Form
5500 Annual Report, and (D) all related trust agreements, insurance
contracts, and other funding agreements which implement each Employee
Benefit Plan.
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<PAGE> 24
On-Line and the other members of the Controlled Group of
Corporations that includes On-Line, if any, does not contribute to, has never
contributed to, nor ever has been required to contribute to any Multiemployer
Plan or has any Liability (including withdrawal Liability) under any
Multiemployer Plan. On-Line has not incurred, and none of the Sellers and the
directors and officers (and employees with responsibility for employee benefits
matters) of On-Line has any reason to expect that On-Line will incur any
Liability to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal Liability) or under the Code with
respect to any Employee Pension Benefit Plan that On-Line and the Controlled
Group of Corporations which includes On-Line, if any, maintains or ever has
maintained or to which any of them contributes, ever has contributed, or ever
has been required to contribute. Section 4(s) of the Disclosure Schedule shall
set forth whether or not On-Line maintains or ever has maintained or
contributes, ever has contributed, or ever has been required to contribute to
any Employee Welfare Benefit Plan providing health, accident, or life insurance
benefits to former employees, their spouses, or their dependents (other than as
required by ERISA or applicable state insurance laws).
(t) GUARANTIES. On-Line is not a guarantor nor is it
otherwise liable for any Liability or obligation (including indebtedness) of
any other person.
(u) ENVIRONMENT, HEALTH, AND SAFETY.
(i) To the Actual Knowledge of the Sellers,
On-Line and its respective predecessors and Affiliates has complied in
all Material respects with all laws (including rules and regulations
thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning the environment, public health and
safety, and employee health and safety, and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against any of them alleging any
failure to comply with any such law or regulation.
(ii) To the Actual Knowledge of the Sellers,
On-Line has no Liability (and there is no Basis related to the past or
present operations, properties, or facilities of On-Line, its
Subsidiaries, and their respective predecessors and Affiliates for any
present or future complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against On-Line giving rise to any
Liability) under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Federal Water Pollution Control Act of 1972,
the Clean Air Act of 1970, the Safe Drinking Water Act of 1974, the
Toxic Substances Control Act of 1976, the Refuse Act of 1899, or the
Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), or any other law (or rule or regulation thereunder) of any
federal, state, local, or foreign government (or agency thereof),
concerning release or threatened release of hazardous substances,
public health and safety, or pollution or protection of the
environment.
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<PAGE> 25
(iii) To the Actual Knowledge of the Sellers,
On-Line has no Liability (and On-Line, its Subsidiaries, and their
respective predecessors and Affiliates has not handled or disposed of
any substance, arranged for the disposal of any substance, or owned or
operated any property or facility in any manner that could form the
Basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common
law or pursuant to any statute) against On-Line giving rise to any
Liability) for damage to any site, location, or body of water (surface
or subsurface) or for illness or personal injury.
(iv) To the Actual Knowledge of the Sellers,
On-Line has no Liability (and there is no Basis for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against On-Line giving rise to any
Liability) under the Occupational Safety and Health Act, as amended,
or any other law (or rule or regulation thereunder) of any federal,
state, local, or foreign government (or agency thereof) concerning
employee health and safety.
(v) To the Actual Knowledge of the Sellers,
On-Line has no Liability (and On-Line has not exposed any employee to
any substance or condition that could form the Basis for any present
or future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to
statute) against On-Line giving rise to any Liability) for any illness
of or personal injury to any employee.
(vi) To the Actual Knowledge of the Sellers,
On-Line has obtained and been in compliance in all Material respects
with all of the terms and conditions of all permits, licenses, and
other authorizations which are required under, and has complied in all
Material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all federal, state,
local, and foreign laws (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
thereunder) relating to public health and safety, worker health and
safety, and pollution or protection of the environment, including laws
relating to emissions, discharge, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
(vii) To the Actual Knowledge of the Sellers, all
properties and equipment of On-Line have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2 trans-dichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances.
(viii) To the Actual Knowledge of the Sellers, no
pollutant, contaminant, or chemical, industrial, hazardous, or toxic
material or waste ever has been buried, stored,
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<PAGE> 26
spilled, leaked, discharged, emitted, or released on any real property
that On-Line owns or ever has owned or, to the Actual Knowledge of the
Sellers, that On-Line leases or ever has leased.
None of the representations and warranties contained in this
Section 4(u) pertain to or relate to the facilities, properties or premises
owned or used by On-Line's customers.
(v) LEGAL COMPLIANCE.
(i) To the Knowledge of Sellers, On-Line has
complied in all Material respects with all laws (including rules and
regulations thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand, or
notice has been filed or commenced against On-Line which is currently
pending and alleges any failure to comply with any such law or
regulation.
(ii) On-Line has complied in all Material respects
with all applicable laws (including rules and regulations thereunder)
relating to the employment of labor, employee civil rights, and equal
employment opportunities.
(iii) To the Knowledge of Sellers and the directors
and officers (and employees with responsibility for legal matters) of
On-Line, On-Line has not violated in any respect or received a notice
or charge asserting any violation of the Sherman Act, the Clayton Act,
the Robinson-Patman Act, or the Federal Trade Act, each as amended.
(iv) On-Line has not:
(A) made or agreed to make any contribution,
payment, or gift of funds or property to any governmental
official, employee, or agent where either the contribution,
payment, or gift or the purpose thereof was illegal under the
laws of any federal, state, local, or foreign jurisdiction;
(B) established or maintained any unrecorded
fund or asset for any purpose, or made any false entries on
any books or records for any reason; or
(C) made or agreed to make any contribution,
or reimbursed any political gift or contribution made by any
other person in excess of $25,000, to any candidate for
federal, state, local, or foreign public office.
(v) On-Line has filed in a timely manner all
reports, documents, and other materials it was required to file (and
the information contained therein was correct and complete in all
respects) under all applicable Material laws (including rules and
regulations thereunder).
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<PAGE> 27
(vi) On-Line has possession of all records and
documents it was required to retain under all applicable laws
(including rules and regulations thereunder).
(w) CERTAIN BUSINESS RELATIONSHIPS WITH ON-LINE. None of
the Sellers and their Affiliates have been involved in any business arrangement
or relationship (other than that of employer-employee) with On-Line within the
past twelve (12) months, and Sellers and their Affiliates do not own any
Material property or right, tangible or intangible, which is used in the
business of On-Line.
(x) BROKERS' FEES. On-Line has no Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(w) DISCLOSURE. The representations and warranties
contained in this Section 4 do not contain any untrue statement of a fact or
omit to state any fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its best
efforts to take all action and to do all things necessary, proper, or advisable
to consummate and make effective the transactions contemplated by this
Agreement (including satisfying the closing conditions set forth in Section 7
below).
(b) NOTICES AND CONSENTS. The Sellers will cause On-Line
to give any notices to third parties, and will cause On-Line to use its
reasonable best efforts to obtain third-party consents, that the Buyer may
reasonably request in connection with the matters pertaining to On-Line
disclosed or required to be disclosed in the Disclosure Schedule. Each of the
Parties will take any additional action (and the Sellers will cause On-Line to
take any additional action) without any obligation to incur any Material cost
or expense that may be necessary, proper, or advisable in connection with any
other notices to, filings with, and authorizations, consents, and approvals of
governments, governmental agencies, and third parties that it may be required
to give, make, or obtain.
(c) OPERATION OF BUSINESS. Except as contemplated hereby
or as is incidental to or in furtherance of the transactions contemplated
hereby, the Sellers will not cause or permit On-Line to engage in any practice,
take any action, embark on any course of inaction, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit On-Line to
engage in any practice, take any action, embark on any course of inaction, or
enter into any transaction of the sort described in Section 4(f) above which is
outside the Ordinary Course of Business.
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<PAGE> 28
(d) PRESERVATION OF BUSINESS. The Sellers will cause
On-Line to utilize its best efforts to keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(e) ACCESS.
(i) Only in the event that Buyer has not
exercised its rights to terminate this Agreement on the terms provided
in Section 9(a)(iii) hereof, the Sellers will permit, and the Sellers
will cause On-Line to permit, representatives of the Buyer to have
access at reasonable times, and in a manner so as not to interfere
with the normal business operations of On-Line, to the headquarter
offices of On-Line, and all books, records, contracts, Tax records,
and documents of or pertaining to On-Line. Notwithstanding the above,
Buyer's on site investigation of On-Line shall be limited to ten (10)
business days, unless otherwise agreed to by Buyer and Sellers in
writing; provided, however, that such limitation of time shall not
otherwise limit Buyer's investigations of On-Line off site. During
Buyer's on site investigation of On-Line, Buyer shall not discuss any
aspects of the operations of On-Line with any employee of On-Line
other than the Sellers, and Buyer shall direct all requests for
information and materials only through the Sellers, unless otherwise
agreed to by Buyer and the Sellers in writing.
(ii) Only in the event that Buyer has not
exercised its rights to terminate this Agreement on the terms set
forth in Section 9(a)(iii) hereof, then Buyer shall proceed to arrange
with the Sellers a mutually agreeable time and place (within ten (10)
days prior to the Closing) at which Buyer may conduct interviews with
up to twenty (20) key employees and/or customers of On-Line mutually
agreed to by Buyer and the Sellers. Such interviews shall be in
strict conformity with a format mutually agreed to by Buyer and the
Sellers.
(f) NOTICE OF DEVELOPMENTS. The Sellers will give prompt
written notice to the Buyer of any Material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of On-Line. Each Party will give prompt written notice to
the others of any Material development affecting the ability of the Parties to
consummate the transactions contemplated by this Agreement. No disclosure by
any Party pursuant to this Section 5(f) however, shall be deemed to amend or
supplement Annex II, Annex III, or the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, and/or breach of covenant.
(g) EXCLUSIVITY. The Sellers will not (and the Sellers
will not cause or permit On-Line to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person relating to any (A)
liquidation, dissolution, or recapitalization, (B) merger or consolidation, (C)
acquisition or purchase of securities or assets, or (D) similar transaction or
business combination involving On-Line or (ii) participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any
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<PAGE> 29
effort or attempt by any person to do or seek any of the foregoing. The
Sellers will notify the Buyer immediately if any person makes any proposal,
offer, inquiry or contact with respect to any of the foregoing.
(h) PREPARATION OF FINANCIAL STATEMENTS. The Sellers
will cause On-Line (at the joint cost and expense of the Sellers and Buyer) to
cause Ernst & Young, L.L.P. to prepare (as soon as is reasonably practicable
hereafter) the audited financial statements for the periods ending on or about
December 31, 1994 and December 31, 1995, and the partial period between January
1, 1996 and the Closing Date.
6. ADDITIONAL COVENANTS. The Parties further agree as follows:
(a) GENERAL. In case at any time after the Closing any
further action is legally necessary or reasonably desirable to carry out the
purposes of this Agreement, each of the Parties will take such further action
(including the execution and delivery of such further instruments and
documents) as any other Party reasonably may request, all at the sole cost and
expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 8 below). The Sellers acknowledges and
agrees that from and after the Closing the Buyer will be entitled to possession
of all documents, books, records, agreements, and financial data of any sort
relating to On-Line; provided, however, that Sellers shall be entitled for a
period of seven (7) years after the Closing to make copies of such books and
records at their sole cost and expense and the Buyer will maintain the books,
records and Material financial data relating to On-Line for the same period of
time.
(b) LITIGATION SUPPORT. In the event and for so long as
any Party actively is contesting or defending against any charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving On-Line, each of the other Parties will cooperate
with him, her or it and his, her or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) TRANSITION. Sellers will not take any action that
primarily is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of On-Line
from maintaining the same business relationships with On-Line after the Closing
for a period of twenty-four (24) months thereafter as it maintained with
On-Line prior to the Closing. Sellers will refer all customer inquiries
relating to the business of On-Line to the Buyer from and after the Closing for
a period of twenty-four (24) months thereafter.
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<PAGE> 30
(d) CONFIDENTIALITY. Sellers will treat and hold as such
all of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement for a period of three (3)
years from the Closing, and deliver promptly to the Buyer or destroy, at the
request and option of the Buyer, all tangible embodiments (and all copies) of
the Confidential Information which are in his, her or its possession except as
otherwise permitted herein. In the event that the Sellers are 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 Sellers will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, the Sellers are, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, the Sellers may disclose the Confidential Information to the
tribunal; provided, however, that the Sellers shall use his, her or its
reasonable best efforts to obtain, at the reasonable request of the Buyer and
at the sole expense of Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
(e) RELEASE OF GUARANTIES. Buyer shall take all
reasonable best efforts necessary to fully, completely and unconditionally
release and/or substitute itself or On-Line within ninety (90) days after the
Closing as guarantor for the Sellers on all lease obligations listed on Section
4(l) of the Disclosure Schedule, and the Buyer and On-Line hereby agree to
indemnify, defend and hold harmless the Sellers from any loss, cost or expense
related to the failure of the Buyer and On-Line to obtain the releases herein
provided.
(f) MONITORING INFORMATION. During the term of this
Agreement, the Sellers shall cause On-Line to deliver (on a bi-weekly basis)
the monitoring information listed on Annex VI hereto.
(g) SECTION 338(H)(10) ELECTION. The Sellers and Buyer
shall join in making a timely election (but in no event later than sixty (60)
days following the Closing) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states, with respect to the sale and purchase of
the On-Line Shares pursuant to this Agreement, and each party shall provide to
the others all necessary information to permit such elections to be made.
Buyer and the Sellers shall, as promptly as practicable following the Closing
Date, take all actions necessary and appropriate (including filing such forms,
returns, schedules and other documents as may be required) to effect and
preserve timely elections. All Taxes attributable to the elections made
pursuant to this Section 6(g) shall be the liability of the Sellers. In
connection with such elections, within sixty (60) days following the Closing
Date, Buyer and the Sellers shall act together in good faith to determine and
agree upon the "deemed sale price" to be allocated to each asset of On-Line in
accordance with Treasury Regulation Section 1.338(h)(10)-1(f) and the other
regulations under Section 338 of the Code.
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<PAGE> 31
Notwithstanding the generality of the immediately preceding sentence, Buyer and
the Sellers agree that the "DEEMED SALE PRICE" shall be allocated to the fixed
assets and the monetary assets of On-Line at its fair market value as of the
Closing Date as determined as part of the determination of the Adjusted Net
Worth of On-Line in accordance with Section 2(c) hereof and the balance of the
"deemed sale price" shall be allocated to goodwill and other intangible assets
of On-Line, but in no event shall (A) the "deemed sale price" allocated to the
non-competition covenant exceed $50,000, and (B) the "deemed sale price"
allocated to the fixed assets exceed their depreciated value. Both Buyer and
the Sellers shall report the tax consequences of the transactions contemplated
by this Agreement consistently with such allocations and shall not take any
position inconsistent with such allocations in any Tax Return or otherwise. The
Sellers shall be liable for, and shall indemnify and hold Buyer and On-Line
harmless against, any Taxes or other costs attributable to (i) a failure on the
part of the Sellers to take all actions required of him under this Section
6(g); or (ii) a failure on the part of On-Line to qualify as an "S corporation"
for which the Section 338(h)(10) election may be made.
(h) LANDLORDS' CONSENTS. Sellers shall cause on or
before the expiration of thirty (30) days after the Closing Date On-Line to
obtain from its landlords (to the extent required under the pertinent premises
lease) written consent to the assignment of said lease to Buyer which
assignment is deemed to have resulted from the transactions contemplated by
this Agreement.
(i) ADDITIONAL TAX MATTERS.
(i) The Sellers shall use their best
efforts to cause On-Line to file with the appropriate governmental
authorities all Tax Returns required to be filed by it for any taxable
period ending prior to the Closing Date and shall remit any Taxes due
in respect of such Tax Returns. The Buyer shall cause On-Line to file
with the appropriate governmental authorities all Tax Returns required
to be filed by it for any taxable period beginning before and ending
after the Closing Date and shall remit any Taxes due in respect of
such Tax Returns. The Buyer will allow the Sellers an opportunity to
review and comment upon the Tax Returns for all periods commencing
prior to the Closing Date and ending after the Closing Date. The
Buyer will take no position on such Tax Returns that relates to
On-Line that would be inconsistent with prior filings and which would
Materially adversely affect the Sellers after the Closing Date.
(ii) The Parties hereto shall, and shall
cause On-Line to, provide such necessary information as any other
Party hereto may reasonably request in connection with the preparation
of such Party's Tax Returns, or to reasonably respond to any audit,
claim for refund or credit or otherwise satisfy any obligation or
requirement relating to Taxes of On-Line.
(iii) Buyer and the Sellers recognize that
each of them will need access, from time to time, after the Closing
Date, to certain accounting and Tax records and information held by
the Buyer and/or On-Line to the extent such records and information
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<PAGE> 32
pertain to events occurring on or prior to the Closing Date;
therefore, Buyer agrees to cause On-Line to (A) use its best efforts
to properly retain and maintain such records for a period of six (6)
years after the Closing, and (B) allow the other Party and its agents
and representatives at times and dates mutually acceptable to the
Parties, to inspect, review and make copies of such records as such
other party may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and at the
other Party's expense.
(iv) The Sellers shall reimburse the
Buyer for the Taxes for which they are liable pursuant to Section
8(b)(v) hereof, but which are payable in respect of Tax Returns to be
filed by the Buyer pursuant to Section 6(i)(i) hereof within ten (10)
business days after receipt of written demand by Buyer; however, only
to the extent such Taxes are in excess of the reserve for such Tax
Liability used to determine the Adjusted Net Worth of On-Line.
7. CONDITIONS TO OBLIGATIONS TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth
in Section 3(a) and Section 4 above shall be true and correct in all
Material respects at and as of the Closing Date;
(ii) the Sellers shall have performed and complied
with all of his, her or its covenants hereunder in all Material
respects through the Closing;
(iii) On-Line shall have procured all of the third
party consents required in Section 5(b) above;
(iv) no action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement, (B) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation, or (C) have a Material adverse effect on the
right of the Buyer to own, operate, or control the On-Line Shares or
On-Line (and no such judgment, order, decree, stipulation, injunction,
or charge shall be in effect);
(v) the Sellers shall have delivered to the Buyer
a certificate (without any additional qualification) to the effect
that each of the conditions specified above in Section 7(a)(i)-(iv) is
satisfied in all respects;
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<PAGE> 33
(vi) the Parties and On-Line shall have received
all other authorizations, consents and approvals of governments and
governmental agencies set forth herein and in Annex II, Annex III and
the Disclosure Schedule;
(vii) the Buyer shall have received from each of
the persons listed on Annex IV an executed employment agreement in the
form and substance attached hereto as Exhibit C;
(viii) the Buyer shall have received from each of
the persons listed on Annex V an executed non-competition agreement in
the form and substance attached hereto as Exhibit D;
(ix) the Buyer shall have received the
resignations, effective as of the Closing, of each director and
officer of On-Line other than those whom the Buyer shall have
specified in writing at least five (5) business days prior to the
Closing; and
(x) the Buyer shall be satisfied that since July
1, 1996, no Material Customer has terminated or curtailed its
relationship with On-Line and (ii) that On-Line has not lost any other
customer or customers representing more than five percent (5%) of its
business;
(xi) the Buyer shall be satisfied that it will get
a stepped-up basis in the assets of On- Line pursuant to the election
under Section 338(h)(10) of the Code as provided for in Section 6(g);
(xii) the Buyer shall be satisfied that at Closing
the Adjusted Net Worth of On-Line shall be equal to or greater than
$3,572,439.55;
(xiii) the Sellers shall have caused On-Line to
purchase and then cancel each outstanding employee stock option,
whether or not exercisable, at no cost to the Buyer;
(xiv) the Buyer shall be satisfied that at the
Closing the Net Working Capital of On-Line shall equal or exceed
$3,487,718.55;
(xv) the Sellers shall have assumed and/or
discharged all deferred taxes (except for any state taxes which are
included in the determination of Adjusted Net Worth of On-Line; and
(xvi) the Sellers shall have caused all officers,
directors and/or employees of On-Line to have repaid in full all debts
and other obligations, if any, owed to On-Line.
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<PAGE> 34
The Buyer may waive any condition specified in this Section
7(a) if it executes a writing so stating at or prior to the Closing. If the
Closing occurs, the Buyer will be conclusively deemed to have waived any
unsatisfied conditions to its obligations hereunder.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLERS. The
obligations of the Sellers to consummate the transactions to be performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth
in Section 3(b) above shall be true and correct in all Material
respects at and as of the Closing Date;
(ii) the Buyer shall have performed and complied
with all of its covenants hereunder in all Material respects through
the Closing;
(iii) no action, suit or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign
jurisdiction wherein an unfavorable judgment, order, decree,
stipulation, injunction, or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment, order, decree,
stipulation, injunction, or charge shall be in effect);
(iv) the Buyer shall have delivered to the Sellers
a certificate (without any additional qualifications) to the effect
that each of the conditions specified above in Section 7(b)(i)-(iii)
is satisfied in all respects;
(v) the Parties and On-Line shall have received
all other authorizations, consents, and approvals of governments and
governmental agencies set forth herein and in Annex II, Annex III, and
the Disclosure Schedule;
(vi) each of the persons listed on Annex IV shall
have received from the Buyer an executed employment agreement in the
form and substance attached hereto as Exhibit C;
(vii) Sellers shall have received from the Buyer an
executed non-competition agreement in the form and substance attached
hereto as Exhibit D; and
(viii) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby
will be reasonably satisfactory in form and substance to the Sellers.
The Sellers may waive any condition specified in this Section
7(b) if they execute a writing so stating at or prior to the Closing.
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<PAGE> 35
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL; EXCLUSIVE REMEDIES; EXCLUSION OF
CONSEQUENTIAL DAMAGES.
(i) All of the representations, warranties,
covenants, promises and agreements contained in Section 3 (other than
those set forth in Section 3(a)(ii) and Section 3(b)(ii),
respectively), Section 4(h), Section 4(s), Section 6(b), Section 6(d),
Section 6(e), Section 6(g) and Section 6(i) hereof and this Section 8
shall survive the Closing hereunder and continue in full force and
effect for a period of five (5) years thereafter. All other
representations, warranties, covenants, promises, and agreements
contained in this Agreement or in any other agreement, instrument,
certificate or other document executed at the Closing or otherwise in
connection with this Agreement or the transactions contemplated hereby
shall survive the Closing hereunder and continue in full force and
effect for a period of two (2) years and one (1) day thereafter.
(ii) The provisions of this Section 8 shall be the
exclusive basis for the assertion of claims against, or the imposition
of liability upon, the Sellers or either of them in connection with
this Agreement and/or the transactions contemplated hereby, whether
based on contract, tort (including strict liability), statute or
otherwise.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) In the event any of the Sellers breaches any
of their Joint and Several representations, warranties, and covenants
contained herein, and provided that the particular representation,
warranty, or covenant survives the Closing and that the Buyer makes a
written claim for indemnification against the Seller pursuant to
Section 10(h) below within the applicable survival period, then
Sellers agree to indemnify the Buyer from and against the entirety of
any Adverse Consequences the Buyer suffered through and after the date
of the claim for indemnification (including any Adverse Consequences
the Buyer will suffer after the end of the applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by the breach; provided, however, that the Sellers shall not
have any obligation to indemnify the Buyer from and against any
Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by the breach of any representation or
warranty of any of the Sellers contained in Section 4 above (i) until
Buyer has suffered aggregate losses by reason of all such breaches in
excess of a $40,000 threshold (at which point the Sellers will be
obligated to indemnify the Buyer from and against all such aggregate
losses including losses back to the first dollar) and (ii) in excess
of $4,000,000; provided further, however, that the limitation set
forth in (ii) above specifically shall not apply to the liability of
Sellers with respect to Adverse Consequences resulting from or
attributable to intentional fraud or any willful misconduct by any of
the Sellers and/or breaches of the representations and warranties
contained in Section 4(g), Section 4(h) and Section 4(n) hereof.
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<PAGE> 36
(ii) In the event any of the Sellers breaches any
of their Several representations, warranties, and covenants contained
in Section 3(a) hereof, and provided that the particular
representation, warranty, or covenant survives the Closing and that
the Buyer makes a written claim for indemnification against the
Sellers pursuant to Section 10(h) below within the applicable survival
period, then the Sellers agree to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer suffers through and
after the date of the claim for indemnification (including any Adverse
Consequences the Buyer will suffer after the end of the applicable
survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach; provided, however, that the
Sellers shall not have any obligation to indemnify the Buyer from and
against any Adverse Consequences resulting from, arising out of, or
relating to, in the nature of, or caused by the breach of any
representation or warranty of any of the Sellers contained in Section
3(a) in excess of the Purchase Price paid to Sellers at Closing (as it
may subsequently be adjusted pursuant to this Agreement, including
without limitation by reason of the provisions of Section 2(c)
hereof).
(iii) Sellers agree to indemnify the Buyer from and
against the entirety of any Adverse Consequences the Buyer suffers
resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of On-Line arising under Reg. Section 1.1502-6
(because On-Line or Subsidiary once was a member of an Affiliated
Group during any part of any consolidated return year within any part
of which consolidated return year any corporation other than On-Line
and its current Subsidiaries also was a member of the Affiliated
Group); provided, that in any event the aggregate liability of the
Sellers under this Agreement, including without limitation this
Section 8(b)(iii), shall not exceed the Purchase Price paid to the
Sellers at Closing (as it may subsequently be adjusted pursuant to
this Agreement, including without limitation by reason of the
provisions in Section 2(c) hereof).
(iv) Sellers agree to indemnify the Buyer from and
against the entirety of any Taxes which may become due and owing to
the State of Florida by reason of the transactions contemplated by
this Agreement; provided, that in any event the aggregate liability of
the Sellers under this Agreement, including without limitation this
Section 8(b)(iv), shall not exceed the Purchase Price paid to the
Sellers at Closing (as it may subsequently be adjusted pursuant to
this Agreement, including without limitation, by reason of the
provisions of Section 2(c) hereof).
(v) Sellers shall be liable for, and hereby
indemnify, the Buyer for all income Taxes imposed on On-Line with
respect to any taxable year or period beginning before and ending
after the Closing Date, for the portions of such taxable year or
period ending prior to the Closing Date. In order to apportion
appropriately any income Taxes relating to any taxable year or period
that begins before and ends after the Closing Date, the Parties hereto
shall, to the extent permitted or not prohibited by applicable law,
elect with the relevant taxing authority, if required or necessary, to
terminate the taxable year of On-Line as of the Closing Date. In any
case where applicable law does not permit On-Line to treat such date
as the end of a taxable year or period, then whenever it is necessary
to
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<PAGE> 37
determine the liability for income Taxes of On-Line, for a portion of
a taxable year or period, such determination shall (unless otherwise
agree to in writing by the Buyer and the Sellers) be determined by a
closing of On-Line's books, except that exemptions, allowances or
deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis. In
no event shall such apportionment of income Taxes be greater than the
income Taxes which would have been allocated to On-Line if such income
Taxes had been based upon a time period in proportion to the number of
days during such taxable year or period the Sellers and Buyer owned
the stock in On-Line; provided, that in any event the aggregate
liability of the Sellers under this Agreement, including without
limitation this Section 8(b)(v), shall not exceed the Purchase Price
paid to the Sellers at Closing (as it may subsequently be adjusted
pursuant to this Agreement, including without limitation by reason of
the provisions of Section 2(c) hereof).
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE
SELLERS. In the event the Buyer breaches any of its representations,
warranties, and covenants contained herein, and provided that the particular
representation, warranty, or covenant survives the Closing and that the Sellers
make a written claim for indemnification against the Buyer pursuant to Section
10(h) below within the applicable survival period, then the Buyer agrees to
indemnify the Sellers from and against the entirety of any Adverse Consequences
the Sellers may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Sellers may suffer
after the end of the applicable survival period) resulting from, arising out
of, relating to, in the nature of, or caused by the breach. In addition, the
Buyer agrees to indemnify the Sellers from and against the entirety of any
income Taxes which may become due and owing by On-Line on any revenues
generated by On-Line on or after the Closing.
(d) MATTERS INVOLVING THIRD PARTIES. If any third party
shall notify any Party (the "INDEMNIFIED PARTY") with respect to any matter
which may give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8, then the Indemnified Party shall
notify in writing each Indemnifying Party thereof promptly; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any liability or
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is damaged. In the event any Indemnifying Party notifies in
writing the Indemnified Party within ten (10) days after the Indemnified Party
has given notice of the matter that the Indemnifying Party is assuming the
defense thereof, (A) the Indemnifying Party will defend the Indemnified Party
against the matter with counsel of his, her or its choice reasonably
satisfactory to the Indemnified Party, (B) the Indemnified Party may retain
separate co-counsel at his, her or its sole cost and expense (except that the
Indemnifying Party will be responsible for the fees and expenses of the
separate co-counsel to the extent the Indemnified Party reasonably concludes
that the counsel the Indemnifying Party has selected has a conflict of
interest), (C) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably),
and (D) the Indemnifying Party will not consent to the entry of any judgment
with respect to the matter, or enter into any settlement
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<PAGE> 38
which does not include a provision whereby the plaintiff or claimant in the
matter releases the Indemnified Party from all Liability with respect thereto,
without the written consent of the Indemnified Party (not to be withheld
unreasonably). In the event no Indemnifying Party notifies in writing the
Indemnified Party within ten (10) days after the Indemnified Party has given
notice of the matter that the Indemnifying Party is assuming the defense
thereof, however, the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate. At any time after commencement of any such action, any
Indemnifying Party may request an Indemnified Party to accept a bona fide offer
from the other Parties to the action for a monetary settlement payable solely
by such Indemnifying Party (which does not burden or restrict the Indemnified
Party nor otherwise prejudice him or her) whereupon such action shall be taken
unless the Indemnified Party determines that the dispute should be continued,
the Indemnifying Party shall be liable for indemnify hereunder only to the
extent of the lesser of (i) the amount of the settlement offer or (ii) the
amount for which the Indemnified Party may be liable with respect to such
action. In addition, the Party controlling the defense of any third party
claim shall deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties
shall make appropriate adjustments for Tax benefits and insurance proceeds
(reasonably certain of receipt and utility in each case) in determining the
amount of Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to
the Purchase Price.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may be
terminated as provided below:
(i) The Buyer and the Sellers may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(ii) The Buyer may terminate this Agreement in the
event Sellers are in breach of any Material representation, warranty
or covenant contained in this Agreement by giving written notice to
the Sellers at any time within five (5) days after the date Buyer
becomes aware of said breach, and the Sellers may terminate this
Agreement in the event the Buyer is in breach of any Material
representation, warranty, or covenant contained in this Agreement by
giving written notice to the Buyer at any time within five (5) days
after the date Sellers become aware of said breach;
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<PAGE> 39
(iii) The Buyer may terminate this Agreement by
giving written notice to the Sellers within ten (10) days of the date
of this Agreement if the Buyer is not reasonably satisfied with the
results of its continuing business, legal and accounting due diligence
to that date, including but not limited to each and every item set
forth on each Disclosure Schedule delivered by the Sellers to Buyer.
(iv) No later than five (5) days before the
Closing, the Buyer may terminate this Agreement by giving written
notice to the Sellers if the Buyer is not reasonably satisfied with
the results of its interviews with the key employees and/or customers
of Targets provided for in Section 5(e)(ii) hereof:
(v) The Buyer may terminate this Agreement by
giving written notice to the Sellers at any time prior to the Closing
if the Closing shall not have occurred on or before September 30,
1996;
(vi) The Sellers may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing if
the Closing shall not have occurred on or before September 30, 1996;
and
(vii) The Buyer may terminate this Agreement at the
Closing in the event the Buyer in its sole reasonable discretion is
not satisfied with any Material amendments to the Disclosure Schedule
delivered to Buyer after the signing of this Agreement or on the
Closing Date.
Nothing contained in this Section 9(a) shall alter, affect,
modify or restrict either Parties' rights to rely on and/or seek
indemnification for a breach of any of the representations and warranties
and/or conditions or covenants of any of the Parties contained in this
Agreement and occurring prior to such termination.
(b) EFFECT OF TERMINATION. If any Party terminates this
Agreement pursuant to Section 9(a) above, all obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach).
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<PAGE> 40
10. MISCELLANEOUS.
(a) THE SELLERS.
(i) When the Sellers make a representation,
warranty, or covenant herein that is referred to herein as the
"SEVERAL" obligation of the Sellers, this means that, subject to the
limitations set forth herein, the Sellers will be solely responsible
for any Adverse Consequences the Buyer may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any breach
thereof. The covenants of the Sellers in Section 2(a) above
concerning the sale of his, her or its On-Line Shares to the Buyer and
the representations and warranties of the Sellers in Section 3(a)
above concerning the transaction are examples of Several obligations.
(ii) When the Sellers make a representation,
warranty, or covenant herein that is referred to herein as the "JOINT
AND SEVERAL" obligation of the Sellers, this means that, subject to
the limitations set forth herein, Sellers will be responsible for the
entirety of any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any
breach thereof. The representations and warranties of the Sellers in
Section 4 above concerning On-Line are examples of Joint and Several
obligations.
(b) PRESS RELEASES AND ANNOUNCEMENTS. Except as may be
required by applicable securities laws, no Party shall issue any press release
or announcement relating to the subject matter of this Agreement prior to, at
or about the Closing without the prior written approval of the Buyer and the
Sellers.
(c) NO THIRD-PARTY BENEFICIARIES. This Agreement shall
not confer any rights or remedies upon any person other than the Parties and
their respective successors and permitted assigns.
(d) ENTIRE AGREEMENT. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
Parties and supersedes any prior understandings, agreements, or representations
by or among the Parties, written or oral, that may have related in any way to
the subject matter hereof.
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of his, her or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Sellers; provided,
however, that the Buyer may (i) assign any or all of its rights and interests
hereunder to an Affiliate (in any or all of which cases the Buyer nonetheless
shall remain liable and responsible for the performance of all of its
obligations hereunder).
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<PAGE> 41
(f) FACSIMILE/COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together will constitute one and the same instrument. A
facsimile, telecopy or other reproduction of this Agreement may be executed by
one or more parties hereto, and an executed copy of this Agreement may be
delivered by one or more parties hereto by facsimile or similar instantaneous
electronic transmission device pursuant to which the signature of or on behalf
of such party can be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of any party
hereto, all parties hereto agree to execute an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.
(g) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Sellers: Mr. N.C. Murthy
Ms. Canan Gurman
2170 W. State Route 434, Suite 220
Longwood, Florida 32779
Telephone:
Facsimile:
With a copy to: Brian Keeler, Esq.
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110-1726
Telephone: 617/951-8000
Facsimile: 617/951-8736
If to the Buyer: COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027
Attention: Michael T. Willis
Telephone: 713/961-3633
Facsimile: 713/627-1059
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<PAGE> 42
With a copy to: Peter T. Dameris, Esq.
Margaret G. Reed, Esq.
COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027-3413
Telephone: 713/961-3633
Facsimile: 713/627-1059
Any Party may give any notice, request, demand, claim, or
other communication hereunder using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail,
or electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Texas.
(j) AMENDMENTS AND WAIVERS. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Sellers. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed.
(l) EXPENSES. Each of the Parties will bear his, her or
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
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<PAGE> 43
(m) CONSTRUCTION. The language used in this Agreement,
including the Disclosure Schedule, will be deemed to be the language chosen by
the Parties to express their mutual intent, and no rule of strict construction
shall be applied against any Party. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
Parties intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty, or covenant relating to the same subject matter as
any other representation, warranty or covenant (regardless of the relative
levels of specificity) which the Party has not breached, it shall not detract
from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES.
The Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(o) SPECIFIC PERFORMANCE. Each of the Parties
acknowledges and agrees that the other Parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the Parties agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
CORESTAFF, INC.
By: /s/ PETER T. DAMERIS
-----------------------------
Name: Peter T. Dameris
Title: Vice President
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<PAGE> 44
SELLERS:
/s/ NALLURU C. MURTHY
--------------------------------
NALLURU C. MURTHY
/s/ CANAN GURMAN
--------------------------------
CANAN GURMAN
ON-LINE:
ON-LINE RESOURCES, INC.
By: /s/ NALLURU C. MURTHY
-----------------------------
Name: Nalluru C. Murthy
Title: President
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<PAGE> 45
Exhibits, Annexes and Schedules
Exhibit A
Exhibit B Financial Statements
Exhibit C Form of Employment Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Opinion of Sellers' Legal Counsel
Exhibit F Form of Opinion of Buyer's Legal Counsel
Annex I Reserved
Annex II Representations and Warranties of Sellers
Annex III Representations and Warranties of Buyer
Annex IV Persons to Deliver Employment Agreement
Annex V Persons to Deliver Non-Competition Agreement
Annex VI Monitoring Information to be delivered to Buyer
Disclosure Schedule
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<PAGE> 46
EXHIBIT C
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into
by and between ______________________ ("EMPLOYEE") and ON-LINE RESOURCES, INC.,
a Florida corporation ("ON-LINE"), to be effective upon the occurrence of the
events described in Paragraph 21 below.
RECITALS:
A. Employee and On-Line desire to enter into an agreement to set
forth the terms and conditions of Employee's employment with On-Line.
B. Employee and On-Line acknowledge the receipt and adequacy of
the consideration for this Agreement, including the premises and covenants in
this Agreement, the employment of Employee by On-Line, and other good and
valuable consideration.
AGREEMENTS:
1. Definitions. For purposes of this Agreement, the following
terms, including both the singular and the plural, shall have the meanings
assigned to them below, as follows:
(a) "AFFILIATE" means any corporation or business entity
that either controls or is controlled by On-Line or is controlled by the
shareholders that control On-Line. For the purposes of this definition,
"control" means the ownership, either directly or through an unbroken chain of
control, of more than sixty percent (60%) of the equity interest or combined
voting or management rights of an entity.
(b) "CONFIDENTIAL INFORMATION" means all confidential
information and trade secrets of On-Line including, without limitation, the
following: the identity, written lists, or descriptions of any customers,
referral sources or Organizations; financial statements, cost reports, or other
financial information; contract proposals or bidding information; business
plans; training and operations methods and manuals; personnel records; fee
structures; and management systems, policies or procedures, including related
forms and manuals. "CONFIDENTIAL INFORMATION" shall not include any
information or knowledge which: (a) is now available or hereafter becomes
available to the public without a breach by Employee of the terms stated in
this Agreement; (b) is disclosed to Employee by a third party who is not under
any obligation of secrecy or confidentiality; (c) a party is compelled to
disclose; or (d) is now or hereafter becomes generally known in the industry of
On-Line.
(c) "EMPLOYMENT PERIOD" means the period during which
Employee is employed pursuant to this Agreement.
<PAGE> 47
(d) "INITIAL TERM" means two (2) years from the effective
date of this Agreement, unless sooner terminated as provided by the terms of
this Agreement.
(e) "ORGANIZATION" means any organization that has
contracted with On-Line for the performance of Services.
(f) "PRACTICE OF SERVICES" means the practice, or
administration of the practice, of Services.
(g) "PURCHASER" means any individual or entity that
purchases all or substantially all the capital stock of On-Line.
(h) "RENEWAL TERM" means each period for which this
Agreement is renewed pursuant to the provisions of Paragraph 7.
(i) "SERVICES" means the temporary placement of computer
support staff, training/courseware development personnel and related permanent
placement services.
(j) "TRADE AREA" means a one hundred (100) mile radius
from any office of On-Line, International Software Designs, Inc., Pacific Data
Group, Inc., Cutler-Williams, Incorporated, Data Aid, Inc., Datronics
Management, Inc., K.C. Consulting Inc., Knauer Associates Systems Engineering,
Inc., Regal Data Systems, Inc., and/or COMSYS Technical Services, Inc.
2. Employment. On-Line hereby employs Employee and Employee
hereby accepts such employment by On-Line for the Initial Term on the terms and
conditions set forth in this Agreement. During the Initial Term, either
On-Line or Employee may terminate this Agreement with or without cause (as
hereinafter defined) on at least thirty (30) days' advance written notice to
the other party. Upon termination of Employee's employment with On-Line
pursuant to the terms contained in this Agreement, On-Line shall have no
further liability to Employee with respect to this Agreement except for
compensation accrued and unpaid on the date of such termination, accrued
vacation pay and sick leave pay, and except as otherwise specifically set forth
herein. Upon termination of this Agreement by Employee or On-Line pursuant to
the terms contained in this Agreement, Employee shall have no further liability
to On-Line with respect to this Agreement except for the covenants of the
Employee which survive the term of this Agreement and except as specifically
set forth herein.
3. Position, Duties and Place of Performance. Employee agrees to
serve as President of On-Line, shall perform the duties, if so requested, which
are consistent therewith and shall undertake and perform such additional or
other duties which are commensurate with such position. The place where such
services are to be performed is Florida.
4. Time and Efforts Devoted. Employee shall, during the period
of his employment by On-Line, devote substantially all of his business time,
energy and best efforts to the business and affairs of On-Line, and not engage,
directly or indirectly, in any other business or businesses without the consent
of On-Line.
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<PAGE> 48
5. Compensation.
(a) During the Initial Term, Employee's base compensation
shall be $__________ per year, payable in regular intervals at least monthly.
(b) During any Renewal Term, Employee shall receive
compensation adjustments as mutually determined by On-Line and Employee from
time to time.
(c) During the Initial Term and any Renewal Term,
Employee shall receive the perquisites set forth in Paragraph 6 below and such
other perquisites as the management of On-Line may determine from time to time.
(d) During the Initial Term, Employee shall be eligible
for incentive compensation of up to $_____________ per year based upon
Employee's attainment of defined corporate objectives as established by the
management of On-Line for the period in question.
6. Benefits. During the Initial Term, Employee shall be entitled
to the following benefits:
(a) A car allowance (similar in amount to that which is
currently provided to Employee by On-Line).
(b) Payment of reasonable travel and other business
expenses in accordance with On-Line's applicable policies, provided Employee
properly accounts therefor in accordance with such policies.
(c) Vacations, holidays and sick leave in accordance with
On-Line's current policies.
(d) All other specific and applicable employee benefits
such as, without limitation, group medical and dental and participation in
pension and/or profit sharing plans all as granted in accordance with On-Line's
policies.
7. Term. After expiration of the Initial Term, On-Line and
Employee may mutually agree to extend the term of this Agreement on terms and
conditions mutually acceptable to Employee and On-Line.
8. Termination.
(a) By Employee. Employee may terminate his employment
at any time during the Employment Period by giving thirty (30) days' prior
notice of termination to On-Line, with or without cause.
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<PAGE> 49
(b) By On-Line. Notwithstanding anything to the contrary
otherwise contained in this Agreement, On-Line may terminate Employee's
employment with cause (as defined below) during the Initial Term by giving
thirty (30) days' prior notice of termination to Employee. On-Line may
terminate Employee's employment at any time during the Employment Period by
giving thirty (30) days' prior notice of termination to Employee, with or
without cause. For purposes of termination by On-Line with cause, the term
"cause" shall mean the occurrence of any of the following events:
(i) Employee shall be determined by the Board of
Directors of On-Line to have failed or refused to diligently perform
the material duties assigned to Employee under this Agreement or
otherwise to have breached any term or provision contained herein and
not to have remedied the situation within fifteen (15) days following
receipt of written notice from On-Line;
(ii) Employee shall be determined by the Board of
Directors of On-Line to have failed or refused to abide by On-Line's
written policies, rules, procedures or directives and not to have
remedied the situation within fifteen (15) days following receipt of
written notice from On-Line;
(iii) Employee shall be determined by the Board of
Directors of On-Line to have become "permanently disabled." For
purposes hereof, the term "permanently disabled" shall mean a
condition (certified by a two licensed physicians, one selected by
On-Line and one by Employee) rendering Employee unable to perform his
responsibilities under this Agreement for a period of at least six (6)
consecutive months; or
(iv) Employee shall have been convicted of a
felony or Employee shall be determined by the Board of Directors of
On-Line to be guilty of fraud or dishonesty in connection with the
performance of his duties hereunder.
In making the determinations described above, the Board of Directors
of On-Line shall act in good faith.
(c) Automatic Termination. Employee's employment shall
automatically terminate on the death of Employee.
9. Confidential Information and Goodwill. Employee
acknowledges and agrees as follows:
(a) As a necessary function of Employee's employment,
Employee will have access to and utilize Confidential Information which is
unique, has been acquired, developed and effectively applied by On-Line, and
constitutes a valuable and essential asset of On-Line's business.
(b) On-Line's relationship with its employees and the
recognition of On-Line in the temporary personnel field as a provider of
efficient and effective Services are valuable and
4
<PAGE> 50
essential elements of the goodwill of On-Line, a portion of which goodwill is
allocable to each business location.
(c) The restrictive covenants and agreements contained in
Paragraph 10 are reasonable for the protection of the legitimate business
interests of On-Line, including, without limitation, its Confidential
Information and goodwill; and constitute a material inducement to On-Line to
enter into this Agreement.
10. Protection of Confidential Information and Goodwill. Employee
covenants and agrees, except in Employee's capacity as an employee of On-Line,
as follows:
(a) At all times following execution of this Agreement,
Employee shall not use or disclose any Confidential Information for any reason
whatsoever, other than at the direction of On-Line.
(b) During the Employment Period and for a period of one
(1) year thereafter, Employee shall not solicit from any existing customer of
On-Line or any Affiliate any business of the type conducted by On-Line or any
Affiliate in the Trade Area, or directly or indirectly disclose to any other
person, firm or corporation the names or addresses of the customers of On-Line
or any Affiliate.
(c) During the Employment Period and for a period of two
(2) years thereafter, Employee shall not solicit, recruit, or employ, directly
or indirectly, any person employed by On-Line at any time within the one (1)
year period immediately preceding such solicitation, recruitment, or
employment.
11. Property of On-Line. Employee agrees that, upon the
termination of this Agreement, Employee will immediately surrender to On-Line
all of On-Line's property, including, without limitation, equipment, funds,
lists, manuals, books, or records (including all copies of the foregoing) in
the possession of, or provided to, Employee.
12. ARBITRATION WITH RESPECT TO CERTAIN MATTERS. EXCEPT WITH
RESPECT TO PARAGRAPH 10 ABOVE, WHICH IS EXPRESSLY EXCLUDED HEREFROM, THE
PARTIES AGREE TO SUBMIT TO ARBITRATION, IN ACCORDANCE WITH THESE PROVISIONS,
ANY CLAIM OR CONTROVERSY ARISING FROM OR RELATED TO THE ALLEGED BREACH OF THIS
AGREEMENT. THE PARTIES FURTHER AGREE THAT THE ARBITRATION PROCESS AGREED UPON
HEREIN SHALL BE THE EXCLUSIVE MEANS FOR RESOLVING ALL DISPUTES MADE SUBJECT TO
ARBITRATION HEREIN, BUT THAT NO ARBITRATOR SHALL HAVE AUTHORITY TO EXPAND THE
SCOPE OF THESE ARBITRATION PROVISIONS. ANY ARBITRATION HEREUNDER SHALL BE
CONDUCTED UNDER THE MODEL EMPLOYMENT PROCEDURES OF THE AMERICAN ARBITRATION
ASSOCIATION (AAA). EITHER PARTY MAY INVOKE ARBITRATION PROCEDURES HEREIN BY
WRITTEN NOTICE FOR ARBITRATION CONTAINING A STATEMENT OF THE MATTER TO BE
ARBITRATED. THE PARTIES SHALL THEN HAVE FOURTEEN (14) DAYS IN WHICH THEY MAY
IDENTIFY A MUTUALLY AGREEABLE, NEUTRAL ARBITRATOR. AFTER THE FOURTEEN (14) DAY
PERIOD HAS EXPIRED, THE PARTIES SHALL PREPARE AND SUBMIT TO THE AAA A JOINT
SUBMISSION, WITH EACH PARTY TO CONTRIBUTE HALF OF THE APPROPRIATE
ADMINISTRATIVE FEE. IN THE EVENT THE PARTIES CANNOT AGREE UPON A NEUTRAL
5
<PAGE> 51
ARBITRATOR WITHIN FOURTEEN (14) DAYS AFTER WRITTEN NOTICE FOR ARBITRATION IS
RECEIVED, THEIR JOINT SUBMISSION TO THE AAA SHALL REQUEST A PANEL OF NINE
ARBITRATORS WHO ARE PRACTICING ATTORNEYS WITH PROFESSIONAL EXPERIENCE IN THE
FIELD OF LABOR AND/OR EMPLOYMENT LAW, AND THE PARTIES SHALL ATTEMPT TO SELECT
AN ARBITRATOR FROM THE PANEL ACCORDING TO AAA PROCEDURES. UNLESS OTHERWISE
AGREED BY THE PARTIES, THE ARBITRATION HEARING SHALL TAKE PLACE IN ORLANDO,
FLORIDA, AT A PLACE DESIGNATED BY THE AAA. UNLESS THE ARBITRATOR DETERMINES
THAT THE CLAIMS OR DEFENSES OF ANY PARTY ARE SUBSTANTIALLY WITHOUT MERIT AND
TAKEN BY SUCH PARTY IN BAD FAITH, ALL ARBITRATION PROCEDURES HEREUNDER SHALL BE
CONFIDENTIAL. EACH PARTY SHALL BE RESPONSIBLE FOR ITS COSTS INCURRED IN ANY
ARBITRATION, AND THE ARBITRATOR SHALL NOT HAVE AUTHORITY TO INCLUDE ALL OR ANY
PORTION OF SAID COSTS IN AN AWARD, REGARDLESS OF WHICH PARTY PREVAILS. THE
ARBITRATOR MAY INCLUDE EQUITABLE RELIEF. ANY ARBITRATION AWARDED SHALL BE
ACCOMPANIED BY A WRITTEN STATEMENT CONTAINING A SUMMARY OF THE ISSUES IN
CONTROVERSY, A DESCRIPTION OF THE AWARD, AND AN EXPLANATION OF THE REASONS FOR
THE AWARD. IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THEIR AGREEMENTS
HEREIN CONCERNING ARBITRATION DO NOT OTHERWISE ALTER THE TERMS AND CONDITIONS
OF EMPLOYEE'S EMPLOYMENT AS PROVIDED BY THIS AGREEMENT.
13. Remedies-Court Action. With respect to each breach or
threatened breach of Paragraph 10 of this Agreement and without waiver of any
right or remedy which On-Line may elect to pursue with respect thereto, all
remedies available at law or in equity, including specific performance and
injunctive relief, may be pursued by On-Line at any time. The agreements and
covenants contained in Paragraph 10 shall not be held invalid or unenforceable
because of the scope of the geographic area or actions subject thereto or
restrictions imposed thereby, or the period of time within which such agreement
or covenant is operative, but any judgment of a court of competent jurisdiction
may reform or define the maximum geographic area and actions subject to and
restricted by Paragraph 10 and the period of time during which such agreement
or covenant is enforceable.
14. Captions and Number. The captions of the paragraphs of this
Agreement have been inserted for convenience of reference only and shall not
affect the interpretation of this Agreement. Whenever it appears appropriate
from the context, each term stated in either the singular or plural shall
include both the singular and the plural.
15. Severability. If any provision of this Agreement is held to
be unenforceable, such provision shall be fully severable and the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the severance of such provision from this Agreement. In
addition, in lieu of such severed provision, a provision shall be added
automatically which is as similar in terms to the severed provision as possible
and enforceable, if such reformation is allowable under applicable law.
16. Assignment. This Agreement may not be assigned by either
party without the prior written consent of the other party except for an
assignment by On-Line to any Affiliate or Purchaser, but no such assignment
shall relieve On-Line from its obligations hereunder.
17. Separate Agreements. This Agreement shall be deemed to
consist of a series of separate covenants. Should a determination be made by a
court of competent jurisdiction that the
6
<PAGE> 52
character, duration, or geographical scope of any provision of this Agreement
is unreasonable in light of the circumstances as they then exist, then it is
the intention and the agreement of On-Line and Employee that this Agreement
shall be construed by the court in such a manner as to impose only those
restrictions on the conduct of Employee which are reasonable in light of the
circumstances as they then exist and as are necessary to assure On-Line of the
intended benefit of this Agreement. If, in any judicial proceeding, a court
shall refuse to enforce all of the separate covenants deemed included herein
because, taken together, they are more extensive than necessary to assure
On-Line of the intended benefit of this Agreement, then it is expressly
understood and agreed by On-Line and Employee that those covenants which, if
eliminated, would permit the remaining separate covenants to be enforced in
such proceeding, shall, for the purpose of such proceeding, be deemed
eliminated from the provisions hereof.
18. Policies, Regulations and Guidelines for Employees. On-Line
may issue policies, rules, regulations, guidelines, procedures, or other
informational material, whether in the form of handbooks, memoranda, or
otherwise, relating to On-Line's employees. These materials are general
guidelines for Employee's information and shall not be construed to alter,
modify or amend this Agreement for any purpose whatsoever.
19. Amendment. No amendment of this Agreement shall be valid
unless made in writing and signed by On-Line and Employee.
20. Entire Agreement. Except for that certain Non-Competition and
Confidentiality Agreement dated September ____, 1996 by and between On-Line and
Employee, this Agreement contains the entire agreement and understanding
between On-Line and Employee with respect to Employee's employment and
supersedes all prior agreements, whether written or oral, relating to
Employee's employment with On-Line. No representations, inducements, or
agreements have been made to induce either Employee or On-Line to enter into
this Agreement which are not expressly set forth herein. This Agreement is the
sole source of rights and duties as between On-Line and Employee relating to
Employee's employment.
21. Conditional Agreement. This Agreement and all of the rights,
duties and obligations of On-Line and Employee contained herein are expressly
conditioned upon the closing of that certain Stock Purchase Agreement dated as
of September ___, 1996 among COREStaff, Inc. and On-Line becoming effective
(the "CLOSING"). In the event of Closing, the date thereof shall be the
effective date of this Agreement.
22. LAW GOVERNING. THIS AGREEMENT AND ALL ISSUES RELATING TO ITS
VALIDITY, INTERPRETATION, AND PERFORMANCE SHALL BE GOVERNED BY AND INTERPRETED
UNDER THE LAWS OF THE STATE OF TEXAS (OTHER THAN THE CHOICE OF LAW PRINCIPLES
THEREOF).
23. Employee's Representations and Warranties. Employee
represents and warrants that he has full right and authority to enter into this
Agreement and fully perform his obligations hereunder, that he is not subject
to any non- competition agreement other than with On-Line, and that his past,
present and anticipated future employment by On-Line have not and will not
infringe
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<PAGE> 53
on the proprietary rights of others. Employee further represents and warrants
that he is not obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency which would conflict with
his obligation to use his best efforts to promote the interests of On-Line or
which would conflict with On-Line's business as conducted or proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of On-Line's business as an officer, director or employee by
Employee will conflict with or result in a breach of the terms, conditions or
provisions of or constitute a default under any contract, covenant or
instrument under which Employee is now obligated.
IMPORTANT; THIS AGREEMENT CONTAINS VERY IMPORTANT TERMS GOVERNING YOUR
EMPLOYMENT WITH ON-LINE. PARAGRAPH 10 CONTAINS PROVISIONS WHICH AFFECT YOUR
ABILITY TO TAKE CERTAIN ACTIONS FOLLOWING THE TERMINATION OF THIS AGREEMENT.
YOU SHOULD FEEL FREE TO SEEK ADVICE FROM YOUR ATTORNEY REGARDING ANY MATTER
RELATING TO THIS AGREEMENT.
BY EXECUTING THIS AGREEMENT, YOU ARE AFFIRMING THAT YOU HAVE HAD THE
OPPORTUNITY TO REVIEW THIS AGREEMENT AND TO CONSULT WITH YOUR ATTORNEY IF YOU
SO DESIRED, THAT YOU UNDERSTAND THE MEANING AND SIGNIFICANCE OF ALL OF ITS
PROVISIONS, THAT NO REPRESENTATIONS OR PROMISES HAVE BEEN MADE TO YOU REGARDING
YOUR EMPLOYMENT WHICH ARE NOT SET FORTH IN THIS AGREEMENT, AND THAT YOU ARE
FREELY SIGNING THIS AGREEMENT TO OBTAIN EMPLOYMENT WITH ON-LINE.
EXECUTED on the _____ day of _________________, 1996, but effective
for all purposes as of the effective date referred to in Section 21 hereof.
WITNESS EMPLOYEE
- --------------------------------- -------------------------------------
Name:
-------------------------------------
Address:
ON-LINE
WITNESS: ON-LINE RESOURCES, INC.
- --------------------------------- By:
Name: ----------------------------------
Name:
Title:
Address:
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<PAGE> 54
EXHIBIT D
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
This NON-COMPETITION AND CONFIDENTIALITY AGREEMENT (the "AGREEMENT")
is made and entered into this ______ day of September, 1996, by and between
ON-LINE RESOURCES, INC., a Florida corporation (the "COMPANY"), and
__________________ ("SHAREHOLDER"), to be effective upon the occurrence of the
events described in Paragraph 14 below.
RECITALS:
WHEREAS, CORESTAFF, INC., a Delaware corporation ("BUYER"), the
Company and the Shareholder have entered into a Stock Purchase Agreement dated
as of September ___, 1996 (the "STOCK PURCHASE AGREEMENT"), to which this
Agreement is ancillary and pursuant to which, among other things, Buyer will
purchase all of the outstanding capital stock of the Company;
WHEREAS, under the terms of the Stock Purchase Agreement, Shareholder
received cash and other good and valuable considerations for Shareholder's
shares of the Company; and,
WHEREAS, for good and valuable consideration, Shareholder hereby
agrees to enter into this Agreement; and
WHEREAS, it is a condition to the closing of the Stock Purchase
Agreement that that Shareholder enter into this Agreement, providing for
covenants of Shareholder not to engage in activities that are detrimental to
the Company, in order to insure for the Company and its affiliates the
continued goodwill and reputation of the Company in the areas served by the
Company.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises hereof, the covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Shareholder hereby covenant and agree as follows:
1. Definitions. Each capitalized term not defined herein shall
have the meaning assigned to that term in the Stock Purchase Agreement.
2. Nondisclosure. Shareholder acknowledges that, in the course
of his or her relationship with the Company, he or she may have received and
may receive certain trade secrets, financial records, lists of customers and
other confidential information which is proprietary to the Company and
knowledge concerning the business of the Company (hereinafter collectively
referred to as "CONFIDENTIAL INFORMATION") which the Company desires to
protect. Shareholder understands that the Confidential Information is
confidential and he or she agrees not to reveal the
<PAGE> 55
Confidential Information to anyone outside the Company or any of its Affiliates
so long as the confidential or secret nature of the Confidential Information
shall continue. Shareholder further agrees that he or she will at no time use
the Confidential Information in competing with the Company or any of its
Affiliates. Upon the reasonable written request of the Company, Shareholder
shall surrender to the Company all papers, documents, writings and other
property produced by him or coming into his possession by or through his
relationship with the Company relating to or containing the Confidential
Information and Shareholder agrees that all such materials will at all times
remain the property of the Company. For the purposes of this Agreement, the
term "CONFIDENTIAL INFORMATION" shall not include any information or knowledge
which: (a) is now available or hereafter becomes available to the public
without a breach by Shareholder of the terms stated in this Agreement; (b) is
disclosed to Shareholder by a third party who is not under any obligation of
secrecy or confidentiality; (c) a party is compelled by law to disclose; or (d)
is now or hereafter becomes generally known in the industry of the Company.
3. Covenant Not To Compete. For a period of two (2) years from
the date of this Agreement or two (2) year beyond the term of his employment
with the Company (whichever is longer), Shareholder agrees that he will not, as
principal, agent, trustee or through the agency of any corporation,
partnership, association or agent or agency, engage in any temporary computer
support staffing business within a one hundred (100) mile radius of any office
of the Company, International Software Designs, Inc., Pacific Data Group, Inc.,
Cutler-Williams Incorporated, Data Aid, Inc., Datronics Management, Inc., Regal
Data Systems, Inc., K.C. Consulting Inc., Knauer Associates Systems
Engineering, Inc. and/or COMSYS Technical Services, Inc. (the "TRADE AREA") in
competition with the Company or any of its Affiliates, and shall not be the
owner of more than ten percent (10%) of the outstanding capital stock of any
corporation, or an officer, director or employee of any corporation, or a
member or employee of any partnership or an owner or employee of any other
business, which conducts a temporary computer support staffing business. During
such period, Shareholder further agrees that he will not (1) directly or
indirectly, in the Trade Area, induce any customer of the Company or any of
its Affiliates to patronize any other individual or entity which conducts a
temporary computer support staffing business in the Trade Area; (2) canvass or
solicit any business of the type conducted by the Company or any of its
Affiliates from any customer of the Company or any of its Affiliates; (3)
directly or indirectly request or advise any customer of the Company or any of
its Affiliates to withdraw, curtail or cancel such customer's business with the
Company or any of its Affiliates; or (4) directly or indirectly disclose to any
other person, firm or corporation the name or address of any customer of the
Company or any of its Affiliates for the purposes of competing with the
Company. For a period of one (1) year from the date of this Agreement,
Shareholder further agrees that he will not, either directly or indirectly,
through any person, firm, association or corporation with which he is now or
may hereafter become associated, cause or induce any employee of the Company or
any of its Affiliates on the date hereof to leave the employ of the Company or
any of its Affiliates to accept employment with Shareholder or with such
person, firm, association or corporation.
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<PAGE> 56
4. Reasonable Restrictions. Shareholder represents to the
Company that the enforcement of the restrictions contained in this Agreement
would and will not be unduly burdensome to Shareholder and acknowledges that
Shareholder is willing and able to compete in other geographical areas not
prohibited by this Agreement. The parties to this Agreement hereby agree that
the covenants contained in this Agreement are reasonable and necessary
restrictions for the purpose of protecting the goodwill and other business
interests of the Company, which includes the Company's expectation of
expanding its business without competition from Shareholder for such period.
5. Entire Agreement. Except for the Stock Purchase Agreement
[and the Employment Agreement by and between Shareholder and Company], this
Agreement contains the entire agreement between the parties hereto with respect
to the subject matter of this Agreement and supersedes and is in full
substitution for any and all prior agreements and understandings, whether
written or oral, between said parties relating to the subject matter of this
Agreement.
6. Amendment. This Agreement may not be amended or modified in
any respect except by an agreement in writing executed by the parties in the
same manner as this Agreement.
7. Assignment. This Agreement may be assigned without the
consent of Shareholder in connection with the sale, transfer or other
assignment of all or substantially all of the capital stock or assets of, or
the merger of, the Company, provided that the party acquiring such capital
stock or assets or into which the Company merge assumes in writing the
obligations of the Company hereunder and provided further that no such
assignment shall release the Company from its obligations hereunder.
Otherwise, this Agreement may not be assigned by any party hereto without the
prior written consent of all of the other parties.
8. Successors. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by each of the parties and their
respective successors and assigns.
9. Unenforceable Provisions. In the event that a court should
determine that any restriction herein is unenforceable, the parties agree that
this Agreement shall nevertheless be enforceable for the maximum term and
maximum geographical area allowed by law.
10. Remedies. Shareholder agrees that a breach or violation of
any provision of this Agreement shall entitle the Company, as a matter of
right, to an injunction, without necessity of posting bond, issued by any court
of competent jurisdiction, restraining any further or continued breach or
violation of such provision. Such right to an injunction shall be cumulative
and in addition to, and not in lieu of, any other remedies to which the Company
may show themselves justly entitled, including, but not limited to, specific
performance and damages. The parties specifically agree that the remedy of
damages alone is inadequate for a breach or violation of any provision of this
Agreement by Shareholder. Further, during any period in which Shareholder is
in
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<PAGE> 57
actual (as opposed to asserted) breach of any covenant in this Agreement, the
time period of this Agreement shall be extended for the amount of time that
Shareholder is in breach hereof.
11. Notice. All notices, consents, requests, approvals or other
communications in connection with this Agreement and all legal process in
regard hereto shall be in writing and shall be deemed validly delivered, if
delivered personally or sent by certified mail, postage prepaid, or by
facsimile transmission (with confirmation of transmission). Unless changed by
written notice pursuant hereto, the address of each party for the purposes
hereof is as follows:
If to Shareholder:
-------------------------------------
-------------------------------------
-------------------------------------
Telephone:
---------------------------
Facsimile:
---------------------------
With a copy to:
-------------------------------------
-------------------------------------
-------------------------------------
Telephone:
---------------------------
Facsimile:
---------------------------
If to Company: On-Line Resources, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027-3413
Telephone: 713/961-3633
Facsimile: 713/627-1059
Attention: Mr. Michael T. Willis
With a copy to: COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027-3413
Telephone: 713/961-3633
Facsimile: 713/627-1059
Attention: Peter T. Dameris, Esq.
Notice given by mail as set out above shall be deemed delivered only when
actually received.
12. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning of or construction of any of the provisions
hereof.
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<PAGE> 58
13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (OTHER
THAN THE CHOICE OF LAW PRINCIPLES THEREOF).
14. Conditional Agreement. This Agreement and all rights, duties
and obligations of Shareholder and the Company contained herein are expressly
conditioned upon the closing of the Stock Purchase Agreement. In the event the
Stock Purchase Agreement closes, the Closing Date thereof shall be the
effective date of this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Non-Competition and Confidentiality Agreement.
"SHAREHOLDER"
--------------------------------
--------------------------------
"COMPANY"
ON-LINE RESOURCES, INC.
By:
----------------------------
Name:
Title:
5
<PAGE> 59
EXHIBIT D-1
NON-COMPETITION/NO SOLICITATION AGREEMENT
This NON-COMPETITION/NO SOLICITATION AGREEMENT (hereinafter
"AGREEMENT") is entered into this _____ day of September, 1996, by and between
_____________________ (hereinafter "EMPLOYEE") and ON-LINE RESOURCES, INC., a
Florida corporation (hereafter "COMPANY") with respect to the following facts:
A. In the course of performing his/her job duties for
the Company, the Company will provide Employee with certain confidential
information, trade secrets, specialized training, and access to computer
information which are the exclusive proprietary information and property of the
Company. The Company desires to protect such information from disclosure and
prevent unfair competition by the Employee during employment and for a one year
period thereafter.
B. The Employee desires to be employed by the Company
under the non-disclosure, confidentiality, nonsolicitation, and noncompete
restrictions contained in this Agreement, and acknowledges that, as a function
of employment in a specialized position with the Company, he/she will be
provided, or will be in a position to access, utilize, create, obtain, and/or
receive confidential information, trade secrets, training, and computer
information which is the exclusive proprietary information and property of the
Company.
C. In consideration of Employee's being given access to
confidential and trade secret information, specialized training, stock options,
benefits, access to various computer processes, designs, and programs, and/or
for other valuable consideration, receipt and sufficiency of which is hereby
acknowledged, the parties agree that the following provisions will govern
during the Employee's employment with Company and for one year thereafter:
1. Inventions.
Employee agrees that during employment he/she will promptly
inform and disclose to the Company all copyrighted materials or programs,
programs or materials subject to being copyrighted, inventions, designs,
improvements and discoveries which he/she has or may have during his/her
employment which pertain or relate to the business of the Company or to any
research or experimental or developmental work carried on by the Company, or
which results from or is suggested by any work performed by Employee on behalf
of the Company or any of its customers. Such disclosure shall be made whether
or not such programs, materials, inventions, designs, improvements and
discoveries are conceived by the Employee alone or with others and whether or
not conceived during regular working hours. All such copyrighted programs,
materials, inventions, designs, improvements and discoveries shall be the
exclusive property of the Company. At the Company's sole expense, the Employee
shall assist in obtaining patents or copyrights on all such inventions,
programs, materials, designs, improvements and discoveries deemed patentable or
subject to copyright by the Company and shall execute all
<PAGE> 60
documents and do all things necessary to obtain letters, patent, or vest the
Company with full and exclusive title thereto, and protect the same against
infringement by others. Employee will not be entitled to additional
compensation for any inventions or designs made during the course of his/her
employment.
2. Government Compliance.
Employee will comply and will take all action necessary to
enable the Company to comply with all state and federal government rules,
regulations and terms and conditions of contracts between agencies of the
United States government or their contractors and the Company, which relate
either to patent rights or to the safeguarding of information pertaining to the
defense of the United States. Employee, at the time of signing this Agreement,
has no right, title or interest in, or no right to assign (because it shall
previously have been assigned) any copyrighted programs or materials, programs
or materials subject to copyright, invention, design, improvement or discovery
which pertains or relates to the Company's business.
3. Trade Secrets.
Due to the nature of the Company's business, maintaining
confidentiality of information regarding the Company's operations, activities
and plans is especially important. Employee has an affirmative obligation to
protect the Company's information. The parties acknowledge and agree that
trade secret and confidential and proprietary information are valuable assets
of the Company. Solely by virtue of specialized employment with the Company,
Employee has acquired and will continue to acquire knowledge of and gain access
to trade secrets and confidential and proprietary information of the Company.
Such trade secrets and confidential and proprietary information is defined as
all items, materials, and information (whether or not reduced to writing and
whether or not patentable or copyrightable) which belong to the Company, relate
to the present or future business of the Company, are kept confidential and
secret by the Company, and are not generally known in the industry in which the
Company is engaged.
Trade secrets and confidential and proprietary information
includes, without limitation, customer lists, personnel lists, fee schedules,
training manuals and materials, devices, inventions, processes and compilations
of information, records and specifications, computer database, programs and
software, financial data and plans, profit margins and pricing policies and
practices, sales and marketing techniques, history, and data forecasts, and
personnel training techniques and materials (hereinafter collectively referred
to as "CONFIDENTIAL INFORMATION"). The failure to designate particular
information as confidential and/or proprietary shall not preclude any later
claim by the company that such information is confidential and proprietary..
Employee agrees that he/she shall not disclose, to any individual, corporation,
firm or other entity, and Confidential Information, directly or indirectly, or
use, cause, facilitate or allow any third party to use Confidential Information
in any way, either during the term of his/her employment or for one year
thereafter, except as required in the course of his/her employment with the
Company.
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All Confidential Information provided to Employee during
his/her employment are the exclusive property of the Company and/or its
customers. No Confidential Information or copies, summaries or compilations of
any kind will be removed from the Company's premises or the premises of the
Company's customers under any circumstances whatsoever without prior written
consent of the Company. Employee promises to return all Confidential
Information, including copies, summaries or compilations of such information to
the Company upon termination of employment or at any other time at the request
of the Company.
4. Non-Solicitation
Employee agrees that he/she will not, during the term of
his/her employment or for one year thereafter, do or commit any of the
following acts:
a. Induce, entice, hire or attempt to hire or
employ any employee of the Company on behalf of an individual or other entity
who provides the same or similar services, processes, or products as the
Company.
b. Induce, or attempt to induce any employee or
other employees employed with the Company to leave the employ or cease doing
business with the Company.
c. Induce, or attempt to induce, any customer,
supplier, vendor or any other person to cease doing business with the Company.
d. Induce or attempt to induce any individual to
violate the provisions or prohibitions contained in this Agreement.
5. Non-Competition.
The services provided by Employee are of a special, unique and
extraordinary nature. Employee shall not directly or indirectly (whether as
owner, partner, consultant, employee or otherwise), at any time during his/her
employment with the Company or any subsidiary or affiliate, or during the
one-year period following termination, engage in or contribute his/her
knowledge to any work or activity that involves a product, process, apparatus,
or service which is then competitive with, or similar to, a product, process,
apparatus or service provided directly by the Company. The limitations and
restrictions contained in this paragraph shall apply only to present and former
customers of the Company, located within a fifty (50) mile radius of any area
which the Company maintains customers or engages in business, and for whom the
Employee, while employed by the Company, has provided services within the
twelve months prior to the date of his/her termination of employment. This
paragraph does not apply to work performed on behalf of any individual or
entity that is not a present or former customer of the Company, and for whom
Employee has not performed services during the twelve months prior to his/her
termination from the Company's employ.
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Employee further agrees and acknowledges that if he/she is on
an assignment with a Company client, he/she will not continue to perform that
same or similar assignment on behalf of another employment agency for a period
of one year after the date that Employee ceases to perform that assignment for
Company.
6. Remedy for Breach
Employee acknowledges that any violation of this Agreement
shall result in immediate termination and dismissal and shall subject employee
to a civil action for money damages by Company for any and all losses sustained
as a result of the unauthorized release of any Confidential Information or the
actions of Employee which may breach any provision of this Agreement.
Employee recognizes that the Company's remedies at law may be
inadequate and that Company shall have the right to seek injunctive relief in
addition to any other remedy available to it. If Employee breaches this
Agreement or any of the covenants contained herein, the Company has the right
to, and will seek, issuance of a court-ordered injunction as well as any and
all other remedies and damages, to compel the enforcement of the terms stated
herein. If court action is necessary to enforce this Agreement, Employee shall
be responsible for the Company attorneys' fees and court costs.
It is agreed by the parties that in the event of a breach or
threatened breach of any of the provisions in this Agreement, in addition to
any other remedy provided for herein or at law, the Company shall have the
right to notify Employee's then present or prospective employer of the terms of
this Agreement (including but not limited to providing a copy of this
Agreement) without in any manner being liable for such action.
7. Waiver.
The failure of the company to insist upon strict adherence to
one or more of the covenants and restrictions contained herein, on one or more
occasions, shall not be construed as a waiver, nor shall such course of action
deprive the Company of the right thereafter to require strict compliance with
the same.
8. Construction.
Employee acknowledges that the restrictions upon his/her
employment and the geographical restrictions hereby imposed are fair and
reasonable and are reasonably required for the protection of the Company. If
any part of this Agreement is held unenforceable or invalid, the remaining
parts thereof shall continue to be enforceable. If the provisions imposing
geographic or time restrictions are deemed unenforceable by a court of
competent jurisdiction, then such provisions for the purposes of this Agreement
shall include the maximum geographic area or time period which a court of
competent jurisdiction determines to be reasonable, valid and enforceable. To
the extent that the court permits blue-penciling, the parties to this Agreement
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intend that the court will take all action necessary to revise this Agreement
so as to create a binding and enforceable Agreement.
9. Governing Law.
This Agreement shall be subject to and governed by the laws of
the State of Texas, irrespective of the choice of law rules in the state of
execution of this Agreement or performance of employment.
10. Length of Employment.
Nothing contained in this Agreement shall be construed as
guaranteeing Employee employment for any particular duration or length of time.
11. Assignment.
This agreement may be assigned without the consent of Employee
in connection with the sale, transfer or other assignment of all or
substantially all of the capital stock or assets of, or the merger of, the
Company, provided that the party acquiring such capital stock or assets or into
which the Company merges assumes in writing the obligations of the Company
hereunder and provided further that no such assignment shall release the
Company from its obligations hereunder. Otherwise, the Agreement may not be
assigned by any party hereto without the prior written consent of all of the
other parties.
EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ THIS AGREEMENT AND
UNDERSTANDS ITS MEANING AND CONSEQUENCE. EMPLOYEE VOLUNTARILY AND KNOWINGLY
EXECUTES THIS AGREEMENT.
EMPLOYEE:
-----------------------------
Name:
COMPANY:
ON-LINE RESOURCES, INC.
By:
--------------------------
Name:
Title:
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