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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): JUNE 12, 1996
CORESTAFF, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
-------------------------------------------------
(State or other jurisdiction
of incorporation)
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0-26970 76-0407849
- ---------------------------------- -----------------------------------------------------
(Commission (IRS Employer I.D. Number)
File Number)
4400 POST OAK PARKWAY, SUITE 1130
HOUSTON, TEXAS 77027-3413
- ------------------------- ------------------------- ---------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(713) 961-3633
-------------------------------------------------
Registrant's telephone number,
including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 12, 1996, pursuant to the terms of the Stock Purchase
Agreement by and among COREStaff, Inc. ("COREStaff"), Data Aid, Inc. ("Data
Aid"), and Richard L. Reid, Jerry L. Chafin and Jimmy H. Wyrosdick (the "Data
Aid Stockholders"), COREStaff purchased all of the issued and outstanding
capital stock of Data Aid for $17 million in cash, subject to certain
post-closing adjustments, and the assumption of certain liabilities. The Data
Aid Stockholders may also receive contingent payments based on the increase in
earnings through February 28, 1997.
The purchase price for Data Aid was determined as a result of direct
negotiations with the Data Aid Stockholders and was based on numerous factors
including COREStaff's estimate of the net worth of Data Aid at February 29,
1996. Data Aid provides information technology services through three
principal offices located in Birmingham and Montgomery, Alabama and Atlanta,
Georgia. Data Aid 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 August
26, 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 August 26,
1996.
(c) Exhibits
10.1 Stock Purchase Agreement dated June 12, 1996, among
COREStaff, Data Aid, Inc., Richard L. Reid, Jerry L.
Chafin and Jimmy H. Wyrosdick.
2
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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: June 24, 1996 By: /s/ EDWARD L. PIERCE
---------------------------------------
Edward L. Pierce
Chief Financial Officer, Vice President
and Assistant Secretary
3
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INDEX TO EXHIBITS
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<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
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<S> <C>
10.1 Stock Purchase Agreement dated June 12, 1996, among
COREStaff, Data Aid, Inc., Richard L. Reid, Jerry L.
Chafin and Jimmy H. Wyrosdick
</TABLE>
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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
CORESTAFF, INC.,
(BUYER)
DATA AID, INC.,
(TARGET)
AND
RICHARD L. REID,
JERRY L. CHAFIN
AND
JIMMY H. WYROSDICK
(SELLERS)
DATED AS OF JUNE 12, 1996
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TABLE OF CONTENTS
<TABLE>
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Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Purchase and Sale of Target Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Earned Payout Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Date and Form of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Representations and Warranties Concerning the Transaction . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Organization of Certain Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ii) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(iii) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(iv) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(v) Target Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Organization of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(ii) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iii) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iv) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(v) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(vi) Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Representations and Warranties Concerning the Target . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Organization, Qualification, and Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Events Subsequent to February 29, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(i) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(j) Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(k) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
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(l) Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(n) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(u) Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(v) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(w) Certain Business Relationships with the Target . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(x) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(y) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6. Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) Termination of Bank Facilities; Release of Guaranties . . . . . . . . . . . . . . . . . . . . . . . 31
(f) Monitoring Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(g) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(h) Additional Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(j) Conduct During Earned Payout Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7. Conditions to Obligations to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Conditions to Obligations of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 37
(c) Indemnification Provisions for Benefit of the Sellers . . . . . . . . . . . . . . . . . . . . . . . 39
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(d) Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Determination of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(f) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(g) Payment; General Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(h) Other Indemnification Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) The Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) Press Releases and Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Facsimile/Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(k) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(m) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(n) Incorporation of Exhibits, Annexes, and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 46
(o) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(p) Buyer's Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(q) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Employment Agreement
Exhibit C Form of Seller Non-Competition Agreement
Exhibit D Form of Opinion of Seller's Legal Counsel
Exhibit E Form of Employee Non-Competition Agreement
Exhibit F Form of Opinion of Buyer's Legal Counsel
ANNEXES
Annex I Determination of 1996 EBIT of the Target
Annex I(A) Determination of 1996 EBIT of the Target and EBIT of Bear Creek
Annex II Representations and Warranties of Buyer
Annex III Persons to Deliver Employment Agreement
Annex IV Persons to Deliver Non-Compete Agreement
SCHEDULES
Disclosure Schedule
Schedule 7(b)(vii)
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STOCK PURCHASE AGREEMENT
DESIGNATION OF PARTIES
This STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into by
and among CORESTAFF, INC., a Delaware corporation (the "BUYER"), DATA AID,
INC., an Alabama corporation ("TARGET"), RICHARD L. REID, JERRY L. CHAFIN and
JIMMY H. WYROSDICK (each individually referred to as "SELLER" and collectively
as the "SELLERS"). The Buyer and the Sellers are referred to collectively
herein as the "PARTIES."
RECITALS
The Sellers in the aggregate own all of the outstanding
capital stock of the Target.
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 the Target.
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:
AGREEMENT
1. DEFINITIONS.
"ADVERSE CONSEQUENCES" means all charges, complaints,
actions, suits, proceedings, hearings, investigations, claims, demands,
judgments, orders, decrees, stipulations, injunctions, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including all attorneys' fees and
court costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2
of the regulations promulgated under the Securities Exchange Act.
"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).
"APPLICABLE RATE" means the announced prime rate as
reported in the Money Rates Section of the Wall Street Journal, plus two
percent (2%) per annum.
<PAGE> 7
"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.
"BEAR CREEK BUSINESS" means the business generated by
the Target from the acquisition of certain purchase orders of the Professional
Services Group of Bear Creek Technologies, Inc.
"BUYER" has the meaning set forth in the preface
above.
"CASH PORTION OF THE PURCHASE PRICE" has the meaning
set forth in Section 2(b) below.
"CLOSING" has the meaning set forth in Section 2(f)
below.
"CLOSING DATE" has the meaning set forth in Section
2(f) below.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"CONFIDENTIAL INFORMATION" means all confidential
information and trade secrets of the Target including, without limitation, the
identity, lists or descriptions of any customers, referral sources or
organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training operations methods and manuals; personnel records; fee structure; and
management systems, policies or procedures, including related forms and
manuals.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning
set forth in Code Sec. 1563.
"CUSTOMER CONTRACT OR AGREEMENT" means any contract
or agreement to provide contract computer support services to a third party.
"DISCLOSURE SCHEDULE" shall mean the document and all
attachments thereto, which is attached hereto and provided for in Section 4
below.
"EARNED PAYOUT AMOUNTS" has the meaning set forth in
Section 2(c) below.
"EARNED PAYOUT PERIOD" has the meaning set forth in
Section 2(c) below.
"EBIT ARBITRATOR" means the person identified to
settle any dispute concerning the determination of the EBIT of Target referred
to in Annex I.
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"EBIT OF BEAR CREEK" means earnings before interest
and taxes generated from the Bear Creek Business after the date of such
acquisition and during the Earned Payout Period (as defined in Section 2(c)
below), calculated in accordance with GAAP, and as determined by Annex I(A)
attached hereto; provided, however, no expenses of the Bear Creek Business in
excess of the revenues generated by such business shall be included in such
calculation of EBIT of Target.
"EBIT OF TARGET" means earnings before interest and
taxes of Target (excluding all revenues and expenses of the Professional
Services Group of Bear Creek Technologies, Inc.) during the Earned Payout
Period, calculated in accordance with GAAP, and as determined by Annex I
attached hereto. In making the determination, no management fees and/or other
"overhead expenses" shall be charged against Target's earnings, except as may
be mutually agreed to by the Parties. Any goods and/or services provided
directly to Target or for the benefit of its employees' shall be charged
against Target's earnings; provided, however, that such goods and services must
have been provided at the request of or with the agreement of Target's Chief
Executive Officer if such charges will exceed the amounts previously paid by
the Target on its own behalf.
"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.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set
forth in ERISA Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set
forth in ERISA Sec. 3(1).
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"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.
"EY DETERMINATION" has the meaning set forth in
Section 2(e).
"FIDUCIARY" has the meaning set forth in ERISA Sec.
3(21).
"FINANCIAL STATEMENT" has the meaning set forth in
Section 4(e) below.
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"FIRST EARNED PAYOUT AMOUNT" has the meaning set
forth in Section 2(c)(i) below.
"GAAP" means United States generally accepted
accounting principles as in effect from time to time.
"GROSS PROFIT MARGIN" means the gross profit of the
Target 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 (including formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, copyrightable works, financial, marketing, and business data,
pricing and cost information, business and marketing plans, and customer and
supplier lists and information), (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 Target with responsibility for the matters in question.
"LIABILITY" means any debt, obligation, amount or sum
due or to become due, including any obligation to pay Taxes.
"LOSS" shall mean any and all direct or indirect
payments, obligations, assessments, losses, losses of income, liabilities,
costs and expenses paid or incurred, or that will 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 will 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
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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).
"MATERIAL" shall mean with respect to such event or
matter, when taken together with all other related Losses that may be
reasonably expected to occur to the Target as a result of any such event or
matter, would exceed FIFTY THOUSAND DOLLARS ($50,000.00) in the aggregate or
unless such event or Loss constitutes a criminal violation of law.
"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 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
the Target minus total current liabilities and long-term debt of the Target as
of the Closing Date, determined in accordance with GAAP, consistently applied.
"NET WORTH OF TARGET" means total assets of the
Target minus total liabilities of the Target as of the Closing Date, determined
in accordance with GAAP, consistently applied.
"NET WORTH ADJUSTMENT" means the amount, if any, by
which the Net Worth of Target is more or less than $1,547,717 on the Closing
Date.
"ORDINARY COURSE OF BUSINESS" means the ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency).
"PARTIES" has the meaning set forth in the preface
above.
"PBGC" means the Pension Benefit Guaranty
Corporation.
"PROHIBITED TRANSACTION" has the meaning set forth in
ERISA Sec. 406 and Code Sec. 4975.
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"PURCHASE PRICE" has the meaning set forth in Section
2(b) below.
"REPORTABLE EVENT" has the meaning set forth in ERISA
Sec. 4043.
"SECOND EARNED PAYOUT AMOUNT" has the meaning set
forth in Section 2(c)(ii) below.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SECURITY INTEREST" means any mortgage, pledge,
security interest, encumbrance, charge, or other lien, other than (a)
mechanic's, materialmen's and similar liens, (b) liens for Taxes not yet due
and payable (or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings), (c) liens arising under worker's compensation,
unemployment insurance, social security, retirement, and similar legislation,
(d) liens arising in connection with sales of foreign receivables, (e) liens on
goods in transit incurred pursuant to documentary letters of credit, (f)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (g) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"SELLER" has the meaning set forth in the preface
above.
"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.
"TARGET" has the meaning set forth in the preface
above.
"TARGET SHARE" means any share of the outstanding
capital stock, $1.00 par value, of the Target.
"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.
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"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.
2. PURCHASE AND SALE OF TARGET SHARES.
(A) BASIC TRANSACTION. On and subject to the
terms and conditions of this Agreement, the Buyer agrees to purchase from each
of the Sellers, and each of the Sellers agrees to sell to the Buyer, all of his
or its Target Shares for the consideration specified below in this Section 2.
The parties have not bargained separately in regard to the
value allocable to the covenant not to compete (see Section 6(l) and Exhibit C
to the Agreement). The Buyer has insisted upon the covenant not to compete
solely for the purpose of protecting the value and goodwill of Target, and the
covenant not to compete has not been bargained for, bought nor sold as a
separate asset. The Buyer agrees, for the Sellers' benefit, not to assign a
separate value to, or to amortize, the covenant not to compete for accounting
or tax purposes.
(B) PURCHASE PRICE. The purchase price for the
Target Shares to be purchased by Buyer from the Sellers pursuant to the terms
hereof shall be composed of the Cash Portion of the Purchase Price (as
hereinafter defined) and the Earned Payout Amounts (as hereinafter defined).
The Buyer agrees to pay to the Sellers the sum of $17,000,000 in cash (the
"CASH PORTION OF THE PURCHASE PRICE") for the Target Shares to be purchased
pursuant to the terms hereof. The Cash Portion of the Purchase Price shall be
paid by Buyer to Sellers at the Closing by wire transfer or delivery of other
immediately available funds to an account or accounts designated by Sellers.
The Cash Portion of the Purchase Price and the Earned Payout
Amounts (the sum of which is herein collectively called the "PURCHASE PRICE")
shall in each case be allocated among the Sellers based on a fraction, the
numerator of which is the number of Target Shares purchased from that Seller
pursuant to the terms hereof and the denominator of which is the total number
of Target Shares purchased pursuant to the terms hereof, or at the sole
election of Sellers, in an amount to each Seller as directed by each Seller or
as specified in writing by the Sellers at the Closing.
(C) EARNED PAYOUT AMOUNTS. In addition to the
Cash Portion of the Purchase Price, the Buyer agrees to pay to the Sellers, if
earned, each of the following earned payout amounts (collectively, the "EARNED
PAYOUT AMOUNTS"):
(I) an earned payout amount (the "FIRST
EARNED PAYOUT AMOUNT") equal to the product of (i) four (4)
and (ii) the amount, if any, by which the EBIT of Target for
the period commencing on March 1, 1996 and
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ending on February 28, 1997 (the "EARNED PAYOUT PERIOD")
exceeds $3,000,000, provided, however that in no event will
the First Earned Payout Amount exceed $4,300,000, and
(II) an earned payout amount (the "SECOND
EARNED PAYOUT AMOUNT") equal to $3,000,000 if, and only if,
the sum of the EBIT of Target and the EBIT of Bear Creek for
the Earned Payout Period exceeds $4,600,000.
(D) DATE AND FORM OF PAYMENT. The Earned Payout
Amounts shall be payable by Buyer to Sellers in cash within fifteen (15) days
following the final determination of EBIT of Target and EBIT of Target and Bear
Creek in accordance with Annex I and Annex I(A) hereto (which determination
shall be conclusive and binding on the Parties).
(E) PURCHASE PRICE ADJUSTMENT. The Purchase
Price shall be adjusted upward or downward on a dollar-for-dollar basis, by the
amount, if any, by which the Net Worth of Target is more or less than
$1,547,717 on the Closing Date (the "NET WORTH ADJUSTMENT").
The Net Worth Adjustment shall be determined subsequent to the
Closing by Ernst & Young, L.L.P. in accordance with this Agreement from the
audited closing balance sheet of the Target (at the sole expense of the Buyer),
which determination (the "EY DETERMINATION") shall be submitted in writing to
Buyer and the Sellers not later than sixty (60) days after the Closing. The EY
Determination shall be final, conclusive and binding on the Parties. Any
required additional payment on the part of Buyer or the Sellers by virtue of a
Net Worth Adjustment shall be made to Sellers by the Buyer or to Buyer by the
Sellers, as the case may be, within seventy (70) days from the Closing Date.
(F) 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
or such other date as the Buyer and the Sellers may mutually determine (the
"CLOSING DATE"); provided, however, that the Closing Date shall be no later
than June 15, 1996.
(G) 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) each of the Sellers will
deliver to the Buyer stock certificates representing all of his or its Target
Shares, endorsed in blank or accompanied by duly executed assignment documents,
and (iv) the Buyer will deliver to each of the Sellers the consideration
specified in Section 2(b) above as may be adjusted after the Closing pursuant
to Section 2(e) above.
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<PAGE> 14
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE
TRANSACTION.
(A) REPRESENTATIONS AND WARRANTIES OF THE
SELLERS. Each of the Sellers 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
itself, except as set forth in the Disclosure Schedule attached hereto.
(I) ORGANIZATION OF CERTAIN SELLERS. If
the Seller is a trust, the Seller is duly organized and
validly existing under the laws of the jurisdiction of its
formation.
(II) AUTHORIZATION OF TRANSACTION. The
Seller has full power and authority (including, if the Seller
is a corporation, full corporate power and authority) to
execute and deliver this Agreement and to perform his or its
obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions, except that (A) such
enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other laws, decisions or
equitable principles now or hereafter in effect relating to or
affecting the enforcement of creditors' rights or debtors'
obligations generally, and to general equity principles, and
(B) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any
proceeding therefore may be brought. The Seller 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, nor the
consummation of the transactions contemplated hereby, will (A)
violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which the
Seller is 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 to which
the Seller is a party or by which he or it is bound or to
which any of his or its assets is subject.
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<PAGE> 15
(IV) BROKER'S FEES. Except as set forth
on the Disclosure Schedule, the Seller 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 the Buyer could become liable or
obligated.
(V) TARGET SHARES. The Seller holds of
record and owns beneficially the number of Target Shares set
forth next to his 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. The Seller is not a party to any
option, warrant, right, contract, call, put, or other
agreement or commitment providing for the disposition or
acquisition of any capital stock of the Target (other than
this Agreement). The Seller is not a party to any voting
trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of the Target.
(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 II 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. 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, nor the
consummation of the transactions contemplated hereby, will (A)
violate any statute, regulation, rule, judgment, order,
decree, stipulation, injunction, charge, or other restriction
of any government, governmental agency, or court to which the
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,
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<PAGE> 16
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.
(IV) BROKERS' FEES. 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 of the Sellers
could become liable or obligated.
(V) INVESTMENT. The Buyer is not
acquiring the Target Shares with a view to or for sale in
connection with any distribution thereof within the meaning of
the Securities Act.
(VI) HART-SCOTT-RODINO. The transaction
contemplated in this Agreement does not require any
registration and notification pursuant to the
Hart-Scott-Rodino Act or any law or act of similar import or
character.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE
TARGET. The Sellers represent and warrant 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 on the date hereof and initialed
by the Parties (the "Disclosure Schedule"). A Customer Contract or Agreement
is "Material" if during the calendar year 1995 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. Any document attached to Disclosure
Schedule to which specific reference in such Disclosure Schedule is made shall
be deemed to be evidence of the fact of the existence of the document and the
contents thereof and the document shall speak for itself. The Disclosure
Schedule shall be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in Sections 3 and 4 hereof. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other items itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 4.
(A) ORGANIZATION, QUALIFICATION, AND CORPORATE
POWER. The Target is a corporation duly organized, validly existing, and in
good standing under the laws of the
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<PAGE> 17
jurisdiction of its incorporation. The Target 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. The Target 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 the Target. The Sellers have delivered to the
Buyer correct and complete copies of the charter and bylaws of the Target (as
amended to date). The minute books containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors, the stock certificate books, and the stock record books of the
Target are correct and complete. The Target is not in default under or in
violation of any provision of its charter or bylaws.
(B) CAPITALIZATION. The entire authorized
capital stock of the Target consists of 1,000 Target Shares, of which 600
Target Shares are issued and outstanding and no Target Shares are held in
treasury. All of the issued and outstanding Target 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 the Target is a party or which are binding
upon the Target 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 the Target.
There are no voting trusts, proxies, or any other agreements or understandings
with respect to the voting of the capital stock of the Target.
(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 the Target is subject or any
provision of the charter or bylaws of the Target or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any part the right to accelerate, terminate, modify, or cancel, or
require any notice under any contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest, or other arrangement to which
the Target is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets). The Target 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. The Target has no
Subsidiaries.
(E) FINANCIAL STATEMENTS. Attached hereto as
Exhibit A are the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) audited balance
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sheet and statement of income, changes in stockholder's equity, and cash flow
as of and for the fiscal years ended February 28, 1994 and 1995 and February
29, 1996 (the "MOST RECENT FISCAL YEAR END") for the Target and (ii) unaudited
balance sheet and income statement of the Target as of and for the three month
period ended May 31, 1996. 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 the Target (which books and records are correct and complete).
The audited Financial Statements for the Most Recent Fiscal Year End (the "MOST
RECENT FINANCIAL STATEMENTS") were audited by Ernst & Young, L.L.P., with the
assistance of Art Leadingham & Co.
(F) EVENTS SUBSEQUENT TO FEBRUARY 29, 1996.
Since February 29, 1996, except as set forth on the Disclosure Schedule, there
has not been any adverse change in the assets, Liabilities, business, financial
condition, operations, results or operations, or future prospects of the
Target. Without limiting the generality of the foregoing, since that date:
(I) The Target 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) The Target 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 $25,000 or outside the
Ordinary Course of Business (except for Customer Contracts);
(III) no party (including the Target) has
accelerated, terminated, modified, or canceled any contract,
lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses)
involving more than $25,000 to which the Target is a party or
by which it is bound;
(IV) The Target has not imposed any
Security Interest upon any of its assets, tangible or
intangible;
(V) The Target has not made any capital
expenditure (or series of related capital expenditures) either
involving more than $25,000 or outside the Ordinary Course of
Business;
(VI) The Target 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 $50,000 individually or $200,000 in the aggregate;
(VII) The Target has not created,
incurred, assumed, or guaranteed any indebtedness (including
capitalized lease obligations) either
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involving more than $25,000 singly or $50,000 in the aggregate
or outside the Ordinary Course of Business;
(VIII) The Target has not delayed or
postponed (beyond its normal practice) the payment of accounts
payable and other Liabilities;
(IX) The Target has not canceled,
compromised, waived, or released any right or claim (or series
of related rights and claims) either involving more than
$25,000 or outside the Ordinary Course of Business;
(X) The Target has not granted any
license or sublicense of any rights under or with respect to
any Intellectual Property;
(XI) there has been no change made or
authorized in the charter or bylaws of the Target;
(XII) The Target 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;
(XIII) The Target has not declared, set
aside, or paid any dividend or distribution with respect to
its capital stock or redeemed, purchased, or otherwise
acquired any of its capital stock;
(XIV) The Target has not experienced any
damage, destruction or Loss (whether or not covered by
insurance) to its property;
(XV) The Target has not made any loan to,
or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course
of Business giving rise to any claim or right on its part
against the person or on the part of the person against it;
(XVI) The Target 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 of its full-time staff
employees;
(XVII) The Target has not granted an
increase outside the Ordinary Course of Business in the base
compensation of any of its directors, officers, and employees;
(XVIII) The Target has not adopted any (A)
bonus, (B) profit-sharing, (C) incentive compensation, (D)
pension, (E) retirement, (F) medical,
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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;
(XIX) The Target has not made any other
change in employment terms for any of its directors, officers,
and full-time staff employees;
(XX) The Target has not made or pledged
to make any charitable or other capital contribution outside
the Ordinary Course of Business;
(XXI) there has not been any other
occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving
the Target; and
(XXII) The Target has not committed to any
of the foregoing.
(G) UNDISCLOSED LIABILITIES. The Target 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 any of them giving rise to any Liability, including, without
limitation, Liability under the Fair Labor Standards Act of 1938, as amended
and the rules and regulations promulgated thereunder) 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 Year End in the Ordinary Course
of Business (none of which relates to any breach of contract, breach of
warranty, tort, infringement, or violation of law or arose out of any charge,
complaint, action, suit, proceedings, hearing, investigation, claim, or
demand).
(H) TAX MATTERS.
(i) The Target has filed all Tax Returns
that it was required to file. All such Tax Returns were
correct and complete in all respects. All Taxes owed by the
Target (whether or not shown on any Tax Return) have been
paid. The Target currently is not the beneficiary of any
extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction
where the Target 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 the Target that
arose in connection with any failure (or alleged failure) to
pay any Tax.
(ii) The Target 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 the Target
has properly reflected the status of all employees and
independent contractors in
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<PAGE> 21
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 the Target has
received any notice that any authority intends to assess any
additional Taxes for any period for which Tax Returns that
have been filed. There is no dispute or claim concerning any
Tax Liability of the Target 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 the Target 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 the Target
for taxable periods ended on or after December 31, 1989,
indicates those Tax Returns 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 the Target since December 31, 1989.
(iv) The Target 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 Target has not filed a consent
under Code Sec. 341(f) concerning collapsible corporations.
The Target has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments
that will not be deductible under Code Sec. 280G. The Target
has not been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the
applicable period specified in Code Sec. 897(c)(1)(A)(ii).
The Target has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of
Code Sec. 6661. The Target is not a party to any Tax
allocation or sharing agreement. The Target has never been
(or has any Liability for unpaid Taxes because it once was) a
member of an Affiliated Group during any part of any
consolidated return year within any part of which consolidated
return year any corporation other than the Target also was a
member of the Affiliated Group.
(vi) The unpaid Taxes of the Target do
not exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face
of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the
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passage of time through the Closing Date in accordance with
the past custom and practice of the Target in filing their Tax
Returns.
(I) TANGIBLE ASSETS. The Target owns or leases
all tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. To Sellers' knowledge,
each such tangible asset is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
(J) OWNED REAL PROPERTY. The Target does not own
nor does it have any interest in any real property or improvements thereon
(other than the leases disclosed in Section 4(j) of the Disclosure Schedule,
and the leasehold improvements relating to the same) nor does the Target 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(j) of the Disclosure Schedule).
(K) INTELLECTUAL PROPERTY.
(I) The Target owns or has the right to
use pursuant to license, sublicense, agreement, or permission
all Intellectual Property necessary for the operation of the
businesses of the Target as presently conducted and as
presently proposed to be conducted. Each item of Intellectual
Property owned or used by the Target immediately prior to the
Closing hereunder will be owned or available for use by the
Target on identical terms and conditions immediately
subsequent to the Closing hereunder. The Target has taken all
necessary or desirable action to protect each item of
Intellectual Property that it owns or uses in the
jurisdictions in which it currently operates its business.
(II) The Target has not interfered with,
infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third
parties, and none of the Sellers and the officers (and
employees with responsibility for Intellectual Property
matters) of the Target has ever received any charge,
complaint, claim, or notice alleging any such interference,
infringement, misappropriation, or violation. To the
Knowledge of any of the Sellers and the officers (and
employees with responsibility for Intellectual Property
matters) of the Target, no third party has interfered with,
infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of any of the
Target.
(III) Section 4(k) of the Disclosure
Schedule identifies each patent or registration which has been
issued to the Target with respect to any of its Intellectual
Property, identifies each pending patent application or
application
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<PAGE> 23
for registration which the Target has made with respect to any
of its Intellectual Property, and identifies each license,
agreement, or other permission which the Target has granted to
any third party with respect to any of its Intellectual
Property (together with any exceptions). The Sellers have
delivered to the Buyer correct and complete copies of all such
patents, 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 the Target owns:
(A) the identified owner possesses
all right, title, and interest in and to the item;
(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 any of the
Sellers and the officers (and employees with
responsibility for Intellectual Property matters) of
the Target, is threatened which challenges the
legality, validity, enforceability, use, or ownership
of the item; and
(D) The Target 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 the Target uses pursuant to
license, sublicense, agreement, or permission. 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:
(A) to the Knowledge of the Sellers
and officers (and employees with responsibility for
Intellectual Property matters) of the Target, the
license, sublicense, agreement, or permission
covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) to the Knowledge of the Sellers
and officers (and employees with responsibility for
Intellectual Property matters) of the Target, the
license, sublicense, agreement, or permission will
continue to
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<PAGE> 24
be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the
Closing;
(C) to the Knowledge of the Sellers
and officers (and employees with responsibility for
Intellectual Property matters) of the Target, 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;
(D) no party to the license,
sublicense, agreement, or permission has repudiated
any provision thereof;
(E) to the Knowledge of the Sellers
and officers (and employees with responsibility for
Intellectual Property matters) of the Target, 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 officers (and employees with responsibility for
Intellectual Property matters) of the Target, 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) The Target 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 the Target. 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:
(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;
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<PAGE> 25
(III) to the Knowledge of Sellers, 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;
(VI) the Target has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
(VII) all facilities leased or subleased
thereunder have received all approvals of governmental
authorities (including licenses and permits) required in
connection with the operation thereof and have been operated
and maintained in accordance with applicable laws, rules, and
regulations.
(M) CONTRACTS. Section 4(m) of the Disclosure
Schedule lists the following contracts, agreements, and other written
arrangements to which the Target 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 raw
materials, commodities, supplies, products, or other personal
property or for the furnishing or receipt of services which
either calls for performance over a period of more than one
year or involves more than the sum of $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;
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<PAGE> 26
(V) any written arrangement concerning
confidentiality or noncompetition;
(VI) any written arrangement involving
any of the Sellers and their Affiliates;
(VII) any written arrangement with any of
its directors, officers, and employees in the nature of a
collective bargaining agreement, 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 the Target;
(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 arrangement so
listed: (A) to the Knowledge of Sellers, the written arrangement is legal,
valid, binding, enforceable, and in full force and effect; (B) to the Knowledge
of Sellers, the written arrangement will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing; (C) the Target is not, nor to the Knowledge of Sellers, is any other
party 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) the
Target is not, nor to the Knowledge of Sellers, has any other party, repudiated
any provision of the written arrangement. The Target 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). To the Knowledge of Sellers, no unfilled
Material Customer Contract or Agreement obligating the Target to perform
services will result in a Loss to the Target upon completion of performance.
No customer of the Target which accounts for more than $100,000 of the
annualized revenues of the Target has indicated to the Sellers 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 the Target are reflected properly on their 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
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<PAGE> 27
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 the Target.
(O) POWERS OF ATTORNEY. There are no outstanding
powers of attorney executed on behalf of the Target.
(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 the
Target 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 scope (including an indication
of whether the coverage was on a claims made, occurrence, or
other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of
coverage; and
(V) a description of any retroactive
premium adjustments or other loss-sharing arrangements.
With respect to each such insurance policy to the Sellers'
Knowledge: (A) the policy is legal, valid, binding, and enforceable and in full
force and effect; (B) the policy will continue to be legal, valid, binding, and
enforceable and in full force and effect on identical terms following the
Closing Date; (C) the Target is not in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a
breach or default or permit termination, modification, or acceleration, under
the policy; and (D) no party to the policy has repudiated any provision
thereof. The Target 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 during the aforementioned period. Section 4(p) of the
Disclosure Schedule describes any self-insurance arrangements affecting the
Target.
(Q) LITIGATION. Section 4(q) of the Disclosure
Schedule sets forth each instance in which the Target (i) is subject to any
unsatisfied judgment, order, decree, stipulation, injunction, or charge or (ii)
is a party or, to the Knowledge of any of the Sellers and the officers
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(and employees with responsibility for litigation matters) of the Target, is
threatened to be made a party to any charge, complaint, action, suit,
proceeding, hearing, or investigation of or in any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. None of the Sellers and the directors and officers (and
employees with responsibility for litigation matters) of the Target has any
reason to believe that any such charge, complaint, action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Target.
(R) EMPLOYEES. To the Knowledge of any of the
Sellers and the officers (and employees with responsibility for employment
matters) of the Target, no key employee or full-time group of employees has any
plans to terminate employment with the Target. The Target is not a party to or
bound by any collective bargaining agreement, nor has it experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. The Target has not committed any unfair labor practice.
None of the Sellers and the directors and officers (and employees with
responsibility for employment matters) of the Target has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Target.
(S) EMPLOYEE BENEFITS. Section 4(s) of the
Disclosure Schedule lists all Employee Benefit Plans that the Target maintains
or to which the Target contributes for the benefit of any current or former
employee of the Target.
(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 and of Code Sec. 162(k) have been met
with respect to each Employee Welfare Benefit Plan.
(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 the
Target. All premiums or other payments for all periods ending
on or before the Closing Date have been paid with respect to
each Employee Welfare Benefit Plan.
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<PAGE> 29
(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) as of the last day of the most recent plan year. No
Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been completely or partially terminated or been the
subject of a Reportable Event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC
to terminate any Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or, to the Knowledge
of any of the Sellers and the officers (and employees with
responsibility for employee benefits matters) of the Target,
threatened.
(VI) There have been no Prohibited
Transactions with respect to any Employee Benefit Plan. No
Fiduciary has any Liability for breach of fiduciary duty or
any other failure to act or comply in connection with the
administration or investment of the assets of any Employee
Benefit Plans. No charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand with
respect to the administration or the investment of the assets
of any Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the Knowledge of any of the
Sellers and the officers (and employees with responsibility
for employee benefits matters) of the Target, threatened.
None of the Sellers and the directors and officers (and
employees with responsibility for employee benefits matters)
of the Target has any Knowledge of any Basis for any such
charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand.
(VII) The Sellers have delivered to the
Buyer 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.
The Target has never contributed to, or ever has been required
to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan. The Target has not
incurred, and none of the Sellers and the directors and officers (and employees
with responsibility for employee benefits matters) of the Target has any reason
to expect that the Target will incur, any Liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA (including any
withdrawal Liability)
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<PAGE> 30
or under the Code with respect to any Employee Pension Benefit Plan that any of
the Target and the Controlled Group of Corporations which includes the Target
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute. The Target does not
maintain, nor has it ever maintained or contributed to, 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 in accordance with Code Sec. 162(k)).
(T) GUARANTIES. The Target is not a guarantor or
otherwise is liable for any Liability or obligation (including indebtedness) of
any other person.
(U) ENVIRONMENT, HEALTH, AND SAFETY.
(I) To the Knowledge of Sellers and the
officers of the Target, each of the Target and its
predecessors and Affiliates has complied 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, the violation of which would have a Material
adverse effect.
(II) To the Knowledge of the Sellers and
the officers of the Target, the Target does not have any
Liability (and there is no Basis related to the past or
present operations, properties, or facilities of any of the
Target and its predecessors and Affiliates for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Target 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.
(III) To the Knowledge of Sellers and the
officers of the Target, the Target does not have any Liability
(and none of the Target, and its predecessors and Affiliates
has handled or disposed of any substance, arranged for the
disposal of any substance, or owned or operated any property
or facility in any manner that could form the Basis for any
present or future charge, complaint,
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action, suit, proceeding, hearing, investigation, claim, or
demand (under the common law or pursuant to any statute)
against the Target giving rise to any Material Liability) for
damage to any site, location, or body of water (surface or
subsurface) or for illness or personal injury.
(IV) To the Knowledge of Sellers and the
officers of the Target, the Target does not have any Material
Liability (and there is no Basis for any present or future
charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand against the Target 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 Knowledge of Sellers and the
officers of the Target, the Target does not have any Material
Liability (and the Target has not exposed any employee to any
substance or condition that could form the Basis for any
present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand (under the common law
or pursuant to statute) against the Target giving rise to any
Liability) for any illness of or personal injury to any
employee.
(VI) To the Knowledge of Sellers and the
officers of the Target, the Target has obtained and been in
compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required
under, and has complied with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all 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, the violation of
which would have a Material adverse effect.
(VII) To the Knowledge of Sellers and the
officers of the Target, all properties and equipment used in
the business of the Target have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2
trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
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<PAGE> 32
(VIII) To the Knowledge of Sellers and the
officers of the Target, no pollutant, contaminant, or
chemical, industrial, hazardous, or toxic material or waste
ever has been buried, stored, spilled, leaked, discharged,
emitted, or released on any real property that the Target owns
or ever has owned or that the Target leases or ever has
leased.
(V) LEGAL COMPLIANCE. Except as it would not
have a Material adverse effect:
(I) To the Knowledge of Sellers and
Officers of the Target, the Target has complied 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 any of the Target alleging any
failure to comply with any such law or regulation.
(II) The Target has complied with all
applicable laws (including rules and regulations thereunder)
relating to the employment of labor (including but not limited
to the engagement of independent contractors under the Fair
Labor Standards Act of 1938, as amended, and the rules and
regulations promulgated thereunder), employee civil rights,
and equal employment opportunities.
(III) The Target 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) The Target 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, to any
candidate for federal, state, local, or foreign
public office.
(V) The Target has filed in a timely
manner all reports, documents, and other materials it was
required to file (and the information
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<PAGE> 33
contained therein was correct and complete in all respects)
under all applicable laws (including rules and regulations
thereunder).
(VI) The Target 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 THE
TARGET. Except as set forth in Section 4(w) of the Disclosure Schedule, none
of the Sellers and their Affiliates has been involved in any business
arrangement or relationship with the Target within the past twelve (12) months,
and none of the Sellers and their Affiliates owns any property or right,
tangible or intangible, which is used in the business of the Target.
(X) BROKERS' FEES. The Target does not have any
Liability or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this Agreement.
(Y) DISCLOSURE. Except as set forth in the
Disclosure Schedule, 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 his
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable to consummate and make effective the transactions
contemplated by this Agreement (including satisfying the closing conditions set
forth in Section 7 below).
(B) NOTICES AND CONSENTS. The Sellers will cause
the Target to give any notices to third parties, and will cause the Target to
use its reasonable best efforts to obtain third-party consents, that the Buyer
may reasonably request in connection with the matters pertaining to the Target
disclosed or required to be disclosed in the Disclosure Schedule. Each of the
Parties will take any additional action (and the Sellers will cause the Target
to take any additional action) 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 he or it may be required to give, make, or obtain.
(C) OPERATION OF BUSINESS. The Sellers will not
cause or permit the Target 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 the Target to engage in any practice, take any
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action, embark on any course of inaction, or enter into any transaction of the
sort described in Section 4(f) above.
(D) PRESERVATION OF BUSINESS. The Sellers will
cause the Target 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) FULL ACCESS. Each of the Sellers will
permit, and the Sellers will cause the Target to permit, representatives of the
Buyer to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of the Target, to all premises,
properties, books, records, contracts, Tax records, and documents of or
pertaining to the Target.
(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 the Target. 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.
(G) EXCLUSIVITY. None of the Sellers will (and
the Sellers will not cause or permit the Target 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 the Target or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing. The Sellers will notify the Buyer immediately if any person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
6. ADDITIONAL COVENANTS. The Parties agree as follows
with respect to the period following the Closing.
(A) GENERAL. In case at any time after the
Closing any further action is necessary or desirable to carry out the purposes
of this Agreement, each of the Parties will take such further action (including
the execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Section 8 below). The Sellers acknowledge and agree 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 the Target.
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(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 the Target, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense,
all at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(C) TRANSITION. None of the Sellers will take
any action that primarily is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of the Target from maintaining the same business relationships with
the Target after the Closing for a period of 24 months thereafter as it
maintained with the Target prior to the Closing. Each of the Sellers will
refer all customer inquiries relating to the business of the Target to the
Buyer from and after the Closing for a period of 24 months thereafter.
(D) CONFIDENTIALITY. Each of the 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 two (2) 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
possession. The parties acknowledge and agree that from and after the date of
Closing, each of the parties shall be entitled to review all documents, books,
records, agreements and financial data of any sort relating to the Target as
may be reasonably necessary for preparation of personal tax returns and for any
legitimate purpose. All such documents, books, records, agreements and
financial data shall be maintained by Buyer at a location in Montgomery,
Alabama (so long as the Target maintains an office there) or after such time in
the State of Alabama for a period of at least six (6) years following the date
of Closing. Buyer shall maintain such documents, books, records, agreements
and financial data in a condition so as to make it reasonably available and
shall take all reasonable steps necessary to protect such items. In the event
that any of the Sellers is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any Confidential
Information, that Seller 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, any of the Sellers is,
on the advice of counsel, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the
disclosing Seller shall use his or its reasonable best efforts to obtain, at
the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the
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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) TERMINATION OF BANK FACILITIES; RELEASE OF
GUARANTIES. Buyer shall take all reasonable best efforts necessary to (i)
retire all of the Target's outstanding bank indebtedness and (ii) fully,
completely and unconditionally release and/or substitute itself or the Target
at or prior to Closing as guarantor for the Sellers on all banking facilities
of the Target, and the Buyer and the Target hereby agree jointly and severally
to indemnify, defend and hold harmless the Sellers from any loss, cost or
expense related to the failure of the Buyer and the Target to obtain the
releases herein provided.
(F) MONITORING INFORMATION. Prior to the
Closing, Sellers shall cause the Target to deliver such information as may
reasonably be requested by Buyer.
(G) LEASES. Sellers shall cause on or before the
expiration of sixty (60) days after the Closing Date the Target to obtain from
its landlords (to the extent required under the pertinent premises lease)
written consent to the assignment of all leases being assumed by Buyer, which
assignments are deemed to have resulted from the transactions contemplated by
this Agreement.
(H) ADDITIONAL TAX MATTERS.
(I) The Buyer shall cause the Target (at
Sellers' sole cost and expense) 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
(but only to the extent such Taxes are in excess of the
reserve, if any, for such Tax liability used to determine the
Net Worth of Target). In addition, Sellers shall cause Ernst
& Young, L.L.P. to prepare a short period tax return for the
Target covering the period January 1, 1996 through the Closing
Date. The cost of preparation of such short period tax return
shall be properly and adequately accrued for on the Closing
balance sheet of the Target.
(II) 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 other
corporate records and information held by the Buyer and/or the
Target to the extent such records and information pertain to
events occurring on or prior to the Closing Date. Therefore,
Buyer agrees to cause the Target to (A) use its best efforts
to properly retain and maintain such records intact and secure
in the State of Alabama for a period of six (6) years from the
date the Tax Returns for the year in which the Closing occurs
are filed; or until the expiration of the tax statute of
limitations with respect to such year; or until the expiration
of
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all statutes of limitations pertaining to, or the release or
waiver of, any and all potential claims, demands and causes of
action which could arise from Seller's warranties and
undertakings under this Agreement, or under the common law
with respect to the subject matter of this Agreement;
whichever is later, and (B) allow the Sellers and their agents
and representatives, 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, under reasonably appropriate and
accommodating physical conditions, with access granted as
promptly as possible under reasonable notice, and at the other
Party's expense.
(III) POST CLOSING LIABILITY. Under no
circumstances shall Sellers have any Liability which accrues
or becomes due resulting from operations of Target following
the date of Closing.
(I) COVENANT NOT TO COMPETE. For a period of two
(2) years from and after the Closing Date, none of the Sellers will engage
directly or indirectly in any business that the Target conducts as of the
Closing Date in any geographic area in which the Target conducts that business
as of the Closing Date as more fully described in Exhibit C; provided, however,
that no owner of less than one percent (1%) of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason thereof
in any of its businesses.
(J) CONDUCT DURING EARNED PAYOUT PERIOD. During
the Earned Payout Period, the Buyer agrees to (i) maintain separate books and
records for the Target; (ii) maintain the Target as a separate entity; (iii)
cause the Target to be operated consistent with the prior practices of Target
and in accordance with reasonable business practices and reasonable business
judgment in order to maximize the amount of the Earned Payout Amounts; (iv)
without the prior written consent of Sellers, not to merge any of the branch
operations of Target with or into any of Buyer's branch operations; (v) to
furnish a monthly income statement and balance sheet of the Target to each
Seller within twenty days after the end of each month; and (vi) permit at
Sellers' expense Art Leadingham and Company access, upon reasonable notice,
during normal business hours, to the books and records of the Target for the
purpose of verifying the accuracy of any such monthly income statement and
balance sheet.
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:
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(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 materially
performed and complied with all of their covenants hereunder
in all material respects through the Closing;
(III) the Target shall have procured all
necessary third party consents specified 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)
affect adversely the right of the Buyer to own, operate, or
control the Target Shares or the Target (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 qualification as to knowledge
or Materiality or otherwise) to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is
satisfied in all respects;
(VI) the Parties and the Target shall
have received all other authorizations, consents and approvals
of governments and governmental agencies set forth herein and
in the Disclosure Schedule;
(VII) the Buyer shall have received from
each of the persons listed on Annex III an executed employment
agreement in the form and substance attached hereto as Exhibit
B (with the employment agreement of Richard Reid providing for
annual compensation of $200,000 and a term expiring on the
third anniversary of the Closing Date and with the salaries of
the other key executives to be in an amount mutually agreed
upon);
(VIII) the Buyer shall have received from
each of the Sellers an executed non-competition agreement in
the form and substance attached hereto as Exhibit C;
(IX) the Buyer shall have received from
counsel to the Sellers an opinion with respect to the matters
set forth in Exhibit D attached hereto, addressed to the Buyer
and dated as of the Closing Date;
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(X) the Buyer shall have received from
certain key employees of the Target listed on Annex IV hereto
an executed non-competition agreement in the form and
substance attached hereto as Exhibit E;
(XI) the Buyer shall have received the
resignations, effective as of the Closing, of each director of
the Target other than those designated by Buyer prior to the
Closing;
(XII) none of the Target's ten (10)
highest grossing revenue customers in the fiscal year ended
February 29, 1996 (including Bell South and Southwestern Bell)
shall have Materially curtailed or terminated its relationship
with Target, unless such customers have been replaced by new
customers or the expansion of accounts with other existing
customers;
(XIII) the Buyer shall be satisfied that at
Closing the Target's gross revenues for the twelve (12) month
period ending February 29, 1996 shall be equal to or greater
than $20,000,000;
(XIV) the Buyer shall be satisfied that
the Net Working Capital of the Target at Closing shall equal
or exceed $800,000;
(XV) the Buyer shall be satisfied that
the Net Worth of Target at Closing shall equal or exceed
$1,400,000;
(XVI) Sellers shall have caused the Target
to purchase and then cancel each outstanding employee stock
option, if any, whether or not exercisable at no cost to the
Buyer;
(XVII) all liens and security interests
securing debts of the Target which have been paid in full
prior to or at the Closing shall have been fully released of
record to the satisfaction of the Buyer and all Uniform
Commercial Code financing statements covering such debts shall
have been terminated;
(XVIII) no unsatisfied liens for the failure
to pay Taxes of any nature whatsoever shall exist against the
Target, or against or in any way affecting any Target Share;
(XIX) all deferred taxes shall be properly
and adequately accrued for on the Closing balance sheet of the
Target (which deferred taxes are to be reflected in the Net
Worth of Target);
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(XX) the Buyer shall be satisfied that
all bonus programs of the Target have been modified to a form
reasonably acceptable to the Buyer;
(XXI) the Target shall have received an
environmental feasibility study with respect to the Target's
real property located at 1535 East Ann Street, Montgomery,
Alabama;
(XXII) Sellers shall have caused Target to
deliver a commitment of title from Mississippi Valley Title
Insurance, Inc., insuring title to the real property of Target
located at 1535 East Ann Street, Montgomery, Alabama at or
prior to the Closing;
(XXIII) the Sellers shall have paid to the
Target the fair market value for any items listed on Schedule
7(b)(vii) hereto which were purchased by Sellers at or prior
to the Closing;
(XXIV) the Sellers shall and the Sellers
shall have caused all Sellers' officers, directors and/or
employees of the Target to, have repaid in full all debts and
other obligations, if any, owed to the Target; and
(XXV) the Buyer shall have received from
the Target audited balance sheets and income statements for
fiscal years ended February 28, 1994 and 1995 and February 29,
1996, of which the February 29, 1996 audited balance sheet and
income statement shall have been prepared by Ernst & Young,
L.L.P., with the assistance of Art Leadingham & Co. (with
Buyer responsible for the fees of Ernst & Young, L.L.P and
Sellers responsible for the fees of Art Leadingham & Co.).
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.
(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;
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(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 qualification as to
knowledge or Materiality or otherwise) 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 the Target shall
have received all other authorizations, consents, and
approvals of governments and governmental agencies set forth
herein and in Annex II and the Disclosure Schedule;
(VI) each of the persons listed on Annex
III shall have received from the Buyer an executed employment
agreement in the form and substance attached hereto as Exhibit
B;
(VII) the Sellers shall have been given
the right to purchase the items listed on Schedule 7(b)(vii)
hereto for the value of such items reflected thereon;
(VIII) the Sellers shall have been paid or
reimbursed for all liabilities owed by the Target to Sellers
as of the Closing Date as reflected on the February 29, 1996
balance sheet of the Target;
(IX) the Sellers shall have received from
counsel to the Buyer an opinion with respect to the matters
set forth in Exhibit F attached hereto, addressed to the
Sellers and dated as of the Closing Date; and
(X) 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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8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(A) SURVIVAL. All of the representations and
warranties of the Sellers contained in Section 4 above (other than the
representations and warranties of the Sellers contained in Section 4(h) above)
shall survive the Closing hereunder and continue in full force and effect for a
period of two (2) years thereafter. The representations and warranties of the
Sellers contained in Section 4(h) above shall survive the Closing and continue
in full force and effect for a period ending on the expiration of the
applicable statute of limitations for any claims made by authorities with
respect to all Tax Returns of the Target for any period on or prior to the
Closing Date. These periods of time shall supplant, and shall apply in lieu
of, any period of limitation that would otherwise apply under the law of
Alabama to any claim or cause of action arising under this Agreement.
(B) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE
BUYER.
(I) In the event the Sellers breach any
of their Joint and Several representations, warranties, and
covenants contained herein (as qualified to the Knowledge of
Sellers and/or to Materiality, where applicable), and provided
that the particular representation, warranty, or covenant
survives the Closing and that the Buyer makes a written claim
for indemnification against any of the Sellers pursuant to
Section 10(h) below within the applicable survival period,
then each of the Sellers agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer
may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyer
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; 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 the Sellers contained in
Section 4 above (i) until the Buyer has suffered aggregate
Losses by reason of all such breaches in excess of a $50,000
threshold (at which point the Sellers will be obligated to
indemnify the Buyer from and against all such aggregate Losses
including Losses relating back to the first dollar) and (ii)
in excess of $13,000,000 (after which point Sellers shall have
no obligation to indemnify Buyer from and against further such
Adverse Consequences); provided, further, however, that the
limitation set forth in (i) above specifically shall not apply
to the liability of any of the Sellers with respect to Adverse
Consequences resulting from or attributable to breaches of the
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representations and warranties contained in Section 4(g),
Section 4(h) and Section 4(n) hereof.
(II) In the event any of the Sellers
breaches any of his Several representations, warranties, and
covenants contained in Section 2(a) and Section 3(a) 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 the Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer
through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer 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.
(III) Each of the Sellers agrees to
indemnify the Buyer from and against 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 Liability of the Target arising under Reg. Section
1.1502-6 (because the Target once was a member of an
Affiliated Group during any part of any consolidated return
year within any part of which consolidated return year any
corporation other than the Target also was a member of the
Affiliated Group).
(IV) Each of the Sellers agree to
indemnify the Buyer from and against the entirety of any Taxes
which may become due and owing to the State of Alabama by
reason of the transactions contemplated by this Agreement.
(V) Each of the Sellers shall be liable
for, and hereby indemnifies, the Buyer for all income Taxes
imposed on the Target 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; provided, however, that such indemnity shall
be made only to the extent such Taxes are in excess of the
reserve; if any, for such Tax Liability used to determine the
Net Worth of Target.
(VI) Each of the Sellers agrees to
indemnify the Buyer from and against 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 Liability of the Target arising from Sellers' ownership or
operation of Data Aid Services, Inc. prior to, on or after the
Closing Date.
(VII) Each of the Sellers agrees to
indemnify the Buyer from and against the entirety of any
Adverse Consequence the Buyer may suffer resulting from,
arising out of, relating to, or caused by any Liability of the
Target arising
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from the failure of the Target to timely file its Federal Tax
Returns and/or the disallowance by the Internal Revenue
Service of any amounts paid to the Sellers as compensation and
the re-designation of the same as a dividend and/or
distribution from the Target to the Sellers.
(VIII) Each of the Sellers agrees to
indemnify the Buyer from and against 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 Liability of the Target arising from the engagement of
independent contractors under the Fair Labor Standards Act of
1938, as amended, and the rules and regulations promulgated
thereunder.
(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 any of the
Sellers makes 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 each of the Sellers from and against the entirety of any
Adverse Consequences the Seller may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences the Seller 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.
(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 each Indemnifying Party thereof promptly; provided, however,
that no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from any liability or
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is damaged. In the event any Indemnifying Party notifies the
Indemnified Party within 30 days after the Indemnified Party has given notice
of the matter that the Indemnifying party is assuming the defense thereof, (A)
the Indemnifying Party will defend the Indemnified Party against the matter
with counsel of the Indemnifying Party's choice reasonably satisfactory to the
Indemnified Party, (B) the Indemnified Party may retain separate co-counsel at
its sole cost and expense (except that the Indemnifying Party will be
responsible for the fees and expenses of the separate co-counsel to the extent
the Indemnified Party reasonably concludes that the counsel the Indemnifying
Party has selected has a conflict of interest), (C) the Indemnified Party will
not consent to the entry of any judgment or enter into any settlement with
respect to the matter without the written consent of the Indemnifying Party
(not to be withheld unreasonably), and (D) the Indemnifying Party will not
consent to the entry of any judgment with respect to the matter, or enter into
any settlement which does not include a provision whereby the plaintiff or
claimant in the matter releases the Indemnified Party from all Liability with
respect thereto, without the written consent of the Indemnified Party (not to
be withheld unreasonably). In the event no Indemnifying Party notifies the
Indemnified Party
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within 30 days after the Indemnified Party has given notice of the matter that
the Indemnifying Party is assuming the defense thereof, however, the
Indemnified Party may defend against, or enter into any settlement with respect
to, the matter in any manner it reasonably may deem appropriate. At any time
after commencement of any such action, any Indemnifying Party may request an
Indemnified Party to accept a bona fide offer from the other Parties to the
action for a monetary settlement payable solely by such Indemnifying Party
(which does not burden or restrict the Indemnified Party nor otherwise
prejudice him or her) whereupon such action shall be taken unless the
Indemnified Party determines that the dispute should be continued, the
Indemnifying Party shall be liable for indemnity hereunder only to the extent
of the lesser of (i) the amount of the settlement offer or (ii) the amount for
which the Indemnified Party may be liable with respect to such action. In
addition, the Party controlling the defense of any third party claim shall
deliver, or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of the third party
claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to the third party claim.
(E) DETERMINATION OF LOSS. The Parties shall
make appropriate adjustments for Tax benefits and insurance proceeds
(reasonably certain of receipt and utility in each case) and for the time cost
of money (using the Applicable Rate as the discount rate) in determining the
amount of Loss for purposes of this Section 8. All indemnification payments
under this Section 8 shall be deemed adjustments to the Purchase Price.
(F) EXCLUSIVE REMEDY. The Buyer acknowledges and
agrees that the foregoing indemnification provisions in this Section 8 shall be
the exclusive remedy of the Buyer for any breach of the representations and
warranties of the Sellers in Sections 3 and 4 above. The Parties stipulate
that in view of the undertakings herein and the value of the rights and assets
obtained by Buyer under this Agreement, and with the Parties acknowledging the
recent, widely reported and irrationally extreme abuses of the system of
awarding punitive damages in the State of Alabama, this exclusive remedy
provision is a reasonable and appropriate limitation, fully understood by
Buyer, and that there is no basis for argument that, as between these
particular Parties, this is an unreasonable or unfair limitation under the laws
of the State of Alabama or otherwise.
(G) PAYMENT; GENERAL RIGHT OF OFFSET. The
Indemnifying Parties shall promptly pay to the Indemnified Party as may be
entitled to indemnity hereunder in cash the amount of any Adverse Consequences
to which Indemnified Party may become entitled to by reason of the provisions
of this Agreement. Furthermore, and in lieu of receiving a cash payment from
the Sellers, Buyer, in good faith, may elect to offset against any Earned
Payout Amounts payable to Sellers, the amount of any Adverse Consequences or
any other payments to which Buyer or such Indemnified Parties may become
entitled to by reason of the provisions of this Agreement. In the event that
Buyer offsets more than the amount of any Adverse
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Consequences (as finally determined), Buyer shall be responsible to Seller for
such sums which should not have been subject to an offset, together with
interest at the Applicable Rate.
(H) OTHER INDEMNIFICATION PROVISIONS. Except as
set forth in Section 8(f) above, the foregoing indemnification provisions are
in addition to, and not in derogation of, any statutory or common law remedy
any Party may have for breach of any covenant contained in Section 5 and
Section 6 of this Agreement.
9. TERMINATION.
(A) TERMINATION OF AGREEMENT. The Parties may
terminate this Agreement 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 by giving written notice to the Sellers at any time
prior to the Closing in the event any of the Sellers is in
breach of any provision hereof, and the Sellers may terminate
this Agreement by giving written notice to the Buyer at any
time prior to the Closing in the event the Buyer is in breach
of any material representation, warranty, or covenant
contained in this Agreement in any material respect;
(III) 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 the Target provided for in
Section 5(e) hereof:
(IV) 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 June 14, 1996 by reason of the failure of any
condition precedent under Section 7(a) hereof (unless the
failure results primarily from the Buyer itself breaching any
representation, warranty, or covenant contained in this
Agreement); or
(V) 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 June 14, 1996 by reason of the failure of any
condition precedent under Section 7(b) hereof (unless the
failure results primarily from any of the Sellers themselves
breaching any representation, warranty, or covenant contained
in this Agreement).
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(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.
10. MISCELLANEOUS.
(A) THE SELLERS.
(I) When any particular Seller (as
opposed to the Sellers as a group) makes a representation,
warranty, or covenant herein, then that representation,
warranty, or covenant will be referred to herein as the
"SEVERAL" obligation of that Seller. This means that the
particular Seller making the representation, warranty, or
covenant 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 each of the Sellers in Section 2(a)
above concerning the sale of his or its Target Shares to the
Buyer and the representations and warranties of each of the
Sellers in Section 3(a) above concerning the transaction are
the Several obligations.
(II) When the Sellers as a group make a
representation, warranty, or covenant herein, then that
representation, warranty, or covenant will be referred to
herein as the "JOINT AND SEVERAL" obligation of the Sellers.
This means that each Seller 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 the
Target are the Joint and Several obligations.
(B) PRESS RELEASES AND ANNOUNCEMENTS. No Party
shall issue any press release or announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Sellers; provided, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party will advise the other Parties prior to making the
disclosure).
(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. No change of any term or provision of
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the Agreement shall be valid or binding unless signed by all Parties. No
waiver of any of the terms of this Agreement shall be valid unless signed by
the Party against whom the waiver is asserted.
(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 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 a wholly-owned Subsidiary of Buyer (in any or all of which cases
the Buyer nonetheless shall remain liable and responsible for the performance
of all of its obligations hereunder).
(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 Table of Contents to this
Agreement and the descriptive headings used 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:
Richard L. Reid
4211 Deatsville Highway
Deatsville, Alabama 36022
Jimmy H. Wyrosdick
86 Creek Drive
Montgomery, Alabama 36117
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Jerry L. Chafin
5293 Cochran Circle
Montgomery, Alabama 36109
with a copy to:
Hill, Hill, Carter, Franco, Cole & Black
425 South Perry Street
Montgomery, Alabama 36104
Attn: David E. Allred, Esq.
Tel: (334) 834-7600
Fax: (334) 263-5969
and to:
Thorington & Gregory
504 South Perry Street
P.O. Box 1748
Montgomery, Alabama 36102
Attn: W. Stanley Gregory, Esq.
Tel: (334) 834-6222
Fax: (334) 834-7080
If to the Buyer:
COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027-3413
Attn: Michael T. Willis
Tel: (713) 961-3633
Fax: (713) 627-1059
with a copy to:
Peter T. Dameris, Esq.
Margaret G. Reed, Esq.
COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027-3413
Tel: (713) 961-3633
Fax: (713) 627-1059
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<PAGE> 50
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 (and not the law
of conflicts) of the State of Alabama.
(J) AMENDMENTS AND WAIVERS. No change of any
term or provision of the Agreement shall be valid or binding unless signed by
all Parties. No waiver of any of the terms of this Agreement shall be valid
unless signed by the party against whom the waiver is asserted. No waiver by
any of the Parties 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
judgement of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the 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 and the Target
will bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Sellers agree that the Target has not borne or will bear any of
the Sellers' costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby.
(M) CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the Parties to express
their mutual intent, and no rule of
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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 (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(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
addition to any other remedy to which they may be entitled, at law or in
equity.
(P) BUYER'S KNOWLEDGE. As of the date of this
Agreement, through the course of its investigation of the Target, no fact has
come to the attention of the Buyer which would cause the Buyer to have actual
Knowledge that any representation, warranty or covenant of the Sellers is
Materially inaccurate or false.
(Q) SUBMISSION TO JURISDICTION. Each of the
Parties submits to the jurisdiction of the federal district court sitting in
Montgomery, Alabama and appellate courts therefrom, in any action or proceeding
arising out of or relating to this Agreement, provided that such action may be
commenced and maintained in federal court and agrees that all claims in respect
of the action or proceeding may be heard and determined in such court, and
agrees not to bring any action or proceeding arising out of relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other Party with respect thereto. Each Party appoints The Corporation Trust
Company in Wilmington, Delaware as his, her or its process agent (the "PROCESS
AGENT") to receive on his, her or its behalf service of copies of the summons
and complaint and any other process that might be served in the action or
proceeding. Any Party may make service on any other Party by sending or
delivering a copy of the process (i) to the Party to be served at the address
and in the manner provided for the giving of notices in Section 10(h) above or
(ii) to the Party to be served in care of the Process Agent at the address and
in the manner provided for the giving of notices in Section 10(h) above.
Nothing in this Section 10(q), however, shall
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affect the right of any Party to serve legal process in any other manner
permitted by law. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law. Any action which may not be
commenced and maintained in federal court may be brought in such state court
sitting in Montgomery, Alabama, as shall be of competent jurisdiction.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed in their respective names, in four (4) counterparts, each of which
shall be deemed an original, and have caused this Agreement to be dated for
convenience as of June 1, 1996, although actually executed by the Seller and
the Target on June 12, 1996, and actually executed by the Buyer on June 12,
1996.
BUYER:
CORESTAFF, INC.
By: /s/ PETER T. DAMERIS
-----------------------------------------
Name: Peter T. Dameris
Title: Vice President
TARGET:
DATA AID, INC.
By: /s/ RICHARD L. REID
-----------------------------------------
Name: Richard L. Reid
Title: President
SELLERS:
/s/ RICHARD L. REID
--------------------------------------------------
Richard L. Reid
/s/ JERRY L. CHAFIN
--------------------------------------------------
Jerry L. Chafin
/s/ JIMMY H. WDYROSDICK
--------------------------------------------------
Jimmy H. Wyrosdick
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