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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): JANUARY 5, 1998
CORESTAFF, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-26970 76-0407849
(Commission File Number) (I.R.S. Employer Identification No.)
FIVE POST OAK PARK
4400 POST OAK PARKWAY, SUITE 1130
HOUSTON, TEXAS 77027-3413
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 548-3400
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 5, 1997, pursuant to terms of a Stock Purchase Agreement
by and among CORESTAFF, Inc., a Delaware corporation ("CORESTAFF"), Dynamic Data
Solutions, Inc., ("DDS") a Texas corporation, DDS Europe Limited ("DDS Europe"),
and Terry Younger Miller and Kevin T. Kennefick (each individually and
collectively, the "Sellers"), CORESTAFF purchased all of the outstanding capital
stock of DDS and DDS Europe for $30.4 million in cash, subject to certain
post-closing adjustments and the assumption of certain liabilities. The Sellers
are also entitled to additional consideration of up to $22.5 million based on
the increase in earnings before interest and taxes, as defined. The purchase
price was determined as a result of direct negotiations with the Sellers and was
funded with borrowings under CORESTAFF's revolving credit facility.
Minneapolis-based DDS, which was founded in 1987, provides education
and training services for SAP and other package software programs, as well as
change management and business transformation programs that are not
software-dependent.
On January 7, 1998, pursuant to terms of an Agreement and Plan of
Merger among CORESTAFF, Inc. ("CORESTAFF"), a Delaware corporation, CORESTAFF
Acquisition Sub #12, Inc., a Delaware corporation and wholly-owned subsidiary
of CORESTAFF, Sage I.T. Partners, Inc. ("Sage"), a California corporation, and
the Shareholders of Sage (the "Sellers"), CORESTAFF purchased all of the
outstanding capital stock of Sage for $10.3 million in cash, subject to certain
post-closing adjustments and the assumption of certain liabilities. The Sellers
are also entitled to additional consideration of up to $35 million based on
future earnings before interest and taxes, as defined. The purchase price was
determined as a result of direct negotiations with the Sellers and was funded
with borrowings under CORESTAFF's revolving credit facility. Sage, which
specializes in developing Internet-enabled solutions, is headquartered in San
Francisco, California and has an office in Denver, Colorado.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
10.1 Stock Purchase Agreement dated as of December 12,
1997 by and among CORESTAFF, Inc., a Delaware
corporation, Dynamic Data Solutions, Inc., a Texas
corporation, and DDS Europe Limited
10.2 Agreement and Plan of Merger dated as of December 23,
1997, among CORESTAFF, Inc., a Delaware corporation,
CORESTAFF Acquisition Sub #12, Inc., a Delaware
corporation, and Sage IT Partners, Inc. a California
corporation
<PAGE> 3
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: January 20, 1997 By: /s/ EDWARD L. PIERCE
--------------------------
Edward L. Pierce
Chief Financial Officer, Senior
Vice President and Assistant
Secretary
<PAGE> 4
INDEX TO EXHIBITS
Exhibit No. Description
10.1 Stock Purchase Agreement dated as of December 12,
1997 by and among CORESTAFF, Inc., a Delaware
corporation, Dynamic Data Solutions, Inc., a Texas
corporation, and DDS Europe Limited
10.2 Agreement and Plan of Merger dated as of December 23,
1997, among CORESTAFF, Inc., a Delaware corporation,
CORESTAFF Acquisition Sub #12, Inc., a Delaware
corporation, and Sage IT Partners, Inc. a California
corporation
<PAGE> 1
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STOCK PURCHASE AGREEMENT
by and among
CORESTAFF, INC. ("COREStaff or Buyer"),
DYNAMIC DATA SOLUTIONS, INC. ("DDS"),
DDS EUROPE LIMITED ("DDS Europe"),
and
the SELLERS listed on the Signature page hereto
("Sellers")
Dated as of December 12, 1997
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<PAGE> 2
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Earn-Out Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Date and Form of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Post-Closing Adjusted Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . 8
(g) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Representations and Warranties Concerning the Transaction . . . . . . . . . . . . . . . . . . . . . . 9
(a) Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ii) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iii) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iv) Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Organization of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(ii) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(iii) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(iv) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(v) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Representations and Warranties Concerning the Targets . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Organization, Qualification, and Corporate Power . . . . . . . . . . . . . . . . . . . . . 12
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(f) Events Subsequent to Most Recent Year End . . . . . . . . . . . . . . . . . . . . . . . . . 14
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(k) Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(l) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
-i-
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<TABLE>
<S> <C> <C>
(n) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(u) Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(v) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(w) Certain Business Relationships with the Targets . . . . . . . . . . . . . . . . . . . . . . 30
(x) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(y) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(z) Payments to Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Preparation of Financial Statements; Delivery of Financial Information . . . . . . . . . . 33
(i) Delivery of Schedules; Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6. Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Monitoring Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(h) Additional Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(i) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(j) Conduct of Business During Earn-Out Period . . . . . . . . . . . . . . . . . . . . . . . . 37
(k) ADC and Disney Bad Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7. Conditions to Obligations to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Conditions to Obligations of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . 40
8. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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<TABLE>
<S> <C> <C>
(c) Limitations and Manner of Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(d) Indemnification Provisions for Benefit of the Sellers . . . . . . . . . . . . . . . . . . . 43
(e) Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Determination of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(g) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Payment; General Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(i) Tax Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) The Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Press Releases and Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(d) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Facsimile/Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(k) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(m) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(n) Incorporation of Exhibits, Annexes, and Schedules . . . . . . . . . . . . . . . . . . . . . 50
(o) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(p) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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<PAGE> 5
LIST OF EXHIBITS, ANNEXES AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Employment Agreement
Exhibit C Form of Employee Non-Competition Agreement
Exhibit D Form of Opinion of Sellers' Legal Counsel
Exhibit E Pro forma GAAP Adjustments
ANNEXES
Annex I Determination of EBIT
Annex II Sellers' Disclosures
Annex III Buyer's Disclosures
SCHEDULES
Disclosure Schedule
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
- iv -
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the
12th day of December, 1997, by and among CORESTAFF, INC., a Delaware
corporation (the "BUYER"), DYNAMIC DATA SOLUTIONS, INC., a Texas corporation
("DDS"), DDS EUROPE LIMITED ("DDS EUROPE" and together with DDS, the
"TARGETS"), and TERRI YOUNGER MILLER and KEVIN T. KENNEFICK (each individually
referred to as "SELLER" and collectively, the "SELLERS"). The Buyer and the
Sellers are referred to collectively herein as the "PARTIES."
The Sellers in the aggregate own all of the outstanding capital stock
of DDS, and DDS and the Sellers in the aggregate own all of the outstanding
capital stock of DDS Europe.
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 Targets owned by the Sellers.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ADJUSTED PURCHASE PRICE" has the meaning set forth in Section
2(e) below.
"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 reasonable attorneys' fees and court
costs.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"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).
"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CASH PORTION OF THE PURCHASE PRICE" has the meaning set forth
in Section 2(b) below.
<PAGE> 7
"CLOSING" has the meaning set forth in Section 2(g) below.
"CLOSING DATE" has the meaning set forth in Section 2(g)
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" means all confidential information
and trade secrets of the Targets 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 of the Targets related to (a) SAP training, education and change
management services; (b) maintenance contracts for application software; (c)
maintenance support arrangements, (d) reengineering and refurbishment
arrangements; (e) consulting arrangements; (f) any other contract computer
support services arrangement; and (g) agreements related to any other services
provided by the Targets.
"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4
below.
"DOCUMENTATION" has the meaning set forth in Section 4(l)
below.
"EARN-OUT PAYMENT" has the meaning set forth in Section 2(c)
below.
"EARN-OUT PAYMENT DETERMINATION" has the meaning set forth in
Section 2(d) below.
"EARN-OUT PAYMENT DISAGREEMENT NOTICE" has the meaning set
forth in Section 2(d) below.
"EARN-OUT PERIOD" has the meaning set forth in Section 2(c)
below.
"EBIT" means earnings before interest and taxes (prepared on an
accrual basis of accounting and in accordance with GAAP, consistently applied),
plus mutually agreed upon "ADJUSTMENTS" and "ADDBACKS" during the Earn-Out
Period (as defined in Section 2(c) below), and as determined by Annex I attached
hereto.
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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<PAGE> 8
"E&Y EARN-OUT PAYMENT DETERMINATION" has the meaning set forth
in Section 2(d) below.
"E&Y NET WORKING CAPITAL DETERMINATION" has the meaning set
forth in section 2(f) below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi employer 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.
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in Section
4(e) below.
"FIRST EARN-OUT PAYMENT" 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.
"GOVERNMENTAL AUTHORITY" shall mean any governmental,
quasi-governmental, state, county, city or other political subdivision of the
United States or any other country, or any agency, court or instrumentality,
foreign or domestic, or statutory or regulatory body thereof.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d)
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d)
below.
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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"INTELLECTUAL PROPERTY" means all (a) trademarks, service marks, trade
dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (b) patents, patent applications, and
provisional applications, including all continuations, divisionals and related
applications, (c) copyrights and registrations and applications for registration
thereof, (d) computer software, data, and documentation, (e) to the extent
legally protectable, trade secrets and confidential business information
(including ideas, formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, 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), (f) to the extent legally protectable, other proprietary rights,
and (g) copies and tangible embodiments thereof (in whatever form or medium).
"INTENTIONAL FRAUD" shall mean a knowing and deliberately false statement
as to a material fact, made with the intent to deceive the other Party, which is
believed by the other Party and on which it relies and by which it is induced to
act and does act to its injury.
"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 the Targets
with responsibility for the matters in question.
"LIABILITY" means any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"LICENSES" has the meaning set forth in Section 4(l) below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within the
Most Recent Financial Statements.
"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 less total current
liabilities of the Targets (including but not limited to all deferred taxes),
further reduced by any long-term debt of the Targets, as determined in
accordance with GAAP, consistently applied.
"NET WORKING CAPITAL DISAGREEMENT NOTICE" has the meaning set forth in
Section 2(f) below.
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"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PRE-CLOSING ADJUSTMENT" has the meaning set forth in Section
2(e) below.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2(b)
below.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec.
4043.
"SECOND EARN-OUT PAYMENT" 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.
"SHARES" means the shares of common stock, par value $.01 per
share, of DDS and the shares of common stock, par value L.1.00 per share, of DDS
Europe.
"SOFTWARE PROGRAMS" has the meaning set forth in Section 4(l)
below.
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"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.
"TARGETS" has the meaning set forth in the preface above.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty or addition thereto,
whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
2. PURCHASE AND SALE OF 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 her
Shares for the consideration specified below in this Section 2.
(b) PURCHASE PRICE. The purchase price for the Shares to
be purchased by Buyer, or such wholly-owned subsidiary of Buyer as Buyer shall
so designate, from the Sellers pursuant to the terms hereof shall be composed
of the Cash Portion of the Purchase Price (as hereinafter defined) and the
Earn-Out Payment (as hereinafter defined). The Buyer agrees to pay to the
Sellers the sum of $30,000,000 in cash (the "CASH PORTION OF THE PURCHASE
PRICE") for the 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 to an account or accounts designated by each of Sellers.
The Purchase Price shall be allocated among Sellers as follows: 75%
shall be paid to Terri Younger Miller and 25% shall be paid to Kevin T.
Kennefick. The sum of the Cash Portion of the Purchase Price and the Earn-Out
Payment is collectively referred to herein as the "PURCHASE PRICE."
(c) EARN-OUT PAYMENT. In addition to the Cash Portion of
the Purchase Price, the Buyer agrees to pay to the Sellers, if earned, the
following earned payout amounts (the "EARN-OUT PAYMENT"):
(i) an earned payout amount (the "FIRST EARN-OUT
PAYMENT") equal to the product of 6.0 multiplied by the remainder of
(x) the EBIT of the Targets for the twelve
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(12) month period ending December 31, 1998 less (y) $5,300,000;
provided, however, that the First Earn-Out Payment shall never exceed
$10,000,000; and
(ii) an additional amount (the "SECOND EARN-OUT
PAYMENT") equal to the product of 5.0 multiplied by the remainder of
(x) the EBIT of the Targets for the twelve (12) month period ending
December 31, 1999 less (y) the greater of (a) EBIT of the Targets for
calendar year 1998 or (b) $7,000,000; provided, however, that the
Second Earn-Out Payment shall never exceed $12,500,000.
Notwithstanding clauses (i) and (ii) above, if the EBIT of the Targets
for the twelve (12) month period ending December 31, 1998 exceeds $7,000,000,
then any EBIT of the Targets for the twelve (12) month period ending December
31, 1998 in excess of $7,000,000 shall be added to the EBIT of the Targets for
the twelve (12) month period ending December 31, 1999 for purposes of
calculating the Second Earn-Out Payment.
The period from January 1, 1998 to December 31, 1999 shall be referred
to as the "EARN-OUT PERIOD."
(d) DATE AND FORM OF PAYMENT. The First Earn-Out Payment
and the Second Earn-Out Payment shall be payable by Buyer to Sellers in cash by
March 15, 1999 and 2000, respectively, and shall be based on the internally-
generated financial statements (which have been prepared under the direction of
Buyer and subject to the review and approval of Sellers) of the Targets for the
Earn-Out Period. In the event there is a dispute between Buyer and Sellers
regarding the Earn-Out Payment or the internally-generated financial
statements, the Earn-Out Payment and such financial statements shall be
determined by Ernst & Young, LLP in accordance with this Agreement (at the
joint expense of the Buyer and the Sellers), which determination (each an "E&Y
Earn-Out Payment Determination") shall be submitted in writing to Buyer and
Sellers no later than February 15, 1999, in the case of the First Earn-Out
Payment, and February 15, 2000, in the case of the Second Earn-Out Payment.
If, within ten (10) business days after receipt of an E&Y Earn-Out Payment
Determination, the Buyer and/or Sellers delivers written notice to the other
Party that such Party disagrees with the E&Y Earn-Out Payment Determination (an
"Earn-Out Payment Disagreement Notice"), then Buyer and Sellers shall attempt
in good faith to mutually determine the correct amount of the Earn-Out Payment
within five (5) business days after Buyer and/or Sellers delivers the Earn-Out
Payment Disagreement Notice to the other Party. If Buyer and Sellers cannot
in good faith mutually determine the amount of the Earn-Out Payments within
such period, then Buyer and Sellers shall have ten (10) days following their
receipt of such determination to object in good faith to the Earn-Out Payment,
in which event the item or items in dispute shall be resolved by another "Big
Six" accounting firm, as combined from time to time, mutually acceptable to
Buyer and Sellers (whose decision shall be conclusive and binding on the
Parties with respect to such disputed item(s)). Any adjustment in the Earn-Out
Payment determined by such "Big Six" accounting firm shall be made within ten
(10) days following such resolution. In the event such resolution would result
in an increase in the Earn-Out Payment, the cost of such "Big Six"
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accounting firm shall be paid for solely by Buyer. Conversely, in the event
that such "Big Six" accounting firm determines that such resolution would
result in a decrease in the Earn-Out Payment, the cost of such "Big Six"
accounting firm shall be paid for solely by Sellers. In the event that such
"Big Six" accounting firm determines that no changes shall be made to the
Earn-Out Payment, the cost of such "Big Six" accounting firm shall be paid by
the Party requesting such dispute resolution.
(e) PURCHASE PRICE ADJUSTMENT. The Net Working Capital
of the Targets will be determined in accordance with the provisions hereof, by
the Parties on or before five (5) days before the time of Closing and shall be
based on the Targets' estimated financial statements as of December 31, 1997,
which have been prepared in accordance with GAAP, consistently applied in a
manner consistent with the pro forma GAAP adjusted financial statements
attached hereto as Exhibit E, and provided to Buyer and the Sellers. In the
event that the Net Working Capital is less or more than $3,061,520, the
Purchase Price shall be adjusted on a dollar-for-dollar basis downward or
upward, as the case may be (the "Pre-Closing Adjustment"). The Purchase Price
adjusted by the Pre-Closing Adjustment is referred to herein as the "Adjusted
Purchase Price."
(f) POST-CLOSING ADJUSTED PURCHASE PRICE ADJUSTMENT. In
the event there is a dispute between Buyer and Sellers regarding the Net
Working Capital of Targets as of December 31, 1997, the Net Working Capital of
Targets as of December 31, 1997 will be determined in accordance with the
provisions hereof, by the Parties at the time of Closing or within thirty (30)
days thereafter. In the event the Parties are still unable to agree on or to
calculate the Net Working Capital of Targets as of December 31, 1997, Ernst &
Young, LLP shall prepare the calculation of the Net Working Capital of Targets
(at the joint expense of the Buyer and the Sellers), which calculation (the
"E&Y Net Working Capital Determination") shall be submitted to Buyer and the
Sellers not later than sixty (60) days after the Closing Date. If within ten
(10) business days after receipt of the E&Y Net Working Capital Determination,
the Buyer and/or Sellers delivers written notice to the other Party that such
Party disagrees with the E&Y Net Working Capital Determination (the "Net
Working Capital Disagreement Notice"), then Buyer and Sellers shall attempt in
good faith to mutually determine the correct amount of the Net Working Capital
of Targets within five (5) business days after Buyer and Sellers delivers the
Net Working Capital Disagreement Notice to the Other Party. If Buyer and
Sellers cannot in good faith mutually determine the amount of the Net Working
Capital of Targets within such period, then Buyer and Sellers shall have ten
(10) days following their receipt of such determination to object in good faith
to the Net Working Capital of Targets, in which event the item or items in
dispute shall be resolved by another "Big Six" accounting firm mutually
acceptable to Buyer and Sellers (whose decision shall be conclusive and binding
on the Parties with respect to such disputed item(s)). The Net Working Capital
derived from such calculation shall be final, conclusive and binding on the
Parties and the Adjusted Purchase Price will be further adjusted on a
dollar-for-dollar basis by the amount by which the Net Working Capital of
Targets is less or more than the difference between (x) $3,061,520 and (y) the
Pre-Closing Adjustment. Any required additional payment on the part of the
Sellers or Buyer, as the case may be, by virtue of this Section 2(f) shall be
made to the other Party within ten (10) days following such resolution. In the
event such resolution would result in an increase in the E&Y Net Working
Capital Determination, the cost of such "Big Six" accounting firm shall be paid
for solely by Buyer. Conversely, in the event that such "Big Six" accounting
firm determines that such resolution would result in a decrease in the E&Y Net
Working Capital
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Determination, the costs of such "Big Six" accounting firm shall be paid for
solely by Sellers. In the event that such "Big Six" accounting firm determines
that no changes shall be made to the Earn-Out Payment, the cost of such "Big
Six" accounting firm shall be paid by the Party requesting such dispute
resolution.
(g) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of DDS in Minneapolis, Minnesota 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
earlier than January 2, 1998, which date may be extended with the mutual
consent of the Buyer and the Sellers.
(h) 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 her 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 pursuant to Section 2(e) and (f) above.
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 such Seller except as
set forth in Annex II attached hereto.
(i) AUTHORIZATION OF TRANSACTION. Such Seller
has full power and authority to execute and deliver this Agreement and
to perform his or her obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of such 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. Such Seller
need not give any notice to,
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make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(ii) NONCONTRAVENTION. Neither the execution and
the delivery by such Seller of this Agreement, nor the consummation by
such Seller 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 such 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 such
Seller is a party or by which such Seller is bound or to which any of
his or her assets is subject.
(iii) BROKER'S FEES. Such 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.
(iv) SHARES. Such Seller holds of record and owns
beneficially the number of Shares set forth next to his or her 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 Sellers hold all of the issued and
outstanding shares of the Targets (other than the shares of DDS Europe
held by DDS) and, upon the consummation of the transaction
contemplated hereby, Buyer will hold all of the issued and outstanding
shares of the Targets. Such 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 Targets (other than this Agreement). Such 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 Targets. Such
Seller hereby further represents and warrants that (i) all other
Shares or options, rights, warrants or other interests in the equity
of the Targets, if any, have been fully repurchased by the Targets
prior to the Closing Date and (ii) there are no pending or threatened
suits, claims or actions by any former holders of Shares or options,
rights, warrants or other interests in the equity of the Targets with
respect to the repurchase of such former holders' equity interest in
the Targets.
(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
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made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(b)), except as set forth in Annex III
attached hereto.
(i) ORGANIZATION OF THE BUYER. The Buyer is a
corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation.
(ii) AUTHORIZATION OF TRANSACTION. The Buyer has
full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and to perform its
obligations hereunder. 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 by the Buyer of this Agreement, nor the consummation by
the Buyer 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, 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 Seller could become liable or obligated.
(v) INVESTMENT. The Buyer is not acquiring the
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE TARGETS. 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 (the "DISCLOSURE
SCHEDULE"). The Disclosure Schedule may be updated one or more times prior to
the date which is five (5) days prior to the Closing Date. Any updated
Disclosure Schedule shall be delivered at or before the Closing. An updated
Disclosure
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Schedule shall only be deemed to modify a representation and/or warranty made
as of the date of this Agreement in the event, and only in the event, that the
Sellers acted in good faith and used their best efforts when preparing the
original Disclosure Schedule delivered to the Buyer as of the date of this
Agreement. In the event any such updated Disclosure Schedule indicates, in the
opinion of Buyer, acting reasonably, a Material change from the information
previously provided to the Buyer, Buyer shall be entitled to terminate this
Agreement notwithstanding any other provision contained in this Agreement by
written notice delivered to the Sellers. An event or matter will be deemed to
be "MATERIAL," to have a "MATERIAL" change in or in respect of, to have a
"MATERIAL ADVERSE EFFECT" or to be "MATERIALLY" affected; provided that such
loss is material or the loss may reasonably be expected to occur to the Targets
or Buyer with respect to such event or matter, when taken together with all
other related losses that may reasonably be expected to occur to the Targets or
Buyer as a result of any such events or matters, would exceed $50,000 in the
aggregate or unless such event or matter constitutes a criminal violation of
law. For purposes of this paragraph, the word "LOSS" shall mean any and all
direct or indirect payments, obligations, assessments, losses, losses of
income, liabilities, costs and expenses paid or incurred, or reasonably likely
to be paid or incurred, or that are reasonably expected to occur, including
without limitation, penalties, interest on any amount payable to a third party
as a result of the foregoing, and any legal or other expenses reasonably
expected to be incurred in connection with defending any demands, claims,
actions or causes of action that, if adversely determined, could reasonably be
expected to result in losses, and all amounts paid in settlement of claims or
actions; provided, however, that losses shall be net of any insurance proceeds
entitled to be received from a nonaffiliated insurance company on account of
such loss (after taking into account any cost incurred in obtaining such
proceeds). A Customer Contract or Agreement is "MATERIAL" if during the twelve
months ended December 31, 1996 such Customer Contract or Agreement produced
$25,000 of Gross Profit Margin less any bad debt specifically related to such
Customer Contract or Agreement. Any item intended to be disclosed must be
identified with the particular representation or warranty it is intended to
limit and shall not be deemed to limit any other representation, warranty or
covenant in the Agreement. Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
unless the Disclosure Schedule identifies the exception with reasonable
particularity and describes the relevant facts in reasonable detail. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or
other items itself). 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.
Each of the Targets is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
the Targets 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 and
where its failure to be so authorized could not reasonably be expected to have
a material adverse effect on the Targets. Each
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of the Targets 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 each of the Targets. The Sellers have delivered to the Buyer
correct and complete copies of the charter and bylaws of each of the Targets
(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
Targets are correct and complete. Neither of the Targets is in default under
or in violation of any provision of its charter or bylaws. The execution and
delivery of this Agreement and the effectuation of the transactions
contemplated hereby has been duly authorized by all of the directors and
shareholders of each of the Targets, and each of the Targets will deliver to
Buyer at the Closing complete and correct copies, certified by its secretary,
of the resolutions duly and validly adopted by its directors and shareholders
evidencing such authorization (which resolutions will not have been modified,
revoked or rescinded in any respect prior to, and will be in full force and
effect at, the Closing). No other corporate act or proceeding on the part of
the Targets or the Sellers is necessary for the due and valid authorization of
this Agreement or the transactions contemplated hereby.
(b) CAPITALIZATION. The entire authorized capital stock
of DDS consists of 100,000 shares of common stock, par value $.01 per share
(the "DDS Shares"), of which 1,000 DDS Shares are issued and outstanding and no
DDS Shares are held in treasury. The entire authorized capital of DDS Europe
consists of 1,000 shares of common stock, par value L.1.00 per share (the "DDS
Europe Shares" and together with the DDS Shares, the "Shares"), of which 1,000
DDS Europe Shares are issued and outstanding and no DDS Europe Shares are held
in treasury. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Sellers (and, in the case of DDS Europe, by DDS) as
set forth in Section 4(b) of the Disclosure Schedule. Except 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 either of the
Targets is a party or which are binding upon the Targets providing for the
issuance, disposition, or acquisition of any of their capital stock. There are
no outstanding or authorized stock appreciation, phantom stock, deferred bonus
programs, or similar rights with respect to the Targets. Except as set forth
in Section 4(b) of the Disclosure Schedule, there are no voting trusts,
proxies, or any other agreements or understandings with respect to the voting
of the capital stock of the Targets.
(c) NONCONTRAVENTION. Except as set forth in Section
4(c) of the Disclosure Schedule, 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 either of the Targets is subject or any
provision of the charter or bylaws of either of the Targets 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,
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agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which either of the Targets 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 Targets do
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency,
which they have not already obtained, in order for the Parties to consummate
the transactions contemplated by this Agreement.
(d) SUBSIDIARIES. The Targets have no Subsidiaries,
except that DDS Europe is a Subsidiary of DDS.
(e) FINANCIAL STATEMENTS. Attached hereto as Exhibit A
are the financial statements (collectively the "FINANCIAL STATEMENTS"),
including balance sheets, income statements, and cash flow statements, for DDS
for each of the (i) fiscal years ended December 31, 1995 and 1996 (the "MOST
RECENT FISCAL YEAR END"), (ii) the nine (9) month period ended September 30,
1997 (the "Most Recent Fiscal Quarter End"), and (iii) the interim period ended
November 30, 1997 (the "Most Recent Fiscal Month End"). The Financial
Statements for the Most Recent Fiscal Year End and the Most Recent Fiscal
Quarter End shall have been audited by Ernst & Young, LLP. The Financial
Statements have been prepared in accordance with GAAP, except as set forth in
Section 4(e) of the Disclosure Schedule.
(f) EVENTS SUBSEQUENT TO MOST RECENT YEAR END. Except as
set forth in Section 4(f) of the Disclosure Schedule, since December 31, 1996,
there has not been any adverse change in the assets, Liabilities, business,
financial condition, operations, results or operations, or future prospects of
the Targets. Without limiting the generality of the foregoing, except as set
forth in Section 4(f) of the Disclosure Schedule, since that date:
(i) The Targets have not sold, leased,
transferred, or assigned any of their assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of
Business;
(ii) The Targets have not entered into any
contract, lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses) either
involving more than $50,000 or outside the Ordinary Course of
Business;
(iii) No party (including the Targets) has
accelerated, terminated, modified, or canceled any contract, lease,
sublease, license or sublicense (or series of related contracts,
leases, subleases, licenses and sublicenses) or notified the Targets
of such involving more than $50,000 to which either of the Targets is
a party or by which it is bound;
(iv) The Targets have not imposed any Security
Interest upon any of their assets, tangible or intangible;
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(v) The Targets have not made any capital
expenditure (or series of related capital expenditures) either
involving more than $50,000 singly or $200,000 in the aggregate, or
outside the Ordinary Course of Business;
(vi) The Targets have 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 $40,000
individually or $100,000 in the aggregate or outside the Ordinary
Course of Business;
(vii) The Targets have not created, incurred,
assumed, or guaranteed any indebtedness (including capitalized lease
obligations) either involving more than $20,000 singly or $50,000 in
the aggregate or outside the Ordinary Course of Business;
(viii) The Targets have not delayed or postponed
(beyond their normal practice) the payment of accounts payable and
other Liabilities;
(ix) The Targets have not settled, canceled,
compromised, waived, or released any right, claim action or proceeding
(or series of related rights, claims, actions or proceedings) either
involving more than $50,000 or outside the Ordinary Course of
Business;
(x) The Targets have 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 Targets;
(xii) The Targets have not issued, sold, or
otherwise disposed of any of their capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion or exercise) any of their capital stock;
(xiii) The Targets have not declared, set aside, or
paid any dividend or distribution with respect to their capital stock
or redeemed, purchased, or otherwise acquired any of their capital
stock;
(xiv) The Targets have not experienced any damage,
destruction or loss (whether or not covered by insurance) to their
property;
(xv) The Targets have not made any loan to, or
entered into any other transaction with, any of their directors,
officers, and employees outside the Ordinary Course of Business giving
rise to any claim or right on their part against the person or on the
part of the person against them;
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(xvi) The Targets have not entered into any
employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or
agreement;
(xvii) The Targets have not granted an increase
outside the Ordinary Course of Business in the base compensation of
any of their directors, officers, and employees;
(xviii) The Targets have not adopted any (A) bonus,
(B) profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance,
(G) severance, or (H) other plan, contract or commitment for any of
their directors, officers, and employees, or modified or terminated
any existing such plan, contract or commitment;
(xix) The Targets have not made any other change in
employment terms for any of their directors, officers, and full-time
staff employees;
(xx) The Targets have not made or pledged to make
any charitable or other capital contribution outside the Ordinary
Course of Business;
(xxi) The Targets have made no dividend, consulting
or other payment to the Sellers, except for payments to the Sellers
necessary to cover their federal and state income tax obligations as
calculated on a cash basis for income tax purposes not in excess of
the accrued earnings generated for the period from January 1, 1997
through the Closing Date and for employment salaries (not to exceed
current compensation levels) to Sellers;
(xxii) There has not been any other Material
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business by or directly involving the
Targets; and
(xxiii) The Targets have not committed to any of the
foregoing.
(g) UNDISCLOSED LIABILITIES. Except as set forth in
Section 4(g) of the Disclosure Schedule, the Targets do 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) which is individually in excess of $10,000,
except for (i) Liabilities set forth on the face of the Financial Statements
(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).
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(h) TAX MATTERS. Except as set forth in Section 4(h) of
the Disclosure Schedule:
(i) The Targets have filed all Tax Returns that
they were required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Targets (whether or
not shown on any Tax Return) have been paid when due. The Targets
currently are not the beneficiary of any extension of time within
which to file any Tax. No claim has ever been made by an authority in
a jurisdiction where the Targets do not file Tax Returns that either
of them is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of the Targets that
arose in connection with any failure (or alleged failure) to pay any
Tax.
(ii) The Targets have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts
paid or owing to any employee, creditor, independent contractor, or
other third party.
(iii) No Seller expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of the
Targets either (A) claimed or raised by any authority in writing or
(B) as to which any of the Sellers has Knowledge based upon personal
contact with any agent of such authority. Section 4(h) of the
Disclosure Schedule lists all Tax Returns filed with any Governmental
Authority with respect to the Targets for taxable periods ended on or
after December 31, 1990, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the
subject of audit. The Sellers have delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by the Targets since December 31, 1990.
(iv) The Targets have 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 Targets have not filed a consent under
Code Sec. 341(f) concerning collapsible corporations. The Targets
have not made any payments, are not obligated to make any payments, or
are not a party to any agreement that under certain circumstances
could obligate either of them to make any payments that will not be
deductible under Code Sec. 280G. The Targets have 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 Targets have disclosed on their federal income
Tax Returns all positions taken therein that could reasonably be
expected to give rise to a substantial understatement of federal
income Tax within the meaning of Code Sec. 6661. The Targets are not
parties to any Tax allocation or sharing agreement. The Targets have
never been (or have 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 Targets also was a member of the
Affiliated Group.
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(vi) Section 4(h) of the Disclosure Schedule sets
forth the following information with respect to the Targets as of the
most recent practicable date (as well as on an estimated pro forma
basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of the Targets in
their assets; (B) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the Targets; and (C) the amount
of any deferred gain or loss allocable to the Targets arising out of
any Deferred Intercompany Transaction.
(vii) The unpaid Taxes of the Targets 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 Financial Statements (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
Targets in filing their Tax Returns.
(i) TANGIBLE ASSETS. The Targets own or lease all
tangible assets necessary for the conduct of their businesses as presently
conducted. Except as set forth in Section 4(i) of the Disclosure Schedule, 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) REAL PROPERTY. The Targets own no real property.
(k) REAL PROPERTY LEASES. Section 4(k) of the Disclosure
Schedule lists and describes briefly all real property leased or subleased to
the Targets. The Sellers have delivered to the Buyer correct and complete
copies of the leases and subleases listed in Section 4(k) of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease listed
in Section 4(k) of the Disclosure Schedule, except as set forth in Section 4(k)
of the Disclosure Schedule:
(i) The lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(ii) The Sellers shall use their best efforts to
ensure that 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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(iii) The Targets are not in breach or default and,
to Sellers' knowledge, no other 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) To Sellers' knowledge, 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 Targets have not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold; and
(vii) All facilities leased or subleased thereunder
have received all approvals of governmental authorities (including
licenses and permits) required to be obtained by the Targets in
connection with the operation thereof and have been operated and
maintained by the Targets in accordance with applicable laws, rules,
and regulations in all material respects.
(l) INTELLECTUAL PROPERTY. Except as set forth in
Section 4(l) of the Disclosure Schedule:
(i) The Targets are the sole and exclusive owners
of all right, title and interest in and have good, valid and
marketable title to, or, as to third party rights identified in
Section 4(l) of the Disclosure Schedule, have obtained a license to
use all Intellectual Property necessary for the operation of the
businesses of the Targets as presently conducted, free and clear of
all mortgages, pledges, liens, security interest, conditional sales
agreements, encumbrances or charges of any kind. Each item of
Intellectual Property owned or used by the Targets immediately prior
to the Closing hereunder will be owned or available for use by the
Targets on identical terms and conditions immediately subsequent to
the Closing hereunder. The Targets are the sole and exclusive owner
of all right, title and interest in and have good, valid and
marketable title to, or, as to third party programs identified in
Section 4(l) of the Disclosure Schedule, have obtained a license to
use and for the right to sublicense, the software programs developed,
authored and/or licensed by the Targets including without limitation
those software programs listed on Section 4(l) of the Disclosure
Schedule (the "SOFTWARE PROGRAMS") and the Documentation, free and
clear of all mortgages, pledges, liens, security interest, conditional
sales agreements, encumbrances or charges of any kind. Section 4(l)
of the Disclosure Schedule contains a complete list of all Software
Programs, registered trademarks and service marks, all reserved trade
names, all registered copyrights, all pending applications for
registration of any marks or copyrights, and all filed patent
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applications and issued patents used in, or otherwise necessary for
the conduct of, the business of the Targets as heretofore conducted.
(ii) Section 4(l) of the Disclosure Schedule sets
forth the form and placement of the proprietary legends and copyright
notices displayed in or on the Software Programs. In no instance has
the eligibility of the Software Programs for protection under
applicable copyright law been forfeited to the public domain by
omission of any required notice or any other action.
(iii) The Targets have enforced the trade secret
protection program set forth in Section 4(l)of the Disclosure
Schedule, and, except as set forth in Section 4(l) of the Disclosure
Schedule, there has been no violation of such program by any person or
entity. The source code and Documentation (except end-user manuals)
relating to the Software Programs (i) have at all times been
maintained in strict confidence, (ii) have been disclosed by the
Targets only to employees having a "need to know" the contents thereof
in connection with the performance of their duties to the Targets and
(iii) have not been disclosed to any third party.
(iv) All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated
in the conception and development of the Software Programs,
Documentation or Intellectual Property have executed the nondisclosure
agreements set forth in Section 4(l) of the Disclosure Schedule and
either (1) have been party to a written agreement with the Targets
that has accorded the Targets full, effective, exclusive and original
ownership of all the Software Programs, Documentation and Intellectual
Property, or (2) have executed appropriate instruments of assignment
in favor of the Targets as assignee that have conveyed to the Targets
full, effective, and exclusive ownership of all the Software Programs,
Documentation and Intellectual Property.
(v) Section 4(l) of the Disclosure Schedule
contains a complete list of software libraries, compilers and other
third-party software used in the development of the Software Programs.
Section 4(l)of the Disclosure Schedule lists all license agreements
for the use of all such software and, if any such software is not
licensed, the basis of the use of such software by the Targets. All
use of each of such Software Programs by the Targets has been in full
compliance with the respective license agreement or other right of use
listed on Section 4(l) of the Disclosure Schedule.
(vi) The Software Programs will perform in
accordance with the technical specifications therefor and with the
warranties set forth in the Licenses.
(vii) The Software Programs, the use thereof by the
Targets and the use, license, sale or lease of the Software Programs,
or of any part thereof, or of any copy, or of any part thereof, do not
and will not infringe on, or contribute to the infringement of, any
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copyright, trade secret, or, to the knowledge of Sellers, any patent
or any other exclusionary right of any third party in either the
United States or any foreign country in which the Targets do business.
No person or entity has asserted a claim that the use, license, sale
or lease of any Software Program, or any part thereof, infringes or
contributes to the infringement of any patent claim, copyright or
trade secret right of any third party in either the United States or
any foreign country, and the Sellers are not aware of any basis for
any such claim.
(viii) Except with respect to demonstration or trial
copies, no portion of the Software Programs contains or will contain
any "back door," "time bomb," "Trojan horse," "worm," "drop dead
device," "virus" or other software routines or hardware components
designed to permit unauthorized access; to disable or erase software,
hardware, or data; or to perform any other such actions.
(ix) The documentation of the Software Programs
includes without limitation the source code (with comments) for all
Software Programs, as well as any pertinent commentary or explanation
that may be necessary to render such materials understandable and
usable by a trained computer programmer, any programs (including
compilers), "workbenches," tools and higher level (or "proprietary")
language necessary for the development, maintenance and implementation
of the Software Programs and any all materials relating to the
Software Programs, including without limitation all notes, flow
charts, programmer's or user's manuals (collectively, the
"DOCUMENTATION").
(x) The Sellers have delivered to the Buyer
correct and complete samples or copies of all trademarks, service
marks, trade names, copyrights, patents, registrations, applications,
licenses, agreements, and permissions (as amended to date) held by the
Targets, 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 used in, or otherwise necessary for the
conduct of, the business of the Targets as heretofore conducted,
except as set forth in Section 4(l) of the Disclosure Schedule:
(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, is
threatened which challenges the legality, validity,
enforceability, use, or ownership of the item; and
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(D) the Targets have never agreed to
indemnify any person or entity for or against any
interference, infringement, misappropriation, or other
conflict with respect to the item.
(xi) The Sellers have supplied the Buyer with
correct and complete copies of all third party licenses, sublicenses,
agreements, and permissions (as amended to date) to which either of
the Targets is a party. With respect to each such item, except as set
forth in Section 4(l) of the Disclosure Schedule:
(A) the license, sublicense, agreement,
or permission covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement,
or permission will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms
immediately following the Closing;
(C) the Targets are not and, to the
knowledge of Sellers, no other 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) the underlying item of Intellectual
Property is not subject to any outstanding judgment, order,
decree, stipulation, injunction, or charge;
(F) no charge, complaint, action, suit,
proceedings, hearing, investigation, claim or demand is
pending or, to the knowledge of Sellers, is threatened which
challenges the legality, validity, or enforceability of the
underlying item of Intellectual Property; and
(G) the Targets have not granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(xii) Section 4(l) of the Disclosure Schedule sets
forth a complete and accurate list of all licenses and sublicenses of
the Software Programs (the "LICENSES") and of all customer trial
agreements for the Software Programs granted by the Targets to other
parties. Except as set forth in Section 4(l) of the Disclosure
Schedule, all Licenses identified in Section 4(l) of the Disclosure
Schedule constitute only end-user agreements, each of which grants the
end user thereunder principally the nonexclusive right and license to
use an identified Software Program and related user documentation, for
internal purposes only, at
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the sites specified in each agreement. Except as set forth in Section
4(l) of the Disclosure Schedule, all Licenses and trials of the
Software Programs are governed by the Targets' standard license and
customer trial agreements, respectively, true and correct copies of
which have been provided to Buyer.
(m) CONTRACTS. Section 4(m) of the Disclosure Schedule
lists the following contracts, agreements, and other written arrangements to
which either of the Targets 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 $50,000 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
$50,000;
(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 $50,000 or under which it has imposed (or may impose) a Security
Interest on any of its assets, tangible or intangible;
(v) any written arrangement concerning
confidentiality or noncompetition;
(vi) any written arrangement involving 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 reasonably be expected
to have an adverse effect on the assets, Liabilities, business,
financial condition, operations, results of operations, or future
prospects of either of the Targets;
(ix) any written arrangement involving a
governmental entity or quasi-governmental agency;
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(x) any written Customer Contract or Agreement;
or
(xi) any other written arrangement (or group of
related written arrangements) either involving more than $50,000 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) the
written arrangement is legal, valid, binding, enforceable, and in full force
and effect; (B) the written arrangement will continue to be legal, valid,
binding, enforceable and in full force and effect on the same or substantially
similar terms immediately following the Closing; (C) the Targets are not and,
to Sellers' knowledge, no other party is in Material breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the
written arrangement; and (D) no party has repudiated any provision of the
written arrangement. Except as set forth in Section 4(m) of the Disclosure
Schedule, the Targets are 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). Based on the facts known to Sellers at Closing, no unfilled
Material Customer Contract or Agreement obligating the Targets to perform
services will result in a loss to the Targets upon completion of performance.
Except as set forth in Section 4(m) of the Disclosure Schedule, neither of the
Targets is a party to any contract, agreement or other arrangement which was
not entered into in an arms-length transaction. None of either Target's
current twenty-five (25) highest grossing revenue customers has Materially
curtailed or terminated its relationship with it or has indicated that it will
stop, or Materially decrease the rate of, buying services from it.
(n) NOTES AND ACCOUNTS RECEIVABLE. Except as set forth
in Section 4(n) of the Disclosure Schedule, all notes and accounts receivable
of the Targets 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 debts set forth on the
face of the Financial Statements (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 Targets.
(o) POWERS OF ATTORNEY. Except as set forth in Section
4(o) of the Disclosure Schedule, there are no outstanding powers of attorney
executed on behalf of the Targets.
(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 Targets
have been a party, a named insured, or otherwise the beneficiary of coverage at
any time within the past three (3) years:
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(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 deductibles and ceilings) of coverage; and
(v) A description of any retroactive premium
adjustments or other loss-sharing arrangements.
Except as set forth in Section 4(p) of the Disclosure Schedule, with
respect to each such insurance policy: (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 immediately following the Closing Date; (C) the Targets are 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. Section 4(p) of the Disclosure Schedule
describes any self-insurance arrangements affecting the Targets.
(q) LITIGATION. Section 4(q) of the Disclosure Schedule
sets forth each instance in which either of the Targets (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, 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 Governmental Authority or before any arbitrator. None of the Sellers has
any knowledge that any such charge, complaint, action, suit, proceeding,
hearing, or investigation may be brought or threatened against either of the
Targets.
(r) EMPLOYEES. To the knowledge of Sellers, no key
employee or full-time group of employees has any plans to terminate employment
with either of the Targets. Neither of the Targets is a party to or bound by
any collective bargaining agreement. Except as set forth in Section 4(r) of
the Disclosure Schedule, neither of the Targets has experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Targets have not committed any unfair labor practice. None of
the Sellers and the directors and officers (and employees with responsibility
for employment matters) of the Targets 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 Targets.
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(s) EMPLOYEE BENEFITS. Section 4(s) of the Disclosure
Schedule lists all Employee Benefit Plans that the Targets maintain or to which
the Targets contribute for the benefit of any current or former employee of the
Targets. Except as set forth in Section 4(s) of the Disclosure Schedule:
(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
Targets. All premiums or other payments for all periods ending on or
before the Closing Date have been paid or accrued in accordance with
the past custom and practice of the Targets with respect to each
Employee Welfare Benefit Plan.
(iv) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a "qualified
plan" under Code Sec. 401(a) and has received 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, 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
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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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,
threatened. None of the Sellers 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.
(viii) The Targets have maintained all employee
benefit plans in accordance in all material respects with the
applicable statutory requirements, and all contributions (including
all employer and employee contributions) which have accrued for
periods prior to the Closing Date to such plans have been made.
Neither of the Targets contributes to, ever has 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
Targets have not incurred, and none of the Sellers has any knowledge that the
Targets will incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that either of the Targets maintains or ever has maintained or to which any of
them contributes, ever has contributed, or ever has been required to
contribute. Except as set forth in Section 4(s) of the Disclosure Schedule,
the Targets do not maintain, nor have they ever maintained or contributed to,
or ever 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. Except as set forth in Section 4(t) of
the Disclosure Schedule, neither of the Targets is a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other
person.
(u) ENVIRONMENT, HEALTH, AND SAFETY. Except as set forth
in Section 4(u) of the Disclosure Schedule:
(i) To the Knowledge of Sellers, each of the
Targets and its Affiliates has complied with all laws (including rules
and regulations thereunder) of any Governmental Authority 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.
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STOCK PURCHASE AGREEMENT
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(ii) To the Knowledge of the Sellers, the Targets
do not have any Liability (and there is no Basis related to the past
or present operations, properties, or facilities of either of the
Targets and its predecessors and Affiliates for any present or future
charge, complaint, action, suit, proceeding, hearing, investigation,
claim, or demand against the Targets 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 1989, 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 Governmental
Authority or common law remedy 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, the Targets do
not have any Liability (and neither of the Targets 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 reasonably be expected to form the Basis for any present or
future charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand (under the common law or pursuant to
any statute) against the Targets 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, the Targets do
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 Targets 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
Governmental Authority concerning employee health and safety.
(v) To the Knowledge of Sellers, the Targets do
not have any Material Liability (and the Targets have not exposed any
employee to any substance or condition that could reasonably be
expected to 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
Targets giving rise to any Liability) for any illness of or personal
injury to any employee.
(vi) To the Knowledge of Sellers, the Targets have
obtained and been in compliance with all of the terms and conditions
of all permits, licenses, and other authorizations which are required
under, and have complied with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all laws of any
Governmental Authority (including rules, regulations, codes, plans,
judgments, orders, decrees, stipulations, injunctions, and charges
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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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, all properties
and equipment used in the business of the Targets have been free of
asbestos, PCB's, methylene chloride, trichloroethylene, 1,2
trans-dichloroethylene, dioxins, dibenzofurans, and Extremely
Hazardous Substances.
(viii) To the Knowledge of Sellers, no pollutant,
contaminant, or chemical, industrial, hazardous, or toxic material or
waste ever has been buried, stored, spilled, leaked, discharged,
emitted, or released in violation of law on any real property that the
Targets own or ever have owned or that the Targets lease or ever have
leased.
(v) LEGAL COMPLIANCE. Except as set forth in Section
4(v) of the Disclosure Schedule:
(i) The Targets have complied with all laws
(including rules and regulations thereunder) of all Governmental
Authorities, and no charge, complaint, action, suit, proceeding,
hearing, investigation, claim, demand, or notice has been filed or
commenced against either of the Targets alleging any failure to comply
with any such law or regulation.
(ii) The Targets have complied with all applicable
laws (including rules and regulations thereunder) relating to the
employment of labor, employee civil rights, and equal employment
opportunities.
(iii) The Targets have 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 Targets have complied with all applicable
laws (including rules and regulations thereunder) relating to the
residency status of foreign individuals which are employees of the
Targets and obtaining the requisite visas, permits and other
documentation to permit such individuals to work in the United States.
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STOCK PURCHASE AGREEMENT
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(v) The Targets have 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 Governmental Authority;
(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 public office
with regards to any Governmental Authority.
(vi) The Targets have filed in a timely manner all
reports, documents, and other materials it was required to file (and
the information contained therein was correct and complete in all
respects) under all applicable laws (including rules and regulations
thereunder).
(vii) The Targets have possession of all records
and documents they were required to retain under all applicable laws
(including rules and regulations thereunder).
(w) CERTAIN BUSINESS RELATIONSHIPS WITH THE TARGETS.
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 Targets (except as an employee) 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 Targets.
(x) BROKERS' FEES. The Targets do 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) BOOKS AND RECORDS. The Sellers have furnished the
Buyer with true and complete copies of the books and records relating to the
ownership and operation of the Targets. The books and records reflect all
minutes and written consents adopted by the Boards of Directors or the Targets.
The books and records have been maintained in accordance with applicable legal
requirements and comprise all of the books and records relating to the
ownership and operation of the Targets.
(z) PAYMENTS TO OFFICIALS. During the three year period
prior to the date hereof, neither the Targets nor any of the Sellers on behalf
of the Targets has paid or given or has authorized or committed to the payment
or gift of money or anything of value to any official or employee of
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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any government entity or instrumentality or any political party or candidate
for political office for the purpose of influencing any governmental action or
decision in order to obtain or retain business or to direct business to any
other party.
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, her, or
its 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 or will cause
the Targets to give any notices to third parties required of the Targets by
this Agreement or the transactions contemplated hereby, and will or will cause
the Targets to use all reasonable efforts to obtain all third-party consents
required of the Targets by this Agreement or the transactions contemplated
hereby or in connection with the matters pertaining to the Targets disclosed or
required to be disclosed in the Disclosure Schedule. Sellers will take
additional actions (and the Sellers will cause the Targets to take all
additional actions) that are reasonably 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, she, it or the Targets is required to give, make, or obtain as
reasonably required by this Agreement or the transactions contemplated hereby
in order that Buyer is able to conduct the business of the Targets in the same
manner as it is currently being conducted; provided, however, that the Sellers
shall not be required to pay any amounts to any such third parties in order to
obtain such consents.
(c) OPERATION OF BUSINESS. The Sellers will not cause or
permit the Targets 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 Targets to engage in any practice, take any
action, embark on any course of inaction, or enter into any transaction of the
sort described in Section 4(f) above.
(d) PRESERVATION OF BUSINESS. The Sellers will cause the
Targets to keep their business and properties substantially intact, including
its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
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(e) FULL ACCESS.
(i) Each of the Sellers will permit, and the
Sellers will cause the Targets to permit, representatives of the Buyer
to have reasonable access at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the
Targets, to all premises, properties, books, records, contracts, Tax
records, and documents of or pertaining to the Targets. Buyer's
on-site investigation of the Targets shall be limited to ten (10)
business days and shall occur only after public announcement of the
transactions contemplated by this Agreement, unless otherwise agree to
by Buyer and the Sellers in writing; provided, however, that such
limitation of time shall not otherwise limit Buyer's investigation of
the Targets off-site. During Buyer's on-site investigation, Buyer
shall not discuss any aspects of the operation of the Targets with any
employee of the Targets, and Buyer shall direct all requests for
information and material only through Terri Younger Miller or Kevin
Kennefick, unless otherwise agreed to by Buyer and the Sellers in
writing. Buyer shall not contact or speak or correspond with any
lender, customer, employee or other person associated in business with
the Targets without the written consent of the Targets.
(ii) Upon completion of the audits and following
public announcement of the transactions contemplated by this Agreement
and so long as this Agreement has not been terminated, Buyer shall
arrange with Sellers a mutually agreeable time and place at which
Buyer may conduct interviews with designated key employees and/or
customers of the Targets mutually agreed to by Buyer and Sellers. Such
interviews shall be in strict conformity with a format mutually agreed
to by Buyer and the Sellers and shall take place and be completed
wholly within the last ten (10) days prior to Closing.
(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 Targets. Each Party will give prompt written notice
to the others of any material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement. No disclosure
by any Party pursuant to this Section 5(f) however, shall be deemed to amend or
supplement Annex II, Annex III, or the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. None of the Sellers will (and the
Sellers will not cause or permit the Targets 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 Targets 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.
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STOCK PURCHASE AGREEMENT
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(h) PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF
FINANCIAL INFORMATION. DDS will prepare (as soon as is reasonably practicable
hereafter) the balance sheets as of, and the income statement and the cash flow
statement for, the 12-month period ending December 31, 1995 and 1996 and for
the 9-month period ending September 30, 1997 from its books and records and
Sellers will cause such balance sheets and income statements to be audited by
Ernst & Young LLP and will provide such records, documentation and assistance
as may be requested by Ernst & Young LLP to complete such audit. Each of the
Buyer and the Targets shall receive a copy of such audited financial
statements. The Sellers shall pay thirty percent (30%) of the cost of such
audit, subject to a cap of $6,000.00 to be paid by the Sellers, and Buyer shall
pay the remaining cost of such audit. The Targets will prepare and deliver to
Buyer, on a bi-weekly basis until the Closing Date, the financial and other
information listed on Exhibit E hereto.
(i) DELIVERY OF SCHEDULES; ACCEPTANCE. Buyer
acknowledges that the preparation and delivery of the Schedules to the
Agreement may not be prepared and/or final at the time of the execution and
delivery of the Agreement. As such, the parties agree as follows:
(i) the Sellers shall have the right to deliver
the Schedules to the Agreement and/or to amend, restate and
update the Schedules to the Agreement up to the date which is
five (5) days prior to the Closing Date.
(ii) at least five (5) days prior to the Closing,
the Seller shall deliver to the Buyer a complete copy of the
proposed final Schedules to the Agreement noting all changes
from the Schedules provided upon execution of the Agreement;
and
(iii) Buyer shall notify Sellers at or prior to the
Closing that either (i) Buyer accepts such revised Schedules,
in which case they shall become part of this Agreement as if
in existence on the date of this Agreement and all such
disclosures made in such amended Schedules shall be deemed
disclosed as if they had been disclosed in the Schedules as of
the date of this Agreement or (ii) that Buyer in its sole
discretion does not accept such Schedules and elects to
terminate this Agreement.
6. ADDITIONAL COVENANTS. The Parties further agree as follows:
(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
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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 Targets, subject to Sellers' right
to access to and to make copies of all such documents.
(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 Targets, 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 or Buyer 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 Targets from maintaining the same business relationships with
the Targets after the Closing for a period of twenty-four (24) months
thereafter as it maintained with the Targets prior to the Closing. Each of the
Sellers will refer all customer inquiries relating to the lines of businesses
of the Targets to the Buyer from and after the Closing for a period of
twenty-four (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 three (3) years from the Closing, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his, her, or its
possession. 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
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 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.
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(e) MONITORING INFORMATION. Prior to the Closing,
Sellers shall cause the Targets to deliver such information as may reasonably
be requested by Buyer.
(f) LEASES. Sellers shall cause prior to the Closing
Date, the Targets to obtain from its landlords (to the extent required under
the pertinent premises lease) written consent to the assignment of all leases
being indirectly assumed by Buyer, which assignments are deemed to have
resulted from the transactions contemplated by this Agreement.
(g) SECTION 338(h)(10) ELECTION. The Sellers and Buyer
shall join in making a timely election (but in no event later than sixty (60)
days following the Closing) under Section 338(h)(10) of the Code and any
similar state law provisions in all applicable states, with respect to the sale
and purchase of the Shares pursuant to this Agreement, and each party shall
provide to the others all necessary information to permit such elections to be
made. Buyer and the Sellers shall, as promptly as practicable following the
Closing Date, take all actions necessary and appropriate (including filing such
forms, returns, schedules and other documents as may be required) to effect and
preserve timely elections. All income Taxes attributable to the elections made
pursuant to this Section 6(g) including any income Taxes resulting from the
change from cash-basis to accrual-basis accounting, shall be the liability of
the Sellers; provided, however, that any increase in income Taxes resulting
from the Section 338(h)(10) election (other than the change in accounting
method) shall be the liability of Buyer. In connection with such elections,
within one hundred twenty (120) days following the Closing Date, Buyer and the
Sellers shall act together in good faith to determine and agree upon the
"deemed sale price" to be allocated to each asset of the Targets in accordance
with Treasury Regulation Section 1.338(h)(10)-1(f) and the other regulations
under Section 338 of the Code. Notwithstanding the generality of the
immediately preceding sentence, Buyer and the Sellers agree that the "deemed
sale price" shall be allocated to the fixed assets and the monetary assets of
the Targets at their fair market value as of the Closing Date as determined in
accordance with GAAP, consistently applied, and the balance of the "deemed sale
price" shall be allocated to goodwill and other intangible assets of the
Targets, but in no event shall (A) the "deemed sale price" allocated to the
non-competition covenant exceed $50,000, and (B) the "deemed sale price"
allocated to the fixed assets exceed their depreciated book value. Both Buyer
and the Sellers shall report the tax consequences of the transactions
contemplated by this Agreement consistently with such allocations and shall not
take any position inconsistent with such allocations in any Tax Return or
otherwise. The Sellers shall be liable for, and shall indemnify and hold Buyer
and the Targets harmless against, any Taxes or other costs attributable to (i)
a failure on the part of the Sellers to take all actions required of them under
this Section 6(g); or (ii) a failure on the part of DDS to qualify as an "S
corporation" at the time of Closing.
(h) ADDITIONAL TAX MATTERS.
(i) The Targets shall 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 the
Targets shall remit any Taxes due in respect of such Tax Returns. The
Sellers
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shall have the right to review and, acting in good faith with
reasonable judgment, approve the Tax Returns prior to filing.
(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 information held by the Buyer
and/or the Targets to the extent such records and information pertain
to events occurring on or prior to the Closing Date; therefore, Buyer
agrees to cause the Targets to (A) use its best efforts to properly
retain and maintain such records 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 statute of limitations with
respect to such year, whichever is later, and (B) allow the Sellers
and their agents and representatives at times and dates mutually
acceptable to the Parties, to inspect, review and make copies of such
records as such other party may deem necessary or appropriate from
time to time, such activities to be conducted during normal business
hours and at the other Party's expense.
(iii) The Sellers shall reimburse the Buyer for the
Taxes for which they are liable pursuant to Section 6(h)(i) hereof,
but which are payable in respect of Tax Returns to be filed by the
Buyer pursuant to Section 6(h)(i) hereof within ten (10) business days
after receipt by the Sellers of signed copies of such Tax Returns as
filed; however, only to the extent such Taxes are in excess of the
reserve for such Tax Liability used to determine the Net Working
Capital of the Targets.
(i) COVENANT NOT TO COMPETE.
(i) For a period of two (2) years from and after
the Closing Date or two (2) years beyond the term of his or her
employment with the Targets, whichever is longer, neither of the
Sellers will (i) engage directly or indirectly in any business that is
substantially similar to that conducted by the Targets as of the
Closing Date within a one hundred (100) mile radius of any office of
the Targets; (ii) service or solicit any current customer of the
Targets relating to any business that is substantially similar to that
conducted by the Targets; or (iii) offer employment to or attempt to
induce any director, officer, employee, agent, or customer of the
Targets to terminate such relationship with the Targets; provided,
however, that no owner of less than 1% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason
of such ownership in any of the Targets' business;
(ii) If any Seller commits a breach, or overtly
threatens to commit a breach, of any of the provisions of Section
6(i)(i) above, Buyer shall have the right and remedy to seek to have
the provisions of Section 6(i)(i) specifically enforced by any court
having jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury and
continuing damage to Buyer, the Targets and their affiliates, and that
the exact amount of which would be difficult to ascertain and that in
any
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event money damages will not provide adequate remedy and Buyer shall
be entitled to seek to obtain injunctive relief restraining any
violation of Section 6(i)(i);
(iii) It is expressly understood and agreed that
Buyer and the Sellers consider the restrictions contained in Section
6(i)(i) above to be reasonable and necessary for the purposes of
preserving and protecting the business of the Targets and goodwill
purchased by Buyer; and
(iv) If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 6(i)
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 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.
(j) CONDUCT OF BUSINESS DURING EARN-OUT PERIOD. During
the Earn-Out Period, Buyer (together with Sellers, as long as they remain
employed by the Targets) shall be entitled to operate and manage the business
of the Targets, consistent with prudent business practices. Buyer agrees that
it will not, during the Earn-Out Period, unreasonably require that the business
of the Targets be operated substantially differently than it was operated in
the past, unreasonably change the prices charged or the level of compensation
of full-time corporate employees or the level or nature of expenses of the
Targets, unless the prior practices are unreasonable or imprudent. Among other
things, during the Earn-Out Period, Buyer shall not, without the prior approval
of the Sellers, which shall not unreasonably be withheld, (i) substantially
change existing business plans and policies in a manner that materially
increases the expenses or decreases the revenues of the Targets in a manner
that adversely affects the calculation of EBIT for purposes of the Earn-Out
Payment, (ii) materially restructure the organization, business, or employees
(including by transferring employees or otherwise reducing the number of
employees or the compensation and benefits payable to them or materially
changing the terms of their employment) of the Targets or mix the business or
revenues of the Targets with the businesses or revenues of any other
subsidiaries or divisions of Buyer in a manner that adversely effects the
calculation of EBIT for purposes of the Earn-Out Payment, (iii) cease or
curtail in any material respect the business of the Targets, (iv) sell the
stock or substantially all of the assets, directly or indirectly, to a third
party without obtaining the written agreement of such third party to comply
with the provisions of this Agreement, or (v) terminate the employment of the
Sellers except in accordance with the employment agreements between each of the
Sellers and DDS. In addition, during the Earn-Out Period, Buyer will provide
such capital to the Targets as reasonably necessary to operate the business as
provided in the budget of Targets as mutually agreed by Buyer and Sellers;
provided, that in no event shall Buyer be required to fund capital to the
Targets during the Earn-Out Period in excess of the capital withdrawn from the
business of the Targets by Buyer. The Buyer will allow certain employees of
Targets to participate in Buyer's incentive stock option program
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consistent with Buyer's policies in effect from time to time. The Sellers
agree not to cut staff, capital expenditures and G&A expenses or take other
actions that are not consistent with prior practices and/or prudent business
practices, and each agrees not to engage in any activity in order to increase
current year profits of the business of the Targets at the expense of the
longer term growth of the business of the Targets.
(k) ADC AND DISNEY BAD DEBTS. The Sellers shall be
allowed to use commercially reasonable and legal collection efforts to pursue
any accounts receivable of ADC Telecommunications, Inc. ("ADC") and Disney
outstanding of the Closing Date which were written off by the Targets and not
included in the calculation of the Net Working Capital of Targets; provided,
however that such right to collect shall be subordinated to the approximately
$168,346 in accounts receivable from ADC and Disney included on the Financial
Statements of Targets and in the calculation of Net Working Capital and
effected only after such amounts have been collected in full by the Targets.
If such accounts receivable of ADC and/or Disney are paid to the Targets in
excess of the amount stated on the Financial Statements of Targets, then
Targets shall remit the proceeds from such accounts to the Sellers.
7. CONDITIONS TO OBLIGATIONS TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The
obligation of the Buyer to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) The representations and warranties set forth
in Section 3(a) and Section 4 above shall be true and correct in all
material respects at and as of the Closing Date;
(ii) The Sellers shall have performed and complied
with all of their covenants hereunder in all Material respects through
the Closing;
(iii) the Targets shall have procured all of the
governmental or third party consents and approvals specified in
Section 5(b) including any landlord consents related to any rental
property and a consent from SAP America, Inc. relating to Targets'
National Logo Partner Agreement;
(iv) No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency within the jurisdiction of any Governmental
Authority 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 Shares or the Targets (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect);
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(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 Buyer shall have received from each of
Terri Younger Miller and Kevin T. Kennefick an executed employment
agreement in the form and substance attached hereto as Exhibit B;
(vii) The Buyer shall have received from each of
Terri Younger Miller and Kevin T. Kennefick an executed
non-competition agreement in the form and substance attached hereto as
Exhibit C;
(viii) 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;
(ix) The Buyer shall have received the
resignations, effective as of the Closing, of each director of the
Targets designated by Buyer prior to the Closing;
(x) All officers, directors of the Targets and
each of the Sellers shall have repaid in full all debts or other
obligations, if any, owed by them to the Targets;
(xi) No Material adverse change shall have
occurred before the Closing in Targets' business or their future
business prospects;
(xii) All appropriate consents and shareholder
authorizations of Targets shall have been obtained;
(xiii) The Buyer shall be satisfied that at Closing
all facilities of the Targets are under legal, valid and binding
leases or subleases, each of which have received all approvals of
governmental authorities;
(xiv) Sellers shall have delivered to Buyer stock
certificates evidencing all of the stock of the Targets in good
delivery form and duly endorsed for transfer or accompanied by duly
executed stock power or other appropriate assignment documents;
(xv) The Sellers shall have caused to be cancelled
and the Targets shall have cancelled any stock options, deferred bonus
programs, and phantom equity plans
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outstanding as of the Closing Date, at no cost to Buyer. Sellers
shall have fully assumed all liabilities relating to the Target's 1997
Contingent Bonus Plan. Buyer shall be satisfied in its sole
reasonable good faith discretion with existing non-compete
arrangements with Targets' employees and with the existing employment
arrangements with Targets' employees, including arrangements between
the Target's employees and Terri Younger Miller and Kevin Kennefick;
(xvi) All liens and security interests securing
debts of the Targets which have been paid in full prior to or at the
Closing shall have been fully released of record to the reasonable
satisfaction of the Buyer and all Uniform Commercial Code financing
statements or other filings of any kind whatsoever, covering or
evidencing such debts, liens and/or security interests shall have been
terminated;
(xvii) No unsatisfied liens for the failure to pay
Taxes of any nature whatsoever shall exist against the Targets, or
against or in any way affecting any of the Shares; and
(xviii) All deferred taxes of the Targets and all
other tax related issues of the Targets shall have been accrued and/or
discharged by the Targets (except for income Taxes payable by the
Sellers).
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;
(iii) no action, suit or proceeding shall be
pending or threatened before any court or quasi-judicial or
administrative agency within the jurisdiction of any Governmental
Authority 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);
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(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 Buyer shall have received from each of
Terri Younger Miller and Kevin Kennefick an executed employment
agreement in the form and substance attached hereto as Exhibit B;
(vi) all actions to be taken by the Buyer in
connection with consummation of the transactions contemplated hereby
will be satisfactory in form and substance to the Sellers; and
(vii) the Targets shall have procured all of the
governmental or third party consents and approvals specified in
Section 5(b) including any landlord consents related to any rental
property and a consent from SAP America, Inc. relating to Targets'
National Logo Partner Agreement.
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.
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL. Except as otherwise specifically provided
in this Agreement, all of the representations, warranties and covenants of the
Sellers (other than the representations and warranties of the Sellers contained
in Section 3 or Section 4(h) above) shall survive the Closing hereunder (even
if the Buyer knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect for a
period of two (2) years thereafter. All of the representations and warranties
of Sellers contained in Section 3 and Section 4(h) of this Agreement and the
representations, warranties and covenants of Buyer shall survive the Closing
(even if the Buyer knew or had reason to know of any misrepresentation or
breach of warranty or covenant at the time of Closing) and continue in full
force and effect for the statute of limitations.
(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 during the period such representations, warranties and
covenants survive, and provided 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 (or the alleged breach).
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(ii) In the event any of the Sellers breaches (or
in the event any third party alleges facts that, if true, would mean
any of the Sellers has breached) any of his or her Several
representations, warranties, and covenants contained herein, and
provided that the particular representation, warranty, or covenant
survives the Closing and that the Buyer makes a written claim for
indemnification against the Seller pursuant to Section 10(h) below
within the applicable survival period, then such 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 (or the alleged 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 Targets arising under
United States Treasury Reg. Section 1.1502-6 (because the Targets 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 Targets 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 any Governmental Authority by reason of the sale of the
Targets to Buyer.
(v) Each of the Sellers agree to indemnify the
Buyer from and against the entirety of any Adverse Consequences which
may become due and owing by reason of the Targets's failure to
properly obtain any visas required for employees of the Targets to
work in the United States.
(vi) Each of the Sellers shall be liable for, and
hereby indemnifies, the Buyer for all income Taxes imposed on the
Targets with respect to any taxable year or period beginning before
and ending on 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 as reflected in the Financial
Statements or in the computation of the Net Working Capital. In order
to apportion appropriately any income Taxes relating to any taxable
year or period that begins before and ends after the Closing Date, the
Parties hereto shall, to the extent permitted or not prohibited by
applicable law, elect with the relevant taxing authority, if required
or necessary, to terminate the taxable year of the Targets as of the
Closing Date. In any case where applicable law does not permit the
Targets to treat such date as the end of a taxable year or period,
then whenever it is necessary to determine the liability for income
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Taxes of the Targets, for a portion of a taxable year or period, such
determination shall (unless otherwise agree to in writing by the Buyer
and the Sellers) be determined by a closing of the Targets' books,
except that exemptions, allowances or deductions that are calculated
on an annual basis, such as the deduction for depreciation, shall be
apportioned on a time basis. In no event shall such apportionment of
income Taxes be greater than the income Taxes which would have been
allocated to the Targets if such income Taxes had been based upon a
time period in proportion to the number of days during such taxable
year or period the Sellers and the Buyer owned the stock in the
Targets.
(c) LIMITATIONS AND MANNER OF SATISFACTION. 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 and Section 8(b)(ii)-(vi) above (i) until the
Buyer has suffered aggregate losses by reason of all such breaches and specific
indemnities in excess of a $25,000 deductible and (ii) in excess of $3,000,000
($10,000,000 in the case of Section 4(l) above); provided, however, that the
limitation set forth in (i) and (ii) above specifically shall not apply to the
liability of any Seller with respect to Adverse Consequences resulting from or
attributable to Intentional Fraud by the Sellers. Any indemnification payment
shall be payable first from the Earn-Out Payment, and specifically the Earn-Out
Payment for the year in which the claim arises, and second from the Cash
Portion of the Purchase Price (and then only to the extent that the Earn-Out
Payment is not sufficient to permit the payment in full of the indemnification
claims), up to a maximum of $1,500,000. All indemnification payments hereunder
to be made by the Sellers shall be paid by the Sellers, and shall be sought by
the Buyer from the Sellers, only on a pro-rata basis in accordance with the
percentage of the Purchase Price payable to each of them, except that claims
under Several representations, warranties, or covenants of a particular Seller
shall be paid by and sought against only that Seller. Further, except with
respect to matters relating to title and ownership of Intellectual Property,
all indemnification claims against the Sellers under Section 4(l) of this
Agreement shall be made only as a result of claims or actions brought by third
parties unrelated in ownership to the Buyer or its Affiliates and shall not be
initiated by the Buyer or its Affiliates unless and until such third party
actions had been initiated.
(d) 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 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.
(e) 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
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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 thirty (30) days after the Indemnified
Party has given written notice of the matter that the Indemnifying party is
assuming the defense thereof, (A) the Indemnifying Party will have the right to
defend the Indemnified Party against the matter with counsel of its 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 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 within thirty (30) days after the Indemnified Party has given written
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, but subject to the provisions of clause (c) of the preceding
sentence. 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, and the
Indemnifying Party shall thereafter 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.
(f) DETERMINATION OF LOSS. The amount of indemnification
to be paid by any Party to another Party hereto shall be reduced by (i) any
insurance proceeds received, including both defense and indemnification costs,
with respect to any insurance policy maintained by the Targets providing
coverage with respect to any of the Adverse Consequences; and (ii) any Tax
benefits received by Buyer as a result of any of the Adverse Consequences
(utilizing the Applicable Rate as the discount rate). All indemnification
payments under this Section 8 shall be deemed adjustments to the Purchase
Price.
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(g) EXCLUSIVE REMEDY. The Buyer and Seller acknowledge
and agree that the foregoing indemnification provisions in this Section 8 shall
be the exclusive remedy of both the Buyer and Sellers for any breach of the
representations and warranties of either Party.
(h) PAYMENT; GENERAL RIGHT OF OFFSET. The Indemnifying
Parties shall promptly pay to such Indemnified Party as may be entitled to
indemnity hereunder in cash the amount of any Adverse Consequences to which
such Indemnified Party may become entitled to by reason of the provisions of
this Agreement, subject to the provisions and limitations in this Section 8.
Furthermore, and in lieu of receiving a cash payment from the Sellers, Buyer,
in good faith, may elect to offset against any Earn-Out Payment, including any
interest payable thereon, payable to Sellers the amount of any Adverse
Consequences or any other payments to which Buyer is entitled to by reason of
the provisions of this Agreement. In the event that Buyer offsets more than
the amount of any Adverse Consequences (as finally determined), Buyer shall be
responsible to Seller for such sums which should not have been subject to an
offset, plus interest thereon from the date of such offset.
(i) TAX DISPUTES. In the event that any dispute arises
between the Targets and the Internal Revenue Service or any state tax authority
relating to an issue in which Sellers have agreed to indemnify Buyer, the
Sellers shall have the right to associate with Buyer in the defense or
settlement of any such claims. Moreover, Buyer at all times shall act in good
faith in order to minimize the tax liability as to issues in which Sellers have
agreed to indemnify Buyer (so long as it does not adversely affect the Targets)
and shall not settle or compromise any claims or amend any Tax returns of the
Targets for any period up to or including the Closing Date without the consent
of Sellers, which consent shall not be unreasonably withheld.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of 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, 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) the Buyer may terminate this agreement in
accordance with the provision of Section 4;
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(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 January 15, 1998
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 January 15, 1998 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).
(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. Upon termination, the Buyer shall return or destroy all confidential
documents, notes or other written memoranda regarding the Targets delivered in
connection with the transactions contemplated hereby within five (5) business
days thereafter.
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 her
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 of the Sellers.
(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 his or her pro-rata Share of 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 Targets are examples of 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
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prior written approval of the Buyer and the Sellers provided, however, that in
no event shall any press release or public filing by the Buyer disclose the
Purchase Price, or other financial terms of this Agreement or the transactions
contemplated hereby; 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). The Sellers shall announce the transaction to the Targets'
employees simultaneously with the first press release by the Buyer, which shall
occur within 24 hours after the execution of this Agreement.
(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, except that the Confidentiality Agreement dated
August 1, 1997, shall remain in effect.
(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 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 and Seller may assign their rights and
interests, upon death, to the beneficiaries of their estates).
(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 and
provide such requesting party with a full set of original signature pages for
each of the parties hereto other than the requesting party within two (2) days
of the original execution date hereof.
(g) HEADINGS. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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(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 a Seller:
Terri Younger Miller
701 Brickell Key Boulevard, Apt. 2607
Miami, Florida 33131
Telephone: (305) 579-9231
Kevin T. Kennefick
3241 Casco Circle
Wayzata, MN 55391
Telephone: (612) 471-0026
with a copy to:
Mary E. Strand, Esq.
Fredrikson & Byron, P.A.
900 Second Avenue South, Suite 1100
Minneapolis, MN 55402
Telephone: (612) 347-7106
Facsimile: (612) 347-7077
If to the Buyer:
COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027
Attention: Michael T. Willis
Telephone: (713) 961-3633
Facsimile: (713) 627-1059
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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<PAGE> 54
with a copy to:
Peter T. Dameris, Esq.
Margaret G. Reed, Esq.
COREStaff, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027
Telephone: (713) 961-3633
Facsimile: (713) 627-1059
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Texas.
(j) AMENDMENTS AND WAIVERS. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by the Buyer and the Sellers. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(k) SEVERABILITY. Any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
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. Except as otherwise specifically provided
in this Agreement, each of the Buyer and the Sellers will bear his or its own
costs and expenses (including legal and
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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<PAGE> 55
investment banking fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Sellers acknowledge and
agree that the Targets shall not be liable for any fees or expenses (including
but not limited to legal, accounting and/or investment banking) associated with
the transactions contemplated by this Agreement.
(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 strict construction shall be applied against any Party.
Any reference to any statute or law of any Governmental Authority 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 (subject
to the provisions set forth in Section 10(p) below), in addition to any other
remedy to which they may be entitled, at law or in equity.
(p) ARBITRATION. IF A PARTY MAKES A GOOD FAITH
DETERMINATION THAT A BREACH (OR POTENTIAL BREACH) OF ANY OF THE
CONFIDENTIALITY, NON-COMPETITION, OR INTELLECTUAL PROPERTY RIGHTS PROVISIONS OF
THIS AGREEMENT BY THE OTHER PARTY (OR THE SELLERS) MAY RESULT IN DAMAGES OR
CONSEQUENCES THAT WILL BE IMMEDIATE, SEVERE AND INCAPABLE OF ADEQUATE REDRESS
AFTER THE FACT, SO THAT A TEMPORARY RESTRAINING ORDER OR OTHER IMMEDIATE
INJUNCTIVE RELIEF IS NECESSARY FOR A REALISTIC AND ADEQUATE REMEDY, THAT PARTY
MAY SEEK IMMEDIATE INJUNCTIVE RELIEF WITHOUT FIRST SEEKING RELIEF THROUGH
ARBITRATION. AFTER THE COURT HAS RULED ON THE REQUEST FOR INJUNCTIVE RELIEF,
THE PARTIES WILL THEREAFTER PROCEED WITH ARBITRATION OF THE DISPUTE AND STAY
THE LITIGATION PENDING ARBITRATION. SUBJECT TO THE FOREGOING, THE PARTIES
AGREE TO SUBMIT
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
- 50 -
<PAGE> 56
TO ARBITRATION, IN ACCORDANCE WITH THESE PROVISIONS, ANY CLAIM OR CONTROVERSY
ARISING FROM OR RELATED TO THE ALLEGED BREACH OF THIS AGREEMENT. THE PARTIES
FURTHER AGREE THAT THE ARBITRATION PROCESS AGREED UPON HEREIN SHALL BE THE
EXCLUSIVE MEANS FOR RESOLVING ALL DISPUTES MADE SUBJECT TO ARBITRATION HEREIN,
BUT THAT NO ARBITRATOR SHALL HAVE AUTHORITY TO EXPAND THE SCOPE OF THESE
ARBITRATION PROVISIONS. ANY ARBITRATION HEREUNDER SHALL BE CONDUCTED UNDER THE
MODEL COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION
(AAA). EITHER PARTY MAY INVOKE ARBITRATION PROCEDURES HEREIN BY WRITTEN NOTICE
FOR ARBITRATION CONTAINING A STATEMENT OF THE MATTER TO BE ARBITRATED. THE
PARTIES SHALL THEN HAVE FOURTEEN (14) DAYS IN WHICH THEY MAY IDENTIFY A
MUTUALLY AGREEABLE, NEUTRAL ARBITRATOR. AFTER THE FOURTEEN (14) DAY PERIOD HAS
EXPIRED, THE PARTIES SHALL PREPARE AND SUBMIT TO THE AAA A JOINT SUBMISSION,
WITH EACH PARTY TO CONTRIBUTE HALF OF THE APPROPRIATE ADMINISTRATIVE FEE. IN
THE EVENT THE PARTIES CANNOT AGREE UPON A NEUTRAL ARBITRATOR WITHIN FOURTEEN
(14) DAYS AFTER WRITTEN NOTICE FOR ARBITRATION IS RECEIVED, THEIR JOINT
SUBMISSION TO THE AAA SHALL REQUEST A PANEL OF NINE ARBITRATORS WHO ARE RETIRED
JUDGES OR PRACTICING ATTORNEYS WITH PROFESSIONAL EXPERIENCE IN THE FIELD OF
COMMERCIAL BUSINESS LAW, AND THE PARTIES SHALL ATTEMPT TO SELECT AN ARBITRATOR
FROM THE PANEL ACCORDING TO AAA PROCEDURES. UNLESS OTHERWISE AGREED BY THE
PARTIES, THE ARBITRATION HEARING SHALL TAKE PLACE IN MINNEAPOLIS, MINNESOTA, AT
A PLACE DESIGNATED BY THE AAA. ALL ARBITRATION PROCEDURES HEREUNDER SHALL BE
CONFIDENTIAL. EACH PARTY SHALL BE RESPONSIBLE FOR ITS COSTS INCURRED IN ANY
ARBITRATION, AND THE ARBITRATOR SHALL NOT HAVE AUTHORITY TO INCLUDE ALL OR ANY
PORTION OF SAID COSTS IN AN AWARD, REGARDLESS OF WHICH PARTY PREVAILS. THE
ARBITRATOR MAY INCLUDE EQUITABLE RELIEF. ANY ARBITRATION AWARDED SHALL BE
ACCOMPANIED BY A WRITTEN STATEMENT CONTAINING A SUMMARY OF THE ISSUES IN
CONTROVERSY, A DESCRIPTION OF THE AWARD, AND AN EXPLANATION OF THE REASONS FOR
THE AWARD. IT IS UNDERSTOOD AND AGREED BY THE PARTIES THAT THEIR AGREEMENTS
HEREIN CONCERNING ARBITRATION DO NOT OTHERWISE ALTER THE TERMS AND CONDITIONS
AS PROVIDED BY THIS AGREEMENT.
[THIS SPACE INTENTIONALLY LEFT BLANK]
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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<PAGE> 57
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
CORESTAFF, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
TARGETS:
DYNAMIC DATA SOLUTIONS, INC.
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
DDS EUROPE LIMITED
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
SELLERS:
--------------------------------------
Terri Younger Miller
--------------------------------------
Kevin T. Kennefick
CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
CORESTAFF, INC.,
CORESTAFF ACQUISITION SUB #12, INC.,
SAGE I.T. PARTNERS, INC.,
AND
THE SHAREHOLDERS OF SAGE I.T. PARTNERS, INC.
December 23, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS
ARTICLE II
CLOSING AND POST CLOSING MATTERS
2.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 MERGER; CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 EFFECTIVE TIME OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 BY-LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 OTHER EFFECTS ON CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 SAGE OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.11 AGREEMENT TO VOTE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.12 DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.13 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.14 DISSENTERS RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.15 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE TRANSACTION
3.1 AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 BROKER'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORESTAFF
CONCERNING THE TRANSACTION
4.1 ORGANIZATION OF CORESTAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 AUTHORIZATION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
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4.3 NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 BROKER'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
5.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER . . . . . . . . . . . . . . . . . . . . . 14
5.2 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 NONCONTRAVENTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . 15
5.7 UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.8 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9 TANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.10 REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.11 REAL PROPERTY LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.12 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.13 CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.14 NOTES AND ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.17 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.18 EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.19 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.20 GUARANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.21 ENVIRONMENT, HEALTH, AND SAFETY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.22 LEGAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.23 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY . . . . . . . . . . . . . . . . . . . . . . 32
5.24 BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.25 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.26 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.27 COMPLIANCE WITH THE LETTER OF INTENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.28 PAYMENTS TO OFFICIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI
PRE-CLOSING COVENANTS
6.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 NOTICES AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 OPERATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 PRESERVATION OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 FULL ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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AGREEMENT AND PLAN OF MERGER
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<TABLE>
<S> <C> <C>
6.6 NOTICE OF DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.7 EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.8 PREPARATION OF FINANCIAL STATEMENTS;
DELIVERY OF FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.9 DELIVERY OF SCHEDULES; ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII
ADDITIONAL COVENANTS
7.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.2 LITIGATION SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 TRANSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.4 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.5 MONITORING INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.6 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 ADDITIONAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.8 COVENANT NOT TO COMPETE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.9 CONDUCT OF BUSINESS DURING EARN-OUT PERIOD . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VIII
CONDITIONS TO OBLIGATIONS TO CLOSE
8.1 CONDITIONS TO OBLIGATION OF CORESTAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.2 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IX
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF CORESTAFF . . . . . . . . . . . . . . . . . . . . 41
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SHAREHOLDERS . . . . . . . . . . . . . . . . 43
9.4 MATTERS INVOLVING THIRD PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.5 DETERMINATION OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.6 EXCLUSIVE REMEDY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 PAYMENT; GENERAL RIGHT OF OFFSET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 TAX DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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<TABLE>
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10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE XI
MISCELLANEOUS
11.1 THE SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 PRESS RELEASES AND ANNOUNCEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3 NO THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 SUCCESSION AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.6 FACSIMILE/COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.8 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.11 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.12 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.13 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.14 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES . . . . . . . . . . . . . . . . . . . . . 50
11.15 SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.16 SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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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 Employee Non-Competition Agreement
Exhibit D Form of Opinion of Company's Legal Counsel
Exhibit F Form of Opinion of Buyer's Legal Counsel
Exhibit 4(l) Form of Nondisclosure Agreement
ANNEXES
Annex I Determination of EBIT
SCHEDULES
Disclosure Schedule
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of December 23, 1997 (this
"Agreement"), among CORESTAFF, Inc., a Delaware corporation ("CORESTAFF" or the
"Buyer"), CORESTAFF Acquisition Sub #12, Inc., a Delaware corporation and
wholly-owned subsidiary of CORESTAFF ("Merger Sub"), Sage I.T. Partners, Inc.,
a California corporation (the "Company" or "Target," which, for the purposes of
this Agreement, shall be deemed to include the Subsidiaries (as defined herein)
except where the context indicates otherwise), and the shareholders of the
Company named on the signature page hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders own all of the capital stock of the Company;
and
WHEREAS, the persons listed in Section 5.2 of the Disclosure Schedule
as the optionholders (the "Optionholders") are the sole owners of outstanding
Sage Options; and
WHEREAS, the parties hereto deem it advisable and in the best
interests of their respective companies and shareholders to consummate the
merger of Merger Sub with and into the Company (the "Merger"), with the Company
as the surviving corporation in the Merger, upon the terms and conditions set
forth in this Agreement; and
WHEREAS, for federal income tax purposes it is intended that the
Merger shall be a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"); and
WHEREAS, the parties hereto desire to set forth certain
representations, warranties, covenants and agreements made by each to the other
in connection with the transactions described in this Agreement, including
certain additional agreements related to the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following respective meanings for
all purposes of this Agreement:
"ADVERSE CONSEQUENCES" means all charges, complaints, actions,
suits, proceedings, hearings, investigations, claims, demands, judgments,
orders, decrees, stipulations, injunctions,
<PAGE> 8
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 of 1934, as amended.
"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).
"BASIS" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction that forms or could form the
basis for any specified consequence.
"BUYER" has the meaning set forth in the preface above.
"CASH PORTION OF THE PURCHASE PRICE" has the meaning set forth
in Section 2.2(a) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CLOSING" shall have the meaning set forth in Section 2.15.
"CLOSING DATE" shall have the meaning set forth in Section
2.15.
"COMPANY COMMON STOCK" shall mean the common stock, no par
value, of the Company.
"CONFIDENTIAL INFORMATION" means all confidential information
and trade secrets of 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 of Target related to (a) information technology or computer support
services, training, education and change management services; (b) maintenance
contracts for application software; (c) maintenance support arrangements, (d)
reengineering and refurbishment arrangements; (e) consulting arrangements; (f)
any other contract computer support services arrangement; and (g) agreements
related to any other services provided by Target.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 5
below.
"DOCUMENTATION" has the meaning set forth in Section 5.12
below.
"EARN-OUT PAYMENT" has the meaning set forth in Section 2.2(b)
below.
"EARN-OUT PAYMENT DETERMINATION" has the meaning set forth in
Section 2.2(c) below.
"EARN-OUT PAYMENT DISAGREEMENT NOTICE" has the meaning set
forth in Section 2.2(c) below.
"EARN-OUT PERIOD" has the meaning set forth in Section 2.2(b)
below.
"EBIT" means earnings before interest and taxes (prepared on
an accrual basis of accounting and in accordance with GAAP, as consistently
applied with the past practice of Metamor Technologies, Ltd.), plus mutually
agreed upon "ADJUSTMENTS" and "ADDBACKS" during the Earn-Out Period (as defined
in Section 2(c) below), and as determined by Annex I attached hereto.
"EFFECTIVE TIME" shall have the meaning set forth in Section
2.3.
"E&Y EARN-OUT PAYMENT DETERMINATION" has the meaning set forth
in Section 2.2(c) below.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi employer 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).
"EPA" shall mean the United States Environmental Protection
Agency.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"EVALUATION LICENSE " has the meaning set forth in Section
5.12 below.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 10
"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in
Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 5.5.
"FIRST EARN-OUT PAYMENT" has the meaning set forth in Section
2.2(b) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any governmental,
quasi-governmental, state, county, city or other political subdivision of the
United States or any other country, or any agency, court or instrumentality,
foreign or domestic, or statutory or regulatory body thereof.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9.4
below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9.4
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) patents, patent applications,
and provisional applications, including all continuations, divisionals and
related applications, (c) copyrights and registrations and applications for
registration thereof, (d) computer software, data, and documentation, (e) to
the extent legally protectable, trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
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), (f) to the extent legally protectable, other proprietary
rights, and (g) copies and tangible embodiments thereof (in whatever form or
medium).
"JOINT AND SEVERAL" has the meaning set forth in Section 11.1
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 liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 11
"LICENSES" has the meaning set forth in Section 5.12 below.
"MERGER CONSIDERATION" has the meaning set forth in Section
2.2(a) below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained
within the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth
in Section 5.5 below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in
Section 5.5 below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec.
3(37).
"NET WORKING CAPITAL" means total current assets less total
current liabilities of Target (including but not limited to all deferred
taxes), further reduced by (i) any long-term debt of Target, as determined in
accordance with GAAP, consistently applied and (ii) Transaction Expenses of the
Shareholders and/or the Company over $25,000 that are liabilities of the
Company. The Net Working Capital shall also be adjusted for the net affect on
Net Working Capital of any compensation charge or expense attributable to
options awarded on or prior to the date of Closing.
"OPTIONHOLDER" has the meaning set forth in the recitals
above.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA
Sec. 406 and Code Sec. 4975.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec.
4043.
"REQUISITE SHAREHOLDERS" means Shareholders holding a majority
in interest of the Shares as set forth in Section 4(b) of the Disclosure
Schedule.
"SAGE OPTIONS" shall mean all outstanding options to purchase
Company Common Stock as described in Section 5.2 of the Disclosure Schedule.
"SECOND EARN-OUT PAYMENT" has the meaning set forth in Section
2.2(b) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 12
"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.
"SEVERAL" has the meaning set forth in Section 11.1 below.
"SHAREHOLDER" has the meaning set forth in the preface above.
"SHAREHOLDERS" has the meaning set forth in the preface
above.
"SHARES" means the shares of the Company Common Stock.
"SOURCE CODE LICENSE" has the meaning set forth in Section
5.12 below.
"SOURCE CODE LICENSEES" has the meaning set forth in Section
5.12 below.
"SOFTWARE PROGRAMS" has the meaning set forth in Section 5.12
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.
"TAX" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 13
ARTICLE II
CLOSING AND POST CLOSING MATTERS
2.1 THE MERGER. In reliance upon the representations, warranties,
covenants and agreements of the parties set forth herein and upon the terms and
subject to the conditions of this Agreement, at the Closing, Merger Sub shall
be merged with and into the Company (the "Merger"), with the Company being the
surviving corporation (the "Surviving Corporation").
2.2 MERGER; CONSIDERATION.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any shares of Company
Common Stock, each Shareholder and Optionholder, in consideration for
all of the Company Common Stock owned or held by such Shareholder and
the cancellation of all Sage Options held by such Optionholder, shall
receive, upon the surrender of the certificates formerly representing
such shares and/or the agreements representing such Sage Options, (i)
an amount in cash, representing (A) such Shareholders or Optionholders
proportionate interest in the Company (treating all shares of the
Company Common Stock issuable upon the exercise of any option,
warrants or other rights and upon conversion of any other rights as
outstanding for such purpose) and (B) an aggregate sum of $10,000,000
(the "Cash Portion of the Purchase Price") and (ii) a proportionate
share of the Earn-Out Payment (as hereinafter defined) (collectively,
the "Merger Consideration"). The Cash Portion of the Purchase Price
payable to each Optionholder shall be reduced by the respective
exercise price for each Sage Option. The proportionate share of the
Earn-Out Payment, if any, shall reflect each Shareholder and
Optionholder's proportionate interest in the Company (treating all
shares of the Company Common Stock issuable upon the exercise of any
options, warranties or other rights and upon conversion of any other
rights as outstanding for such purpose).
(b) In addition to the Cash Portion of the Purchase
Price, CORESTAFF agrees to pay to the Shareholders and Optionholders,
if earned, the following earned payout amounts (the "Earn-Out
Payment"):
(i) an earned payout amount (the "First Earn-Out
Payment") equal to the product of 2.0 multiplied by the EBIT
of the Company for the twelve (12) month period ending
December 31, 1998 (subject to adjustment as set forth below);
and
(ii) an additional amount (the "Second Earn-Out
Payment") equal to the product of 1.4 multiplied by the EBIT
of the Company for the twelve (12) month period ending
December 31, 1999.
The First Earn-Out Payment and the Second Earn-Out Payment are
collectively referred to herein as the "Earn-Out Payments." In no
event shall the Earn-Out Payments exceed $35,000,000 in the aggregate.
The period from January 1, 1998 to December 31, 1999 shall be
referred to as the "Earn-Out Period."
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 14
(c) The First Earn-Out Payment and the Second Earn-Out
Payment shall be payable by CORESTAFF to the Shareholders in cash by
March 15, 1999 and 2000, respectively, and shall be based on the
internally-generated financial statements (which have been prepared
under the direction of CORESTAFF) of the Company for the Earn- Out
Period. In the event there is a dispute between CORESTAFF and the
Shareholders regarding the Earn-Out Payment, the Earn-Out Payment
shall be determined by Ernst & Young, LLP in accordance with this
Agreement (at the expense of CORESTAFF), which determination (each an
"E&Y Earn-Out Payment Determination") shall be submitted in writing to
CORESTAFF and the Shareholders no later than February 15, 1999, in the
case of the First Earn-Out Payment, and February 15, 2000, in the case
of the Second Earn-Out Payment. If, within five (5) days after
receipt of an E&Y Earn-Out Payment Determination, CORESTAFF and/or the
Shareholders delivers written notice to the other Party that such
Party disagrees with the E&Y Earn-Out Payment Determination (an
"Earn-Out Payment Disagreement Notice"), then CORESTAFF and the
Shareholders shall attempt in good faith to mutually determine the
correct amount of the Earn-Out Payment within five (5) days after
CORESTAFF and/or Shareholders delivers the Earn-Out Payment
Disagreement Notice to the other Party. If CORESTAFF and
Shareholders cannot in good faith mutually determine the amount of the
Earn-Out Payments within such period, then CORESTAFF and Shareholders
shall have ten (10) days following their receipt of such determination
to object in good faith to the Earn-Out Payment, in which event the
item or items in dispute shall be resolved by another "Big Six" (as
combined from time-to-time) accounting firm mutually acceptable to
CORESTAFF and Shareholders (whose decision shall be conclusive and
binding on the Parties with respect to such disputed item(s)). Any
adjustment in the Earn-Out Payment determined by such "Big Six"
accounting firm shall be made within ten (10) days following such
resolution. In the event such resolution would result in an increase
in the Earn-Out Payment, the cost of such "Big Six" accounting firm
shall be paid for solely by CORESTAFF. Conversely, in the event that
such "Big Six" accounting firm determines that such resolution would
result in a decrease in the Earn-Out Payment, the cost of such "Big
Six" accounting firm shall be paid for solely by Shareholders. In the
event that such "Big Six" accounting firm determines that no changes
shall be made to the Earn-Out Payment, the cost of such "Big Six"
accounting firm shall be paid by the Party requesting such dispute
resolution.
(d) The Net Working Capital of the Company will be
determined in accordance with GAAP, by the Parties on or before thirty
(30) days after the time of Closing and shall be based on the
Company's financial statements as of the Closing, which shall have
been provided to CORESTAFF. In the event that the Net Working Capital
as of December 31, 1997 is less than $900,000, the First-Earn-Out
Payment shall be adjusted on a dollar-for-dollar basis downward. In
the event there is a dispute between CORESTAFF and Shareholders
regarding the Net Working Capital of the Company as of the date thirty
(30) days after the time of the Closing, Ernst & Young, LLP shall
prepare the calculation of the Net Working Capital of the Company (at
the expense of CORESTAFF), which calculation shall be submitted to
CORESTAFF and the Shareholders not later than sixty (60) days from the
Closing Date. The Net Working Capital derived from such calculation
shall be final, conclusive and binding on the Parties.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 15
(e) At the Closing, each Shareholder shall surrender to
CORESTAFF the certificates for Company Common Stock owned by such
Shareholder in exchange for the Merger Consideration, as may be
adjusted pursuant to Section 2(d)above. As of and after the Effective
Time, no holder of any certificate that immediately prior to the
Effective Time represented shares of Company Common Stock shall have
any rights as a holder of Company Common Stock other than to receive
the Merger Consideration issuable to such holder pursuant to the
Merger.
2.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date, the
parties shall file this Agreement and the officers' certificates required
pursuant to the General Corporation Law of the State of California ("CGCL") and
shall make all other filings or recordings required under the CGCL to cause the
Merger to become effective. The Merger shall become effective at such time as
the Merger Agreement, together with any required supporting documentation, is
duly filed with the Secretary of State of the State of California or at such
other time as is permissible in accordance with the CGCL and as CORESTAFF and
the Company shall agree (the time the Merger becomes effective being the
"Effective Time").
2.4 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Merger Sub shall be the Articles of Incorporation of the Surviving Corporation
after the Effective Time.
2.5 BY-LAWS. The By-Laws of Merger Sub shall be the By-Laws of
the Surviving Corporation after the Effective Time.
2.6 DIRECTORS. The directors of Merger Sub shall be the directors
of the Surviving Corporation, who shall serve until their respective successors
are duly elected and qualified in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by law.
2.7 OFFICERS. The officers of the Surviving Corporation shall
initially consist of the officers of Merger Sub, until their successors are
duly elected and qualified in the manner provided in the Articles of
Incorporation and By-Laws of the Surviving Corporation, or as otherwise
provided by law.
2.8 OTHER EFFECTS ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or capital stock of Merger Sub:
(a) each issued and outstanding share of the capital
stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, $1.00 par value, of the
Surviving Corporation.
(b) all shares of Company Common Stock that are owned by
the Company as treasury stock shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in exchange
therefore.
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 16
(c) all options, warrants and other rights to purchase
Shares of Company Common Stock shall be cancelled immediately prior to
the Effective Time.
2.9 SAGE OPTIONS. Immediately prior to the Merger, the Company
shall, and the Shareholders shall cause the Company to, cause the cancellation
of each Sage Option held by an Optionholder and each Optionholder shall receive
his proportionate share of the Merger Consideration (less the aggregate of the
exercise price for each Sage Option held and cancelled by such Optionholder) as
provided in Section 2.2.
2.10 RIGHTS. At and after the Effective Time, the Surviving
Corporation shall possess all the rights and property and be subject to all of
the debts and liabilities of Merger Sub and the Company as provided in the
CGCL.
2.11 AGREEMENT TO VOTE SHARES. The Shareholders agree to approve
this Agreement in the manner required by the CGCL, and the Company will deliver
to CORESTAFF at the Closing complete and correct copies, certified by its
secretary, of the resolutions duly and validly adopted by Shareholders
evidencing such approval (which resolutions will not have been modified,
revoked or rescinded in any respect prior to, and will be in full force and
effect at, the Closing). Each Shareholder further agrees (i) at any meeting of
the shareholders of the Company or with respect to any written consent
solicited in lieu thereof, to vote all of the shares of capital stock of the
Company beneficially owned by him in favor of approval of the Merger and any
matter which could reasonably be expected to facilitate the Merger and against
approval of any proposal made in opposition to or competition with consummation
of the Merger, and against any other matter which would, or could reasonably be
expected to, prohibit or discourage the Merger and (ii) to otherwise use his
reasonable best efforts to cause the transactions contemplated herein to be
consummated. The Shareholders, as the holders of all of the voting stock of the
Company, each agree to be present, in person or by proxy, at all meetings of
the shareholders of the Company so that all their shares of Company Common
Stock are counted for the purposes of determining the presence of a quorum at
such meetings.
2.12 DOCUMENTS. On the Closing Date, CORESTAFF, Merger Sub, the
Company and the Shareholders shall execute and deliver all appropriate
documents and instruments to effectuate the transactions as set forth in this
Agreement, including, on the part of the Shareholders, the various
certificates, instruments and documents referred to in Section 8.1 below and,
on the part of CORESTAFF, the various certificates, instruments and documents
referred to in Section 8.2 below.
2.13 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to
use all reasonable efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including cooperating fully with the other
parties, including by provision of information and making of all necessary
filings with Governmental Entities (including, if required, filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act")). In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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<PAGE> 17
properties, assets, rights, approvals, immunities and franchises of either of
the Company or Merger Sub, the parties shall take all such necessary action.
2.14 DISSENTERS RIGHTS. The Shareholders each hereby waive any
dissenters rights of appraisal or similar rights to which they may be entitled
under the CGCL, including any notice required in connection therewith.
2.15 CLOSING. Subject to the terms and conditions of this
Agreement, including without limitation thereto the conditions to closing set
forth in Article IX hereof, the transactions described and provided for in this
Agreement shall be consummated at a closing (the "Closing") that shall take
place at the offices of CORESTAFF 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 CORESTAFF and the Shareholders may
mutually determine (the "Closing Date"); provided, however, that the Closing
Date shall be no later than January 7, 1998 which dates may be extended with
the mutual consent of CORESTAFF and the Shareholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
CONCERNING THE TRANSACTION
Each of the Shareholders, represents and warrants to CORESTAFF that
the statements contained in this Article III 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 Article III) with respect to himself
except as set forth in Annex II attached hereto.
3.1 AUTHORIZATION OF TRANSACTION. The Shareholder has full power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Shareholder, 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 Shareholder 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.
3.2 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,
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governmental agency, or court to which the Shareholder is subject or (B)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest, or other
arrangement to which the Shareholder is a party or by which he is bound or to
which any of his assets is subject.
3.3 BROKER'S FEES. The Shareholder 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 CORESTAFF could
become liable or obligated.
3.4 SHARES. The Shareholder holds of record and owns beneficially
the number of Shares set forth next to his name in Section 3.4 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 Shareholders hold all of the issued
and outstanding shares of the Company and upon the consummation of the
transaction contemplated hereby, CORESTAFF will hold all of the issued and
outstanding shares of the Company. The Shareholder 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
Company (other than this Agreement). The Shareholder 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 Company. The Shareholder hereby further
represents and warrants that (i) except as provided in Section 5.2 of the
Disclosure Schedule, all other Shares or options, rights, warrants or other
interests in the equity of the Company, if any, have been fully repurchased by
the Company prior to the Closing Date and (ii) there are no pending or
threatened suits, claims or actions by any former holders of Shares or options,
rights, warrants or other interests in the equity of the Company with respect
to the repurchase of their equity interest in the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CORESTAFF
CONCERNING THE TRANSACTION
CORESTAFF represents and warrants to the Shareholders that the
statements contained in this Article IV 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 Article IV), except as set forth in Annex III
attached hereto.
4.1 ORGANIZATION OF CORESTAFF. CORESTAFF is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
4.2 AUTHORIZATION OF TRANSACTION. CORESTAFF 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
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CORESTAFF, enforceable in accordance with its terms and conditions. CORESTAFF
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.
4.3 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 CORESTAFF is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which CORESTAFF is a party or by which it is
bound or to which any of its assets is subject.
4.4 BROKER'S FEES. CORESTAFF 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 Shareholder could
become liable or obligated.
ARTICLE V
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Shareholders, represent and warrant to CORESTAFF that the
statements contained in this Article V 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 Article V), except as set forth in the
disclosure schedule delivered by the Shareholders to CORESTAFF on the date
hereof (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule may be updated one
or more times prior to the date which is five (5) days prior to the Closing
Date. Any updated Disclosure Schedule shall be delivered at or before the
Closing. An updated Disclosure Schedule shall only be deemed to modify a
representation and/or warranty made as of the date of the Agreement in the
event, and only in the event, that the Shareholders acted in good faith and
used their reasonable best efforts when preparing the original Disclosure
Schedule delivered to CORESTAFF as of the date of this Agreement. In the event
any such updated Disclosure Schedule indicates a Material change from the
information previously provided to CORESTAFF, CORESTAFF shall be entitled to
terminate this Agreement notwithstanding any other provision contained in this
Agreement by written notice delivered to the Shareholders. An event or matter
will be deemed to be "MATERIAL," to have a "MATERIAL" change in or in respect
of, to have a "MATERIAL ADVERSE EFFECT" or to be "MATERIALLY" affected;
provided that in the opinion of CORESTAFF, acting reasonably, such loss is
material or the loss may reasonably be expected to occur to the Company or
CORESTAFF with respect to such event or matter, when taken together with all
other related losses that may reasonably be expected to occur to the Company or
CORESTAFF as a result of any such events or matters, would exceed $20,000 in
the aggregate or unless such event or matter constitutes a criminal violation
of law. For purposes of this paragraph,
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the word "LOSS" shall mean any and all direct or indirect payments,
obligations, assessments, losses, losses of income, liabilities, costs and
expenses paid or incurred, or reasonably likely to be paid or incurred, or that
are reasonably expected to occur, including without limitation, penalties,
interest on any amount payable to a third party as a result of the foregoing,
and any legal or other expenses reasonably expected to be incurred in
connection with defending any demands, claims, actions or causes of action
that, if adversely determined, could reasonably be expected to result in
losses, and all amounts paid in settlement of claims or actions; provided,
however, that losses shall be net of any insurance proceeds entitled to be
received from a nonaffiliated insurance company on account of such loss (after
taking into account any cost incurred in obtaining such proceeds). A Customer
Contract or Agreement is "MATERIAL" if during the ten months ended October 31,
1997 such Customer Contract or Agreement produced $25,000 of Gross Profit
Margin less any bad debt specifically related to such Customer Contract or
Agreement. Any item intended to be disclosed must be identified with the
particular representation or warranty it is intended to limit and shall not be
deemed to limit any other representation, warranty or covenant in the
Agreement. Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, unless the
Disclosure Schedule identifies the exception with reasonable particularity and
describes the relevant facts in reasonable detail to the satisfaction of
CORESTAFF. 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 Article V.
5.1 ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. The Company is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company. The Company
has full corporate power and authority to carry on the business in which it is
engaged and to own and use the properties owned and used by it. Section 5.1 of
the Disclosure Schedule lists the directors and officers of the Company. The
Shareholders have delivered to CORESTAFF correct and complete copies of the
charter and bylaws of the Company (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 Company are correct and complete. The Company is
not in default under or in violation of any provision of its charter or bylaws.
The execution and delivery of this Agreement and the effectuation of the
transactions contemplated hereby has been duly authorized by all of the
directors and the Requisite Shareholders of the Company, and the Company will
deliver to CORESTAFF on the date hereof and at the Closing complete and correct
copies, certified by its secretary, of the resolutions duly and validly adopted
by its directors and shareholders evidencing such authorization (which
resolutions will not have been modified, revoked or rescinded in any respect
prior to, and will be in full force and effect at, the Closing). No other
corporate act or proceeding on the part of the Company or the Shareholders is
necessary for the due and valid authorization of this Agreement or the
transactions contemplated hereby.
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5.2 CAPITALIZATION. The entire authorized capital stock of the
Company consists of 10,000,000 shares of common stock, no par value (the
"Shares"), of which 2,000,000 Shares are issued and outstanding and no Shares
are held in treasury. All of the issued and outstanding Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Shareholders as set forth in Section 3.4 of the
Disclosure Schedule. Section 5.2 of the Disclosure Schedule sets forth all
outstanding Sage Options and the amounts owned by each Optionholder. Other
than as set forth in Section 5.2 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 Company is a party or which are binding upon the Company providing
for the issuance, disposition, or acquisition of any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock,
deferred bonus programs, or similar rights with respect to the Company. There
are no voting trusts, proxies, or any other agreements or understandings with
respect to the voting of the capital stock of the Company.
5.3 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 Company is subject or any provision
of the charter or bylaws of the Company 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 Company 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),
except that the Merger will trigger the acceleration of the vesting periods for
the Sage Options. The Company 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, which it has not already obtained, in order
for the Parties to consummate the transactions contemplated by this Agreement.
5.4 SUBSIDIARIES. The Company has no Subsidiaries.
5.5 FINANCIAL STATEMENTS. Attached hereto as Exhibit A are the
financial statements (collectively the "FINANCIAL STATEMENTS"), including
balance sheets, income statements, and cash flow statements, for the Company
prepared in accordance with GAAP for each of the (i) fiscal years ended
December 31, 1995 and 1996 (the "MOST RECENT FISCAL YEAR END"), (ii) the ten
(10) month period ended October 31, 1997 (the "MOST RECENT FINANCIAL
STATEMENTS"); provided, however, that the unaudited Most Recent Financial
Statements are not presented in accordance with GAAP as described in Section
5.5 of the Disclosure Schedule.
5.6 EVENTS SUBSEQUENT TO MOST RECENT FINANCIAL STATEMENTS. Except
as set forth in Section 5.6 of the Disclosure Schedule, since the date of the
Most Recent Financial Statements, there has not been any material adverse
change in the assets, Liabilities, business, financial condition,
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operations, results or operations, or future prospects of the Company. Without
limiting the generality of the foregoing, since that date:
(a) The Company 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;
(b) The Company has not entered into any contract, lease,
sublease, license or sublicense (or series of related contracts,
leases, subleases, licenses and sublicenses) either involving more
than $20,000 or outside the Ordinary Course of Business;
(c) No party (including the Company) has accelerated,
terminated, modified, or canceled any contract, lease, sublease,
license or sublicense (or series of related contracts, leases,
subleases, licenses and sublicenses) or notified the Company of such
involving more than $20,000 to which the Company is a party or by
which it is bound;
(d) The Company has not imposed any Security Interest
upon any of its assets, tangible or intangible;
(e) The Company has not made any capital expenditure (or
series of related capital expenditures) either involving more than
$50,000 singly or $200,000 in the aggregate, or outside the Ordinary
Course of Business;
(f) The Company 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 $40,000 individually or
$100,000 in the aggregate or outside the Ordinary Course of Business;
(g) The Company has not created, incurred, assumed, or
guaranteed any indebtedness (including capitalized lease obligations)
either involving more than $20,000 singly or $50,000 in the aggregate
or outside the Ordinary Course of Business;
(h) The Company has not delayed or postponed (beyond its
normal practice) the payment of accounts payable and other
Liabilities;
(i) The Company has not settled, canceled, compromised,
waived, or released any right, claim action or proceeding (or series
of related rights, claims, actions or proceedings) either involving
more than $20,000 or outside the Ordinary Course of Business;
(j) The Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(k) There has been no change made or authorized in the
charter or bylaws of the Company;
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(l) The Company 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;
(m) The Company 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;
(n) The Company has not experienced any material damage,
destruction or loss (whether or not covered by insurance) to its
property;
(o) The Company 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;
(p) The Company 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;
(q) The Company has not granted an increase outside the
Ordinary Course of Business in the base compensation of any of its
directors, officers, and employees;
(r) The Company has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance,
(G) severance, or (H) other plan, contract or commitment for any of
its directors, officers, and employees, or modified or terminated any
existing such plan, contract or commitment;
(s) The Company has not made any other change in
employment terms for any of its directors, officers, and full-time
staff employees;
(t) The Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course
of Business;
(u) The Company shall have made no dividend, consulting
or other payment to the Shareholders, except for payments to the
Shareholders necessary to cover their federal and state income tax
obligations as calculated on a cash basis for income tax purposes not
in excess of the accrued earnings generated for the period from
January 1, 1997 through the Closing Date and for employment salaries
(not to exceed current compensation levels) to Shareholders, except
for those payments set forth in Section 5.6(u) of the Disclosure
Schedule which were made prior to the contemplation of the transaction
contemplated by this Agreement;
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(v) There has not been any other Material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Company; and
(w) The Company has not committed to any of the
foregoing.
5.7 UNDISCLOSED LIABILITIES. The Company does not have any
Liability (and there is no Basis for any present or future charge, complaint,
action, suit, proceeding, hearing, investigation, claim, or demand against it
giving rise to any Liability), except for (i) Liabilities set forth on the face
of the Financial Statements (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).
5.8 TAX MATTERS.
(a) The Company 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 Company (whether or not shown on
any Tax Return) have been paid. The Company currently is not the
beneficiary of any extension of time within which to file any Tax. No
claim has ever been made by an authority in a jurisdiction where the
Company does not file Tax Returns that either of them is or may be
subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Company that arose in connection
with any failure (or alleged failure) to pay any Tax.
(b) The Company 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.
(c) No Shareholder or director or officer (or employee
responsible for Tax matters) of the Company expects any authority to
assess any additional Taxes for any period for which Tax Returns have
been filed. There is no dispute or claim concerning any Tax Liability
of the Company either (A) claimed or raised by any authority in
writing or (B) as to which any of the Shareholders and the directors
and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of
such authority. Section 5.8 of the Disclosure Schedule lists all Tax
Returns filed with any Governmental Authority with respect to the
Company for taxable periods ended on or after December 31, 1990,
indicates those Tax Returns that have been audited, and indicates
those Tax Returns that currently are the subject of audit. The
Company has delivered to CORESTAFF correct and complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since
December 31, 1990.
(d) The Company 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.
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(e) The Company has not filed a consent under Code Sec.
341(f) concerning collapsible corporations. The Company has not made
any payments, is not obligated to make any payments, or 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 Company 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
Company 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 Company
is not a party to any Tax allocation or sharing agreement. The
Company 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 Company also was a member of the
Affiliated Group.
(f) Section 5.8 of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most
recent practicable date (as well as on an estimated pro forma basis as
of the Closing giving effect to the consummation of the transactions
contemplated hereby): (A) the basis of the Company in its assets; (B)
the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to the Company; and (C) the amount of any
deferred gain or loss allocable to the Company arising out of any
Deferred Intercompany Transaction.
(g) The unpaid Taxes of the Company 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 Financial Statements (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 Company in
filing their Tax Returns.
5.9 TANGIBLE ASSETS. The Company owns or leases all tangible
assets necessary for the conduct of its business as presently conducted. To
the Company's 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.
5.10 REAL PROPERTY. Section 5.10 of the Disclosure Schedule lists
the real property that the Company owns. With respect to each such parcel of
owned real property, and except for matters which would not have a material
adverse effect on the financial condition of the Company:
(a) The identified owner has good and marketable title to
the parcel of real property, free and clear of any security interests,
easement, covenant, or other restriction;
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(b) There are no leases, subleases, licenses, concessions
or other agreements granting to any party or parties use or occupancy
of any portion of the parcel of real property;
(c) There are no outstanding options or rights of first
refusal to purchase the parcel of real property or any portion thereof
or interests therein;
(d) There are no parties in possession of any portion of
any real property as lessees, subtenants or tenants at sufferance or
trespassers;
(e) There is no pending, threatened condemnation, eminent
domain or similar proceeding or special assessment affecting any
portion of the real property, nor has the Company or any of the
Shareholders received notification that any such proceeding or
assessment is contemplated;
(f) Permanent certificates of occupancy and all other
licenses, permits, authorizations, and approvals required by any
governmental authority having jurisdiction have been issued for each
improvement on the real property and all such certificates, licenses,
permits, authorizations and approvals have been paid for and are in
full force and effect;
(g) No commitments have been made by Shareholder to any
governmental authority, utility company, school board, church or other
religious body or any homeowners' association, or any other
organization, group or individual, relating to the real property that
would impose an obligation on the Company or their successors or
assigns to make any contribution or dedications of money or land, or
to construct, install, or maintain any improvements of a public or
private nature on or off of the real property;
(h) All improvements related to the real property have
been located and constructed and are being used, occupied and
maintained in accordance with all applicable legal requirements
(including local municipal laws and regulations), surface leases,
easements, contracts, permits, insurance requirements, restrictions,
building setback lines, covenants and reservations;
(i) The improvements related to the real property are
free from material patent and latent structural and mechanical defects
and are suitable and adequate for their intended use and operation
subject to ordinary wear and tear;
(j) All facilities located on the parcel of real property
are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services are
adequate in accordance with all applicable laws, ordinances, rules,
and regulations and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the parcel of real
property; and
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(k) Each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via
a permanent, irrevocable, appurtenant easement benefitting the parcel
of real property, and access to the property is provided by paved
public right-of-way with adequate curb cuts available.
5.11 REAL PROPERTY LEASES. Section 5.11 of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to the
Company. The Shareholders have delivered to CORESTAFF correct and complete
copies of the leases and subleases listed in Section 5.11 of the Disclosure
Schedule (as amended to date). With respect to each lease and sublease listed
in Section 5.11 of the Disclosure Schedule:
(a) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(b) The Shareholders shall use their reasonable best
efforts to ensure that the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the Closing;
(c) The Company is not and, to the Company's knowledge,
no other 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;
(d) No party to the lease or sublease has repudiated any
provision thereof;
(e) There are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(f) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(g) 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; and
(h) The real property listed in Sections 5.10 and 5.11 of
the Disclosure Schedule represents all of the real property necessary
to operate the business in the manner that it is currently being
operated.
5.12 INTELLECTUAL PROPERTY.
(a) The Company is the sole and exclusive owner of all
right, title and interest in and has good, valid and marketable title
to, or, as to third party rights, has obtained a valid license to use
all copyrights and trade secrets, and to the Company's knowledge all
patents,
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necessary for the operation of the business of the Company as
presently conducted, free and clear of all mortgages, pledges, liens,
security interest, conditional sales agreements, encumbrances or
charges of any kind. The Company is the sole and exclusive owner of
all right, title and interest in and has good, valid and marketable
title to, or, as to third party programs identified in Section 5.12 of
the Disclosure Schedule, has obtained a license to use and the right
to sublicense, the software programs developed, authored and/or
licensed by the Company and that are listed on Section 5.12 of the
Disclosure Schedule (the "SOFTWARE PROGRAMS") and the Documentation,
free and clear of all mortgages, pledges, liens, security interest,
conditional sales agreements, encumbrances or charges of any kind.
Section 5.12 of the Disclosure Schedule contains a complete list of
all Software Programs, registered trademarks and service marks, all
reserved trade names, all registered copyrights, all pending
applications for registration of any marks or copyrights, and all
filed patent applications and issued patents owned or licensed by the
Company.
(b) Section 5.12 of the Disclosure Schedule sets forth
the form and placement of the proprietary legends and copyright
notices displayed in or on the Software Programs. In no instance has
the eligibility of the Software Programs for protection under
applicable copyright law been forfeited to the public domain by
omission of any required notice or any other action.
(c) The Company has enforced the trade secret protection
program set forth in Section 5.12 of the Disclosure Schedule, except
as set forth in Section 5.12 of the Disclosure Schedule, and there has
been no violation of such program by any person or entity. Except as
set forth in Section 5.12(c) of the Disclosure Schedule, the source
code and Documentation (except end-user manuals) relating to the
Software Programs (i) have at all times been maintained in confidence,
(ii) have been disclosed by the Company only to employees, independent
contractors, Source Code Licensees and potential Source Code Licensees
having a "need to know" the contents thereof in connection with the
performance of their duties to the Company or for evaluation by
potential Source Code Licenses or pursuant to a Source Code License
and (iii) have not been disclosed to any other third party. The source
code and Documentation to the Software Programs has been provided only
to the Source Code Licensees under Source Code Licenses containing the
restrictions on use and disclosure of such source code and
Documentation set forth in Section 5.12(c) of the Disclosure
Schedules.
(d) All personnel, including employees, agents,
consultants, and contractors, who have contributed to or participated
in the conception and development of the Software Programs,
Documentation or Intellectual Property have executed nondisclosure
agreements substantially in the form of Exhibit 5.12 and either (1)
have been party to a written agreement with the Company that has
accorded the Company full, effective, exclusive and original ownership
of all the Software Programs and related Documentation and
Intellectual Property, or (2) have executed appropriate instruments of
assignment in favor of the Company as assignee that have conveyed to
the Company full, effective, and exclusive ownership of all the
Software Programs and related Documentation and Intellectual Property.
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(e) All use of the software libraries, compilers and
other third-party software used in the development of the Software
Programs by the Company has been in full compliance with the
respective license agreement or other right of use for such software.
(f) The Software Programs will perform in accordance with
the documentation and other technical specifications therefor and with
the warranties set forth in the Licenses.
(g) The Software Programs, the use thereof by the Company
and the use, license, sale or lease of the Software Programs, or of
any part thereof, or of any copy, or of any part thereof, do not and
will not infringe on, or contribute to the infringement of, any
copyright or trade secret, or, to the knowledge of the Company, any
patent or any other exclusionary right of any third party in either
the United States or any foreign country. No person or entity has
asserted a claim that the use, license, sale or lease of any Software
Program, or any part thereof, infringes or contributes to the
infringement of any patent claim, copyright or trade secret right of
any third party in either the United States or any foreign country,
and the Shareholders are not aware of any basis for any such claim.
(h) Except with respect to demonstration or trial copies,
no portion of the Software Programs contains or will contain any "back
door," "time bomb," "Trojan horse," "worm," "drop dead device,"
"virus" or other software routines or hardware components designed to
permit unauthorized access; to disable or erase software, hardware, or
data; or to perform any other such actions.
(i) The documentation of the Software Programs includes
without limitation the source code (with comments) for all Software
Programs, as well as any pertinent commentary or explanation that may
be necessary to render such materials understandable and usable by a
trained computer programmer in the same area of software development,
any Company developed (i) programs (including compilers), (ii)
"workbenches," (iii) tools and higher level (or "proprietary")
language necessary for the development, maintenance and implementation
of the Software Programs and (iv) any all materials relating to the
Software Programs, including without limitation all notes, flow
charts, programmer's or user's manuals (collectively, the
"DOCUMENTATION").
(j) The Shareholders have delivered to CORESTAFF correct
and complete copies of all registered trademarks, service marks, trade
names, copyrights, patents, and applications for the same (as amended
to date), and have made available to CORESTAFF 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 set forth in the preceding sentence used
in, or otherwise necessary for the conduct of, the business of the
Company as heretofore conducted:
(i) the Company possesses all right, title, and
interest in and to the item;
(ii) the item is not subject to any outstanding
judgment, order, decree, stipulation, injunction, or charge;
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(iii) no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand is
pending or, to the Knowledge of the Company and the officers
(and employees with responsibility for Intellectual Property
matters) of the Company, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the
item; and
(iv) Other than pursuant to Source Code Licenses
or other Company licenses of such Intellectual Property, the
Company has never agreed to indemnify any person or entity for
or against any interference, infringement, misappropriation,
or other conflict with respect to the item.
(k) The Shareholders have supplied or made available to
CORESTAFF correct and complete copies of all third party licenses,
sublicenses, agreements, and permissions (as amended to date) related
to the Intellectual Property (other than patents to which the Company
has no knowledge of infringement) used in, or otherwise necessary for
the conduct of the business of the Company as heretofore conducted.
With respect to each such item:
(i) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding and in
full force and effect unless terminated by its own terms;
(ii) the license, sublicense, agreement, or
permission will continue to be legal, valid, binding and in
full force and effect on identical terms following the Closing
unless terminated by its own terms;
(iii) 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;
(iv) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(v) the underlying item of Intellectual Property
is not subject to any outstanding judgment, order, decree,
stipulation, injunction, or charge wherein the Company is a
named party thereto;
(vi) 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 wherein the Company is a named party
thereto; and
(vii) The Company has not granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission, that the Company did not have the
right to grant.
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(l) Section 5.12 of the Disclosure Schedule sets forth a
complete and accurate list of all licenses and sublicenses of the
Software Programs (the "LICENSES") and of all customer trial
agreements for the Software Programs granted by the Company to other
parties. All Licenses identified in Section 5.12 of the Disclosure
Schedule are designated as either (A) source code licenses for use in
developing software products derivative of the Software Programs (the
"Source Code Licenses") or (B) evaluation licenses or customer trial
agreements to potential Source Code Licensees for Software Programs
(the "Evaluation Licenses"). Section 5.12 of the Disclosure Schedule
sets forth the royalty rates and other significant financial terms for
each of the Licenses. As used in this Agreement, "Source Code
Licensees" shall mean those persons to whom the Company has licensed
any source code for any of the Software Programs.
5.13 CONTRACTS. Section 5.13 of the Disclosure Schedule lists the
following contracts, agreements, and other written arrangements to which the
Company is a party:
(a) 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 $20,000 per annum;
(b) 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 $20,000;
(c) any written arrangement concerning a partnership or
joint venture;
(d) 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 $20,000
or under which it has imposed (or may impose) a Security Interest on
any of its assets, tangible or intangible;
(e) any written arrangement concerning confidentiality or
noncompetition;
(f) any written arrangement involving any of the
Shareholders and their Affiliates;
(g) any written arrangement with any of its directors,
officers, and employees in the nature of a collective bargaining
agreement, employment agreement, or severance agreement;
(h) 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 Company;
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(i) any written arrangement involving a governmental
entity or quasi-governmental agency;
(j) any written Customer Contract or Agreement; or
(k) any other written arrangement (or group of related
written arrangements) either involving more than $20,000 or not
entered into in the Ordinary Course of Business.
The Company has delivered or made available to CORESTAFF a correct and
complete copy of each written arrangement listed in Section 5.13 of the
Disclosure Schedule (as amended to date). With respect to each written
arrangement so listed: (A) the written arrangement is legal, valid, binding,
enforceable, and in full force and effect; (B) the written arrangement will
continue to be legal, valid, binding, enforceable and in full force and effect
on the same or substantially similar terms following the Closing; (C) no party
is in Material breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration, under the written arrangement; and (D) no party
has repudiated any provision of the written arrangement. The Company 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 5.13 of the
Disclosure Schedule under the terms of this Section 5.13. No unfilled Material
Customer Contract or Agreement obligating the Company to perform services will
result in a loss to the Company upon completion of performance. The Company is
not a party to any contract, agreement or other arrangement which was entered
into on terms which would not be considered market standard if such arrangement
was entered into in an arms-length transaction. None of the Company's
twenty-five (25) highest grossing revenue customers in the ten months ended
October 31, 1997 has Materially curtailed or terminated its relationship with
it or has indicated that it will stop, or Materially decrease the rate of,
buying services from it.
5.14 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts
receivable of the Company are reflected properly on its books and records, are
valid receivables subject to no setoffs or counterclaims, are presently current
and collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Financial Statements (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 Company.
5.15 POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company.
5.16 INSURANCE. Section 5.16 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 Company has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within the past three (3) years:
(a) The name, address, and telephone number of the agent;
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(b) The name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) The policy number and the period of coverage;
(d) 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
(e) A description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy: (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 Company 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 Company has been covered during the
past three (3) years by insurance in scope and amount customary and reasonable
for the businesses in which it has engaged during the aforementioned period.
Section 5.16 of the Disclosure Schedule describes any self-insurance
arrangements affecting the Company.
5.17 LITIGATION. Section 5.17 of the Disclosure Schedule sets
forth each instance in which the Company (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 Shareholders and the officers (and employees
with responsibility for litigation matters) of the Company, 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 Governmental Authority or before any arbitrator. None of the Shareholders
and the directors and officers (and employees with responsibility for
litigation matters) of the Company has any reason to believe that any such
charge, complaint, action, suit, proceeding, hearing, or investigation may be
brought or threatened against the Company.
5.18 EMPLOYEES. No key employee or full-time group of employees
has any plans to terminate employment with the Company. The Company 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 Company has not committed any unfair labor
practice. None of the Shareholders and the directors and officers (and
employees with responsibility for employment matters) of the Company 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 Company.
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5.19 EMPLOYEE BENEFITS. Section 5.19 of the Disclosure Schedule
lists all Employee Benefit Plans that the Company maintains or to which the
Company contributes for the benefit of any current or former employee of the
Company.
(a) 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.
(b) 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. 4980(b) have been met
with respect to each Employee Welfare Benefit Plan.
(c) 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
Company. All premiums or other contributions for all periods ending
on or before the Closing Date have been paid with respect to each
Employee Welfare Benefit Plan.
(d) Each such Employee Benefit Plan which is an 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.
(e) 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 Shareholders and
the officers (and employees with responsibility for employee benefits
matters) of the Company, threatened.
(f) 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 Shareholders and the officers (and
employees with responsibility for employee benefits matters) of the
Company, threatened. None of the Shareholders and the directors and
officers (and employees with responsibility for employee
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benefits matters) of the Company has any Knowledge of any Basis for
any such charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand.
(g) The Shareholders have delivered to CORESTAFF 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.
(h) The Company has maintained all employee benefit
schemes in accordance with the applicable statutory requirements and
all contributions (including all employer and employee contributions),
which have accrued for periods prior to the Closing Date, to such
schemes have been made.
Neither the Company nor the other members of the Controlled Group of
Corporations that includes the Company contributes to, ever has 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
Company has not incurred, and none of the Shareholders and the directors and
officers (and employees with responsibility for employee benefits matters) of
the Company has any reason to expect that the Company will incur, any Liability
to the PBGC (other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal Liability) or under the Code with respect to
any Employee Pension Benefit Plan that the Company and the Controlled Group of
Corporations which includes the Company maintains or ever has maintained or to
which any of them contributes, ever has contributed, or ever has been required
to contribute. The Company does not maintain, nor has it ever maintained or
contributed to, or ever 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. 4980(b)).
5.20 GUARANTIES. The Company is not a guarantor or otherwise
liable for any Liability or obligation (including indebtedness) of any other
person.
5.21 ENVIRONMENT, HEALTH, AND SAFETY.
(a) To the Knowledge of Shareholders and the officers of
the Company, the Company and its predecessors and Affiliates has
complied with all laws (including rules and regulations thereunder) of
any Governmental Authority 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.
(b) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Liability (and there is
no Basis related to the past or present operations, properties, or
facilities of the Company and its predecessors and Affiliates for any
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present or future charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand against the Company 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 1989, or the
Emergency Planning and Community Right-to-Know Act of 1986 (each as
amended), any other law (or rule or regulation thereunder) of any
Governmental Authority or common law remedy concerning release or
threatened release of hazardous substances, public health and safety,
or pollution or protection of the environment.
(c) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Liability (and the
Company 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, action, suit,
proceeding, hearing, investigation, claim, or demand (under the common
law or pursuant to any statute) against the Company 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.
(d) To the Knowledge of the Shareholders and the officers
of the Company, the Company 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
Company 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 Governmental Authority concerning employee health
and safety.
(e) To the Knowledge of the Shareholders and the officers
of the Company, the Company does not have any Material Liability (and
the Company 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 Company
giving rise to any Liability) for any illness of or personal injury to
any employee.
(f) To the Knowledge of the Shareholders and the officers
of the Company, the Company 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 laws of any Governmental Authority (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,
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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.
(g) To the Knowledge of the Shareholders and the officers
of the Company, all properties and equipment used in the business of
the Company have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2 trans-dichloroethylene, dioxins, dibenzofurans,
and Extremely Hazardous Substances.
(h) To the Knowledge of the Shareholders and the officers
of the Company, 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 Company owns or ever has owned or that the Company leases or
ever has leased.
5.22 LEGAL COMPLIANCE.
(a) The Company has complied with all laws (including
rules and regulations thereunder) of all Governmental Authorities, and
no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced
against the Company alleging any failure to comply with any such law
or regulation.
(b) The Company has complied with all applicable laws
(including rules and regulations thereunder) relating to the
employment of labor, employee civil rights, and equal employment
opportunities.
(c) The Company 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.
(d) The Company has complied with all applicable laws
(including rules and regulations thereunder) relating to the residency
status of foreign individuals which are employees of the Company and
obtaining the requisite visas, permits and other documentation to
permit such individuals to work in the United States.
(e) The Company has not:
(i) 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 Governmental Authority;
(ii) 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
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(iii) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any
other person, to any candidate for public office with regards
to any Governmental Authority.
(f) The Company has filed in a timely manner all reports,
documents, and other materials it was required to file (and the
information contained therein was correct and complete in all
respects) under all applicable laws (including rules and regulations
thereunder).
(g) The Company has possession of all records and
documents it was required to retain under all applicable laws
(including rules and regulations thereunder).
5.23 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
set forth in Section 4(w) of the Disclosure Schedule, none of the Shareholders
and their Affiliates has been involved in any business arrangement or
relationship with the Company within the past twelve (12) months, and none of
the Shareholders and their Affiliates owns any property or right, tangible or
intangible, which is used in the business of the Company.
5.24 BROKERS' FEES. The Company 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.
5.25 DISCLOSURE. The representations and warranties contained in
this Section 5 along with the Disclosure Schedule and any other information,
statement or certificate provided by the Company or the Shareholders does not
contain any untrue statement of fact or omit to state any fact necessary in
order to make the statements and information contained in this Article V not
misleading.
5.26 BOOKS AND RECORDS. The Company has furnished CORESTAFF with
true and complete copies of the books and records relating to the ownership and
operation of the Company. The books and records reflect all minutes and
written consents adopted by the Boards of Directors of the Company. The books
and records have been maintained in accordance with applicable legal
requirements, comprise all of the books and records relating to the ownership
and operation of the Company, reflect all proceedings and transactions
customarily contained in corporate books and records.
5.27 COMPLIANCE WITH THE LETTER OF INTENT. Shareholders have
complied in all respects with the terms of the Letter of Intent dated November
21, 1997 by and among Shareholders, the Company and CORESTAFF.
5.28 PAYMENTS TO OFFICIALS. During the three year period prior to
the date hereof, neither the Company nor any of the Shareholders on behalf of
the Company has paid or given or has authorized or committed to the payment or
gift of money or anything of value to any official or employee of any
government entity or instrumentality or any political party or candidate for
political office for the purpose of influencing any governmental action or
decision in order to obtain or retain business or to direct business to any
other party.
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ARTICLE VI
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
6.1 GENERAL. Each of the Parties will use his or its 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
Article VIII below).
6.2 NOTICES AND CONSENTS. The Shareholders will or will cause the
Company to give any notices to third parties required by this Agreement or the
transactions contemplated hereby, and will or will cause the Company to obtain
all third-party consents required by this Agreement or the transactions
contemplated hereby or in connection with the matters pertaining to the Company
disclosed or required to be disclosed in the Disclosure Schedule. Shareholders
will take additional actions (and the Shareholders will cause the Company to
take all additional actions) that may be deemed necessary, proper, or advisable
by CORESTAFF in connection with any other notices to, filings with, and
authorizations, consents, and approvals of governments, governmental agencies,
and third parties that he, she, it or the Company may be required to give,
make, or obtain as reasonably required by this Agreement or the transactions
contemplated hereby in order that CORESTAFF is able to conduct the business of
the Company in the same manner as it is currently being conducted.
6.3 OPERATION OF BUSINESS. The Shareholders will not cause or
permit the Company 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
Shareholders will not cause or permit the Company to engage in any practice,
take any action, embark on any course of inaction, or enter into any
transaction of the sort described in Section 5.6 above.
6.4 PRESERVATION OF BUSINESS. The Shareholders will cause the
Company 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.
6.5 FULL ACCESS.
(a) Each of the Shareholders will permit, and the
Shareholders will cause the Company to permit, representatives of
CORESTAFF to have reasonable access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of
the Company, to all premises, properties, books, records, contracts,
Tax records, and documents of or pertaining to the Company.
CORESTAFF's on-site investigation of the
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Company shall be limited to ten (10) business days, unless otherwise
agreed to by CORESTAFF and the Shareholders in writing; provided,
however, that such limitation of time shall not otherwise limit
CORESTAFF's investigation of the Company off-site. During CORESTAFF's
on-site investigation, CORESTAFF shall not discuss any aspects of the
operation of the Company with any employee of the Company, and
CORESTAFF shall direct all requests for information and material only
through Gene Rooney or David Stanton, unless otherwise agreed to by
CORESTAFF and the Shareholders in writing. CORESTAFF shall not
contact or speak or correspond with any lender, customer, employee or
other person associated in business with the Company without the
written consent of the Company.
(b) Upon completion of the accounting review and
business, legal and accounting due diligence by CORESTAFF and so long
as this agreement has not been terminated, CORESTAFF shall arrange
with Shareholders a mutually agreeable time and place at which
CORESTAFF may conduct interviews with designated key employees and/or
customers of the Company mutually agreed to by CORESTAFF and
Shareholders. Such interviews shall be in strict conformity with a
format mutually agreed to by CORESTAFF and the Shareholders and shall
take place and be completed wholly within the last ten (10) days prior
to Closing.
6.6 NOTICE OF DEVELOPMENTS. The Shareholders will give prompt
written notice to CORESTAFF of any material development affecting the assets,
Liabilities, business, financial condition, operations, results of operations,
or future prospects of the Company. Each Party will give prompt written notice
to the others of any material development affecting the ability of the Parties
to consummate the transactions contemplated by this Agreement. No disclosure
by any Party pursuant to this Section 6.6 however, shall be deemed to amend or
supplement Annex II, Annex III, or the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty, or breach of covenant.
6.7 EXCLUSIVITY. None of the Shareholders will (and the
Shareholders will not cause or permit the Company 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, other than
pursuant to the exercise of outstanding options in connection with the
transactions contemplated by this Agreement, or (D) similar transaction or
business combination involving the Company 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 Shareholders
will notify CORESTAFF immediately if any person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
6.8 PREPARATION OF FINANCIAL STATEMENTS; DELIVERY OF FINANCIAL
INFORMATION. The Company will prepare (as soon as is reasonably practicable
hereafter) the balance sheets as of, and the income statement and the cash flow
statement for, the 12-month period ending December 31, 1995 and 1996 and for
the 10-month period ending October 31, 1997 from its books and records and
Shareholders will cause such balance sheets and income statements to be
reviewed by Ernst & Young LLP (at Buyer's sole expense) and will provide such
records, documentation and assistance
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as may be requested by Ernst & Young LLP to complete such review. The Company
will prepare and deliver to CORESTAFF, on a bi-weekly basis until the Closing
Date, the financial and other information it generates, consistent with its
past practice.
6.9 DELIVERY OF SCHEDULES; ACCEPTANCE. CORESTAFF acknowledges
that the preparation and delivery of the Schedules to the Agreement may not be
prepared and/or final at the time of the execution and delivery of the
Agreement. As such, the parties agree as follows:
(a) the Shareholders shall have the right to deliver the
Schedules to the Agreement and/or to amend, restate and update the
Schedules to the Agreement up to the date which is five (5) days prior
to the Closing Date.
(b) at least five (5) days prior to the Closing, the
Shareholder shall deliver to CORESTAFF a complete copy of the proposed
final Schedules to the Agreement noting all changes from the Schedules
provided upon execution of the Agreement; and
(c) CORESTAFF shall notify Shareholders at or prior to
the Closing that either (i) CORESTAFF accepts such revised Schedules,
in which case they shall become part of this Agreement as if in
existence on the date of this Agreement and all such disclosures made
in such amended Schedules shall be deemed disclosed as if they had
been disclosed in the Schedules as of the date of this Agreement or
(ii) that CORESTAFF in its sole discretion does not accept such
Schedules and elects to terminate this Agreement.
ARTICLE VII
ADDITIONAL COVENANTS
The Parties further agree as follows:
7.1 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 9 below). The Shareholders acknowledge and agree that from and
after the Closing CORESTAFF will be entitled to possession of all documents,
books, records, agreements, and financial data of any sort relating to the
Company.
7.2 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 Company, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available
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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
Article IX below).
7.3 TRANSITION. None of the Shareholders 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
Company from maintaining the same business relationships with the Company after
the Closing for a period of twenty-four (24) months thereafter as it
maintained with the Company prior to the Closing. Each of the Shareholders
will refer all customer inquiries relating to the lines of businesses of the
Company to CORESTAFF from and after the Closing for a period of twenty-four
(24) months thereafter.
7.4 CONFIDENTIALITY. Each of the Shareholders will treat and hold
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement for a period
of three (3) years from the Closing, and deliver promptly to CORESTAFF or
destroy, at the request and option of CORESTAFF, all tangible embodiments (and
all copies) of the Confidential Information which are in his or its possession.
In the event that any of the Shareholders 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 Shareholder will notify CORESTAFF
promptly of the request or requirement so that CORESTAFF may seek an
appropriate protective order or waive compliance with the provisions of this
Section 7.4. If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Shareholders is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else
stand liable for contempt, that Shareholder may disclose the Confidential
Information to the tribunal; provided, however, that the disclosing Shareholder
shall use his reasonable best efforts to obtain, at the reasonable request of
CORESTAFF, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as CORESTAFF 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.
7.5 MONITORING INFORMATION. Prior to the Closing, Shareholders
shall cause the Company to deliver such information as may reasonably be
requested by CORESTAFF.
7.6 LEASES. Shareholders shall cause prior to the Closing Date,
the Company to obtain from its landlords (to the extent required under the
pertinent premises lease) written consent to the assignment of all leases being
indirectly assumed by CORESTAFF, which assignments are deemed to have resulted
from the transactions contemplated by this Agreement.
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7.7 ADDITIONAL TAX MATTERS.
(a) The Company shall 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 the
Company shall remit any Taxes due in respect of such Tax Returns.
(b) CORESTAFF and the Shareholders recognize that each of
them will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by CORESTAFF
and/or the Company to the extent such records and information pertain
to events occurring on or prior to the Closing Date; therefore,
CORESTAFF agrees to cause the Company to (A) use its best efforts to
properly retain and maintain such records 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 statute of limitations
with respect to such year, whichever is later, and (B) allow the
Shareholders and their agents and representatives at times and dates
mutually acceptable to the Parties, to inspect, review and make copies
of such records as such other party may deem necessary or appropriate
from time to time, such activities to be conducted during normal
business hours and at the other Party's expense.
(c) The Shareholders shall reimburse CORESTAFF for the
Taxes for which the Company is liable pursuant to Section 7.7(a)
hereof, but which are payable in respect of Tax Returns to be filed by
CORESTAFF pursuant to Section 7.7(a) hereof within ten (10) business
days after receipt by the Shareholders of signed copies of such Tax
Returns as filed; however, only to the extent such Taxes are in excess
of the reserve for such Tax Liability used to determine the Net
Working Capital of the Company.
7.8 COVENANT NOT TO COMPETE.
(a) For a period of two (2) years from and after the
Closing Date or two (2) years beyond the term of his employment with
the Company, which ever is longer, none of the Shareholders will (i)
engage directly or indirectly in any business that is substantially
similar to that conducted by the Company as of the Closing Date within
a one hundred (100) mile radius of any office of the Company; (ii)
service or solicit any current or future customer of the Company
relating to any business that is substantially similar to that
conducted by the Company; or (iii) offer employment to or attempt to
induce any director, officer, employee, agent, or customer of the
Company to terminate such relationship with the Company; provided,
however, that no owner of less than 1% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason
of such ownership in the Company's business;
(b) If any Shareholder commits a breach, or overtly
threatens to commit a breach, of any of the provisions of Section
7.8(a) above, CORESTAFF shall have the right and remedy to seek to
have the provisions of Section 7.8(a) specifically enforced by any
court having jurisdiction, it being acknowledged and agreed that any
such breach or threatened breach will cause irreparable injury and
continuing damage to CORESTAFF, the Company and their affiliates, and
that the exact amount of which would be difficult to ascertain and
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that in any event money damages will not provide adequate remedy and
CORESTAFF shall be entitled to seek to obtain injunctive relief
restraining any violation of Section 7.8(a);
(c) It is expressly understood and agreed that CORESTAFF
and the Shareholders consider the restrictions contained in Section
7.8(a) above to be reasonable and necessary for the purposes of
preserving and protecting the business of the Company and goodwill
purchased by CORESTAFF; and
(d) If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 7.8
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 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.
7.9 CONDUCT OF BUSINESS DURING EARN-OUT PERIOD. During the
Earn-Out Period, unless terminated pursuant to their respective employment
agreements, the Shareholders shall be entitled to operate and manage the
business of the Company, consistent with prudent business practices. CORESTAFF
agrees that it will not, during the Earn-Out Period, unreasonably require that
the business of the Company be operated substantially differently than it was
operated in the past, unreasonably change the prices charged, the level of
compensation of full-time corporate employees and the level of "G&A" expenses,
unless the prior practices are unreasonable or imprudent, and in no event shall
CORESTAFF do any of the foregoing during the Earn-Out Period without the prior
consultation with and notice to the Shareholders. In addition, during the
Earn-Out Period, CORESTAFF will provide such capital to the Company as
reasonably necessary to operate the business as provided in the budget of the
Company as agreed to by CORESTAFF and the Shareholders prior to the date
hereof; provided that in no event shall CORESTAFF be required to fund capital
in excess of $1,000,000 to the Company during the Earn-Out Period. The Parties
shall agree on the Company's employees that are eligible to participate in the
Buyer's stock option programs.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS TO CLOSE
8.1 CONDITIONS TO OBLIGATION OF CORESTAFF. The obligation of
CORESTAFF to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in
Article III and Article V above shall be true and correct in all
material respects at and as of the Closing Date;
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(b) The Shareholders and the Company shall have performed
and complied with all of their covenants hereunder in all Material
respects through the Closing;
(c) The Company shall have procured all of the
governmental or third party consents and approvals specified in
Section 6.2 including any landlord consents related to any rental
property.
(d) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative
agency within the jurisdiction of any Governmental Authority 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 CORESTAFF to own, operate, or
control the Shares or the Company (and no such judgment, order,
decree, stipulation, injunction, or charge shall be in effect);
(e) The Shareholders shall have delivered to CORESTAFF a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 8.1(a)-(d) is satisfied in all respects;
(f) CORESTAFF shall have received from Gene Rooney and
David Stanton, executed and delivered satisfactorily, determined in
the sole good faith discretion of CORESTAFF, employment arrangements;
(g) CORESTAFF shall have received from Gene Rooney and
David Stanton mutually agreed to by the Parties an executed
non-competition agreement in the form and substance attached hereto as
Exhibit C;
(h) CORESTAFF shall have received from counsel to the
Company an opinion with respect to the matters set forth in Exhibit D
attached hereto, addressed to CORESTAFF and dated as of the Closing
Date;
(i) CORESTAFF shall have received the resignations,
effective as of the Closing, of each director of the Company
designated by CORESTAFF prior to the Closing;
(j) All officers and directors of the Company and each of
the Shareholders shall have repaid in full all debts or other
obligations, if any, owed to the Company;
(k) No Material adverse change shall have occurred before
the Closing in the Company's business or its future business
prospects;
(l) All appropriate consents and shareholder
authorizations of the Company shall have been obtained;
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(m) CORESTAFF shall be satisfied that at Closing all
facilities of the Company are under legal, valid and binding leases or
subleases, each of which have received all approvals of governmental
authorities;
(n) The Requisite Shareholders shall have delivered to
CORESTAFF stock certificates evidencing all of the stock of the
Company in good delivery form and duly endorsed for transfer or
accompanied by duly executed stock power or other appropriate
assignment documents and no dissenters or appraisal rights have been
asserted by Shareholders representing more than 1% of the outstanding
shares;
(o) The Shareholders shall have caused and the Company
shall have cancelled any stock options, deferred bonus programs, and
phantom equity plans outstanding as of the Closing Date (to the extent
not reserved for in the December 31, 1997 financial statements of the
Company and excluding the Company's regular bonus plan which shall not
be treated as a deferred bonus program for these purposes), at no cost
to CORESTAFF. The cancellation of such programs will be on terms and
conditions as reasonably agreed to by CORESTAFF. In conjunction with
the cancellation of such programs, optionholders representing
substantially all of the Shares underlying outstanding options shall
have signed cancellation agreements in the form agreed to by
CORESTAFF. All former employees who are optionholders shall have
executed option cancellation agreements in substantially the form
agreed to by CORESTAFF. The Company shall have made arrangements for
the cancellation or replacement of options satisfactory to CORESTAFF
relating to persons to whom employment offers have been made by the
Company and whose employment date is effective after the Closing.
(p) All liens and security interests securing debts of
the Company which have been paid in full prior to or at the Closing
shall have been fully released of record to the reasonable
satisfaction of CORESTAFF and all Uniform Commercial Code financing
statements or other filings of any kind whatsoever, covering or
evidencing such debts, liens and/or security interests shall have been
terminated;
(q) All obligations of the Company which are not being
retired or satisfied by the Shareholders prior to or at the Closing,
shall have been modified in such a manner that their covenants,
repayment schedules, and other provisions will be upon terms
reasonably satisfactory to CORESTAFF; and
(r) No unsatisfied liens for the failure to pay Taxes of
any nature whatsoever shall exist against the Company, or against or
in any way affecting any of the Shares.
CORESTAFF may waive any condition specified in this Section
8.1 if it executes a writing so stating at or prior to the Closing.
8.2 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The
obligations of the Shareholders to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
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(a) the representations and warranties set forth in
Article IV above shall be true and correct in all material respects at
and as of the Closing Date;
(b) CORESTAFF shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(c) no action, suit or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
within the jurisdiction of any Governmental Authority 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);
(d) CORESTAFF shall have delivered to the Shareholders a
certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified above
in Section 8.2(a)-(c) is satisfied in all respects; and
(e) all actions to be taken by CORESTAFF in connection
with consummation of the transactions contemplated hereby will be
reasonably satisfactory in form and substance to the Shareholders.
The Requisite Shareholders may waive any condition specified in this
Section 8.2 if they execute a writing so stating at or prior to the Closing.
ARTICLE IX
REMEDIES FOR BREACHES OF THIS AGREEMENT
9.1 SURVIVAL. Except as otherwise specifically provided in this
Agreement, all of the representations, warranties and covenants of the
Shareholders (other than the representations and warranties of the Shareholders
contained in Article III or Section 5.8 above) shall survive the Closing
hereunder (even if CORESTAFF knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of sixteen (16) months thereafter. All of
the representations and warranties of Shareholders contained in Article III and
Section 5.8 of this Agreement and the representations, warranties and covenants
of CORESTAFF shall survive the Closing (even if CORESTAFF knew or had reason to
know of any misrepresentation or breach of warranty or covenant at the time of
Closing) and continue in full force and effect for the statute of limitations.
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9.2 INDEMNIFICATION PROVISIONS FOR BENEFIT OF CORESTAFF.
(a) In the event the Shareholders (or in the event any
third party alleges facts that, if true, would mean any of the
Shareholders has breached) breach any of their Joint and Several
representations, warranties, and covenants contained herein during the
period such representations, warranties and covenants survive, and
provided that CORESTAFF makes a written claim for indemnification
against any of the Shareholders pursuant to Section 11.8 below within
the applicable survival period, then each of the Shareholders agrees
to indemnify CORESTAFF from and against the entirety of any Adverse
Consequences CORESTAFF may suffer through and after the date of the
claim for indemnification (including any Adverse Consequences
CORESTAFF 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 (or the alleged breach); provided, however, that
the Shareholders shall not have any obligation to indemnify CORESTAFF
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 Shareholders contained in Article V
above (i) until CORESTAFF has suffered aggregate losses by reason of
all such breaches in excess of a $50,000 threshold (at which point the
Shareholders will be obligated to indemnify CORESTAFF from and against
all such aggregate losses including losses relating back to the first
dollar above a $25,000 deductible) and (ii) in excess of the aggregate
of ten percent (10%) of the Cash Portion of the Purchase Price
received by the Shareholders and the Earn-Out Payments allocated to
the Shareholders (after which point Shareholders shall have no
obligation to indemnify CORESTAFF from and against further such
Adverse Consequences); provided, however, that the limitation set
forth in (i) and (ii) above specifically shall not apply to the
liability of any Shareholder with respect to Adverse Consequences
resulting from or attributable to intentional fraud or any willful
misconduct by the Shareholders; provided further, however that the
limitation set forth in (i) above specifically shall not apply to the
liability of any Shareholder with respect to Adverse Consequences
resulting from breaches of the representations and warranties
contained in Sections 5.8 and 5.14 hereof.
(b) All indemnity claims under this Section 9 shall be
made after the end of the First Earn-Out Period and shall, subject to
the limitations set forth in Section 9.2(a), be made against the
Earn-Out Payments before being made against the Cash Portion of the
Purchase Price.
(c) In the event any of the Shareholders breaches (or in
the event any third party alleges facts that, if true, would mean any
of the Shareholders has breached) any of his Several representations,
warranties, and covenants contained herein, and provided that the
particular representation, warranty, or covenant survives the Closing
and that CORESTAFF makes a written claim for indemnification against
the Shareholder pursuant to Section 11.8 below within the applicable
survival period, then the Shareholder agrees, subject to the
limitations set forth in Section 9.2(a) to indemnify CORESTAFF from
and against the entirety of any Adverse Consequences CORESTAFF may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences CORESTAFF 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 (or the alleged
breach).
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(d) Each of the Shareholders agrees to indemnify
CORESTAFF from and against the entirety of any Adverse Consequences
CORESTAFF may suffer resulting from, arising out of, relating to, in
the nature of, or caused by any Liability of the Company arising under
United States Treasury Reg. Section 1.1502-6 (because the Company 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 Company also was a member of the
Affiliated Group).
(e) Each of the Shareholders agree to indemnify CORESTAFF
from and against the entirety of any Taxes which may become due and
owing to any Governmental Authority by reason of the sale of the
Company to CORESTAFF.
(f) Each of the Shareholders agree to indemnify CORESTAFF
from and against the entirety of any Adverse Consequences which may
become due and owing by reason of the Company's failure to properly
obtain any visas required for employees of the Company to work in the
United States.
(g) Each of the Shareholders shall be liable for, and
hereby indemnifies, CORESTAFF for all income Taxes imposed on the
Company with respect to any taxable year or period beginning before
and ending after 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 as reflected in the
Financial Statements or in the computation of the Net Working Capital.
In order to apportion appropriately any income Taxes relating to any
taxable year or period that begins before and ends after the Closing
Date, the Parties hereto shall, to the extent permitted or not
prohibited by applicable law, elect with the relevant taxing
authority, if required or necessary, to terminate the taxable year of
the Company as of the Closing Date. In any case where applicable law
does not permit the Company to treat such date as the end of a taxable
year or period, then whenever it is necessary to determine the
liability for income Taxes of the Company, for a portion of a taxable
year or period, such determination shall (unless otherwise agree to in
writing by CORESTAFF and the Shareholders) be determined by a closing
of the Company' books, except that exemptions, allowances or
deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis. In
no event shall such apportionment of income Taxes be greater than the
income Taxes which would have been allocated to the Company if such
income Taxes had been based upon a time period in proportion to the
number of days during such taxable year or period the Shareholders and
CORESTAFF owned the stock in the Company.
9.3 INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SHAREHOLDERS.
In the event CORESTAFF breaches any of its representations, warranties, and
covenants contained herein, and provided that any of the Shareholders makes a
written claim for indemnification against CORESTAFF pursuant to Section 11.8
below within the applicable survival period, then CORESTAFF agrees to indemnify
each of the Shareholders from and against the entirety of any Adverse
Consequences the Shareholder may suffer through and after the date of the claim
for
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indemnification (including any Adverse Consequences the Shareholder 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.
9.4 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 Article IX, 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 thirty (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 its 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 within thirty
(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.
9.5 DETERMINATION OF LOSS. The amount of indemnification to be
paid by any Party to another Party hereto shall be reduced by (i) any insurance
proceeds received, including both defense and indemnification costs, with
respect to any insurance policy maintained by the Company providing coverage
with respect to any of the Adverse Consequences; and (ii) any Tax benefits
received by CORESTAFF as a result of any of the Adverse Consequences (utilizing
the Applicable
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Rate as the discount rate). All indemnification payments under this Article IX
shall be deemed adjustments to the Purchase Price.
9.6 EXCLUSIVE REMEDY. CORESTAFF and Shareholder acknowledge and
agree that the foregoing indemnification provisions in this Section 9 shall be
the exclusive remedy of both CORESTAFF and Shareholders for any breach of the
representations and warranties of either Party.
9.7 PAYMENT; GENERAL RIGHT OF OFFSET. Subject to the limitations
set forth in this Section 9, the Indemnifying Parties shall promptly pay to
CORESTAFF or such other Indemnified Party as may be entitled to indemnity
hereunder in cash the amount of any Adverse Consequences to which CORESTAFF or
such 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
Shareholders, CORESTAFF, in good faith, may elect to offset against any Earned
Payout Amount, including any interest payable thereon, payable to Shareholders
the amount of any Adverse Consequences or any other payments to which CORESTAFF
or such Indemnified Parties may become entitled to by reason of the provisions
of this Agreement. In the event that CORESTAFF offsets more than the amount of
any Adverse Consequences (as finally determined), CORESTAFF shall be
responsible to Shareholder for such sums which should not have been subject to
an offset.
9.8 TAX DISPUTES. In the event that any dispute arises between
the Company and the Internal Revenue Service or any state tax authority
relating to an issue in which Shareholders have agreed to indemnify CORESTAFF,
the Shareholders shall have the right to associate with CORESTAFF in the
defense or settlement of any such claims. Moreover, CORESTAFF at all times
shall act in good faith in order to minimize the tax liability as to issues in
which Shareholders have agreed to indemnify CORESTAFF (so long as it does not
adversely affect the Company) and shall not settle or compromise any claims
without the consent of Shareholders, which consent shall not be unreasonably
withheld.
ARTICLE X
TERMINATION
10.1 TERMINATION OF AGREEMENT. Certain of the Parties may
terminate this Agreement as provided below:
(a) CORESTAFF and the Shareholders may terminate this
Agreement by mutual written consent at any time prior to the Closing;
(b) CORESTAFF may terminate this Agreement by giving
written notice to the Shareholders at any time prior to the Closing in
the event any of the Shareholders is in breach, and the Shareholders
may terminate this Agreement by giving written notice to CORESTAFF at
any time prior to the Closing in the event CORESTAFF is in breach of
any material representation, warranty, or covenant contained in this
Agreement in any material respect;
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(c) CORESTAFF may terminate this agreement in accordance
with the provision of Article V;
(d) no later than five (5) days from the date which
CORESTAFF is notified by Shareholders that it may contact key
employees and customers of the Company, CORESTAFF may terminate this
Agreement by giving written notice to the Shareholders if CORESTAFF is
not reasonably satisfied with the results of its interviews with the
key employees and/or customers of the Company as provided for in
Section 6.5(a) hereof;
(e) CORESTAFF may terminate this Agreement by giving
written notice to the Shareholders at any time prior to the Closing if
the Closing shall not have occurred on or before January 30, 1998 by
reason of the failure of any condition precedent under Section 7.1
hereof (unless the failure results primarily from CORESTAFF itself
breaching any representation, warranty, or covenant contained in this
Agreement); or
(f) the Shareholders may terminate this Agreement by
giving written notice to CORESTAFF at any time prior to the Closing if
the Closing shall not have occurred on or before January 30, 1998 by
reason of the failure of any condition precedent under Section 7.2
hereof (unless the failure results primarily from any of the
Shareholders themselves breaching any representation, warranty, or
covenant contained in this Agreement).
10.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 8(a) above, all obligations of the Parties hereunder shall
terminate without any Liability of any Party to any other Party. Upon
termination, CORESTAFF shall return or destroy all confidential documents,
notes or other written memoranda regarding the Company delivered in connection
with the transactions contemplated hereby within five (5) business days
thereafter.
ARTICLE XI
MISCELLANEOUS
11.1 THE SHAREHOLDERS.
(a) When any particular Shareholder (as opposed to the
Shareholders 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 Shareholder.
This means that the particular Shareholder making the representation,
warranty, or covenant will be solely responsible for any Adverse
Consequences CORESTAFF may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any breach thereof. The
representations and warranties of each of the Shareholders in Article
III above concerning the transaction are the Several obligations of
the Shareholders.
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(b) When the Shareholders 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 Shareholders. This means
that each Shareholder will be responsible for the entirety of any
Adverse Consequences CORESTAFF 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 Shareholders in Article V
above concerning the Company are examples of Joint and Several
obligations.
11.2 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 CORESTAFF and the
Shareholders; 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).
11.3 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.
11.4 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.
11.5 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 CORESTAFF and the Shareholders; provided, however, that
CORESTAFF may (i) assign any or all of its rights and interests hereunder to a
wholly-owned subsidiary of CORESTAFF (in any or all of which cases CORESTAFF
nonetheless shall remain liable and responsible for the performance of all of
its obligations hereunder).
11.6 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 and provide
such requesting party with a full set of original signature pages for each of
the parties hereto other than the requesting party within two (2) days of the
original execution date hereof.
11.7 HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
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11.8 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 a Shareholder:
at the address shown for such Shareholder on
Section 3.4 of the Disclosure Schedule.
with a copy to:
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, California 94304
Attn: Jorge del Calvo, Esq.
Telephone: (650) 233-4500
Facsimile: (650) 233-4545
If to CORESTAFF:
CORESTAFF, Inc.
4400 Post Oak Parkway, Suite 1130
Houston, Texas 77027
Attention: Michael T. Willis
Telephone: (713) 961-3633
Facsimile: (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
Telephone: (713) 961-3633
Facsimile: (713) 627-1059
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any Party may
change the address to which notices, requests,
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demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
11.9 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 Texas.
11.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
CORESTAFF and the Shareholders. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
11.11 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.
11.12 EXPENSES.
(a) If the Closing under this Agreement shall occur,
CORESTAFF agrees to pay up to $25,000 of fees or expenses incurred by
the Shareholders and/or the Company arising under or relating to this
Agreement or the transactions contemplated by this Agreement (the
"Transaction Expenses"). The Transaction Expenses shall not be
included in any calculation of the EBIT of the Company. CORESTAFF
shall pay the Shareholders the Transaction Expenses or cause the
Transaction Expenses to be paid at the Closing, or after the Closing
within three (3) business days following CORESTAFF's receipt from
Shareholders of copies of invoices or other documents relating to the
Transaction Expenses.
(b) Except as provided in paragraph (a) above, each of
CORESTAFF and the Company will bear their own costs and expenses
(including legal and investment banking fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby. Except as provided in paragraph (a) above, Shareholders
acknowledge and agree that any fees or expenses (including but not
limited to legal, accounting and/or investment banking) associated
with the transactions contemplated by this Agreement of the
Shareholders and/or the Company shall be included in the definition of
Net Working Capital of Target.
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11.13 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 strict construction shall be applied against any Party. Any
reference to any statute or law of any Governmental Authority 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.
11.14 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.
11.15 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 (subject to the provisions set
forth in Section 11.16 below), in addition to any other remedy to which they
may be entitled, at law or in equity.
11.16 SUBMISSION TO JURISDICTION. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF SHAREHOLDERS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS. ANY LEGAL ACTION OR PROCEEDING
AGAINST ANY SHAREHOLDER WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT AND
ENFORCED IN A FEDERAL OR STATE COURT LOCATED IN THE STATE OF DELAWARE AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, SHAREHOLDERS HEREBY IRREVOCABLY
ACCEPTS FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY, GENERALLY, IRREVOCABLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. SHAREHOLDERS
AGREE THAT A JUDGMENT, AFTER EXHAUSTION OF ALL AVAILABLE APPEALS, IN ANY SUCH
ACTION OR PROCEEDINGS SHALL BE CONCLUSIVE AND BINDING UPON SHAREHOLDERS, AND
MAY BE ENFORCED IN ANY OTHER JURISDICTION BY A SUIT UPON SUCH JUDGMENT, A
CERTIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE JUDGMENT.
SHAREHOLDERS HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CT
CORPORATION SYSTEM, WITH OFFICES ON THE DATE HEREOF IN WILMINGTON, DELAWARE, SO
LONG AS THIS AGREEMENT IS OUTSTANDING, AS ITS DESIGNEE, APPOINTEE AND AGENT
WITH RESPECT TO ANY ACTION OR PROCEEDING TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR
AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION
OR PROCEEDING AND AGREES THAT THE FAILURE OF ANY SUCH AGENT TO GIVE ANY ADVICE
OF ANY SERVICE OF PROCESS TO SHAREHOLDERS SHALL NOT IMPAIR OR AFFECT THE
VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON. IF FOR ANY REASON
SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH,
SHAREHOLDERS AGREE TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN THE
STATE OF DELAWARE ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION
SATISFACTORY TO CORESTAFF. SHAREHOLDERS FURTHER IRREVOCABLY CONSENT TO THE
SERVICE OF PROCESS
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OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO
SHAREHOLDERS, AT ITS ADDRESS SET FORTH IN SECTION 9(H) HEREOF, SUCH SERVICE TO
BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF CORESTAFF TO SERVE PROCESS OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST SHAREHOLDERS IN ANY OTHER MANNER PERMITTED BY LAW.
SHAREHOLDERS HEREBY WAIVE IRREVOCABLY, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION TO THE LAYING OF VENUE IN HOUSTON, TEXAS OR ANY CLAIM OF
INCONVENIENT FORUM IN RESPECT OF ANY SUCH ACTION IN WILMINGTON, DELAWARE TO
WHICH IT MIGHT OTHERWISE NOW OR HEREAFTER BE ENTITLED IN ANY ACTIONS ARISING
OUT OF OR BASED ON THIS AGREEMENT.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
CORESTAFF:
CORESTAFF, INC.
By:
------------------------------------------
Name: Peter T. Dameris
Title: Senior Vice President and Secretary
THE COMPANY:
SAGE I.T. PARTNERS, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
THE SHAREHOLDERS:
---------------------------------------------
EUGENE ROONEY
---------------------------------------------
DAVID STANTON
SAGE I.T. PARTNERS, INC.
AGREEMENT AND PLAN OF MERGER
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