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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
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Date of Report (Date of earliest event reported): JULY 8, 1998
METAMOR WORLDWIDE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
<TABLE>
<S> <C>
0-26970 76-0407849
(Commission File Number) (I.R.S. Employer Identification No.)
FIVE POST OAK PARK
4400 POST OAK PARKWAY, SUITE 1100
HOUSTON, TEXAS 77027-3413
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (713) 548-3400
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 8, 1998, pursuant to the terms of a Stock Purchase Agreement
by and among Metamor Worldwide, Inc. ("Metamor Worldwide") and The Corporate
Services Group PLC, an international staffing firm based in the United Kingdom
("Corporate Services"), Corporate Services purchased all of the outstanding
shares of stock of the CORESTAFF Services group of Metamor Worldwide, its
staffing services business ("CORESTAFF Services"). The estimated after-tax
proceeds from the sale of approximately $200 million were used to pay down
borrowings under Metamor Worldwide's senior revolving credit facility. The
purchase price for CORESTAFF Services was determined as a result of direct
negotiations between Metamor Worldwide and Corporate Services.
CORESTAFF Services provides office support, light industrial and
specialized services to local, regional and national customers through more
than 100 offices in 18 states. CORESTAFF Services generated $478 million in
revenues in 1997, or 47 percent of Metamor Worldwide's consolidated revenues,
and accounted for 34 percent of its 1997 operating income.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
2 Stock Purchase Agreement dated as of June 8, 1998 by
and among Metamor Worldwide, Inc., a Delaware
corporation, and The Corporate Services Group PLC, an
England and Wales corporation.
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.
METAMOR WORLDWIDE, INC.
(Registrant)
Dated: July 21, 1998 By: /S/ Edward L. Pierce
--------------------------------------
Edward L. Pierce
Chief Financial Officer, Senior Vice
President and Assistant Secretary
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INDEX TO EXHIBITS
Exhibit No. Description
2 Stock Purchase Agreement dated as of June 8, 1998 by
and among Metamor Worldwide, Inc., a Delaware
corporation, and The Corporate Services Group PLC, an
England And Wales corporation.
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EXHIBIT 2
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STOCK PURCHASE AGREEMENT
BETWEEN
METAMOR WORLDWIDE, INC.
AND
THE CORPORATE SERVICES GROUP PLC
__________________________________
DATED AS OF JUNE 8, 1998
__________________________________
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STOCK PURCHASE AGREEMENT dated as of June 8, 1998, between METAMOR
WORLDWIDE, INC., a Delaware corporation (referred to herein as "Seller")
and the sole shareholder of each of CORESTAFF ACQUISITION SUB #5, INC., a
Colorado corporation, CORESTAFF ACQUISITION SUB #6, INC., a Delaware
corporation, CORESTAFF ACQUISITION SUB #7, INC., a Delaware corporation,
CORESTAFF CONSOLIDATED MANAGEMENT SOLUTIONS, INC., a Delaware corporation,
CORESTAFF HOLDINGS, INC., a Delaware corporation, CORESTAFF SERVICES
HOLDINGS, INC., a Delaware corporation, CORESTAFF (UK) LIMITED, a United
Kingdom company, CORESTAFF BUSINESS SERVICES, INC., a Delaware corporation,
CORESTAFF SUPPORT SERVICES, INC., a California corporation, LEAFSTONE,
INC., a New York corporation and REGENCY STAFFING, INC., a Florida
corporation (each of the foregoing subsidiaries of Seller is referred to
individually as a "Constituent Company"), and THE CORPORATE SERVICES GROUP
PLC, an England and Wales corporation ("Buyer"). Buyer desires to purchase
from Seller, and Seller desires to sell to Buyer, all the issued and
outstanding shares of common stock (collectively, the "Shares") of each
Constituent Company. "Company" shall mean collectively each Constituent
Company and any and all of their directly and indirectly held subsidiaries.
Accordingly, Seller and Buyer hereby agree as follows:
1. Purchase and Sale of the Shares.
(a) Purchase Price. On the terms and subject to the
conditions of this Agreement, Seller shall sell, transfer and
deliver or cause to be sold, transferred and delivered to Buyer,
and Buyer shall purchase from Seller, the Shares (and/or such other
mutually agreed assets relating to the Company and not otherwise
owned thereby) for an aggregate purchase price of $250,000,000 (the
"Purchase Price"), as may be adjusted pursuant to Sections 1(b) and
1(c).
(b) Purchase Price Adjustment. The Net Working
Capital (as defined below) of the Company as of the Closing Date
(as defined below) 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 Company's estimated
financial statements as of the Closing, which have been prepared on
a pro forma basis in accordance with United States generally
accepted accounting principals ("US GAAP"), and provided to Buyer
(the "Estimated Net Working Capital"). In the event that the
Estimated Net Working Capital is less or more than $20,720,000, 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."
(c) Post-Closing Purchase Price Adjustment. After the
Closing Date, the Net Working Capital of the Company will be
determined in accordance with the provisions hereof, by the parties
hereto as of the Closing Date and shall be based on the Company's
financial statements as of the Closing Date, which shall have been
prepared by Buyer in accordance with US GAAP and provided to Seller
within 120 days of the Closing Date. In
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the event that the Net Working Capital as of the Closing Date is
less or more than the Estimated Net Working Capital, the Adjusted
Purchase Price shall be adjusted on a dollar-for-dollar basis
downward or upward. Within sixty (60) days of receipt of the Net
Working Capital of the Company as of the Closing Date, Seller shall
provide any comments relating to such Net Working Capital to Buyer.
If within sixty (60) days, or such longer period agreed to by Buyer
and Seller, after receipt of such comments of Seller, Seller and
Buyer have not finally determined the Net Working Capital of the
Company as of the Closing Date, such amount shall be determined by
an independent public accounting firm agreed to by both parties and
at the joint expense of both parties which determination shall be
final and binding. In any event, if the Net Working Capital is
determined to be less than the Estimated Net Working Capital,
Seller shall pay to Buyer, within five (5) business days after such
determination, an amount in cash equal to the Estimated Net Working
Capital less the Net Working Capital. If the Net Working Capital
is determined to be more than the Estimated Net Working Capital,
Buyer shall pay to Seller, within five (5) business days after such
determination, an amount in cash equal to the Net Working Capital
less the Estimated Net Working Capital. "Net Working Capital"
means current assets less current liabilities, with the exception
of deferred income taxes, determined in accordance with US GAAP
consistently applied.
2. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall be held at the offices of Vinson &
Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002 at
10:00 a.m. on July 8, 1998 (the "Initial Closing Date"), or, if the
conditions to the Closing set forth in Section 3 shall not have been
satisfied by such date, as soon as practicable after such conditions shall
have been satisfied but no later than July 31, 1998. The date on which the
Closing shall occur is hereinafter referred to as the "Closing Date". At
the Closing, (i) Buyer shall deliver to Seller, by wire transfer to the
bank account or accounts, designated in writing by Seller, immediately
available funds in an amount equal to the Adjusted Purchase Price and (ii)
Seller shall deliver or cause to be delivered to Buyer certificates
representing the Shares, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank in proper form for transfer, with appropriate
transfer stamps, if any, affixed. Seller shall designate the bank account
or accounts for wire transfer of the Adjusted Purchase Price at least two
business days prior to the Closing Date.
3. Conditions to Closing.
(a) Buyer's Obligation. The obligation of Buyer to
purchase and pay for the Shares is subject to the satisfaction (or
waiver by Buyer) as of the Closing of the following conditions:
(i) Seller shall deliver to Buyer (or its
designated US holding company) the Shares and all other
documents reasonably requested by Buyer to transfer
ownership of all assets related to the Company to be
purchased by Buyer hereunder.
(ii) Seller shall deliver to Buyer:
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(1) a certificate of good standing of
the Secretary of State of each jurisdiction in
which incorporated and in each jurisdiction in
which qualified to do business for each
Constituent Company;
(2) a certificate of an officer of
Seller certifying (a) the articles of
incorporation and bylaws (or similar charter
documents) of each Constituent Company and (b) the
resolutions of the Seller approving the
transactions contemplated hereby;
(3) a certificate of non-foreign
status prepared in accordance with Treasury
Regulation Section 1.1445-2(b);
(4) a certificate of the Secretary of
Seller certifying the incumbency of each
individual executing this Agreement or any other
documents contemplated hereby on behalf of Seller;
and
(5) the Original Form 8023 described
in Section 12(c)(viii).
(iii) The representations and warranties of
Seller made in this Agreement shall be true and correct in
all respects, as of the date hereof and as of the time of
the Closing as though made as of such time, except to the
extent such representations and warranties expressly
relate to an earlier date (in which case such
representations and warranties shall be true and correct
in all respects, on and as of such earlier date) and in
each case except for breaches as to matters that would not
have a Material Adverse Closing Effect (as defined below)
on the Company and/or Buyer. Seller shall have performed
or complied in all respects with all obligations and
covenants required by this Agreement to be performed or
complied with by Seller by the time of the Closing, in
each case except for breaches as to matters that would not
have a Material Adverse Closing Effect on the Company
and/or Buyer; provided, however, that this condition shall
be deemed to be waived by Buyer as to any breaches of such
representations and/or warranties if Seller provides to
Buyer indemnification in form and substance reasonably
satisfactory to Buyer and its counsel with respect to any
such breach, including, if requested by Buyer, reasonable
evidence of insurance or other assets sufficient to fund
such indemnification. Seller shall have delivered to
Buyer a certificate dated the Closing Date and signed by
an authorized officer of Seller confirming the foregoing.
"Material Adverse Closing Effect" shall mean any events,
effects, conditions or circumstances which, individually
or in the aggregate, have resulted in or would be
reasonably likely to result in a loss to such referenced
person equal to or greater than $2,850,000.
(iv) Buyer shall have received an opinion
dated the Closing Date of Vinson & Elkins L.L.P., counsel
to Seller, substantially in the form of Exhibit A.
(v) No statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered,
promulgated, enforced or issued by any Federal, state,
local or foreign
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government or any court of competent jurisdiction,
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
"Governmental Entity"), or other legal restraint or
prohibition preventing the purchase and sale of the Shares
or any other transaction contemplated by this Agreement
shall be in effect.
(vi) There shall not be pending or threatened
by any Governmental Entity any suit, action or proceeding
(or by any other person any suit, action or proceeding
which has a reasonable likelihood of success), (A)
challenging or seeking to restrain or prohibit the
purchase and sale of the Shares or any of the other
transactions contemplated by this Agreement or seeking to
obtain from Buyer or any of its subsidiaries in connection
with the purchase and sale of the Shares or any other
transaction contemplated by this Agreement any material
damages, (B) seeking to prohibit or limit the ownership or
operation by Buyer of the Company, or to compel Buyer or
the Company to dispose of any material portion of the
business or assets of Buyer or the Company, in each case
as a result of the purchase and sale of the Shares or any
of the other transactions contemplated by this Agreement,
(C) seeking to impose limitations on the ability of Buyer
to acquire or hold, or exercise full rights of ownership
of, the Shares or any other assets to be acquired by Buyer
hereunder or (D) seeking to prohibit Buyer from
effectively controlling the business or operations of the
Company; provided, however, that this condition shall be
deemed to be waived by Buyer as to any suit, action or
proceeding (except for any suit, action or proceeding by
any Governmental Entity) if Seller provides to Buyer
indemnification in form and substance reasonably
satisfactory to Buyer and its counsel with respect to any
such suit, action or proceeding, including, if requested
by Buyer, reasonable evidence of insurance or other assets
sufficient to fund such indemnification.
(vii) The waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
if applicable to the purchase and sale of the Shares,
shall have expired or been terminated.
(viii) Buyer shall have obtained approval of the
transactions contemplated hereby from its shareholders.
(b) Seller's Obligation. The obligation of Seller to
sell and deliver the Shares to Buyer is subject to the satisfaction
(or waiver by Seller) as of the Closing of the following
conditions:
(i) Buyer shall deliver to Seller, by wire
transfer to the bank account or accounts, designated in writing by
Seller at least two business days prior to the Closing Date, the
Adjusted Purchase Price in immediately available funds .
(ii) Buyer shall deliver to Seller:
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(1) a certificate of good standing
of Buyer from the incorporation authority
in its jurisdiction of organization;
(2) a certificate of the Secretary
of Buyer certifying (a) the resolutions
of the shareholders and board of
directors of Buyer approving the
transactions contemplated hereby and (b)
the incumbency of each individual
executing this Agreement or any other
documents contemplated hereby on behalf
of Buyer.
(iii) The representations and warranties of
Buyer made in this Agreement shall be true and correct in
all respects, as of the date hereof and as of the time of
the Closing as though made as of such time, except to the
extent such representations and warranties expressly
relate to an earlier date (in which case such
representations and warranties shall be true and correct
in all respects, on and as of such earlier date), in each
case except for breaches as to matters that would not have
a Material Adverse Closing Effect on Seller. Buyer shall
have performed or complied in all respects with all
obligations and covenants required by this Agreement to be
performed or complied with by Buyer by the time of the
Closing, in each case except for breaches as to matters
that would not have a Material Adverse Closing Effect on
Seller ; provided, however, that this condition shall be
deemed to be waived by Seller as to any breaches of such
representations and/or warranties if Buyer provides to
Seller indemnification in form and substance reasonably
satisfactory to Seller and its counsel with respect to any
such breach, including, if requested by Seller, reasonable
evidence of insurance or other assets sufficient to fund
such indemnification. Buyer shall have delivered to
Seller a certificate dated the Closing Date and signed by
an authorized officer of Buyer confirming the foregoing.
(iv) Seller shall have received an opinion
dated the Closing Date of Sonnenschein Nath & Rosenthal,
counsel to Buyer, substantially in the form of Exhibit B.
(v) No statute, rule, regulation, executive
order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered,
promulgated, enforced or issued by any Governmental Entity
or other legal restraint or prohibition preventing the
purchase and sale of the Shares or any other transaction
contemplated by this Agreement shall be in effect.
(vi) There shall not be pending or threatened
by any Governmental Entity any suit, action or proceeding
(or by any other person any suit, action or proceeding
which has a reasonable likelihood of success), challenging
or seeking to restrain or prohibit the purchase and sale
of the Shares or any of the other transactions
contemplated by this Agreement or seeking to obtain any
material damages from Seller in connection with the
purchase and sale of the Shares or any other transaction
contemplated by this Agreement; provided, however, that
this condition shall be deemed to be waived by Seller as
to any suit, action or proceeding (except for any
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suit, action or proceeding by any Governmental Entity) if
Buyer provides to Seller indemnification in form and
substance reasonably satisfactory to Seller and its
counsel with respect to any such suit, action or
proceeding, and if requested by Seller, reasonable
evidence of insurance or other assets to fund such
indemnification.
(vii) The waiting period under the HSR Act, if
applicable to the purchase and sale of the Shares and the
other transactions contemplated by this Agreement, shall
have expired or been terminated.
(c) Frustration of Closing Conditions. Neither Buyer
nor Seller may rely on the failure of any condition set forth in
Section 3(a) or 3(b), respectively, to be satisfied if such failure
was caused by such party's failure to act in good faith or to use
its reasonable best efforts to cause the Closing to occur, as
required by Section 8(d). Each party shall in good faith promptly
notify the other party if such party determines that the other
party's conditions for Closing set forth in Section 3(a) or 3(b),
respectively, shall have become incapable of fulfillment.
4. Representations and Warranties of Seller. Seller
represents and warrants to Buyer that the statements contained in this
Section 4 are true and correct as of the date of this Agreement and as of
the time of the Closing as though made as of such time, except to the
extent such representations and warranties relate to an earlier date (in
which case such representations and warranties shall be true and correct,
on and as of such earlier date). In addition, except for disclosures
relating to Sections 4(c), (e), (f), (g), (h), (k)(i) and (n), if
information is set out in the Disclosure Schedules for informational
purposes, but not as part of the representation and warranty, the
Disclosure Schedules shall list the items so requested only to the extent
such items are Material to the Company. All of the Disclosure Schedules
are as of the date of this Agreement. The Disclosure Schedules may be
supplemented one or more times prior to the date which is five (5) days
prior to the Closing Date. An item or matter will be deemed "Material"
when such item or matter individually (a) involves an obligation or loss to
the Company, which has occurred or may reasonably be expected to occur to
the Company resulting in a loss in excess of $1,000,000 or (b) constitutes
a criminal violation of law. A customer contract or agreement is
"Material" if during the twelve months ended December 31, 1997 such
customer contract or agreement produced $285,000 of gross profit margin
less any bad debt specifically related to such customer contract or
agreement. For purposes of this Section 4, "Material Adverse Effect" shall
mean any event, effect, condition or circumstance which individually has
resulted in or would be reasonably likely to result in a loss equal to or
greater than $285,000.
(a) Authority. All corporate actions and other
proceedings required to be taken by Seller to authorize the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and properly taken. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with
its terms, except as enforceability may be limited by general
equitable principles and by bankruptcy, insolvency, reorganization,
debtor relief or similar laws affecting the rights of creditors
generally.
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(b) No Conflicts; Consents. Except as disclosed on
Schedule 4(b), the execution and delivery of this Agreement by
Seller do not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof shall not,
conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any
obligation or to loss of a benefit under, or result in the creation
of any lien, claim, encumbrance, security interest, option, charge
or restriction of any kind upon any of the properties or assets of
the Company under, any provision of (i) any Certificate of
Incorporation or Bylaws of the Company, (ii) any note, bond,
mortgage, indenture, deed of trust, or any license, lease,
contract, commitment, agreement or arrangement to which Seller or
the Company is a party or is subject or by which any of their
respective properties or assets are bound or subject or (iii) any
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Seller or the Company or their respective
properties or assets, other than any such items that would not have
a Material Adverse Effect on the Company. For purposes of this
Agreement, the term "loss" shall mean any and all direct or
indirect payments, obligations, assessments, losses, loss of
income, liabilities, fines, penalties, costs and expenses, or
diminutions in value of any kind or character; provided, however,
that losses shall be net of any insurance proceeds entitled to be
received from a nonaffiliated insurance company on account of such
losses. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
or other person is required to be obtained or made by or with
respect to Seller or the Company in connection with the execution,
delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby as to which the failure to
obtain or make would have a Material Adverse Effect on the Company
other than (I) compliance with and filings under the HSR Act, if
applicable, and (II) those listed on Schedule 4(b).
(c) The Shares. Assuming Buyer has the requisite
power and authority to be the lawful owner of the Shares, upon
delivery to Buyer at the Closing of certificates representing the
Shares, and upon Seller's receipt of the Purchase Price, good and
valid title to the Shares will pass to Buyer, free and clear of any
liens, claims, encumbrances, security interests, options, charges
and restrictions of any kind, other than those arising from acts of
Buyer or its affiliates. Other than this Agreement, the Shares
will not be, as of the Closing Date, subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding restricting or otherwise relating to the Shares. As
of the Closing Date, all outstanding shares of stock of the
subsidiary corporations owned by each Constituent Company will be
duly authorized, validly issued, fully paid and nonassessable, and
such Constituent Company will have good and valid title thereto,
free and clear of any liens, claims, encumbrances, security
interests, options, charges and restrictions of any kind.
(d) Organization and Standing. Each Constituent
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation. Each Constituent Company has full power and
authority (corporate or otherwise) and possesses all governmental
franchises and licenses necessary to enable it to own, lease or
otherwise hold its properties and assets and to carry on its
business as currently
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conducted, other than such franchises and licenses the lack of
which would not have a Material Adverse Effect on the Company.
Each Constituent Company is duly qualified and in good standing to
do business as a foreign corporation in each jurisdiction in which
the conduct or nature of its business or the ownership, leasing or
holding of its properties makes such qualification necessary,
except such jurisdictions where the failure to be so qualified or
in good standing would not have a Material Adverse Effect on the
Company.
(e) Capital Stock of the Company. The authorized
capital stock of each Constituent Company is set forth on Schedule
4(e). The Shares, are duly authorized and validly issued and
outstanding, fully paid and nonassessable. Except for the Shares,
there are no shares of capital stock or other equity interests of
any Constituent Company outstanding. None of the Shares have been
issued in violation of, and none of the Shares are subject to, any
purchase option, call, right of first refusal, preemptive,
subscription or similar rights under any provision of Applicable
Laws, the Certificates of Incorporation or By-laws of any
Constituent Company, any rulings, orders, contract, agreement or
instrument to which any Constituent Company or Seller is subject,
bound or a party or otherwise. There are no outstanding warrants,
options, rights, "phantom" stock rights, agreements, convertible or
exchangeable securities or other commitments (other than this
Agreement) pursuant to which any Constituent Company or Seller is
or may become obligated to issue, sell, purchase, return or redeem
any shares of capital stock or other interests of any Constituent
Company. There are no equity interests of any Constituent Company
reserved for issuance for any purpose. There are no outstanding
bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which shareholders of any Constituent
Company may vote.
(f) Equity Interests and Subsidiaries. Except for the
subsidiaries listed in Schedule 4(f), the Company will not as of
the Closing Date directly or indirectly own any capital stock of or
other equity interests in any corporation, partnership, joint
venture or similar entity. Schedule 4(f) lists the direct and
indirect subsidiary corporations of each Constituent Company, and
shows as to each of such subsidiary corporations the percentage of
the total outstanding stock thereof which is owned by each
Constituent Company and each other owner thereof. Each such
subsidiary is a corporation duly incorporated, validly existing,
and in good standing under the laws of the jurisdiction under which
it is incorporated and has full requisite corporate power and
authority and possesses all governmental franchises and licences
necessary to enable it to own, lease or otherwise hold its
properties and assets and to carry on its business as currently
conducted, other than such franchises and licenses the lack of
which would not have a Material Adverse Effect on the Company.
Each such subsidiary is duly qualified and in good standing to do
business as a foreign corporation in each jurisdiction in which the
conduct or nature of its business makes such qualification
necessary, except such jurisdictions where the failure to be so
qualified or in good standing would not have a Material Adverse
Effect on the Company.
(g) Financial Statements. Schedule 4(g) sets forth
the (i) unaudited combined balance sheet of the Company as of March
29, 1998, and the unaudited combined statements of operations of
the Company for the three-month periods ended March 30, 1997 and
March 29, 1998, and (ii) the audited combined balance sheets of the
Company as of December 31,
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1996 and 1997 (the "Balance Sheet") and the audited combined
statements of operations and cash flows for the years ended
December 31, 1995, 1996 and 1997 reported on by Ernst & Young, LLP,
together with the notes to such financial statements (collectively,
the "Financial Statements"). The Financial Statements have been
prepared in conformity with US GAAP (except that the interim
Financial Statements do not contain all of the footnote disclosures
required for year end financial statements under US GAAP)
consistently applied (except in each case as described in the notes
thereto) and fairly present in all material respects under US GAAP
(subject, in the case of the unaudited statements, to normal
year-end adjustments and the absence of footnotes) the combined
financial position of the Company as of the dates thereof and the
combined results of the Company's operations and cash flows for the
periods presented therein.
(h) Tax Returns and Audits. Except as set forth on
Schedule 4 (h),
(i) all material Tax (hereinafter defined)
returns, statements, reports and forms (including
estimated Tax returns and reports, collectively such
returns the "Tax Returns"; provided, however, that "Tax
Returns" shall not include any such return, statement,
report, or form related to any employee benefit plan,
program, or arrangement) required to be filed on or before
the Closing by the Seller Group (hereinafter defined) and
each of the Constituent Companies (hereinafter defined)
with any Taxing Authority (hereinafter defined) have been
or will be timely filed, and all items of income, gain,
loss, deduction or credit ("Tax Items") required to be
included in such Tax Returns have been or will be so
included in such Tax Returns in the correct amount;
(ii) the Seller Group has timely paid,
withheld or made provision (or has caused the appropriate
Constituent Company to timely pay, withhold or make
provision) for all Taxes shown as due and payable on such
Tax Returns;
(iii) the Seller Group has made or will make
provision for all Taxes payable by or with respect to the
Constituent Companies for any Pre-Closing Tax Period
(hereinafter defined)for which no Tax Return has yet been
filed;
(iv) all Tax Returns filed with respect to
Taxable years of the Seller Group through the Taxable year
ended December 31, 1994 have been examined and closed or
are Tax Returns with respect to which the applicable
period for assessment under the applicable law, after
giving effect to extensions or waivers, has expired, and
all state Tax Returns of the Seller Group which include
the Constituent Companies through the Taxable year ended
December 13, 1994 have been examined and closed;
(v) neither the Seller Group nor any of the
Constituent Companies has granted any extension or waiver
of the statute of limitation applicable to any Tax
Returns;
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(vi) there is no material Tax claim, audit,
action, suit or proceeding now pending or threatened
against or with respect to any of the Constituent
Companies;
(vii) there are no requests for rulings in
respect of any Tax pending between any of the Constituent
Companies and any Taxing Authority;
(viii) none of the Constituent Companies has
been a member of an affiliated group other than the Seller
Group or filed or been included in a combined,
consolidated or unitary Tax Return other than one filed by
the Seller Group or by a member of the Seller Group;
(ix) none of the Constituent Companies (A) is
a "passive foreign investment company" as defined in
Section 1296 of the Code, (B) would be required to report
a material amount of "Subpart F income," within the
meaning of Section 952 of the Code, attributable to the
operation of such entity if such entity's taxable year
ended on the day before the Closing Date, or (C) has
incurred a "dual consolidated loss" within the meaning of
Section 1503 of the Code;
(x) none of the Constituent Companies has an
overall foreign loss within the meaning of Section 904(f)
of the Code for periods through December 31, 1996;
(xi) each of the Constituent Companies (A) has
used its best efforts to obtain from its employees such
documentation as is required by law establishing the
amount of Employment Taxes required to be withheld from
such employees or from any third party; (B) has properly
withheld such Employment Taxes from wages or other
compensation paid to its employees or to any third party
in accordance with such documentation; (C) has timely paid
or deposited or caused to be timely paid or deposited, all
Employment Taxes required by applicable law to be paid or
deposited with respect to its employees or any third
party; (D) has properly maintained records reflecting all
Tax Returns filed with any Taxing Authority with respect
to amounts of Taxes described in (B) and (C) of this
subparagraph (xi); and (E) has properly maintained the
information described in (A) of this subparagraph (xi);
and
(xii) none of the Constituent Companies (A) is
currently under any contractual obligation to indemnify
any other person with respect to Taxes, and (B) is a party
to any agreement providing for payments with respect to
Taxable income or Tax benefits except for any Tax sharing
agreement applicable to the Seller Group for the periods
prior to the Closing.
(i) Title to Real Property. Except as set forth on
Schedule 4(i), the Company owns no real property. Schedule 4(i)
sets forth a list of all real property leased by the Company. Each
lease and sublease with respect to the leased property of the
Company (individually, a "Leased Property") (a Leased Property
being sometimes referred to herein, individually, as "Property"
and, collectively, as "Properties") is legal, valid and enforceable
and in full force and effect except where such failure to be so
legal, valid and enforceable and in full force and effect would not
have a Material Adverse Effect on the Company. Except
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<PAGE> 12
as disclosed on Schedule 4(i), the Company has performed all
obligations required to be performed by it to date under each lease
and sublease, except where such failure to perform would not have a
Material Adverse Effect on the Company, and the Company possesses
and quietly enjoys the Leased Property, except where such failure
to possess and quietly enjoy would not have a Material Adverse
Effect on the Company. To the knowledge of Seller, each lessee,
sublessee, lessor or sublessor of a Leased Property (other than
Seller or the Company) has performed all obligations required to be
performed by it to date under such lease, except where such failure
to perform would not have a Material Adverse Effect on the Company.
(j) Intellectual Property. For purposes of this
Agreement, "Intellectual Property" shall mean all patents, patent
applications, trademark registrations and applications, trade
names, service mark registrations and applications and copyright
registrations and applications therefor relating to the Company and
the Intellectual Property relating to the Company's front office
time entry and reservation system and back office financial
reporting system (the "COREnerstone Assets"). Schedule 4(j) sets
forth a true and complete list of all registered Intellectual
Property currently used, filed by or licensed to the Company and
necessary for the continued operation of the business of the
Company consistent in all material respects with the past practices
of the business of the Company in the preceding year. With respect
to registered trademarks, Schedule 4(j) sets forth a list of all
jurisdictions in which such trademarks are registered or applied
for and all registration and application numbers. Except as
disclosed in Schedule 4(j), no proceedings have been instituted, or
are pending or to the knowledge of the Seller threatened, which
challenge the rights of the Company with respect to Intellectual
Property used, sold or licensed by Company in the course of its
business, nor has any person claimed in writing or alleged any
rights to such Intellectual Property, except for any such
proceeding, challenge or claim which would not have a Material
Adverse Effect on the Company.
(k) Contracts. Set forth in Schedule 4(k) is a list
of contracts and agreements (provided that for the purposes of this
Agreement the term "contract" or "agreement" shall not include any
employee benefit plan, program or arrangement or associated
contract or any other contract type covered by a specific
representation or warranty herein, other than this Section 4(k))
whether oral or written, to which the Company is a party or is
subject or bound and which are:
(i) employee collective bargaining agreements
or other contracts with any labor union;
(ii) covenants not to compete (other than
pursuant to any radius restriction contained in any lease,
reciprocal franchise, operating or similar agreement);
(iii) leases, subleases or similar agreements
with any person under which the Company is a lessor or
sublessor of, or makes available for use to any person
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<PAGE> 13
(A) any Property or (B) any portion of any premises
otherwise occupied by the Company;
(iv) agreements, contracts or other
instruments under which the Company has borrowed any money
from, or issued any note, bond, debenture or other
evidence of indebtedness to, any person;
(v) agreements, contracts or other
instruments under which (A) any person has directly or
indirectly guaranteed indebtedness, liabilities or
obligations of the Company or (B) the Company has directly
or indirectly guaranteed indebtedness, liabilities or
obligations of any person (in each case other than in the
ordinary course of business);
(vi) agreements, contracts or other
instruments under which the Company has, directly or
indirectly, made any advance, loan, extension of credit or
capital contribution to, or other investment in, any
person, (in each case other than in the ordinary course of
business);
(vii) mortgages, pledges, security agreements,
deeds of trust or other instruments granting a lien or
other encumbrance (in each case other than landlord liens
and encumbrances that are set forth in the Company's
leases) upon any real or personal property owned or leased
by the Company, which lien or other encumbrance is set
forth in Schedule 4(i);
(viii) contracts or agreements or instruments
providing for indemnification of any person with respect
to liabilities relating to the business of the Company
(other than indemnities in contracts concerning Company's
performance contracts or support services contracts);
(ix) customer contracts or agreements whereby
the Company provides temporary personnel placement and/or
permanent personnel placement services to a third party;
(x) other agreements, contracts, leases,
licenses, commitments or instruments to which the Company
is a party or by or to which it or any of its assets or
business is bound or subject which has an aggregate future
liability to any person;
(xi) agreements, contracts or other
instruments not made in the ordinary course of business or
made with any past or present officer, director,
executive, shareholder or affiliate (or with such person's
immediate family), including any Material employment
agreements; or
(xii) agreements, contracts or other
instruments which relate to Project COREnerstone.
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<PAGE> 14
Except as disclosed on Schedule 4(k), all agreements,
contracts or instruments of the Company (other than any employee
benefit plan, program or arrangement or associated contract or
other contract type covered by a specific representation or
warranty herein other than Section 4(k)) (collectively, the
"Contracts") are valid, binding and in full force and effect and
are enforceable by the Company in accordance with their terms,
except where such failure to be valid, binding and in full force
and effect and enforceable would not have a Material Adverse Effect
on the Company. Except as disclosed on Schedule 4(k), the Company
has performed all obligations required to be performed by it to
date under the Contracts and the Company is not (with or without
the lapse of time or the giving of notice, or both) in breach or
default in any respect thereunder and, to the knowledge of Seller,
no other party to any of the Contracts is (with or without the
lapse of time or the giving of notice, or both) in breach or
default in any respect thereunder except for any failure to
perform, breach or default which would not have a Material Adverse
Effect on the Company. For purposes of this Agreement, the term
"knowledge" shall mean the actual knowledge of the officers and
directors of Seller or Buyer, as the case may be; provided that for
purposes of this Section 4, except subsections 4(j), (l), (n) and
(o), the term "knowledge of Seller" shall also include the actual
knowledge of Tina Boxwell, Robert Mooney, Kevin Baer, Kristi
Kennedy, Phil Westerman and John Riley.
(l) Litigation. As of the date hereof and except as
disclosed on Schedule 4(l), there are no actions or suits pending
or, to the knowledge of Seller, threatened against the Company at
law or in equity which would have a Material Adverse Effect on the
Company. As of the date hereof and except as disclosed on Schedule
4(l), the Company is not a party or subject to or in default under
any judgment, order, injunction or decree of any Governmental
Entity or arbitration tribunal applicable to it or any of its
properties, assets, operations or business.
(m) Insurance. The Seller or the Company maintains
policies of fire and casualty, liability and other forms of
insurance in connection with the business of the Company in such
amounts, with such deductibles and against such risks and losses as
are, required by law and in Seller's judgment, reasonable for the
business and assets of the Company.
(n) Benefit Plans.
(i) Set forth in Schedule 4(n) is a true and
complete list as of the date hereof of all bonus, pension,
stock option, stock purchase, benefit, welfare, profit
sharing, retirement, disability, vacation, severance,
hospitalization, insurance, incentive, deferred
compensation and other similar fringe or employee benefit
plans, funds, programs or arrangements, all employment
contracts or executive compensation agreements, written or
oral, and all collective bargaining agreements, in each of
the foregoing cases which is governed by the Employee
Retirement Income Security Act of 1974 ("ERISA") and which
is sponsored by the Company prior to the Closing Date for
the benefit of any or all employees of the Company
(collectively the "Employee Plans"). Also listed on
Schedule 4(n) is each other employee benefit plan,
program, or arrangement, which to the knowledge of Seller
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<PAGE> 15
is maintained by the Company as of the date hereof for the
benefit of the Company's employees.
(ii) With respect to the Employee Plans, and
to any other employee benefit plan, program, agreement or
arrangement to which the Company or any other trade or
business, whether or not incorporated, that together with
the Company would be deemed a "single employer" within the
meaning of Section 414(b), (c), (m) or (o) of the Code (a
"Commonly Controlled Entity"), has made, or was required
to make, contributions at any time within six years prior
to Closing, no events have occurred, and there exist no
conditions (including ongoing conditions) or set of
circumstances which have subjected or would be reasonably
likely to subject the Company or Buyer to any liability
under ERISA, the Code or any other Applicable Laws, except
to the extent any such event, condition or set of
circumstances would not have a Material Adverse Effect on
the Company, Buyer or any Commonly Controlled Entity.
(iii) No payment made by Buyer or the Company
to any current or former employee, director or independent
contractor of the Company as a result of the transactions
contemplated by this Agreement will be characterized as an
"excess parachute payment" as defined in Section 280G(b)
of the Code.
(iv) As soon as practicable, but prior to
Closing, the Seller will furnish to Buyer, with respect to
each Employee Plan, true and complete copies of (i) all
plan documents, (ii) all collective bargaining agreements,
if any, (iii) the most recent determination letters
received from the Internal Revenue Service, if any, (iv)
the most recent application for determination filed with
the Internal Revenue Service, if any, (v) the latest
actuarial valuations, if any, (vi) the latest financial
statements, if any, (vii) the latest Form 5500 Annual
Report, if any, (viii) all related trust agreements,
insurance contracts or other funding arrangements which
implement any of such Employee Plans, if any, and (ix) all
Summary Plan Descriptions and summaries of material
modifications and all modifications thereto communicated
to employees, if any.
(v) No Employee Plan provides medical, dental
or life benefits to former employees of the Company after
retirement or other termination of employment other than
as required by the continuation of health coverage
provisions of Section 4980B of the Code.
(o) Compliance with Applicable Laws; Environmental
Matters.
(i) The Company is in compliance with all
applicable statutes, laws, ordinances, rules, orders,
permits and regulations of any Governmental Entity
("Applicable Laws"), except for instances of noncompliance
that would not have a Material Adverse Effect on the
Company. This Section 4(o)(i) does not relate to matters
with respect to environmental matters, which are the
subject of Section 4(o)(ii)-(iv).
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<PAGE> 16
(ii) Neither Seller nor the Company has
received any written or oral notice alleging that the
Company has or may have any environmental liability
(whether accrued, absolute, contingent, unliquidated or
otherwise and including without limitation any
investigatory, remedial or corrective obligations).
(iii) Neither the Company nor, to the knowledge
of Seller, any of its predecessors or any other person for
which they may be obligated has disposed of or released
any hazardous or regulated material in a manner that would
have a Material Adverse Effect on the Company.
(iv) To the knowledge of Seller, there is no
contamination from any hazardous or regulated material at,
on, upon, or under the Property or any real property the
Company formerly owned, leased, operated, or controlled,
that would have a Material Adverse Effect on the Company.
(v) To the knowledge of Seller, there
currently exist no conditions, circumstances, or events
that reasonably could be expected to result in the Company
incurring any expenditure to comply with Applicable Laws
that would have a Material Adverse Effect on the Company.
(vi) To the knowledge of Seller, no
environmental studies, reports, assessments, sampling
results, or audits with respect to real property currently
owned, leased, operated or controlled by the Company have
been conducted by the Company during its tenure at such
property or, to Seller's knowledge, during any other time.
(p) Employee and Labor Matters. Except as would not
have a Material Adverse Effect on the Company, (i) there is, and
during the past two years there has been, no labor strike, dispute,
work stoppage or lockout pending, or, to the knowledge of Seller,
threatened, against the Company; (ii) to the knowledge of Seller,
no union organizational campaign is in progress with respect to the
employees of the Company; (iii) there is no unfair labor practice
charge or complaint against the Company pending, or, to the
knowledge of Seller, threatened, before the National Labor
Relations Board; (iv) there are no pending, or, to the knowledge of
Seller, threatened, union grievances against the Company; (v)
except as disclosed on Schedule 4(p), there are no pending, or, to
the knowledge of Seller, threatened, discrimination charges against
the Company or current or former employees of the Company before
the Equal Employment Opportunity Commission or any similar state or
local agency responsible for the prevention of unlawful
discriminatory employment practices; and (vi) except as disclosed
on Schedule 4(p), neither the Seller nor the Company has received
written notice during the past two years of the intent of the
United States Department of Labor to conduct an investigation of
the Company and, to the knowledge of Seller, no such investigation
is in progress.
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<PAGE> 17
(q) Licenses. Except as would not have a Material
Adverse Effect on the Company, all licenses that are necessary for
the conduct of the business of the Company as currently conducted
are validly held by the Company, the Company has complied in all
respects with all terms and conditions thereof and the same will
not be subject to suspension, modification, revocation or
nonrenewal as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby. Each license is valid and in full force and effect, except
where the failure to be valid and in full force and effect would
not have a Material Adverse Effect on the Company.
(r) Regulatory Filings. The Seller, on behalf of the
Company, or the Company, has filed or otherwise provided all
reports, data, registrations, filings, other information and
applications required to be filed with or otherwise provided to the
agencies or authorities of all jurisdictions in which the Company
is authorized to do business, and all other Governmental Entities
with jurisdiction over the Company or any of its operations, and
all required regulatory approvals in respect thereof are in full
force and effect on the date hereof, except for failures to file or
otherwise provide material reports, data, registrations, filings,
or other information or applications, if any, which would not have
a Material Adverse Effect on the Company. All such regulatory
filings were in compliance with Applicable Laws when filed, and no
deficiencies have been asserted by any such Governmental Entity
with respect to such regulatory filings that have not been
satisfied, except for failures to comply and deficiencies which
would not have a Material Adverse Effect on the Company.
(s) Private Offering. Neither the Company, any of its
affiliates nor anyone acting on its or their behalf has issued,
sold or offered any security of the Company or of any affiliate to
any person under circumstances that would cause the issuance and
sale of the Shares, as contemplated by this Agreement, to be
subject to the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"). Neither the Company, any
of its affiliates nor anyone acting on its or their behalf will
offer the Shares or any part thereof or any similar securities for
issuance or sale to, or solicit any offer to acquire any of the
same from, anyone so as to make the issuance and sale of the Shares
subject to the registration requirements of Section 5 of the
Securities Act. Assuming the representations of Buyer contained in
Section 6(c) are true and correct, the issuance, sale and delivery
of the Shares hereunder are exempt from the registration and
prospectus delivery requirements of the Securities Act.
(t) Absence of Undisclosed Liabilities. As of the
date hereof and except as disclosed on Schedule 4(t), the Company
has no liabilities that would have a Material Adverse Effect on the
Company, except (i) liabilities which are accrued or reserved
against in the consolidated balance sheets of the Company as of
December 31, 1997 and March 31, 1998, included in the Financial
Statements delivered prior to the date of this Agreement or
reflected in the notes thereto and (ii) liabilities which have
arisen in the ordinary course of business.
(u) Accounts Receivable and Payable. Except as set
forth on Schedule 4(w), all notes and accounts receivable of the
Company are reflected properly on its books and
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records, are valid receivables subject to no setoffs or
counterclaims, are presently current and collectible, and will be
collected in accordance with their terms (or within 120 days of
their due date) at their recorded amounts, subject only to the
reserve for bad debts set forth in the Financial Statements as
adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company.
(v) Title to Assets. Except as disclosed on Schedule
4(v), the Company holds and owns good and valid title to all of its
tangible assets, in each case free of any liens or other
encumbrances except for such liens and encumbrances which would not
have a Material Adverse Effect on the Company. Such tangible
assets constitute all of the tangible assets sufficient for the
conduct of the business of the Company as presently conducted.
(w) Customers. Except as disclosed on Schedule 4(w),
none of the Company's twenty (20) largest customers calculated on
the basis of gross revenue for the year ended December 31, 1997 has
materially curtailed or terminated its relationship with the
Company or has indicated in writing that it will stop or materially
decrease the rate of buying services from the Company as of the
date hereof.
(x) Transactions with Related Parties. The Company
does not use any tangible or intangible property in its business
that is owned by any officer, director, employee, shareholder or
affiliate of the Company (or such person's immediately family) on
terms that are less favorable than those the Company would
otherwise receive in an arms length transaction with a third party.
(y) Fees to Related Parties. Except as set forth on
Schedule 4(y), no officer, director, employee or agent of Seller,
the Company or any of their affiliates will receive, as a result of
the successful completion of the transactions contemplated by this
Agreement, a financial benefit, including, but not limited to any
fee, acceleration of any payment or the replacement of such
person's compensation. Except as set forth on Schedule 4(y),
Seller is not obligated to make any payments to any officer,
director, employee or agent of the Company after the Closing Date.
(z) Books and Records. All books and records relating
to the ownership and operation of the business have been maintained
substantially in accordance with Applicable Laws, except where such
failures to maintain would not have a Material Adverse Effect on
the Company.
(aa) Cash Sale to Third Party. Seller is not aware of
any third party that will make an offer for the acquisition of
Seller in a cash transaction during the year ending December 31,
1998 and Seller currently has no intention to enter into any cash
transaction for the sale of Seller to a third party.
5. Covenants of Seller. Seller covenants and agrees
as follows:
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(a) Access. Prior to the Closing, Seller shall, and
shall cause the Company to, give Buyer and its representatives,
employees, counsel and accountants reasonable access, during normal
business hours and upon reasonable notice, to the personnel,
properties, books and records of the Company; provided, however,
that such access does not unreasonably disrupt the normal
operations of the Company.
(b) Ordinary Conduct. Except as set forth in Schedule
5(b) or otherwise expressly permitted by the terms of this
Agreement, from the date hereof to the Closing, Seller shall cause
the business of the Company to be conducted in the ordinary course
in substantially the same manner as currently conducted and shall
make all reasonable efforts consistent with past practices to
preserve their relationships with customers, employees and others
with whom the Company deals; provided that Seller shall not be
obligated to, directly or indirectly, provide any funds to the
Company other than in the ordinary course of business. Seller
shall not, and shall not permit the Company to, take any action
that would, or that could reasonably be expected to, result in any
of the conditions to the Closing set forth in this Agreement not
being satisfied. In addition, except as set forth in Schedule 5(b)
or otherwise expressly permitted by the terms of this Agreement,
Seller shall not permit the Company to do any of the following
without prior consent of Buyer:
(i) amend its Certificate of Incorporation or
Bylaws;
(ii) adopt or amend any Employee Plan or
collective bargaining agreement, except as required by law
or elsewhere in this Agreement;
(iii) grant to any employee executive officer
any increase in compensation or benefits, except in the
ordinary course of business consistent with past practice
or as may be required under existing agreements and except
for any increases for which Seller shall be solely
obligated;
(iv) incur or assume any liabilities,
obligations or indebtedness for borrowed money or
guarantee any such liabilities, obligations or
indebtedness, other than in the ordinary course of
business consistent with past practice; provided that in
no event shall the Company incur, assume or guarantee any
long-term indebtedness for borrowed money;
(v) make any change in any method of
accounting or accounting practice or policy other than
those required by US GAAP;
(vi) acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of,
or by any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof or otherwise acquire any assets (other
than inventory) which are material to the Company;
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<PAGE> 20
(vii) sell, lease or otherwise dispose of any
of its assets, except in the ordinary course of business
consistent with past practice;
(viii) enter into any contract, agreement or
other arrangement, written or oral, or modify or terminate
any existing contract, agreement or other arrangement,
except in the ordinary course of business;
(ix) issue or sell any equity interests or
enter into any agreement relating to the equity interests
of the Company; or
(x) agree, whether in writing or otherwise,
to do any of the foregoing.
(c) No Solicitation of Transaction Proposals. Seller
shall not directly or indirectly authorize or permit any of its
respective agents or affiliates to:
(i) solicit, initiate, encourage (including
by way of furnishing information) or take any other action
to facilitate, any inquiry or the making of any proposal
which constitutes, or may reasonably be expected to lead
to, any acquisition or purchase of a substantial amount of
assets of, or any equity interest in, the Company or any
merger, consolidation, business combination, sale of
substantially all assets, sale of securities,
recapitalization, liquidation, dissolution or similar
transaction involving the Company (other than the
transactions contemplated by this Agreement) or any other
corporate transactions relating to the Shares or assets of
the Company the consummation of which would, or could
reasonably be expected to, impede, interfere with, prevent
or materially delay the transactions contemplated by this
Agreement (collectively, "Transaction Proposals"); or
(ii) propose, enter into or participate in any
discussions or negotiations regarding any of the
foregoing, or furnish to another person any information
with respect to the Company's business, properties or
assets or any of the foregoing, or otherwise cooperate in
any way with, or assist or participate in, facilitate or
encourage, an effort or attempt by any other person to do
or seek any of the foregoing;
provided, however, that the foregoing clauses (i) and (ii) shall
not prohibit Seller from (A) furnishing information pursuant to an
appropriate confidentiality letter concerning the Company and its
businesses, properties or assets to a third party who has made a
Superior Transaction Proposal (as defined below), (B) engaging in
discussions or negotiations with a third party who has made a
Superior Transaction Proposal or (C) following receipt of a
Superior Transaction Proposal, terminating this Agreement pursuant
to Section 15(a)(iii), but in each case referred to in the
foregoing clauses (A) through (C) only after the board of directors
of Seller concludes in good faith following advice of its outside
advisors that such action is in the best interest of its
shareholders; provided, however, that Seller shall not terminate
this Agreement based on a Superior Transaction Proposal if Buyer
increases the Purchase Price and modifies the terms of this
Agreement to at least equal (determined in
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<PAGE> 21
good faith by the board of directors of Seller following advice of
its outside advisors) any such Superior Transaction Proposal within
five (5) business days of receipt of written notice of a Superior
Transaction Proposal (including the material terms thereof). If
the board of directors of Seller receives a Transaction Proposal,
then Seller shall immediately inform Buyer of the terms and
conditions of such proposal and shall keep Buyer fully informed of
the status and details of any such Transaction Proposal and of all
steps it is taking in response to such Transaction Proposal;
provided that nothing contained in this Section 5(c) shall prohibit
Seller or its board of directors from taking any action which, in
the good faith judgment of Seller's board of directors based on
advice of its outside counsel, may be required under Applicable
Laws. For purposes of this Agreement, the term "Superior
Transaction Proposal" shall mean a bona fide Transaction Proposal
that (i) is not solicited or initiated by Seller or any of its
officers, directors, employees, agents or affiliates and (ii) is
more favorable to Seller and Seller's stockholders than the
transactions contemplated hereby, including, but not limited to,
having a total consideration payable in cash at closing of not less
than the Purchase Price, having a schedule for consummation similar
to that contemplated hereunder and a scheduled closing promptly
upon receipt of required consents of Governmental Entities,
shareholders, lenders or others and having closing subject to no
material conditions.
(d) Insurance. Seller shall keep, or cause to be
kept, insurance policies consistent with past practice or suitable
replacements therefor, in full force and effect through the close
of business on the Closing Date.
(e) Non-Competition/No Solicitation.
(i) Seller agrees that until the earlier of
(x) a Change of Control (as defined below) or (y) the end
of the 36 months period following the Closing, it will not
engage, either directly or indirectly, in any business
that competes anywhere in the world with the office
clerical and light industrial staffing business of the
Company as it exists on the Closing Date; provided that
nothing herein shall prohibit (A) the acquisition by
Seller or any of its affiliates of not more than 10% of
the total voting power of any publicly traded person, (B)
the continued operation by Seller of information
technology businesses and related information technology
staffing services, including without limitation any and
all businesses and services performed by Seller other than
through the Company, (C) the solicitation of any and all
customers of the Company for the provision of any and all
services other than office clerical and light industrial
staffing services, or (D) the acquisition by Seller or its
affiliates of any person whose revenues from the provision
of office clerical and light industrial staffing services
do not exceed 30% of such persons's total revenues;
provided that immediately following such acquisition
(other than a merger acquisition treated as a pooling of
interests or a purchase combination which is part of a
group of transactions which will be treated as a pooling
of interests) Seller shall provide Buyer the right of
first refusal to acquire all of such office clerical and
light industrial staffing services business so acquired on
terms not less favorable than the
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<PAGE> 22
terms on which Seller or its affiliate could sell such
business to a bona fide third party.
(ii) Seller agrees that until the second
anniversary of the Closing Date, it will not, directly or
indirectly, solicit, employ or otherwise attempt to employ
any employee of the Company; provided that this Section
5(e) shall not prohibit Seller or any of its affiliates
from (A) employing or accepting the performance of
services by any employee of the Company who is terminated
by the Company for any reason or who is not then employed
and after any applicable non-compete agreement has lapsed
or terminated, (B) employing or accepting the performance
of services of those employees listed on Schedule
5(e)(iii) pursuant to Section 5(e)(iii) below and (C)
soliciting employees generally, such as by advertising in
mass media and/or using head hunters, over any and all
mediums.
(iii) If Buyer terminates or relocates in a
manner that would constructively terminate any of the
employees listed on Schedule 5(e)(iii), or intends to do
any of the foregoing, Buyer shall give Seller written
notice of such event or intention and afford Seller the
opportunity to offer employment to any of such employees.
(iv) If any provision contained in this
Section 5(e) shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provisions of this Section 5(e), but this Section 5(e)
shall be construed as if such invalid, illegal or
unenforceable provision had never been contained in this
Section 5(e). It is the intention of the parties that if
any restriction or covenant contained in this Section 5(e)
is held to cover a geographic area or to be for a length
of time that is not permitted by Applicable Laws, or is in
any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null,
void and of no effect, but to the extent such provision
would be valid or enforceable under Applicable Laws, a
court of competent jurisdiction shall construe and
interpret or reform this Section 5(e) to provide for a
covenant having the maximum enforceable geographic area,
time period and other provisions (not greater than those
contained in this Section 5(e)) as shall be valid, legal
and enforceable under such Applicable Laws.
(v) For the purposes of this Section 5(e), a
"Change of Control" means the occurrence of any of the
following events: (A) any other person or group (as such
term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) is
or becomes the beneficial owner (as defined in Rule 13d-3
of the Exchange Act), directly or indirectly, of more than
35% of the voting stock of Seller, (B) Seller sells,
assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of the assets of Seller and
its subsidiaries to any person, (C) Seller or any of its
subsidiaries consolidates with, or merges with or into,
any person, and as a result of such consolidation or
merger the voting stock of Seller outstanding prior to
such consolidation or merger does not represent (either by
remaining outstanding or by being converted into voting
stock of the surviving
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<PAGE> 23
person or any parent thereof) at least a majority of the
voting stock of Seller or the surviving person or any
parent thereof outstanding immediately after such
consolidation or merger, or (D) during any consecutive
two-year period, individuals who at the beginning of such
period constituted the Board of Directors of Seller
(together with any new directors whose election by such
Board of Directors or whose nomination for election by the
shareholders of Seller was approved by a vote of a majority
of the directors then still in office who were either
directors at the beginning of such period or whose election
or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board
of Directors of Seller then in office.
(f) Additional Information. Seller shall furnish as
soon as reasonably practical to Buyer such information as Buyer may
reasonably request through the Closing. In addition, in the event
Seller becomes aware of any matter hereafter arising that is the
subject of any of the disclosures made on any of the Disclosure
Schedules made for informational purposes which would be Material
to the Company, Seller shall provide Buyer with reasonable
information relating to such matter. In no event shall any such
information provided pursuant to this Section 5(f) provide either
party a right to terminate this Agreement or to refuse to Close.
(g) Transfer of Assets. At Buyer's request, prior to
Closing, Seller shall transfer all of its rights to the
Intellectual Property used by the Company and not otherwise held
thereby and all of its rights to the COREnerstone Assets to a
Constituent Company designated by Buyer. In the event Buyer does
not request such a transfer prior to Closing, at Closing Seller
shall transfer all of its rights to such Intellectual Property and
COREnerstone Assets directly to Buyer.
(h) Seller Indebtedness. At or prior to Closing, (i)
Seller shall cause the Company to be released from all liabilities,
obligations or indebtedness or guarantees of any such indebtedness
relating to borrowed money of the Seller and (ii) at the option of
the Buyer, Seller shall either (A) cancel and extinguish all
intercompany balances and accounts between the Seller and the
Company, including but not limited to, notes receivable, notes
payable, working capital advances, intercompany receivables and
payables and any other obligations ("Intercompany Accounts") and
contribute an equal amount to the capital accounts of the Company,
or (B) transfer and assign to the Buyer the Seller's interest in
all Intercompany Accounts in connection with the acquisition of the
Company by the Buyer.
6. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Seller as follows:
(a) Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of England and
Wales. Buyer has all requisite power and authority (corporate or
otherwise) to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
All corporate acts and other proceedings required to be taken by
Buyer to authorize the execution, delivery and
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<PAGE> 24
performance of this Agreement and the consummation of the
transactions contemplated hereby have been or will by the Closing
Date be duly and properly taken. This Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid and
binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, except as enforceability may be limited
by general equitable principles and by bankruptcy, insolvency,
reorganization, debtor relief or similar laws affecting the rights
of creditors generally. The approval of the shareholders of Buyer
is required under Applicable Laws for Buyer to consummate the
transactions contemplated by this Agreement.
(b) No Conflicts; Consents. The execution and
delivery of this Agreement by Buyer do not, and the consummation of
the transactions contemplated hereby and compliance with the terms
hereof shall not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under, or
result in the creation of any lien, claim, encumbrance, security
interest, option, charge or restriction of any kind upon any of the
properties or assets of Buyer under, any provision of (i) the
charter documents of Buyer, (ii) any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment,
agreement or arrangement to which Buyer is a party or is subject or
by which any of their respective properties or assets are bound or
subject or (iii) any judgment, order, or decree, or material
statute, law, ordinance, rule or regulation applicable to Buyer or
its properties or assets, other than any such items that would not
have a Material Adverse Effect on Buyer. No consent, approval,
order or authorization of, or registration, declaration or filing
with, any Governmental Entity or other person is required to be
obtained or made by or with respect to Buyer or any of its
subsidiaries or their respective affiliates in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby, other than
(I) compliance with and filings under the HSR Act, if applicable,
and (II) approval of the shareholders of Buyer.
(c) Securities Act. The Shares purchased by Buyer
pursuant to this Agreement are being acquired for investment only
and not with a view to any public distribution thereof, and Buyer
shall not offer to sell or otherwise dispose of the Shares so
acquired by it in violation of any of the registration requirements
of the Securities Act.
(d) Actions and Proceedings, etc. There are no (i)
outstanding judgments, orders, injunctions or decrees of any
Governmental Entity or arbitration tribunal against Buyer or any of
its affiliates, (ii) lawsuits, actions or proceedings pending or,
to the knowledge of Buyer, threatened against Buyer or any of its
affiliates, or (iii) investigations by any Governmental Entity
which are, to the knowledge of Buyer, pending or threatened against
Buyer or any of its affiliates, and which, in the case of each of
clauses (i), (ii) and (iii), have or could have a material adverse
effect on the ability of Buyer to consummate the transactions
contemplated hereby.
(e) Availability of Funds. Buyer has cash available
or has existing borrowing facilities and commitments, which
together are sufficient to enable it to consummate the
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<PAGE> 25
transactions contemplated by this Agreement. True and correct
copies of any such facilities and commitments have been provided to
Seller. The financing required to consummate the transactions
contemplated hereby is collectively referred to as the "Financing".
As of the date hereof, Buyer has no reason to believe that any of
the conditions to the Financing will not be satisfied or that the
Financing will not be available on a timely basis for the
transactions contemplated by this Agreement.
(f) No Knowledge of Misrepresentations or Omissions.
Buyer has no knowledge that the representations and warranties of
Seller made in this Agreement qualified as to materiality are not
true and correct, or that those not so qualified are not true and
correct in all material respects, and Buyer has no knowledge of any
material errors in, or material omissions from, the Schedules to
this Agreement. Buyer has received or been afforded the
opportunity to review prior to the date hereof all written
materials which Seller was required to deliver or make available,
as the case may be, to Buyer pursuant to this Agreement on or prior
to the date hereof.
7. Covenants of Buyer. Buyer covenants and agrees as
follows:
(a) Confidentiality. Buyer acknowledges that the
information being provided to it in connection with the purchase
and sale of the Shares and the consummation of the other
transactions contemplated hereby is subject to the terms of a
confidentiality agreement dated March 27, 1998, between Buyer and
Seller (the "Confidentiality Agreement"), the terms of which, to
the extent such terms do not conflict with, or are not contrary to,
this Agreement, are incorporated herein by reference. Effective
upon, and only upon, the Closing, the Confidentiality Agreement
shall terminate with respect to information relating solely to the
Company; provided that Buyer acknowledges that any and all other
information provided to it by Seller or Seller's representatives or
any employee or agent of the Company concerning Seller, whether
before or after the Closing, shall remain subject to the terms and
conditions of the Confidentiality Agreement after the Closing Date.
The covenant set forth in this Section 7(a) shall terminate three
years after the Closing Date.
(b) Shareholder Meeting. Buyer shall, as soon as
possible following the date of this Agreement, duly call, give
notice of, convene and hold a meeting of its shareholders (the
"Buyer Shareholder Meeting") for the purpose of obtaining the
required approvals (the "Buyer Shareholder Approval") of the
shareholders of Buyer of this Agreement and shall, through its
Board of Directors, recommend to its shareholders the approval and
adoption of this Agreement and the other transactions contemplated
hereby, which recommendation shall not be revoked or rescinded, and
shall use best efforts to solicit from its shareholders all
required votes, consents and proxies in favor of approval and
adoption of this Agreement and the other transactions contemplated
hereby. Buyer shall use its best efforts to cause each of the
directors and officers of Buyer owning shares of Buyer entitled to
vote at any such Buyer Shareholder Meeting to vote all of such
shares in favor of the adoption of this Agreement and the other
transactions contemplated hereby.
(c) No Additional Representations. Buyer acknowledges
that it and its representatives have been permitted access to the
books and records, facilities, equipment,
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<PAGE> 26
tax returns, contracts, insurance policies (or summaries thereof)
and other properties and assets of the Company which it and its
representatives have desired or requested to see and/or review, and
that it and its representatives have had opportunity to meet with
certain officers and employees of the Company to discuss the
businesses and assets of the Company. Buyer acknowledges that none
of Seller or the Company or any other person has made any
representation or warranty, expressed or implied, as to the
accuracy or completeness of any information regarding the Company
furnished or made available to Buyer and its representatives
(including Project COREnerstone), except as expressly set forth in
this Agreement or the Disclosure Schedules hereto.
(d) Employment Agreements; Guarantees.
(i) Buyer acknowledges that certain senior
employees of the Company are parties to the agreements
described on Schedule 7(d). Buyer agrees to assume any and
all obligations of Seller to the employees under such
agreements, including without limitation any payment
obligations. If Buyer terminates any such employee, Buyer
shall not be released from any such obligations under such
employee's employment agreement and shall remain obligated
to make all payments to such employee required to be made
under such employment agreement.
(ii) Buyer acknowledges that Seller has
provided guarantees for certain liabilities, obligations
and indebtedness of the Company. Buyer agrees to assume
any and all such obligations of Seller under such
guarantees, including without limitation any payment
obligations.
(e) No Solicitation.
(i) Buyer agrees that until the second
anniversary of the Closing Date, it will not, directly or
indirectly, solicit or otherwise attempt to employ any
employee of Seller; provided that this Section 7(e)(i)
shall not prohibit Buyer or any of its affiliates from (A)
employing or accepting the performance of services by any
employee of Seller who is terminated by Seller for any
reason or who is not then employed and after any
applicable non-compete agreement has lapsed or terminated
and (B) soliciting employees generally, such as by
advertising in mass media and/or using head hunters, over
any and all mediums.
(ii) If any provision contained in this
Section 7(e) shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provisions of this Section 7(e), but this Section 7(e)
shall be construed as if such invalid, illegal or
unenforceable provision had never been contained in this
Section 7(e). It is the intention of the parties that if
any restriction or covenant contained in this Section 7(e)
is held to cover a geographic area or to be for a length
of time that is not permitted by Applicable Laws, or is in
any way construed to be too broad or to any extent
invalid, such provision shall not be construed to be null,
void and of no effect, but to the extent
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<PAGE> 27
such provision would be valid or enforceable under
Applicable Laws, a court of competent jurisdiction shall
construe and interpret or reform this Section 7(e) to
provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not
greater than those contained in this Section 7(e) as shall
be valid, legal and enforceable under such Applicable
Laws.
8. Mutual Covenants. Each of Seller and Buyer covenants and
agrees as follows:
(a) Consents. Buyer acknowledges that certain
consents and waivers with respect to the transactions contemplated
by this Agreement may be required from certain third parties and
that such consents and waivers have not been obtained as of the
date of this Agreement. Prior to the Closing, Seller shall, and
shall cause the Company to, cooperate with Buyer, upon the request
of Buyer, in any reasonable manner in connection with Buyer
obtaining any consents and waivers; provided, however, that such
cooperation shall not include any requirement of Seller or any of
its affiliates (including the Company) to expend money, commence or
participate in any litigation or offer or grant any accommodation
(financial or otherwise) to any third party.
(b) Cooperation. Buyer and Seller shall cooperate
with each other, and shall cause their officers, employees, agents,
affiliates, auditors and representatives to cooperate with each
other after the Closing to ensure the orderly transition of the
Company from Seller to Buyer and to minimize any disruption to the
business of the Company that might result from the transactions
contemplated hereby. After the Closing, upon reasonable written
notice, Buyer and Seller shall furnish or cause to be furnished to
each other and their employees, counsel, auditors and
representatives access, during normal business hours, to such
information and assistance relating to the Company as is reasonably
necessary for financial reporting and accounting matters, the
preparation and filing of any tax returns, reports or forms or the
defense of any tax claim or assessment. Each party shall reimburse
the other for reasonable out-of-pocket costs and expenses incurred
in assisting the other pursuant to this Section 8(b). Neither
party shall be required by this Section 8(b) to take any action
that would unreasonably interfere with the conduct of its business
or unreasonably disrupt its normal operations (or, in the case of
Buyer, the business or operations of the Company).
(c) Publicity. Seller and Buyer agree that, from the
date hereof through the Closing Date, no public release or
announcement concerning the transactions contemplated hereby shall
be issued by either party without the prior consent of the other
party (which consent shall not be unreasonably withheld), except as
such release or announcement may be required by law or the rules or
regulations of any United States or foreign securities exchange, in
which case the party required to make the release or announcement
shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance.
(d) Best Efforts. Subject to the terms and conditions
of this Agreement (including the provisions set forth in Sections
8(a) and 8(e)), each party shall use its
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<PAGE> 28
reasonable best efforts to cause the Closing to occur. Without
limiting the foregoing or the provisions set forth in Section 8(e),
Buyer and Seller shall use their respective reasonable best efforts
to cause the Closing to occur on or prior to July 8, 1998.
(e) Antitrust Notification. Each of Seller and Buyer
shall as promptly as practicable, but in no event later than ten
business days following the execution and delivery of this
Agreement, file with the United States Federal Trade Commission
(the "FTC") and the United States Department of Justice (the "DOJ")
the notification and report form, if any, required for the
transactions contemplated hereby and any documentary information
requested in connection therewith pursuant to the HSR Act. Any
such notification and report form and supplemental information
shall be in substantial compliance with the requirements of the HSR
Act. Each of Buyer and Seller shall furnish to the other such
necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or
submission which is necessary under the HSR Act and Buyer and
Seller shall each pay one-half (1/2) of any filing fees incurred
in connection with such filing under the HSR Act. Seller and Buyer
shall keep each other apprised of the status of any communications
with, and any inquiries or requests for additional information
from, the FTC and the DOJ and, shall comply promptly with any such
inquiry or request. Each of Seller and Buyer shall use its best
efforts to obtain any clearance required under the HSR Act for the
purchase and sale of the Shares.
(f) Records. On the Closing Date, Seller shall
deliver or cause to be delivered to Buyer all material agreements,
documents, books, records and files (collectively, "Records"), if
any, in the possession of Seller relating to the business and
operations of the Company to the extent not then in the possession
of the Company, subject to the following exceptions:
(i) Buyer recognizes that certain Records may
contain incidental information relating to the Company or
may relate primarily to subsidiaries or divisions of
Seller, other than the Company, and that Seller may retain
such Records and shall provide copies of the relevant
portions thereof to Buyer at Buyer's cost;
(ii) Seller may retain all Records prepared in
connection with the sale of the Shares, including bids
received from other parties and analyses relating to the
Company; and
(iii) Seller may retain any tax returns,
reports or forms, and Buyer shall be provided with copies
of such returns, reports or forms only to the extent that
they relate to the Company's separate returns or separate
tax liability.
(g) Use of "CORESTAFF" Name.
(i) Following the Closing, Seller shall not,
without the consent of Buyer, use the name "CORESTAFF" or
"COREnerstone" in its commercial operations or for any
legal, regulatory or filing purposes in any manner and
shall make reasonable
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efforts to minimize any confusion which may result from
such use prior to Seller's name change, including, without
limitation, cooperating with Buyer to provide notice of
the sale of the Company to Buyer to corporate and industry
publications; provided, however, that Buyer and its
affiliates hereby grant Seller a fully-paid,
non-exclusive, non-transferable license to use the
foregoing terms until the second anniversary of the
Closing as necessary for transition to the name Metamor
Worldwide, Inc. in internal and external materials and in
connection with any reports to governmental authorities
and communications to the shareholders of Seller; and
(ii) Buyer shall be entitled to use the name
"CORESTAFF" in connection with its operations following
the Closing; provided that until the third anniversary of
the Closing Buyer shall not include the name "CORESTAFF,"
or any name that is confusingly similar to "CORESTAFF," in
the name of any entity which issues securities to the
public.
(h) Transition Services.
(i) In the event Buyer or Seller requires
administrative services from the other party hereto for
the conduct of its business during the twelve (12) month
period following the Closing (the "Transition Period"),
such other party agrees to provide such services at
mutually agreeable market rates (the rate such other party
would charge an unaffiliated third party for comparable
services). For purposes of this Section 8(h),
"administrative services" mean financial, treasury,
accounting, tax, audit, management information services
and other related services; human resources services;
corporate office lease services; and other similar
administrative services currently provided to the Company
by Seller, in the case of Buyer, or provided by the
Company to Seller, in the case of Seller. Notwithstanding
the foregoing, in no event shall either party provide
professional services or advice to the other party without
the party receiving such professional services or advice
providing a mutually agreed to indemnity for any such
services, in the form of Exhibit C attached hereto.
(ii) Notwithstanding the generality of the
foregoing Section 8(h)(i), Seller shall, for up to 180
days after the Closing, make Jody Tusa (to the extent Mr.
Tusa remains employed by Seller) available to Buyer for
the deployment of Project COREnerstone. Subject to Mr.
Tusa's continued employment with Seller, Jody Tusa shall
be available for 80% of his time up to 90 days following
the Closing to provide transition assistance to the Buyer
and for 50% of his time for an additional 90 days after
the Closing upon the written request of the Buyer.
(i) Grant Back. Buyer hereby grants to Seller and its
affiliates a royalty-free, perpetual, nontransferable, nonexclusive
right and license to use, modify, display and create derivative
works from the COREnerstone Assets for internal purposes only.
(j) Royalty for Commercialization to Third Parties.
In light of Seller's substantial investment in the development of
the COREnerstone Assets, Buyer agrees to pay
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royalties to Seller under the following circumstances in which
Buyer markets the COREnerstone Assets to third parties:
(i) If Buyer licenses or otherwise transfers
part or all of the COREnerstone Assets to any third party,
then Buyer hereby agrees and undertakes to pay on a
quarterly basis to Seller the following royalty: 15% of
the net license fees for all COREnerstone Assets licensed
during the preceding quarter; and
(ii) If Buyer operates as an outsource
provider or time share by using or operating part or all
of the COREnerstone Assets on behalf of any third party,
then Buyer hereby agrees and undertakes to pay on a
quarterly basis to Seller the following royalty: 15% of
the net outsourcing or services fees for all such services
rendered in the preceding quarter.
(k) Workers' Compensation Matters. As of the Closing,
if requested by Buyer, Seller shall assign the workers'
compensation insurance policies listed on Schedule 8(k) to the
Company and Buyer shall provide replacement collateral relating to
such workers' compensation policies that is sufficient to release
all collateral of Seller relating to such workers' compensation
policies. In the event Buyer does not assume such insurance
policies, Buyer shall on or before the Closing Date acquire
workers' compensation insurance policies relating to the Company
that provide sufficient insurance coverage as required under
Applicable Laws.
9. Employee Benefit Matters.
(a) Effective as of the Closing Date, Buyer shall
cause the Company to continue the employment of each employee of
the Company and of each subsidiary corporation of the Company (for
purposes of this Section 9, the term "Company" shall include each
such subsidiary) who was employed on the day prior to the Closing
Date (each such continued employee shall be referred to in this
Section 9 as a "Continued Employee") on substantially equivalent
employment terms and conditions (including compensation and
benefits) as in effect immediately prior to the Closing Date ;
provided, however, that except as otherwise provided under the
terms of any applicable employment agreement, each Continued
Employee shall remain an "at-will" employee of the Company and
nothing in this Agreement shall be construed to prevent or preclude
Buyer or the Company from terminating the employment of any
Continued Employee at any time after the Closing Date.
(b) Effective on the Closing Date, Seller shall: (i)
to the extent not prohibited by any applicable insurance or other
provider contract, spin off and transfer to the Company sponsorship
of the portion of Seller's welfare benefit plans and arrangements
(including without limitation, plans and arrangements providing
hospitalization, medical, prescription, dental, vision, disability,
salary continuance, vacation, health care reimbursement, dependent
care reimbursement, accidental death, travel accident, workers
compensation insurance, severance benefits, and individual or group
life or other insurance or similar benefits and any cafeteria plan
described in Code section 125) and any accompanying trust
instrument,
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<PAGE> 31
insurance contract or other funding vehicle covering the Continued
Employees (collectively the "Spinoff Welfare Plans") and Buyer
shall cause the Company to accept the sponsorship of, and all
rights, responsibilities and obligations associated with
sponsorship of, the Spinoff Welfare Plans, (ii) transfer to the
Company sponsorship of the CORESTAFF, Inc. 401(k) Retirement
Savings Plan and Buyer shall cause the Company to accept
sponsorship of, and all rights, responsibilities and obligations
associated with sponsorship of, the CORESTAFF, Inc. 401(k)
Retirement Savings Plan, (iii) transfer to the Company cash in an
amount equal to the aggregate amounts credited to the dependent
care reimbursement accounts and medical reimbursement accounts of
Continued Employees ("Transferred Flexible Spending Accounts")
maintained under the Metamor Worldwide, Inc. Flexible Benefits Plan
since January 1, 1998 less the aggregate amount of claims against
such Transferred Flexible Spending Accounts incurred since January
1, 1998 and paid prior to the Closing Date, (iv) spin off and
transfer to the Company sponsorship of the portion of the
CORESTAFF, Inc. Executive Retirement Savings Plan ("Spinoff
Executive Plan"), and Buyer shall cause the Company to accept
sponsorship of, and all rights, responsibilities and obligations
associated with sponsorship of, the Spinoff Executive Plan, (v)
cause the trustee of any rabbi trust established in connection with
the CORESTAFF, Inc. Executive Retirement Savings Plan to transfer
to the trustee of any rabbi trust established in connection with
the Spinoff Executive Plan cash in an amount equal to the aggregate
amounts credited to the Continued Employees under the CORESTAFF,
Inc. Executive Retirement Savings Plan and held in the Seller's
rabbi trust as of the Closing Date and Seller shall cause the
trustee of any rabbi trust established in connection with the
Spinoff Executive Plan to accept such transfer of cash from the
trustee of the Seller's rabbi trust. Schedule 9(b) lists all
plans, which will be transferred from Seller to the Company
pursuant to this Section 9.
(c) Effective as of the Closing Date, Buyer shall: (i)
cause each Continued Employee to be provided with benefits having
substantially equivalent value in the aggregate to those benefits
provided to the Continued Employees immediately prior to the
Closing Date, including, but not limited to, qualified and
nonqualified retirement plans, stock option plans, incentive and
bonus plans, welfare plans, severance arrangements, vacation, paid
time off, sick leave, disability benefits, workers' compensation,
and all other employee benefit arrangements and personnel policies,
for a period of not less than one year following the Closing Date,
(ii) cause each Spinoff Welfare Plan to credit each Continued
Employee for the calendar year during which the Closing Date
occurs, with any deductibles and copayments (to the extent not
prohibited by an insurer or other provider contract) paid by each
such Continued Employee during such year under any and all of
Seller's group health plans, (iii) cause each Spinoff Welfare Plan
which provides group health benefits to waive any preexisting
condition restrictions applicable to any Continued Employee, (iv)
cause to be recognized each Continued Employee's years of service
and level of seniority, which was recognized by Seller and the
Company as of the day prior to the Closing Date, for purposes of
terms of employment and eligibility, benefit entitlement and
determination, and vesting under all benefit plans and arrangements
maintained or contributed to by Buyer or the Company on or after
the Closing Date.
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(d) On and after the Closing Date, Buyer shall cause
to be provided to all former employees of the Company sufficient
medical, mental health, vision, dental, and other group health plan
benefits to satisfy the obligations, if any, of Seller, the
Company, any Commonly Controlled Entity (as defined in Section
4(n)(ii)), and Buyer under the continuation of coverage provisions
described in Section 4980B of the Code and Sections 601 through 608
of ERISA and any similar continuation of health coverage provisions
under applicable state law.
(e) Neither Buyer nor the Company shall assume or have
any obligations or responsibilities with respect to any stock
options, stock appreciation rights, restricted stock or any other
form of stock-based compensation granted or awarded under any plan
established or maintained by Seller.
10. Further Assurances. From time to time, as and when
requested by either party hereto, the other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions (subject to the provisions of Sections 8(a), 8(d) and 8(e)), as
such other party may reasonably deem necessary or desirable to consummate
the transactions contemplated by this Agreement.
11. Indemnification.
(a) Indemnification by Seller. Seller shall indemnify
Buyer, its affiliates and each of their respective officers,
directors, employees, shareholders, agents and representatives
against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses)
suffered or incurred by any such indemnified party (other than any
relating to Taxes) to the extent arising from (i) any breach of any
representation or warranty of Seller which survives the Closing
contained in this Agreement or in any certificate delivered
pursuant hereto and (ii) any breach of any covenant of Seller
contained in this Agreement requiring performance after the Closing
Date.
(b) Indemnification by Buyer. Buyer shall indemnify
Seller, its affiliates and each of their respective officers,
directors, employees, shareholders, agents and representatives
against and hold them harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses)
suffered or incurred by any such indemnified party (other than any
relating to Taxes) to the extent arising from (i) any breach of any
representation or warranty of Buyer which survives the Closing
contained in this Agreement or in any certificate delivered
pursuant hereto, (ii) any breach of any covenant of Buyer contained
in this Agreement requiring performance after the Closing Date,
(iii) any guarantee or obligation to assure performance given or
made by Seller or an affiliate of Seller with respect to any
obligation of the Company set forth in clause (iv) below, (iv) all
obligations and liabilities of the Company or of Buyer of whatever
kind and nature, primary or secondary, direct or indirect, absolute
or contingent, known or unknown, whether or not accrued, whether
arising before, on or after the Closing Date, including any such
obligations or liabilities contained in the contracts or any
agreement, lease, license, permit, plan or commitment that, because
it fails to meet the relevant threshold amount or term, is not
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included within the definition of contracts, or because it relates
to the benefit plans sponsored by the Company (collectively, the
"Plans") (in each case other than items for which indemnification
is provided under Section 11(a)), (v) any discontinuance,
suspension or modification on or after the Closing Date of any
Plan, and (vi) any and all actions or suits against the Company at
law or in equity whether arising before, on or after the Closing
Date, including all such actions or suits arising before or on the
Closing Date that name Seller as a party where Seller did not
engage in affirmative wrongful conduct or negligently fail to take
action that would be sufficient to impose liability independent of
any conduct of the Company.
(c) Losses Net of Insurance. The amount of any loss
for which indemnification is provided under this Section 11 shall
be net of any amounts recovered or recoverable by the indemnified
party under insurance policies with respect to such loss.
(d) Termination of Indemnification. The obligations
to indemnify and hold harmless a party hereto shall terminate when
the applicable representation or warranty terminates pursuant to
Section 16; provided, however, that such obligations to indemnify
and hold harmless shall not terminate with respect to any item as
to which the person to be indemnified or the related party thereto
shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice of such claim
(stating in reasonable detail the basis of such claim) to the
indemnifying party.
(e) Procedures Relating to Indemnification. In order
for a party (the "indemnified party") to be entitled to any
indemnification provided for under this Agreement (other than under
Section 12(a)) in respect of, arising out of or involving a claim
or demand made by any person against the indemnified party (a
"Third Party Claim"), such indemnified party must notify the
indemnifying party in writing, and in reasonable detail, of the
Third Party Claim with reasonable promptness after receipt by such
indemnified party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent
the indemnifying party shall have been actually prejudiced as a
result of such failure. Thereafter, the indemnified party shall
deliver to the indemnifying party, with reasonable promptness after
the indemnified party's receipt thereof, copies of all notices and
documents (including court papers) received by the indemnified
party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified
party, the indemnifying party shall be entitled to participate in
the defense thereof and, if it so chooses, to assume the defense
thereof with counsel selected by the indemnifying party; provided
that such counsel is not reasonably objected to by the indemnified
party. Should the indemnifying party so elect to assume the
defense of a Third Party Claim, (i) the indemnifying party shall
not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection with
the defense thereof and (ii) the indemnified party shall have the
right to participate in the defense thereof and to employ counsel
at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party
shall control such defense. The indemnifying party shall be liable
for the
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<PAGE> 34
fees and expenses of counsel employed by the indemnified party for
any period during which the indemnifying party has failed to assume
the defense thereof (other than during the period prior to the time
the indemnified party shall have given notice of the Third Party
Claim as provided above).
The indemnified parties and indemnifying parties shall
cooperate with one another in the defense or prosecution thereof.
Such cooperation shall include the retention and the provision to
the other party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available
on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. Whether or not
the indemnifying party shall have assumed the defense of a Third
Party Claim, the indemnified party shall not admit any liability
with respect to, or settle, compromise or discharge, such Third
Party Claim without the indemnified party's prior written consent
(which consent shall not be unreasonably withheld). If the
indemnifying party shall have assumed the defense of a Third Party
Claim, the indemnified party shall agree to any monetary
settlement, compromise or discharge of a Third Party Claim which
the indemnifying party may recommend and which by its terms
obligates the indemnifying party to pay the full amount of the
liability in connection with such Third Party Claim and which
releases the indemnified party completely in connection with such
Third Party Claim.
All claims under Section 11(a) or 11(b) other than Third
Party Claims shall be governed by Section 11(f). All Tax Claims
(as defined in Section 12(b)) shall be governed by Section 12(b).
(f) Other Claims. In the event any indemnified party
should have a claim against any indemnifying party under Section
11(a) or 11(b) that does not involve a Third Party Claim being
asserted against or sought to be collected from such indemnified
party, the indemnified party shall deliver notice of such claim
with reasonable promptness to the indemnifying party. The failure
by any indemnified party so to notify the indemnifying party shall
not relieve the indemnifying party from any liability which it may
have to such indemnified party under Section 11(a) or 11(b), except
to the extent that the indemnifying party shall have been
prejudiced as a result of such failure. If the indemnifying party
does not notify the indemnified party within 30 calendar days
following its receipt of such notice that the indemnifying party
disputes its liability to the indemnified party under Section 11(a)
or 11(b), such claim specified by the indemnified party in such
notice shall be conclusively deemed a liability of the indemnifying
party under Section 11(a) or 11(b) and the indemnifying party shall
pay the amount of such liability to the indemnified party on demand
or, in the case of any notice in which the amount of the claim (or
any portion thereof) is estimated, on such later date when the
amount of such claim (or such portion thereof) becomes finally
determined. If the indemnifying party has timely disputed its
liability with respect to such claim, as provided above, the
indemnifying party and the indemnified party shall proceed in good
faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by
arbitration as provided in Section 29.
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(g) Mitigation. Buyer and Seller shall cooperate with
each other with respect to resolving any claim or liability with
respect to which one party is obligated to indemnify the other
party hereunder, including by making commercially reasonably
efforts to mitigate or resolve any such claim or liability;
provided that such party shall not be required to make such efforts
if they would be detrimental in any material respect to such party.
In the event that Buyer or Seller shall fail to make such
commercially reasonably efforts to mitigate or resolve any claim or
liability, then (unless the proviso to the foregoing covenant shall
be applicable) notwithstanding anything else to the contrary
contained herein, the other party shall not be required to
indemnify any person for the amount of any loss, liability, claim,
damage or expense that could reasonably be expected to have been
avoided if Buyer or Seller, as the case may be, had made such
efforts.
(h) Limitation on Indemnification. Seller's liability
for indemnification under Sections 11 and 12 (other than with
respect to the representations and warranties contained in Sections
4(c)) shall be payable only after Buyer has suffered losses by
reason of all such breaches of representations and warranties or
covenants of Seller in excess of $2,850,000 and shall in no event
and in no circumstances exceed $60,000,000 (the "maximum liability
amount"); provided, however, that only up to $50,000,000 of such
maximum liability amount shall be available to satisfy
indemnification claims hereunder other than such claims under
Section 12 (relating to Taxes) and Section 11 (relating to Section
4(u)).
12. Tax Matters.
(a) Definitions. For the purposes of this Agreement,
the following terms have the following meanings:
(i) "Code" means the Internal Revenue Code of
1986, as amended, and the regulations promulgated
thereunder.
(ii) "Constituent Companies" means the
companies acquired by Buyer from Seller pursuant to this
Agreement.
(iii) "Employment Taxes" means (A) income Taxes
and Social Security and Medicare Taxes required under
applicable law to be withheld by an employer with respect
to wages or other compensation paid to an employee, and
(B) Social Security and Medicare Taxes and Federal and
State unemployment Taxes required under applicable law to
be paid by an employer with respect to wages or other
compensation paid to an employee.
(iv) "Federal Taxes" means United States
Federal income and alternative minimum taxes but shall not
include any such Tax associated with any employee benefit
plan, program, or arrangement.
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(v) "Overlap Tax Period" means a Taxable
period that commences prior to the Closing Date and ends
after the Closing Date for which a Tax Return must be
filed.
(vi) "Post-Closing Tax Period" means (i) any
Taxable period beginning after the Closing Date and (ii)
with respect to any Taxable period beginning on or before
and ending after the Closing Date, the portion of such
Taxable period that is after the Closing Date.
(vii) "Pre-Closing Tax Period" means any (i)
any Taxable period ending on or before the Closing Date
and (ii) with respect to any Taxable period beginning on
or before and ending after the Closing Date, the portion
of such Taxable period that is on or before the Closing
Date.
(viii) "Section 338(h)(10) Elections" means
with respect to the purchase and sale of the Constituent
Companies, an election under Section 338(h)(10) of the
Code and any corresponding election under state, local or
foreign law including, if no election may be made pursuant
to such law under Section 338(h)(10) of the Code or
corresponding state, local or foreign law provision, an
election under Section 338(g) of the Code or corresponding
state, local or foreign law provisions.
(ix) "Seller Group" means, with respect to
Federal Taxes, the affiliated group of corporations (as
defined in Section 1504 (a) of the Code except that a
foreign corporation shall not be excluded for this
purpose) of which Seller is the common parent and with
respect to combined, consolidated or unitary state Taxes,
the combined, consolidated or unitary group of which
Seller (or an Affiliate of Seller) and any Constituent
Company is a member.
(x) "Subsidiary" means any (i) corporation
(or entity treated as a corporation) in which Seller owns
at least 80 percent of the total voting power of the stock
entitled to vote and at least 80 percent of the total
value of the stock, and (ii) any other corporation as to
which Seller and one or more Subsidiaries together satisfy
the above-noted stock ownership requirements.
(xi) "Tax" (and, with correlative meaning,
"Taxes" and "Taxable") means any net income, alternative
minimum tax, gross income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding on
amounts paid to or by Seller or any Constituent Company,
payroll, employment, excise, severance, surplus lines,
stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by
any governmental authority (a "Taxing Authority")
responsible for the imposition of any such tax but shall
not include any such tax associated with any employee
benefit plan, program, or arrangement.
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(b) Tax Indemnification. Notwithstanding the
indemnification obligations set forth in Section 11 hereof:
(i) Seller hereby indemnifies Buyer against
and agrees to hold it harmless from any Taxes (together
with any costs, expenses, losses or damages, including
reasonable expenses of investigation and attorneys' fees
and expenses, arising out of or incident to the assessment
of such Taxes, all referred to herein as a "Tax Loss" or
"Tax Losses") (A) of any of the Constituent Companies
attributable to a Pre-Closing Tax Period, (B) attributable
to the Section 338(h)(10) Elections, (C) assessed against
any Constituent Company by reason of its having been a
member of the Seller Group or any other affiliated group
of corporations filing a consolidated Return which
included such Constituent Company during a Pre-Closing Tax
Period, and (D) attributable to a breach by Seller of its
obligations under this Section 12.
(ii) Buyer hereby indemnifies Seller against
and agrees to hold it harmless from (A) any Tax Losses of
any of the Constituent Companies attributable to a
Post-Closing Tax Period, and (B) any material increase in
Taxes for a Pre-Closing Tax Period that is attributable to
a written administrative ruling or similar statement of
position sought after the Closing by the Buyer, any of its
affiliates (including any of the Constituent Companies),
or any controlled transferee of Buyer or any of its
affiliates from the Taxing Authorities in the states set
forth in Schedule 12(b) hereto with respect to state
unemployment Tax rates or intercompany allocations or
charges, and (C) any Tax Losses attributable to a breach
by Buyer of its obligations under this Section 12.
(iii) For purposes of this Section 12, in the
case of any Taxes payable for an Overlap Tax Period, the
portion of such Taxes related to the Pre-Closing Tax
Period or the Post-Closing Tax Period, as the case may be,
shall (1) in the case of any Taxes other than Taxes based
upon or related to income, be deemed to be the amount of
such Tax for the entire Taxable period multiplied by a
fraction, the numerator of which is the number of days in
the Pre-Closing Tax Period or Post-Closing Tax Period, as
applicable, and the denominator of which is the number of
days in the entire Taxable period, and (2) in the case of
any Tax based upon or related to income, be deemed equal
to the amount which would be payable if (A) in the case of
a Pre-Closing Tax Period, the relevant Taxable period
ended on and included the Closing Date, and (B) in the
case of a Post-Closing Tax Period, the relevant Taxable
period began the next day after the Closing Date. All
determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with
prior practice of the Constituent Companies. For purposes
of this Section 12(b)(iii), Employment Taxes shall be
treated as Taxes based upon or related to income.
(iv) If a claim shall be made by any Taxing
Authority (a "Tax Claim") that, if successful, would
result in the indemnification of a party (the "Tax
Indemnified Party") under this Section, the Tax
Indemnified Party shall promptly notify the party (the
"Tax Indemnifying Party") obligated under this Section to
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indemnify the Tax Indemnified Party in writing of such
fact; provided, however, that the failure to give such
prompt notification shall not affect the indemnification
provided hereunder except and to the extent the Tax
Indemnifying Party shall have been actually prejudiced as
a result of such failure. Thereafter, the Tax Indemnified
Party shall deliver to the Tax Indemnifying Party with
reasonable promptness copies of all notices and documents
(including court papers) received by the Tax Indemnified
Party relating to the Tax Claim. The Tax Indemnifying
Party shall have the right to determine whether such Tax
Claim should be paid or otherwise settled without further
action or should be contested as provided herein.
(v) Provided that within sixty (60) days
after the notice required by subsection (b)(iv) has been
delivered (or such earlier date that any payment of Taxes
or written response to a Tax Claim is due by the Tax
Indemnified Party, but in no event sooner than five (5)
days after the Tax Indemnifying Party's receipt of such
notice), the Tax Indemnifying Party requests that such Tax
Claim be contested and agrees to pay to the Tax
Indemnified Party all costs and expenses (including
reasonable attorneys' and accountants' fees and
disbursements) that the Tax Indemnified Party incurs in
connection with contesting such claim, the Tax Indemnified
Party shall take such action in connection with contesting
such Tax Claim as the Tax Indemnifying Party shall request
in writing, including the selection of counsel and experts
and the execution of powers of attorney. The Tax
Indemnifying Party shall determine the method of any
contest of such Tax Claim, the forum in which the Tax
Claim is contested, and shall control the conduct thereof.
Subject to the provisions of this subsection (b), the Tax
Indemnified Party shall enter into a settlement of such
contest with the applicable Taxing Authority or prosecute
such contest to a determination in a Court, all as the Tax
Indemnifying Party may request. The Tax Indemnified Party
shall give to the Tax Indemnifying Party any information
requested relating to such Tax Claim, and otherwise shall
cooperate with the Tax Indemnifying Party in order to
contest effectively any such Tax Claim.
(vi) Within five (5) days after the extent of
the liability of the Tax Indemnified Party with respect to
a Tax Claim shall be established by the final
non-appealable judgment or decree of a Court or a final
and binding settlement with a Governmental Authority
having jurisdiction thereof, the Tax Indemnifying Party
shall pay to the Tax Indemnified Party the amount of any
Tax Losses to which the Tax Indemnified Party may become
entitled by reason of the provisions of this Section 12;
provided, that if the contest or appeal of a Tax Claim
requires that all or a portion of the Taxes (or a bond in
respect thereof) be paid as a jurisdictional prerequisite,
the Tax Indemnifying Party shall advance (on an interest
free basis) to the Tax Indemnified Party the amount of
such Taxes or fee for such bond (but in no event shall the
amount of such advance exceed the Tax Indemnifying Party's
liability under this Section 12). Notwithstanding
anything to the contrary in this Section 12, any interest,
penalties, fines or additions to Tax resulting solely
from, and solely to the extent attributable to, the
failure of the Tax Indemnified Party to act in a timely
manner, including in filing Tax Returns or making Tax
payments, shall not be
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indemnifiable hereunder and shall be the sole
responsibility of the Tax Indemnified Party.
(vii) Any payment required under this Section
12 and not made when due shall bear interest at the rate
per annum determined, from time to time, under the
provisions of Section 6621 (a) (2) of the Code for each
day until paid.
(viii) Buyer and Seller shall cooperate in the
defense or prosecution of any Tax Claim. Such cooperation
shall include the retention and (upon request) the
provision of records and information which are reasonably
relevant to such Tax Claim, and making employees available
on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder.
(ix) No investigation by Buyer or any of its
Affiliates at or prior to the Closing shall relieve Seller
of any liability hereunder.
(c) Tax Covenants.
(i) Inclusion of the Constituent Companies in
Consolidated Federal Tax Return. Seller shall include the
Constituent Companies through the Closing Date in its
consolidated Federal Tax Return and in those state and
local Tax returns that are required to be filed by the
Seller or a member of the Seller Group on a consolidated,
combined or unitary basis and which include any of the
Constituent Companies through the Closing Date, shall file
timely all such Tax Returns with the appropriate Taxing
Authorities and shall pay timely all Taxes due with
respect to the periods covered by such Tax Returns.
(ii) Filing of Separate Tax Returns for
Taxable Year. With respect to each Tax Return covering a
Taxable period ending on or before the Closing Date that
is required to be filed after the Closing Date for, by or
with respect to any of the Constituent Companies (other
than the consolidated, combined or unitary Tax Returns
described in subsection (i) of this section (c)), the
Seller shall cause such Tax Return to be prepared and
shall cause to be included in such Tax Return all Tax
Items required to be included therein. Not later than
five (5) days prior to the due date (including extensions)
of such Tax Return, Seller shall deliver to Buyer (A) the
original of such Tax Return, and (B) the amount of any Tax
shown to be due and payable on such Tax Return. The Buyer
shall cause the Constituent Company to file timely such
Tax Return with the appropriate Taxing Authority and to
pay the amount of Taxes shown to be due and payable on
such Tax Return.
(iii) Overlap Tax Period Tax Returns. Not
later than sixty (60) days prior to the due date
(including extensions) for filing the Tax Return (other
than Tax Returns described in subsection (i) of this
section (c)) with respect to each Overlap Tax Period of
any of the Constituent Companies, the Seller shall deliver
to Buyer a statement (a "Pro-Forma Tax Return") setting
forth the Tax Items attributable to the
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Pre-Closing Tax Period (determined in accordance with
Section 12(b)(iii) hereof) required to be included on such
Tax Return and a calculation of the Tax liability
attributable to such Pre-Closing Tax Period determined by
applying the applicable rate to the net income as set
forth on such Pro- Forma Tax Return (the "Pro-Forma Tax
Liability"). Unless Buyer objects to such Pro-Forma Tax
Return or such Pro-Forma Tax Liability within fifteen (15)
business days, such Pro-Forma Tax Return and Pro-Forma Tax
Liability shall be considered agreed to by Buyer and
Seller. If Buyer timely objects to the treatment of any
Tax Item on the Pro-Forma Return or the calculation of the
Pro-Forma Tax Liability, Buyer and Seller shall endeavor
in good faith to resolve such dispute. If Buyer and
Seller are unable to resolve such dispute, the matter
shall be referred to a nationally recognized accounting
firm with no affiliation or relationship whatsoever with
Buyer, Seller or their affiliates (the "Accounting
Referee") which shall be chosen and mutually acceptable to
both Buyer and Seller. The Accounting Referee shall be
instructed that in making its determination, Seller's
position with respect to any disputed Tax Item or the
Pro-Forma Tax Liability shall be upheld unless such
position is clearly erroneous. The costs associated with
the services of the Accounting Referee shall be borne
equally by Buyer and Seller. Following resolution of any
disputes, the Buyer shall cause the Tax Items attributable
to the Pre-Closing Tax Period and Post-Closing Tax Period
to be included on the applicable Tax Return, shall file
timely such Tax Return with the appropriate Taxing
Authority and shall pay timely all Taxes due with respect
to the period covered by such Tax Return. Not later than
five (5) days prior to the due date (including extensions)
for filing such Tax Return, Seller shall pay to Buyer the
amount of the Pro-Forma Tax Liability reduced by the
aggregate amount of any estimated Tax payments made by
Seller with respect to such Pro-Forma Tax Liability.
(iv) Termination of Existing Tax Sharing
Agreements. Any and all existing Tax sharing agreements
or arrangements binding any of the Constituent Companies
and any other agreement, express or implied, relating to
Taxable income shall be terminated effective as of the
Closing.
(v) Tax Information. (1) On or before sixty
(60) days prior to the due date for the Seller Group's
Federal Tax Return for the Taxable year ending December 31,
1997, Buyer shall deliver to Seller information concerning
the Constituent Companies (to the extent Buyer is in
possession of the records necessary to compile such
information and such information has not already been
delivered to Seller by the Constituent Companies) so that
Seller can prepare and file its consolidated Federal Tax
Return, each combined, consolidated or unitary state Tax
Return and any other Tax Return which includes the
Constituent Companies for the Taxable year ending December
31, 1997. Not later than ninety (90) days after the
Closing Date, Buyer shall deliver to Seller information
concerning the Constituent Companies for the period from
January 1, 1998 through the Closing Date (to the extent
Buyer is in possession of the records necessary to compile
such information and such information has not already been
delivered to Seller by the Constituent Companies)
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so that Seller can prepare and file its consolidated
Federal Tax Return, and each consolidated, combined or
unitary state Tax Return required to be filed by Seller or
a member of the Seller Group, other than the Constituent
Companies, for the Taxable year ending December 31, 1998
and each Pro-Forma Tax Return.
(vi) Transfer Tax. All transfer, documentary,
sales, use, stamp, registration and other such Taxes and
fees (including any penalties and interest) incurred in
connection with this Agreement (including any New York
City Transfer Tax and any similar tax imposed in other
states or subdivisions) shall be paid by the party on whom
such Tax would be imposed under applicable laws of the
jurisdiction imposing such Tax.
(vii) Cooperation on Tax Matters. Buyer and
Seller shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection
with any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the
provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient
basis to provide additional information and explanation of
any material provided hereunder. Seller and Buyer agree
(A) to retain all books and records with respect to Tax
matters pertinent to the Constituent Companies relating to
any Pre-Closing Taxable Period until the expiration of the
applicable statute of limitations has expired, and to
abide by all record retention agreements entered into with
any Taxing Authority, and (B) to give the other party
reasonable written notice prior to destroying or
discarding any such books and records and, if the other
party so requests, Seller or Buyer, as the case may be,
shall allow the other party to take possession of such
books and records. Buyer and Seller further agree, upon
request, to uses their best efforts to obtain any
certificate or other document from any governmental
authority or customer of any Constituent Company or any
other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but
not limited to, with respect to the transactions
contemplated hereby).
(viii) Section 338(h)(10) Elections; Allocation
of Purchase Price. Seller, as the common parent of the
Seller Group, and Buyer shall join in making the Section
338(h)(10) Elections within the period required by
applicable law. On the Closing Date, Buyer shall deliver
to Seller an Internal Revenue Service Form 8023 (the
"Original Form 8023") and any similar form under
applicable state income tax law (the "Original State
Forms") with respect to the Section 338(h)(10) Elections,
which shall have been substantially completed except for
information related to the allocation of the Purchase
Price among the Constituent Companies and among the assets
of the Constituent Companies. Seller shall cause such
Original From 8023 and Original State Forms to be duly
executed by an authorized person for Seller and shall
deliver such forms to a designated escrow agent (the
"Escrow Agent") who shall administer such forms in
accordance with an Escrow Agreement to be signed by Buyer
and Seller at Closing. Within one-hundred and twenty
(120) days after
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Closing, Seller shall deliver to Buyer a schedule setting
forth (A) an allocation of the Purchase Price among the
Constituent Companies and (B) an allocation of the
Purchase Price (so allocated) and liabilities of each
Constituent Company among the classes of assets of each
such Constituent Company consistent with the requirements
of Section 338(h)(10) and the regulations thereunder (the
"Allocation Schedule"). Also within one-hundred and
twenty (120) days after Closing, Seller shall deliver to
the Escrow Agent a completed and duly executed Internal
Revenue Service Form 8023 and accompanying schedules (the
"Final Form 8023") and completed and duly executed State
Forms including any required schedules (the "Final State
Forms") at which time the Escrow Agent shall return to
Seller the Original Form 8023 and the Original State
Forms. Should Seller fail to deliver the Final Form 8023
and the Final State Forms to the Escrow Agent in
accordance with the preceding sentence, the Escrow Agent
shall promptly release to Buyer the Original Form 8023 and
the Original State Forms and such forms shall thereafter
be considered final. The Final Form 8023 and the Final
State Forms shall be prepared consistent with the
Allocation Schedule and Buyer and Seller agree that the
allocation of the purchase price and liabilities of the
Constituent Companies as set forth on the Allocation
Schedule shall be used for all purposes (including Tax and
financial accounting purposes) and that Seller, Buyer, and
each of the Acquired Companies shall file all Tax Returns
(including amended Tax Returns and claims for refund) and
information reports in a manner consistent with such
Allocation Schedule.
(ix) Tax Refunds. Tax refunds for Taxes
relating to any Pre-Closing Tax Period received by the
Buyer and after the Closing, by any of the Constituent
Companies, shall be paid to Seller no later than fifteen
(15) days of receipt of any such Tax Refund.
13. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Buyer or Seller
(including by operation of law in connection with a merger, or sale of
substantially all the assets, of Buyer or Seller) without the prior written
consent of the other party hereto; provided, however, that Buyer may assign
its rights and its obligations hereunder to a wholly owned subsidiary of
Buyer without the prior written consent of Seller; provided further,
however, that no assignment shall limit or affect the assignor's
obligations hereunder. Any attempted assignment in violation of this
Section 13 shall be void.
14. No Third-Party Beneficiaries. Except as provided in
Section 11, this Agreement is for the sole benefit of the parties hereto
and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any person, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
15. Termination.
(a) Anything contained herein to the contrary
notwithstanding, this Agreement may be terminated and the
transactions contemplated hereby abandoned at any time prior to the
Closing Date:
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(i) by mutual written consent of Seller and
Buyer;
(ii) by Seller if (A) any of the conditions
set forth in Sections 3(a)(viii) or 3(b) shall have become
incapable of fulfillment, and shall not have been waived
by Seller or (B) the underwriting agreement of even date
herewith between Guinness Mahon & Co. Limited, HSBC
Investment Bank PLC and Buyer (the "Underwriting
Agreement") shall have been terminated;
(iii) by Seller if, before the Closing Date,
Seller's board of directors shall have withdrawn or
modified its approval of this Agreement or the
transactions contemplated hereby in connection with a
Superior Transaction Proposal under the terms, conditions
and procedures set forth in Section 5(c);
(iv) by Buyer if (A) any of the conditions set
forth in Section 3(a) shall have become incapable of
fulfillment, and shall not have been waived by Buyer or
(B) the Underwriting Agreement shall have been terminated;
or
(v) by either party hereto, if the Closing
does not occur on or prior to July 31, 1998;
but only if the party seeking termination pursuant to clause (ii),
(iv) or (v) is not in breach in any material respect of any of its
representations, warranties, covenants or agreements contained in
this Agreement.
(b) In the event of termination by Seller or Buyer
pursuant to this Section 15, written notice thereof shall forthwith
be given to the other party and the transactions contemplated by
this Agreement shall be terminated, without further action by
either party. If the transactions contemplated by this Agreement
are terminated as provided herein:
(i) Buyer shall return all documents and
other material received from Seller or the Company, or any
of their respective employees, officers or agents relating
to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to Seller;
and
(ii) all confidential information received by
Buyer with respect to the business of the Company shall be
treated in accordance with the Confidentiality Agreement,
which shall remain in full force and effect
notwithstanding the termination of this Agreement.
(c) If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in this
Section 15, this Agreement shall become void and of no further
force or effect, except for the provisions of (i) Section 7(a)
relating to the obligation of Buyer to keep confidential certain
information and data obtained by it, (ii) Section 19 relating to
certain expenses, (iii) Section 20 relating to the Break-up Fee (as
defined),
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(iv) Section 8(c) relating to publicity, (v) Section 26 relating to
finder's fees and broker's fees and (vi) this Section 15. Nothing
in this Section 15 shall be deemed to release either party from any
liability for any breach by such party of the terms and provisions
of this Agreement or to impair the right of either party to compel
specific performance by the other party of its obligations under
this Agreement.
16. Survival of Representations. The representations and
warranties in this Agreement and in any certificate delivered pursuant
hereto (in each case other than the representations and warranties
contained in Sections 4(c), 4(h), 6(c), 6(e) and 6(f)) shall survive the
Closing solely for purposes of Section 11(a), 11(b) and 11(c) and shall
terminate at the close of business 18 months after the Closing Date;
provided, however, that the representations and warranties contained in
Sections 4(h), 6(c), 6(e) and 6(f) shall survive the Closing until the day
following the expiration of the applicable statute of limitation and the
representations and warranties contained in Section 4(c) shall survive the
Closing and shall terminate at the close of business ten years after the
Closing Date.
17. Effect of Representations, Warranties, Covenants and
Agreements of Seller. The parties hereto agree that the representations,
warranties, covenants and agreements of Seller contained herein or in any
schedule or exhibit hereto are made for purposes of this Agreement only and
are made by Seller solely in conjunction with the execution of this
Agreement and with the closing conditions and indemnification provisions
set forth in Sections 3, 11 and 12 of this Agreement. The parties agree
that the representations, warranties, covenants and agreements of Sections
4, 11 and 12 contained in this Agreement shall not provide the basis for
any action or remedy other than as set forth in, or permitted by, this
Agreement.
18. Remedies Exclusive. The parties hereto agree that the
sole and exclusive remedies for breaches of this Agreement, for negligence,
negligent misrepresentation or for any tort (but not any tort based upon
intent to deceive) committed in connection with the transactions described
in, or contemplated by, this Agreement are those set forth in this
Agreement, and that no claim may be made by any party hereto for any matter
in connection with the transactions described in, or contemplated by, this
Agreement unless specifically set forth in this Agreement and then only
pursuant to the terms of this Agreement.
19. Expenses. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise specifically provided in
this Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs or expenses.
20. Break-Up Fees. (a) If this Agreement is terminated by
Seller pursuant to Section 15(a)(iii) hereof or due to a breach of Section
5(c) by Seller in connection with the acceptance by Seller of an offer to
purchase the Company by a purchaser other than Buyer, Seller shall pay to
Buyer simultaneously with such termination (by wire transfer of immediately
available funds to an account designated by Buyer for such purpose), a fee
in an amount equal to $8,100,000 (the "Break-Up Fee").
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(b) If this Agreement is terminated by Seller pursuant
to Section 15(a)(ii)(B) hereof or by Buyer pursuant to Section
15(a)(iv)(B), Buyer shall pay to Seller simultaneously with such
termination (by wire transfer of immediately available funds to an account
designated by Seller for such purpose), a fee in an amount equal to the
Break-Up Fee.
21. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered
by hand or sent by prepaid telex, cable or telecopy or sent, postage
prepaid, by registered, certified or express mail or reputable overnight
courier service and shall be deemed given when so delivered by hand,
telexed, cabled or telecopied, or if mailed, three days after mailing (one
business day in the case of express mail or overnight courier service), as
follows:
(i) if to Buyer,
The Corporate Services Group PLC
Glaston Park, Spring Lane
Glaston, Rutland
LE15 9BX
United Kingdom
Attention: Jeffrey G. Fowler and Chris Martin
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Harold D. Shapiro
(ii) if to Seller,
Metamor Worldwide, Inc.
4400 Post Oak Parkway, Suite 1100
Houston, Texas 77027
Attention: Peter T. Dameris
with a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Attention: Robert K. Hatcher
22. Amendments. No amendment, modification or waiver in
respect of this Agreement shall be effective unless it shall be in writing
and signed by both parties hereto.
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23. Interpretation; Exhibits and Schedules. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the
table of contents to this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. All Exhibits and Disclosure Schedules annexed hereto or
referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning as defined in this Agreement.
24. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts
have been signed by each of the parties and delivered to the other party.
25. Entire Agreement. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings relating to such subject matter.
Neither party shall be liable or bound to any other party in any manner by
any representations, warranties or covenants relating to such subject
matter except as specifically set forth herein or in the Confidentiality
Agreement.
26. Fees. Each party hereto hereby represents and warrants
that (a) the only brokers or finders that have acted for such party in
connection with this Agreement or the transactions contemplated hereby or
that may be entitled to any brokerage fee, finder's fee or commission in
respect thereof are Goldman, Sachs & Co. with respect to the Company and
Salomon Smith Barney and such other investment banks as are participating
in the financing activities related to the transactions contemplated hereby
with respect to Buyer and (b) each party shall pay all fees or commissions
which may be payable to the firm so named with respect to such party.
27. Severability. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other
provision hereof (or the remaining portion thereof) or the application of
such provision to any other persons or circumstances.
28. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware,
without regard to the conflicts of law principles of such State.
29. 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 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
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and stay the litigation pending arbitration. Subject to the foregoing, any
dispute arising out of this Agreement, or its performance or breach, shall
be resolved by binding arbitration under the Commercial Arbitration Rules
(the "AAA Rules") of the American Arbitration Association (the "AAA").
This arbitration provision is expressly made pursuant to and shall be
governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16. The
parties hereto agree that pursuant to Section 9 of the Federal Arbitration
Act, a judgment of the United States District Courts for the District of
Delaware shall be entered upon the award made pursuant to the arbitration.
The party submitting the dispute to arbitration (the "Disputing Party")
shall notify the AAA and the other party in writing, describing in
reasonable detail the nature of the dispute (the "Dispute Notice"). Within
thirty (30) days of service of the Dispute Notice, each party shall select
one arbitrator. The two arbitrators selected by the parties shall promptly
thereafter select a third arbitrator, completing the "Arbitration Panel."
While the third arbitrator shall be neutral, the two party-appointed
arbitrators are not required to be neutral and it shall be no grounds for
removal of either of the two party-appointed arbitrators that either such
arbitrator has past or present minimal contacts with the appointing party.
The Arbitration Panel shall conduct the arbitration in accordance with the
Federal Rules of Evidence. The Arbitration Panel shall decide the amount
and extent of pre-hearing discovery which is appropriate. The Arbitration
Panel shall have the power to enter any award of monetary and/or injunctive
relief (including the power to issue permanent injunctive relief and also
the power to reconsider any prior request for immediate injunctive relief
by either of the parties and any order as to immediate injunctive relief
previously granted or denied by a court in response to a request therefor
by either of the parties), including the power to render an award as
provided in Rule 43 of the AAA Rules; provided, however, that the
Arbitration Panel shall not have the power to award punitive damages under
any circumstances (whether styled as punitive, exemplary, or treble
damages, or any penalty or punitive type of damages) regardless of whether
such damages may be available under Applicable Laws, the parties hereby
waiving their rights to recover any such damages. The Arbitration Panel
shall award the prevailing party its costs and reasonable attorney's fees,
and the losing party shall bear the entire cost of the arbitration,
including the Arbitration Panel's fees. The Arbitration Panel's award
shall, as between the parties and those in privity with them, be final and
entitled to all of the protections and benefits of a final judgment (e.g.,
res judicata and collateral estoppel) as to all claims, including
compulsory counterclaims, that would or could have been presented to the
Arbitration Panel. Any arbitration shall be held in Wilmington, Delaware,
for any claim brought by any party hereto. In addition to the above
courts, the arbitration award may be enforced in any court having
jurisdiction over the parties and the subject matter of the arbitration.
Notwithstanding the foregoing, the parties irrevocably submit to the
nonexclusive jurisdiction of the state and federal courts situated where
the respondent is domiciled or resides as of the Closing Date in any action
to enforce an arbitration award. With respect to any request for immediate
injunctive relief, the state and federal courts in Wilmington, Delaware,
shall have exclusive jurisdiction and venue over any such disputes. A
party's breach of this Agreement shall not affect this agreement to
arbitrate, and the parties' obligations under this agreement to arbitrate
are enforceable even after termination of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
SELLER:
Metamor Worldwide, Inc.
By: /s/ Michael T. Willis
-------------------------------
Name: Michael T. Willis
-----------------------------
Title: President
----------------------------
BUYER:
The Corporate Services Group PLC
By: /s/ Jeffrey G. Fowler
-------------------------------
Name: Jeffrey G. Fowler
-----------------------------
Title: Chairman
----------------------------
48
