UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 1, 1997
THE VINCAM GROUP, INC.
(Exact name of registrant as specified in its charter)
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FLORIDA 0-28148 59-2452823
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
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2850 DOUGLAS ROAD, CORAL GABLES, FLORIDA 33134
(Address of principal executive offices) (Zip Code)
(305) 460-2350
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since last
report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the terms of a previously announced definitive merger
agreement, on December 1, 1997, The Vincam Group, Inc. (the "Company") completed
the acquisition by merger of Staffing Network, Inc. ("SNI"), a privately held
professional employer organization headquartered in Manchester, New Hampshire
with approximately 525 clients and more than 5,000 worksite employees. Upon
consummation of the merger, SNI, the surviving corporation in the merger,
changed its name to Vincam/Staffing Network, Inc. and became a wholly owned
subsidiary of the Company. Vincam issued 1.2 million shares of its common stock
in the transaction which will be accounted for as a pooling of interests. SNI
reported revenues of $114.6 million for the fiscal year ended December 31, 1996,
and $90 million for the nine months ended September 30, 1997.
Statements in this Form 8-K relating to matters that are not historical
facts are forward- looking statements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performances or achievements of The Vincam Group, Inc., to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such known and unknown
risks, uncertainties and other factors include, but are not limited to, the
following: (i) potential for unfavorable interpretation of government
regulations relating to labor, taxes, insurance, employment matters and the
provision of managed care services; (ii) the Company's ability to obtain or
maintain all required licenses or certifications required to further expand the
range of specialized managed care services offered by the Company; (iii)
potential increases in the Company's costs, such as health care costs, that the
Company may not be able to reflect immediately in its service fees; (iv) the
Company's ability to offer its services to prospective clients in additional
states where it has less or no market penetration; (v) the level of acquisition
opportunities available to the Company and the Company's ability to efficiently
price and negotiate such acquisitions on a favorable basis; (vi) the financial
condition of the Company's clients; (vii) additional regulatory requirements
affecting the Company; (viii) the impact of competition from existing and new
professional employer organizations; (ix) the failure to properly manage growth
and successfully integrate acquired companies and operations, and to achieve
synergies and other cost savings in the operation of acquired companies; and (x)
other factors which are described in further detail in the Company's filings
with the Securities and Exchange Commission.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the financial statements required by
Item 7(a). In accordance with Item 7(a)(4) of Form 8-K, such financial
statements shall be filed by amendment to this Current Report on Form 8-K no
later than 75 days after the date of this Current Report on Form 8-K, or
February 14, 1998.
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(b) Pro Form Financial Information
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the pro forma financial information
required by Item 7(b). In accordance with Item 7(b)(2) of Form 8-K, such pro
forma financial information shall be filed by amendment to this Current Report
on Form 8-K no later than 75 days from the date of this Current Report, or
February 14, 1998.
(c) Exhibits
EXHIBIT NO. DESCRIPTION
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2 Agreement and Plan of Merger by and among The Vincam
Group, Inc., Staffing Network, Inc., Michael J. Gatsas and
Theodore L. Gatsas, dated as of October 24, 1997.*
*Schedules and exhibits to Exhibit 2 have not been filed with the
Securities and Exchange Commission (the "Commission"). The Registrant
agrees to provide those schedules and exhibits supplementally upon the
request of the Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE VINCAM GROUP, INC.
Date: DECEMBER 5, 1997 By: /S/ STEPHEN L. WAECHTER
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Stephen L. Waechter, Chief Financial
Officer and Senior Vice President
Finance and Administration (Principal
Financial Officer)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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2 Agreement and Plan of Merger by and among The Vincam Group,
Inc., Staffing Network, Inc., Michael J. Gatsas and Theodore L.
Gatsas, dated as of October 24, 1997.
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE VINCAM GROUP, INC.,
STAFFING NETWORK, INC.,
MICHAEL J. GATSAS
AND
THEODORE L. GATSAS
DATED AS OF
OCTOBER 24, 1997
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER...............................................................................................1
SECTION 1.01 The Merger.................................................................................1
SECTION 1.02 Effective Time.............................................................................2
SECTION 1.03 Effect of the Merger.......................................................................2
SECTION 1.04 Articles of Incorporation; By-Laws.........................................................2
SECTION 1.05 Directors and Officers.....................................................................2
SECTION 1.06 Taking Necessary Action; Further Action....................................................2
SECTION 1.07 The Closing................................................................................2
ARTICLE II
EFFECT ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES........................................................3
SECTION 2.01 Effect on Capital Stock.....................................................................3
SECTION 2.02 Delivery of Per Share Merger Consideration..................................................4
SECTION 2.03 Registration Rights.........................................................................6
SECTION 2.04 Accounting Treatment........................................................................6
SECTION 2.05 Tax Treatment...............................................................................6
ARTICLE III
DEFINITIONS..............................................................................................6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS.........................................................................8
SECTION 4.01 Organization and Qualification; No Subsidiaries............................................8
SECTION 4.02 Articles of Incorporation; By-Laws.........................................................8
SECTION 4.03 Capitalization.............................................................................8
SECTION 4.04 Authority; Enforceability..................................................................9
SECTION 4.05 Noncontravention; Required Filings and Consents............................................9
SECTION 4.06 Permits; Compliance.......................................................................10
SECTION 4.07 Reports; Financial Statements.............................................................11
SECTION 4.08 Absence of Certain Changes or Events......................................................12
SECTION 4.09 Absence of Litigation.....................................................................14
SECTION 4.10 Contracts; No Default.....................................................................15
SECTION 4.11 Employee Benefit Plans; Labor Matters.....................................................17
SECTION 4.12 Taxes.....................................................................................19
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SECTION 4.13 Intellectual Property Rights..............................................................22
SECTION 4.14 Insurance.................................................................................22
SECTION 4.15 Brokers...................................................................................23
SECTION 4.16 Title to Properties.......................................................................23
SECTION 4.17 Notes and Accounts Receivable.............................................................25
SECTION 4.18 Related Parties...........................................................................25
SECTION 4.19 Disclosure................................................................................25
SECTION 4.20 Sole Representations and Warranties.......................................................25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS.....................................................................................26
SECTION 5.01 Authority; Enforceability.................................................................26
SECTION 5.02 Noncontravention..........................................................................26
SECTION 5.03 Investment................................................................................26
SECTION 5.04 Company Shares............................................................................27
SECTION 5.05 Share Ownership...........................................................................27
SECTION 5.06 Disclosure................................................................................27
SECTION 5.07 Tax Liability.............................................................................27
SECTION 5.08 Termination of Shareholders Agreement.....................................................27
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR.............................................................................................28
SECTION 6.01 Organization and Qualification............................................................28
SECTION 6.02 Capitalization............................................................................28
SECTION 6.03 Authority.................................................................................29
SECTION 6.04 No Conflict, Required Filings and Consents................................................29
SECTION 6.05 Reports; Financial Statements.............................................................29
SECTION 6.06 Absence of Certain Changes or Events......................................................30
SECTION 6.07 Brokers...................................................................................30
SECTION 6.08 Sole Representations and Warranties.......................................................30
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................31
SECTION 7.01 Affirmative Covenants of the Company......................................................31
SECTION 7.02 Negative Covenants of the Company.........................................................31
SECTION 7.03 Access and Information....................................................................33
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ARTICLE VIII
ADDITIONAL AGREEMENTS...................................................................................34
SECTION 8.01 Appropriate Action; Consents; Filings.....................................................34
SECTION 8.02 Update Disclosure; Breaches...............................................................35
SECTION 8.03 Affiliate Agreements; Tax Treatment.......................................................35
SECTION 8.04 Public Announcements......................................................................36
SECTION 8.05 NMS Listing...............................................................................36
SECTION 8.06 Survival of Representations and Warranties; Indemnification...............................36
SECTION 8.07 Obligations of Acquiror Sub...............................................................37
SECTION 8.08 Accounting Treatment......................................................................37
SECTION 8.09 Good Faith................................................................................37
SECTION 8.10 Publication of Post-Merger Results........................................................37
SECTION 8.11 Legend....................................................................................38
SECTION 8.12 Shareholder Payables......................................................................38
SECTION 8.13 Shareholder Receivables...................................................................38
SECTION 8.14 Filing of Tax Returns.....................................................................38
SECTION 8.15 Future Tax Contests.......................................................................39
SECTION 8.16 Cooperation and Record Retention..........................................................40
SECTION 8.17 Shareholder Tax Distributions.............................................................40
SECTION 8.18 Holiday Bonuses...........................................................................40
SECTION 8.19 Employee Stock Options....................................................................40
SECTION 8.20 Season Tickets............................................................................40
ARTICLE IX
CLOSING CONDITIONS......................................................................................41
SECTION 9.01 Conditions to Obligations of Each Party Under This Agreement..............................41
ARTICLE X
TERMINATION; AMENDMENT..................................................................................45
SECTION 10.01 Termination...............................................................................45
SECTION 10.02 Effect of Termination.....................................................................46
SECTION 10.03 Fees and Expenses.........................................................................46
ARTICLE XI
GENERAL PROVISIONS......................................................................................46
SECTION 11.01 Notices...................................................................................46
SECTION 11.02 Amendment.................................................................................47
SECTION 11.03 Waiver....................................................................................48
SECTION 11.04 Headings..................................................................................48
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SECTION 11.05 Severability..............................................................................48
SECTION 11.06 Entire Agreement..........................................................................48
SECTION 11.07 Assignment................................................................................48
SECTION 11.08 Parties in Interest.......................................................................48
SECTION 11.09 Governing Law.............................................................................49
SECTION 11.10 Counterparts; Facsimile Signatures........................................................49
SECTION 11.11 Attorneys' Fees...........................................................................49
EXHIBITS
Exhibit 2.02 Escrow Agreement
Exhibit 2.03 Registration Agreement
Exhibit 4.01 Company Disclosure Schedule
Exhibit 8.03 Affiliate Agreement
Schedule 8.19 Employee Option Grants
Schedule 9.01(a)(iv) Lease Term Sheet
Schedule 9.01(b)(ix) Stock Option Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of October 24, 1997 (this
"AGREEMENT"), is by and among The Vincam Group, Inc., a Florida corporation
("ACQUIROR"), Staffing Network, Inc., a New Hampshire corporation (the
"COMPANY"), Michael J. Gatsas and Theodore L. Gatsas (Michael J. Gatsas and
Theodore L. Gatsas are referred to individually in this Agreement as a
"SHAREHOLDER" and collectively as the "SHAREHOLDERS").
RECITALS:
A. Subject to the provisions of this Agreement and the satisfaction of
the conditions to this Agreement, a wholly owned subsidiary of Acquiror
("ACQUIROR SUB") shall be merged (the "Merger") with and into the Company at the
time provided for in Section 1.02. Following the Merger, the Company shall be a
wholly owned subsidiary of Acquiror. Shares of common stock, no par value per
share, of the Company ("COMPANY COMMON STOCK") issued and outstanding prior to
the Merger will be converted into shares of common stock, $.001 par value per
share, of Acquiror ("ACQUIROR COMMON STOCK") pursuant to the exchange ratio set
forth in Article II of this Agreement.
B. The parties hereto desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the execution and delivery of this
Agreement and the conditions precedent to the consummation of the Merger.
C. The Company, the Acquiror and Acquiror Sub have adopted this
Agreement as a plan of reorganization within the meaning of Section 368(a)(1)(A)
and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants herein contained, Acquiror, the Company and
the Shareholders agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the New Hampshire Business Corporation
Act (the "NEW HAMPSHIRE ACT"), at the Effective Time (as defined below), the
Acquiror Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of the Acquiror Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
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"SURVIVING CORPORATION"). Acquiror Sub and the Company are collectively referred
to in this Agreement as the "Constituent Corporations."
SECTION 1.02 EFFECTIVE TIME. At the Closing (as defined below), the parties
shall cause the Merger to be consummated by filing articles of merger (the
"ARTICLES OF MERGER") with the Secretary of State of New Hampshire in such form
as required by, and executed in accordance with, the relevant provisions of the
New Hampshire Act (the effective date and time of such filing being the
"EFFECTIVE TIME").
SECTION 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the New Hampshire
Act. Without limiting the generality of such act, and subject to its provisions,
at the Effective Time, all the property, interests, assets, rights, privileges,
immunities, powers and franchises of Acquiror Sub and the Company shall vest in
the Surviving Corporation, and all debts, liabilities, duties and obligations of
Acquiror Sub and the Company shall become the debts, liabilities, duties and
obligations of the Surviving Corporation.
SECTION 1.04 ARTICLES OF INCORPORATION; BY-LAWS. At the Effective Time, the
Articles of Incorporation and the By-Laws of the Acquiror Sub shall be the
Articles of Incorporation and the By-Laws of the Surviving Corporation.
SECTION 1.05 DIRECTORS AND OFFICERS. The directors of Acquiror Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquiror Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
SECTION 1.06 TAKING NECESSARY ACTION; FURTHER ACTION. Acquiror, Acquiror Sub and
the Company, respectively, shall each use its reasonable best efforts to take
all such action as may be necessary or appropriate to effectuate the Merger
under the New Hampshire Act at the Effective Time. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all properties, interests, assets, rights,
privileges, immunities, powers and franchises of either of the Constituent
Corporations, the officers of the Surviving Corporation are fully authorized in
the name of each Constituent Corporation or otherwise to take, and shall take,
all such lawful and necessary action.
SECTION 1.07 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be held on December 1, 1997 or such other date
as the parties agree upon, subject to the satisfaction of, or waiver by the
party entitled to satisfaction of, all conditions precedent to the Merger
specified in this Agreement. The Closing will take place at the offices of Steel
Hector & Davis LLP, 200 S. Biscayne Blvd., Suite 4000, Miami, Florida
33131-2398, at 10:00 a.m. local Miami time on such date, or at such other time
and place as the parties may agree.
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ARTICLE II
EFFECT ON CAPITAL STOCK; EXCHANGE OF CERTIFICATES
SECTION 2.01 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any further action on the part of Acquiror Sub, the Company
or the holders of Company Common Stock:
(a) All issued and outstanding shares of capital stock of Acquiror Sub
shall continue to be issued and shall be converted into 1,000 shares of common
stock of the Surviving Corporation. Each stock certificate of Acquiror Sub
evidencing ownership of any such shares shall evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) Each share of Company Common Stock, or fraction thereof, issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Common Stock to be cancelled pursuant to Section 2.01(e)) shall be
converted, without any action on the part of the holders thereof into four
thousand (4,000) shares of Acquiror Common Stock (the "PER SHARE MERGER
CONSIDERATION"). The shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock to be cancelled pursuant to Section 2.01(e)) are sometimes referred to
herein as the "Outstanding Company Shares."
(c) All such shares of Company Common Stock so converted shall no
longer be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each certificate previously representing any such shares
shall thereafter represent the right to receive the aggregate per share
consideration into which such Company Common Stock was converted in the Merger.
No fractional share of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 2.01(d) hereof.
(d) No fractional shares of Acquiror Common Stock shall be issued, but
in lieu thereof each holder of shares of Company Common Stock who would
otherwise be entitled to receive a fraction of a share of Acquiror Common Stock
(after aggregating all fractional shares of Acquiror Common Stock to be received
by such holder) shall receive from Acquiror an amount of cash equal to the
product of (i) the fraction of a share of Acquiror Common Stock to which such
holder would otherwise be entitled, and (ii) the average closing price, as
reported on the Nasdaq National Market, of a share of Acquiror Common Stock for
the ten (10) days on which Acquiror Common Stock has traded immediately
preceding the Closing (the "MARKET VALUE").
(e) Each share of Company Common Stock held in the treasury of the
Company shall be cancelled and extinguished without any conversion of such
shares and no payment shall be made with respect to such shares.
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SECTION 2.02 DELIVERY OF PER SHARE MERGER CONSIDERATION. (a) At the Closing,
Acquiror shall deliver to Norwest Bank Colorado, N.A., as escrow agent (the
"ESCROW AGENT"), and to the holders of the Outstanding Company Shares,
certificates representing the shares of Acquiror Common Stock and the cash, in
immediately available funds, to which the holders of Outstanding Company Shares
shall be entitled pursuant to Section 2.01, as further provided below. The fees
and expenses of the Escrow Agent shall be borne by Acquiror.
(b) At the Closing, each holder of record (other than Acquiror or
Acquiror Sub or any other Subsidiary of Acquiror) of a certificate or
certificates which immediately prior to the Effective Time represented
Outstanding Company Shares (individually a "CERTIFICATE" and collectively the
"CERTIFICATES") shall deliver to the Acquiror such shareholder's Certificates.
The holder of such Certificate(s) shall be entitled to receive in exchange
therefor a certificate representing all of the shares of Acquiror Common Stock
(other than those shares being placed in escrow as described below) and the
cash, if any, that such holder is entitled to receive pursuant to Section 2.01.
Of the shares otherwise issuable to the holders of Outstanding Company Shares,
an aggregate number of shares equal to 10% of the number of shares of Acquiror
Common Stock issuable to such holders hereunder (the "INDEMNIFICATION ESCROW
SHARES") shall be deposited by the Acquiror with the Escrow Agent in accordance
with the terms and provisions of an escrow agreement substantially in the form
attached as EXHIBIT 2.02 (the "ESCROW AGREEMENT"). The number of Indemnification
Escrow Shares to be delivered to the Escrow Agent on behalf of each holder of
Outstanding Company Shares shall equal the product of (i) the total number of
Escrow Shares to be delivered to the Escrow Agent and (ii) a fraction, the
numerator of which is the number of shares of Acquiror Common Stock into which
such holder's Outstanding Company Shares are converted as a result of the Merger
and the denominator of which is the total number of shares of Acquiror Common
Stock into which all of the Outstanding Company Shares are converted as a result
of the Merger, rounded up to the next whole share. The delivery of the
Indemnification Escrow Shares shall be made on behalf of the holders of the
Outstanding Company Shares in accordance with the provisions hereof, with the
same force and effect as if such shares had been delivered by Acquiror directly
to such holders and subsequently delivered by such holders to the Escrow Agent.
The shares so deposited shall be evidenced by separate certificates in the names
of each of the holders of the Outstanding Company Shares. The adoption of this
Agreement by the Shareholders shall also constitute their approval of the terms
and provisions of the Escrow Agreement in the form attached hereto, including
the indemnification provided for therein and their confirmation of the
appointment of Norwest Bank Colorado, N.A. to act as Escrow Agent.
(c) If any certificate for shares of Acquiror Common Stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that such transfer be in compliance with any applicable state and federal
securities laws and that the certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder
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of the certificate surrendered, or established to the satisfaction of Acquiror
or any agent designated by it that such tax has been paid or is not payable.
(d) Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon surrender (i) the Per Share Merger Consideration
into which the shares of Company Common Stock previously represented by such
Certificate were converted at the Effective Time, (ii) cash in lieu of any
fractional shares of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.01(d) and (iii) any dividends or other distributions to
which such holder is entitled pursuant to Section 2.02(f).
(e) At and after the Effective Time, the holders of Certificates shall
cease to have any rights as shareholders of the Company, except for the right to
surrender Certificates to be converted pursuant to Section 2.01. All shares of
Acquiror Common Stock issued (and cash paid in lieu of fractional shares) upon
conversion of the shares of Company Common Stock in accordance with the terms of
this Agreement and delivered as provided herein shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to such shares of
Company Common Stock.
(f) Holders of unsurrendered Certificates, with respect to the shares
of Acquiror Common Stock represented thereby, shall be entitled to receive
dividends and other distributions declared or made with respect to Acquiror
Common Stock with a record date as of the close of business on or after the date
on which the Effective Time occurs. No such dividends or other distributions,
however, and no cash payment in lieu of fractional shares payable pursuant to
Section 2.01(d), shall be paid to the holder of any such unsurrendered
Certificate until such holder shall surrender such Certificate. Subject to the
effect of escheat, tax or other applicable laws, following surrender of any such
Certificate, there shall be paid to the holder of the certificates representing
whole shares of Acquiror Common Stock issued in exchange therefor, without
interest, (i) promptly, the amount of any cash payable with respect to a
fractional share of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.01(d) and the amount of dividends or other distributions
with a record date as of the close of business on or after the Effective Time
theretofore paid with respect to such whole shares of Acquiror Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date as of the close of business on or after the
Effective Time but prior to surrender, payable with respect to such whole shares
of Acquiror Common Stock.
(g) If, between the date hereof and the Effective Time, the outstanding
shares of Acquiror Common Stock shall be changed into a different number of
shares or a different class by reason of any reclassification, recapitalization,
split-up, exchange of shares or readjustment, or if a stock dividend thereon
shall be declared with a record date within such period, the number of shares of
Acquiror Common Stock to be issued and delivered in the Merger for each
outstanding share of Company Common Stock (including the Indemnification Escrow
Shares) as provided in this Agreement shall be correspondingly adjusted. It is
agreed and understood that the grant by the Acquiror of stock options or other
stock-based awards pursuant to any stock option or stock
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incentive plan, or the exercise by any holder of such a stock option or
stock-based award, shall not constitute an action of the type requiring
adjustment pursuant to this Section 2.02.
SECTION 2.03 REGISTRATION RIGHTS. The shares of Acquiror Common Stock received
in the Merger shall be entitled to certain registration rights, as defined in
and pursuant to the Registration Agreement attached as EXHIBIT 2.03.
SECTION 2.04 ACCOUNTING TREATMENT. The parties intend that the Merger shall be
treated as a pooling of interests for accounting purposes.
SECTION 2.05 TAX TREATMENT. The Company, the Acquiror, Acquiror Sub and the
Shareholders intend that the Merger will be a non-taxable transaction to the
holders of Company Common Stock under sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code and will report the Merger for tax purposes consistent therewith.
Acquiror and its Affiliates shall not take any actions that would prevent the
treatment of the Merger as a tax-free reorganization under Section 368(a) of the
Code, including but not limited to, any merger, liquidation, sale of assets or
stock, or other similar action, with respect to the Company. After the Merger,
Acquiror shall cause the Company to meet the continuity of business enterprise
requirements under Section 368 of the Code.
ARTICLE III
DEFINITIONS
As used in this Agreement:
The term "ACQUIROR MATERIAL ADVERSE EFFECT" means any change or effect that is
materially adverse to the financial condition, results of operations, business,
properties, assets, liabilities or prospects of Acquiror and its Subsidiaries,
taken as a whole.
The term "AFFILIATE" means, with respect to a given person, a person who
controls, is controlled by or is under common control with, such person.
The term "AFFILIATED GROUP" has the meaning described in Section 1504 of the
Code, without regard to the exceptions contained in subsection (b) thereof.
The term "CODE" means the Internal Revenue Code of 1986, as amended.
The term "COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that is
materially adverse to the financial condition, results of operations,
businesses, properties, assets, liabilities or prospects of the Company.
The term "EMPLOYEE" includes, but is not limited to, any leased employee,
co-employee, worksite employee, internal employee or corporate employee.
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The term "ENVIRONMENTAL LAWS" means any applicable federal, state or local
statutory or common law, and any regulation, code, plan, order, decree,
judgment, permit, license, grant, franchise, concession, restriction, agreement,
requirement, and injunction issued, entered, promulgated, or approved
thereunder, relating to the environment, or human health or safety relating to
occupational or environmental matters, including, without limitation, any law
relating to emissions, discharges, releases or threatened releases of hazardous
materials or substances into the environment (including, without limitation,
air, surface water, groundwater and land), relating to the presence,
manufacture, generation, refining, processing, distribution, use, sale,
treatment, recycling, receipt, storage, disposal, transport, arranging for
transportation, treatment or disposal, or handling of hazardous materials or
substances.
The term "GOVERNMENTAL ENTITY" means any federal, state, local, or foreign
government or any agency thereof.
The term "KNOWLEDGE" means the actual knowledge of a person, or of its current
officers and directors in the case of a corporate person, after reasonable
investigation. For purposes of establishing the knowledge of a corporate person,
"reasonable investigation" means that inquiry has been made of those persons
employed or retained by the corporate person or its Subsidiaries who are likely
to know the facts of the subject matter being investigated and all files or
documents in the possession of all such persons which relate to the subject
matter being investigated have been reviewed. The parties hereby acknowledge,
that in any event, "reasonable investigation" shall not require the party
representing such fact or statement to make inquiry of clients or leased
employees of such corporate person.
The term "LAW" means any federal, state or local law, statute, rule, ordinance
or regulation (including codes, plans, judgments, injunctions, administrative
interpretations, orders, or charges thereunder), including Environmental Laws.
The term "LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
The term "PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")).
The term "SUBSIDIARY" (or its plural) as used in this Agreement with respect to
the Company, the Acquiror, the Surviving Corporation or any other person shall
mean any corporation, partnership, joint venture or other legal entity of which
the Company, the Acquiror, the Surviving Corporation or such other person, as
the case may be (either alone or through or together with any other
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Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders jointly and severally represent and
warrant to Acquiror that the statements contained in this Article IV are correct
and complete as of the date of this Agreement and will be correct and complete
immediately prior to the Effective Time (as though made then and as though the
Effective Time were substituted for the date of this Agreement throughout this
Article IV), other than those statements made as of a particular date, which
will continue to be true and correct as of such date.
SECTION 4.01 ORGANIZATION AND QUALIFICATION; NO SUBSIDIARIES. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
Laws of New Hampshire, and has all requisite corporate or other power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, except where the failure to be so qualified will not have,
individually or in the aggregate with any other failure to be qualified, a
Company Material Adverse Effect. The Company has never had, nor does it
currently have, any Subsidiaries, nor has it owned, nor does it currently own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have direct or indirect equity or ownership interest in any
association, partnership, joint venture or other entity. SECTION 4.01 of the
disclosure schedule attached as EXHIBIT 4.01 (the "COMPANY DISCLOSURE SCHEDULE")
lists by state, as of the most recent practicable date, the number of employees
of the Company in each state, according to the state(s) in which the employee is
working as of such date. Such list includes all employees of the Company as of
such date.
SECTION 4.02 ARTICLES OF INCORPORATION; BY-LAWS. The Company has furnished to
Acquiror complete and correct copies of the Articles of Incorporation and
By-Laws of the Company, as amended or restated, and as currently in effect. The
Company is not in violation of any of the provisions of its Articles of
Incorporation or By-Laws, as amended or restated.
SECTION 4.03 CAPITALIZATION. (a) The authorized capital stock of the Company
consists of 300 shares of Company Common Stock, of which three hundred (300)
shares are issued and outstanding. Each of the Shareholders owns one hundred
fifty (150) shares of Company Common Stock. The Company has no other classes of
stock. At no time since January 1, 1995 has the Company been controlled by
another corporation, and except as otherwise set forth in SECTION 4.03 of the
Company
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Disclosure Schedule, since January 1, 1995, no person other than the
Shareholders has owned any shares of capital stock of the Company.
(b) All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and non-assessable. No outstanding shares of Common
Stock of the Company have been issued in violation of, or are currently subject
to, any preemptive or similar rights. Except as set forth in SECTION 4.03 of the
Company Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments to which the Company is a party or by
which it is bound relating to the issued or unissued capital stock of the
Company or obligating the Company to repurchase, grant, issue, sell or register
for sale any shares of capital stock, by sale, lease, license or otherwise. As
of the date of this Agreement, there are no obligations, contingent or
otherwise, of the Company to provide funds to, or make any investment in (in the
form of a loan, capital contribution or otherwise), or provide any guarantee
with respect to the obligations of, any other person. All outstanding shares of
Company Common Stock have been issued in compliance with or subject to
exemptions provided by the Securities Act of 1933, as amended (the "SECURITIES
ACT") and state securities or state Blue Sky laws ("BLUE SKY LAWS").
(c) Since January 1, 1995, there have been no redemptions or
repurchases by the Company of shares of Common Stock and no changes in the
proportionate equity ownership of the Company.
SECTION 4.04 AUTHORITY; ENFORCEABILITY. The Board of Directors of the Company
has (a) adopted this Agreement and recommended the Merger for the approval of
the Shareholders pursuant to the applicable requirements of the New Hampshire
Act, and (b) waived the right of first refusal provisions set forth in Article
V, Section 5.5 of the First Amended and Restated Bylaws of the Company. The
Shareholders have adopted and approved the Agreement and the Merger contemplated
hereby. The Company has the requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations under this Agreement and
to consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate and shareholder action and no other corporate or shareholder
proceedings on the part of the Company, other than the filing of the Articles of
Merger, are necessary to authorize this Agreement or to consummate the
transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Acquiror, constitutes a legal, valid and binding
obligation of the Company, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws limiting creditors' rights generally and to general
equitable principles.
SECTION 4.05 NONCONTRAVENTION; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the Articles of
Incorporation or By-Laws of the Company; or (ii) subject to giving the notices
and obtaining the consents, approvals, authorizations or permits
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described in SECTION 4.05 of the Company Disclosure Schedule and the filing of
the Articles of Merger and the filing of such notices and documents as may be
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (x) conflict with or violate any Laws applicable to the
Company or by which the Company or its assets are bound or affected; or (y)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or its assets are bound or affected,
except for any such conflicts or violations described in clause (ii)(x) that
would not have, individually or in the aggregate, a Company Material Adverse
Effect, and any such breaches or defaults described in clause (ii)(y) that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 4.06 PERMITS; COMPLIANCE. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary for the
Company to own, lease and operate its properties or to carry on its businesses
substantially as it is now being conducted (the "COMPANY PERMITS"), except where
the failure to have such Company Permits would not, individually or in the
aggregate, have a Company Material Adverse Effect, and no suspension, revocation
or cancellation of any of the Company Permits is pending or, to the knowledge of
the Company and the Shareholders, threatened. All of the Company Permits are set
forth in SECTION 4.06 of the Company Disclosure Schedule. The Company and the
Shareholders are licensed or registered as professional employer organizations
and/or as control persons thereof, as appropriate, in each jurisdiction in which
their activities require such licensing or registration, except where failure to
be so licensed or registered will not have, individually or in the aggregate, a
Company Material Adverse Effect. All such professional employer organization
licenses and registrations are included in the list of Company Permits set forth
in SECTION 4.06 of the Company Disclosure Schedule. Except as set forth in
SECTION 4.06 of the Company Disclosure Schedule, neither the Company nor, to the
knowledge of the Company and the Shareholders, any client of the Company, has
operated (nor is the Company or, to the knowledge of the Company and the
Shareholders, any client of the Company currently operating) in violation of any
Law applicable to the Company or its clients or by which any of their respective
assets is bound or affected, including without limitation, laws with respect to
the regulation, registration or licensure of professional employer
organizations, the Occupational Safety and Health Act, the Environmental
Protection Act, the Equal Employment Opportunities Act, the Age Discrimination
in Employment Act, Title VII of the Civil Rights Act, the Vocational
Rehabilitation Act, the Americans with Disabilities Act, the Vietnam Era
Veterans Readjustment Act, the Fair Labor Standards Act, the Federal Drug Free
Workplace Act, Laws with respect to immigration and naturalization and all Laws
relating to wages and hours, workers' compensation, labor practice regulations
and employment discrimination, other than violations that, individually or in
the aggregate, would not have a Company Material Adverse Effect, nor has the
Company received any notice (oral or written) or correspondence which asserts
that the Company is or may be in violation of any such Law. Other than as
disclosed in SECTION 4.09(A) of the Company Disclosure Schedule, neither the
Company nor,
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to the knowledge of the Company and the Shareholders, any of the Company's
clients, is the object of any employee claims alleging violation of federal or
state laws prohibiting discrimination or sexual harassment or any other charges
reportable to the Equal Employment Opportunity Commission or comparable state
human rights or equal employment opportunity agency.
SECTION 4.07 REPORTS; FINANCIAL STATEMENTS. (a) Except as set forth in SECTION
4.07(A) of the Company Disclosure Schedule, since its incorporation, the Company
has filed all forms, reports, statements and other documents required to be
filed with all applicable federal or state regulatory authorities (all such
forms, reports, statements and other documents, including any amendment thereto,
being collectively referred to as the "COMPANY REPORTS"), other than those
forms, reports, statements or other documents, the failure of which to file has
not had, and will not have, individually or in the aggregate, a Company Material
Adverse Effect. The Company Reports were prepared in all material respects in
accordance with the requirements of applicable Law.
(b) The audited balance sheets of the Company as of December 31, 1996
and December 31, 1995 and the statements of income, changes in stockholders'
equity and cash flows for each of the fiscal years in the three-year period
ended on December 31, 1996, including any notes thereto (the "COMPANY FINANCIAL
STATEMENTS"), are attached as SECTION 4.07(B) of the Company Disclosure
Schedule. The Company Financial Statements for the years ended December 31, 1996
and December 31, 1995 have been audited by Ernst & Young LLP, certified public
accountants. The Company Financial Statements for the year ended December 31,
1994 have been audited by Howe, Riley & Howe, certified public accountants. The
Company Financial Statements (i) have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except to the extent required by changes in GAAP or as may
be permitted by GAAP and indicated in the notes thereto), and (ii) present
fairly, in all material respects, the financial position of the Company as of
the respective dates thereof and the results of operation and cash flows for the
periods indicated.
(c) The unaudited balance sheet and statements of income, changes in
stockholders' equity and cash flows of the Company as of and for the nine months
ended September 30, 1997 attached as SECTION 4.07(C) of the Company Disclosure
Schedule (such financial statements being referred to as the "INTERIM FINANCIAL
STATEMENTS"), (i) have been prepared in accordance with GAAP applied on a
consistent basis with past practice (except for the absence of footnotes to the
Interim Financial Statements and appropriate year-end adjustments (none of which
would be material) and other presentation items), and (ii) present fairly, in
all material respects, the financial position of the Company as of September 30,
1997 and its results of operations and cash flows for the nine months ended
September 30, 1997.
(d) Except as and to the extent reflected or reserved in the balance
sheet of the Company as of September 30, 1997, attached as SECTION 4.07(C) of
the Company Disclosure Schedule (the "INTERIM BALANCE SHEET"), the Company does
not have any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company, prepared in accordance with
GAAP consistent
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with past practice, except for liabilities or obligations incurred in the
ordinary course of business since September 30, 1997, none of which have
resulted or will result in a Company Material Adverse Effect.
(e) The reserves for workers' compensation and health care costs,
including amounts for incurred but not reported claims, reflected on the audited
balance sheets included in the Company Financial Statements and the Interim
Balance Sheet are adequate and appropriate and have been accrued in accordance
with generally accepted accounting principles. The Company has not received any
report (including, without limitation, a report from any actuary, insurance
company or accountant) which suggests that any of the reserves reflected on the
Interim Balance Sheet may be inadequate in any material respect.
(f) Ernst & Young LLP and Howe, Riley & Howe, the accountants who have
audited the Company Financial Statements, are independent accountants within the
meaning of the Securities Act and the rules and regulations promulgated
thereunder.
SECTION 4.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
SECTION 4.08 of the Company Disclosure Schedule, since December 31, 1996:
(a) there has not been any change or development as of the date of this
Agreement which has caused, or which the Company or the Shareholders have a
reasonable basis to believe is reasonably likely to cause, individually or in
the aggregate, a Company Material Adverse Effect;
(b) the Company has not increased compensation to officers, its
employees (other than leased employees, co-employees, worksite employees) or its
consultants or increased or created any new bonus, insurance, pension or other
employee benefit plan, payment or arrangement (including, but not limited to,
the granting of employee stock options);
(c) the Company has not made any distribution upon its capital stock,
by way of dividend, repurchase or otherwise or made any loan or advance to any
officer, director, shareholder or Affiliate (except for ordinary travel and
business expense payments and distributions to the Shareholders to pay such
Shareholder's federal, state and local income tax liability (calculated at a
rate of 45% of taxable earnings) for the earnings of the Company from January 1,
1997 through Closing ("SHAREHOLDER TAX DISTRIBUTIONS")) or guaranteed or pledged
collateral to support any loan or advance made to an officer, director,
employee, shareholder or Affiliate;
(d) the Company has not entered into any agreement, contract, lease, or
license (or series of agreements, contracts, leases, or licenses related to the
same transaction or involving the same party or an Affiliate thereof) involving
more than $50,000, other than client service agreements with its professional
employer organization clients;
(e) no party has accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of agreements, contracts,
leases, or licenses related to the same transaction
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or involving the same party or an Affiliate thereof) involving more than $50,000
to which the Company is or was a party or by which the Company is or was bound,
or notified the Company that it intends to do any of the foregoing;
(f) the Company has not granted any security interest in any of its
assets, tangible, or intangible;
(g) the Company has not made a capital expenditure (or series of
related capital expenditures) involving more than $50,000, individually or in
the aggregate;
(h) the Company has not made any capital investment in, any loan to,
guarantee for the benefit of or any acquisition of the securities or assets of,
any other person (or series of related capital investments, loans, and
acquisitions related to the same transactions or involving the same party or an
Affiliate thereof) involving more than $50,000, individually or in the
aggregate;
(i) the Company has not delayed or postponed the payment of accounts
payable or other liabilities;
(j) the Company has not cancelled, compromised, waived, or released any
right or claim (or series of related rights or claims) involving more than
$25,000;
(k) there has not been any change in the accounting methods or
practices followed by the Company except as required or permitted by GAAP;
(l) to the knowledge of the Company and the Shareholders, the Company
has not entered into any employee leasing agreement which, as of the date
hereof, requires the Company to provide services at a loss;
(m) the Company has not issued any notes, bonds or other debt
securities or any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or other equity
securities;
(n) the Company has not borrowed any amount or incurred or become
subject to any material liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered into in the
ordinary course of business, and in any event not in excess of $50,000,
individually or in the aggregate;
(o) the Company has not discharged or satisfied any material Lien or
paid any obligation or liability prior to the date due, other than current
liabilities paid in the ordinary course of business;
(p) the Company has not has mortgaged or pledged any of its properties
or assets or subjected them to any material Lien, except Liens for current
property taxes not yet due and payable;
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(q) the Company has not sold, assigned or transferred any of its
tangible assets, except in the ordinary course of business;
(r) the Company has not sold, assigned or transferred any patents or
patent applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registration, trade secrets or other intangible assets,
or disclosed any material proprietary confidential information to any person;
(s) the Company has not made any charitable contributions or pledges in
excess of $5,000 in the aggregate;
(t) the Company has not suffered any damage, destruction or casualty
loss or had a claim therefor exceeding in the aggregate $50,000, whether or not
covered by insurance;
(u) the Company has not entered into any other material transaction,
whether or not in the ordinary course of business; and
(v) the Company has not entered into any commitment (contingent or
otherwise) to do any of the foregoing.
SECTION 4.09 ABSENCE OF LITIGATION. (a) SECTION 4.09(A) of the Company
Disclosure Schedule lists all claims, actions, suits, litigations, proceedings,
arbitrations or investigations of any kind in excess of $1,000 individually
against the Company which are pending or, to the Company's and the Shareholders'
knowledge, threatened. To the knowledge of the Company and the Shareholders,
there are no facts or circumstances with regard to which it is reasonably
foreseeable that a claim, action, suit, litigation, proceeding, arbitration or
investigation which, individually or in the aggregate, is reasonably like to
have a Company Material Adverse Effect will be filed or initiated against the
Company, except as set forth in SECTION 4.09(A) of the Company Disclosure
Schedule. SECTION 4.09(A) of the Company Disclosure Schedule lists all claims,
actions, suits, litigations, proceedings, arbitrations or investigations of any
kind against a client of the Company which, to the Company's and the
Shareholders' knowledge are pending or threatened and with regard to which it is
reasonably foreseeable that the Company may be named as a defendant or as an
indemnitor. There is no action pending seeking to enjoin or restrain the Merger
or the other transactions contemplated by this Agreement.
(b) Except as set forth in SECTION 4.09(B) of the Company Disclosure
Schedule, the Company is not subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or, to the
knowledge of the Company and the Shareholders, continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Governmental Entity or arbitrator, including without limitation,
cease-and-desist orders. To the knowledge of the Company and the Shareholders,
no client of the Company is subject to any continuing order of, consent decree,
settlement agreement or other similar written agreement with, or continuing
investigation by, any Governmental Entity, or any judgment,
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order, writ, injunction, decree or award of any Governmental Entity or
arbitrator, including without limitation, cease-and-desist orders other than
such orders, decrees, agreements, investigations, judgments, writs, injunctions
or awards that (i) individually or in the aggregate, would not have a Company
Material Adverse Effect or (ii) are not related to the client's agreement with
the Company.
SECTION 4.10 CONTRACTS; NO DEFAULT. (a) SECTION 4.10(A) of the Company
Disclosure Schedule sets forth as of the date of this Agreement a true and
complete list of each contract or agreement (written or oral) to which the
Company is a party or by which it is bound (each, a "COMPANY CONTRACT"):
(i) which is a professional employer organization agreement;
(ii) concerning a partnership or joint venture with another
person;
(iii) involving annual consideration in excess of $25,000;
(iv) involving employment agreements, employment contracts or
understandings (other than understandings with respect to "at will" employment)
relating to employment to which the Company is a party;
(v) concerning confidentiality or non-competition;
(vi) with any shareholder or Affiliate or person under the
influence or control of or related to any shareholder or Affiliate;
(vii) involving indebtedness (other than trade payables
arising in the ordinary course of business) or pursuant to which the Company has
guaranteed the indebtedness of another person or pursuant to which a security
interest in an asset of the Company has been created;
(viii) concerning consulting services, changes of control, or
severance or termination payments (whether or not with respect to "at will"
employment);
(ix) with respect to payment of taxes or tax sharing;
(x) with respect to the promotion of the Company's business
through the Internet or the World Wide Web or otherwise through a computer
network;
(xi) which evidences an automobile lease;
(xii) which is a lease or agreement under which the Company is
lessee of or holds or operates any property, real or personal, owned by any
other party, except for any lease of real or personal property under which the
aggregate annual rental payments do not exceed $5,000;
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(xiii) which is a lease or agreement under which the Company
is lessor of or permits any third party to hold or operate any property, real or
personal, owned or controlled by the Company;
(xiv) which is an assignment, license, indemnification or
other agreement with respect to any intangible property (including, without
limitation, any Intellectual Property (as defined in Section 4.13 hereof) other
than generally available, off-the-shelf software) pursuant to an agreement which
involves consideration in the aggregate in excess of $1,000 annually;
(xv) under which it has granted any person any registration
rights with respect to the securities of the Company (including, without
limitation, demand and piggyback registration rights);
(xvi) which is an agreement involving in the aggregate more
than $5,000 annually with a term of more than six months which is not terminable
by the Company upon less than 60 days notice without penalty; and
(xvii) which is otherwise material to the business of the
Company or under which the consequences of a default or termination could have a
Company Material Adverse Effect.
(b) The Company has delivered to the Acquiror a correct and complete
copy of each written Company Contract (other than the professional employer
agreements) and a materially complete and accurate description of each oral
Company Contract listed in SECTION 4.10(A) of the Company Disclosure Schedule.
Each Company Contract is in full force and effect, is a legal, valid and binding
contract or agreement of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other laws limiting creditors' rights generally and to general
equitable principles, and there is no default (or any event known to the Company
or the Shareholders which, with the giving of notice or lapse of time or both,
would be a default) by the Company or, to the Company's and the Shareholders'
knowledge, any other party to a Company Contract, in the timely performance of
any obligation to be performed or paid under any such contract or agreement,
other than defaults which, individually or in the aggregate, would not have a
Company Material Adverse Effect. The consummation of the transactions
contemplated hereby will not affect the status of any Company Contract as a
legal, valid and binding agreement or the enforceability thereof. No party is
currently in negotiations with the Company regarding renegotiation of a Contract
(other than Contracts which are, by their terms, set to expire within the next
60 days) nor has any party repudiated any provision thereunder or indicated that
it intends to terminate or not renew a Company Contract.
(c) With respect to any professional employer organization agreement to
which the Company is a party, whether or not such agreement is currently in
effect, SECTION 4.10(C) of the Company Disclosure Schedule sets forth each claim
by a client for breach of such professional employer organization agreement or
failure of performance in excess of $5,000 made against the Company from January
1, 1994 through the Closing.
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(d) There are no outstanding powers of attorney executed on behalf of
the Company.
SECTION 4.11 EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) SECTION 4.11 of the
Company Disclosure Schedule lists all pension, retirement, savings, disability,
medical, dental, health, life (including all individual life insurance policies
as to which the Company is the owner, beneficiary or both), death benefit, group
insurance, profit sharing, deferred compensation, stock option, bonus,
incentive, vacation pay, severance pay, Code Section 401(k) plan, Code Section
125 "cafeteria" or "flexible benefit" plan, or other employee benefit plan,
trust, arrangement, contract, agreement, policy or commitment (including without
limitation, all employee pension benefit plans as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and all
employee welfare benefit plans as defined in Section 3(1) of ERISA), under which
current or former directors or employees of the Company or its ERISA Affiliates
(as defined in Section 4.11(c) below) are entitled to participate by reason of
their employment with the Company or its ERISA Affiliates, whether or not any of
the foregoing is funded, whether insured or self-funded, and whether written or
oral, (i) to which the Company or its ERISA Affiliates are a party or a sponsor
or a fiduciary thereof or by which the Company or its ERISA Affiliates (or any
of their rights, properties or assets) are bound, or (ii) with respect to which
the Company or its ERISA Affiliates have made any payments, contributions or
commitments, or may otherwise reasonably be expected to have any liability
(other than client-established payroll and leave practices that do not
constitute "employee benefit plans" within the meaning of ERISA), whether or not
the Company or its ERISA Affiliates still maintains such plan, trust,
arrangement, contract, agreement, policy or commitment (the "Employee Benefit
Plans"). For each Employee Benefit Plan, the Company has provided true and
correct copies of all plan documents, summary plan descriptions, determination
letters and the three most recent Form 5500, including financial statements,
where applicable.
(b) Except as set forth in SECTION 4.11(B) of the Company Disclosure
Schedule, the Company and its ERISA Affiliates and, to the Company's and the
Shareholders' knowledge, any "administrator(s)" (as described in Section
3(16)(A) of ERISA) of the Employee Benefit Plans have complied in all material
respects with such Plan's terms and with the applicable requirements of ERISA,
the Code and all other statutes, orders, rules or regulations, specifically
including the reporting and disclosure requirements of Part 1 of Title 1, and
Title IV, of ERISA and the Code, in a timely and accurate manner, such that no
penalties that could reasonably be expected to have a Company Material Adverse
Effect have been or are reasonably expected to be imposed on the Company and no
material penalties could reasonably be expected to be imposed on Acquiror under
ERISA, the Code or otherwise with respect to the Employee Benefit Plans or any
related trusts. With respect to any employee pension benefit plan, within the
meaning of Section 3(2) of ERISA, and any related trust, to which the Company or
any of its ERISA Affiliates has transferred funds but that the Company and its
ERISA Affiliates do not sponsor, the Company and its ERISA Affiliates have
complied in all material respects with applicable requirements of ERISA, the
Code and all other statutes, orders, rules and regulations such that no
penalties or liability that could reasonably be expected to have a Company
Material Adverse Effect have been or are reasonably expected to be imposed on
the Company and no material penalties could reasonably be expected to be imposed
on Acquiror under ERISA, the Code or otherwise.
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(c) For purposes of this Agreement, "ERISA AFFILIATES" shall mean any
trade or business (whether or not incorporated) that is part of the same
controlled group, or under common control with, or part of an affiliated service
group that includes, the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code. SECTION 4.11 of the Company Disclosure Schedule lists all
ERISA Affiliates of the Company.
(d) As used in this Agreement, "PENSION PLAN" means any Employee
Benefit Plan which is an employee pension benefit plan as defined in Section
3(2) of ERISA.
(e) With respect to the Employee Benefit Plans:
(i) None of the Employee Benefit Plans is a "multiemployer
plan," as such term is defined in Section 3(37) of ERISA, and each of the
Employee Benefit Plans that is subject to ERISA is and at all times has been in
compliance (both in form and operation) with ERISA, the Code and all other
applicable laws and all amendments to the Employee Benefit Plans required to be
made on or prior to the date hereof by ERISA, the Code and all other applicable
Laws have been made, other than any such noncompliances which would not have,
individually or in the aggregate, a Company Material Adverse Effect; none of the
Employee Benefit Plans intended to be "qualified" within the meaning of Section
401(a) of the Code has received a favorable determination letter ruling that the
plan complies with the Tax Reform Act of 1986, as amended; no Employee Benefit
Plan has an accumulated or waived funding deficiency within the meaning of
Section 412 of the Code; neither the Company nor any ERISA Affiliate has
incurred, directly or indirectly, any liability (including any contingent
liability) to or on account of an Employee Benefit Plan pursuant to Title IV of
ERISA; no proceedings have been instituted to terminate any Employee Benefit
Plan that is subject to Title IV of ERISA; no "reportable event," as such term
is defined in Section 4043(b) of ERISA, has occurred with respect to any
Employee Benefit Plan; and no condition exists that presents a material risk to
the Company or any of its ERISA Affiliates of incurring a liability to or on
account of an Employee Benefit Plan pursuant to Title IV of ERISA.
(ii) The current value of the assets of each of the Employee
Benefit Plans that are subject to Title IV of ERISA exceeds the present value of
the accrued benefits under each such plan, taking into account projected salary
increases and based upon the actuarial assumptions used for funding purposes in
the most recent actuarial report prepared for such plan. All legally required
contributions, premium payments or other amounts payable by the Company or its
ERISA Affiliates through the Effective Time with respect to each Employee
Benefit Plan in respect of current or prior plan years have been or will be
(prior to or at the Effective Time) either paid or accrued on the Company's
regularly prepared financial statements.
(iii) There are no pending, threatened or anticipated material
claims (other than routine claims for benefits) by, on behalf of or against any
of the Employee Benefit Plans, or to the knowledge of the Company or the
Shareholders, the fiduciaries of such plans or any trust related thereto.
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(iv) Except for the employment, consulting, change of control
and severance agreements set forth in SECTION 4.10(A) of the Company Disclosure
Schedule, no Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured), with respect to
current or former employees, their spouses or dependents for periods extending
beyond their retirement or other termination of service, other than (i) coverage
mandated by applicable law (including conversion rights under any insurance
policy), (ii) death benefits or retirement benefits under any Pension Plan, or
(iii) deferred compensation accrued as liabilities on the books of the Company
or its ERISA Affiliates.
(v) Except as set forth in SECTION 4.11 of the Company
Disclosure Schedule, each Employee Benefit Plan may be amended or terminated on
or at any time after the Effective Time.
(f) Except as set forth in SECTION 4.11(F) of the Company Disclosure
Schedule, none of the Company or its clients is a party to any collective
bargaining or other labor union contract. There are no union organization
attempts underway with respect to any employees of the Company or its clients.
There is no pending or, to the knowledge of the Company and the Shareholders,
threatened labor dispute, strike or work stoppage involving such employees. To
the knowledge of the Company and the Shareholders, neither the Company nor its
clients has committed any unfair labor practices (as defined in the National
Labor Relations Act of 1947, as amended) in connection with the operation of its
business, and except as set forth in SECTION 4.11(F) of the Company Disclosure
Schedule, there is no pending or, to the knowledge of the Company and the
Shareholders, threatened charge or complaint against the Company or its clients
by the National Labor Relations Board or any comparable state or local agency.
(g) All persons who are or have previously been characterized as
"independent contractors" of the Company are properly characterized as such and
are not entitled to any benefits under any Employee Benefit Plan, except to the
extent that any such improper characterization would not have, individually or
the aggregate, a Company Material Adverse Effect.
SECTION 4.12 TAXES. (a) Except as set forth in SECTION 4.12 of the Company
Disclosure Schedule:
(i) all Returns (as defined below) in respect of Taxes (as
defined below) required to be filed with respect to the Company have been timely
filed (including extensions) and no extension of time within which to file any
such Return has been requested, which Return has not since been filed, other
than such Returns which if not filed would not have, individually or in the
aggregate, a Company Material Adverse Effect;
(ii) all Taxes shown on Returns to be due or payable, or
otherwise imposed on the Company or for which the Company is liable, whether to
taxing authorities or to other persons with respect to all taxable periods or
portions of taxable periods ending on or before the Effective Time have been
timely paid or reserved for on the Interim Financial Statements, other than any
such Taxes which, the failure to timely pay would not have, individually or in
the aggregate, a Company Material Adverse Effect and all payments of estimated
Taxes required to be made with respect to the
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Company under Section 6655 of the Code or any comparable provision of state,
local or foreign law have been made on the basis of a good faith estimate of the
required installments, and all applicable tax Laws and agreements have been
fully complied with;
(iii) all Returns (or, in cases where amended Returns have
been filed, such Returns as amended) are true, correct and complete in all
material respects and are not subject to penalties under Section 6662 of the
Code relating to accuracy-related penalties (or any corresponding provision of
state, local or foreign tax Laws) or any predecessor provision of Law;
(iv) no issues have been raised or adjustments proposed by any
taxing authority in connection with any of the Returns and except to the extent
shown in SECTION 4.12 of the Company Disclosure Schedule, all deficiencies
asserted or assessments made as a result of any examinations have been fully
paid or are fully reflected as a liability on the Interim Financial Statements
or are being contested and an adequate reserve therefore has been established
and is fully reflected in the Interim Financial Statements;
(v) there are no outstanding subpoenas or requests for
information with respect to any Returns or the Taxes reflected on such Returns;
(vi) the Company is not a party to or bound by any
tax-indemnity, tax-sharing or tax-allocation agreement, the Company has not ever
been a member of an Affiliated Group, and the Company is not liable for the
Taxes of any person under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of state, local or foreign Tax Law) or by contract, as a
successor or otherwise;
(vii) the Company has not, in any taxable period for which the
statute of limitations on assessment remains open, acquired any corporation that
filed a consolidated federal income tax return with any other corporation that
was not also acquired by the Company, and no corporation that was included in
the filing of a Return with the Company on a consolidated, combined, or unitary
basis has left the Company's consolidated, combined or unitary group in a
taxable year for which the statute of limitations on assessment remains open;
(viii) no consent under Section 341(f) of the Code (or any
corresponding provision of state, local or foreign Law) has been filed with
respect to the Company;
(ix) there are no Tax liens on any assets of the Company other
than liens for Taxes not yet due or payable;
(x) all Taxes required to be withheld, collected or deposited
by the Company during any taxable period for which the statute of limitations or
an assessment remains open have been timely withheld, collected or deposited
and, to the extent required, have been paid to the relevant Tax authority,
except where the Taxes in question are subject to challenge by the Company
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in an appropriate proceeding, and adequate reserves therefor have been provided
on the Company's consolidated financial statements;
(xi) the Company was not acquired in a qualified stock
purchase under Section 338(d)(3) of the Code and no elections under Section
338(g) of the Code, protective carryover basis elections, offset prohibition
elections or other deemed or actual elections under Section 338 are applicable
to the Company;
(xii) there is no material difference on the consolidated
books of the Company between the amounts of the book basis and the tax basis of
assets (net of liabilities) that is not accounted for by an accrual on the books
for federal income tax purposes;
(xiii) there are no outstanding waivers or agreements
extending the statute of limitations for any period with respect to any Tax to
which the Company may be subject and SECTION 4.12 of the Company Disclosure
Schedule sets forth each of the taxable years of the Company as to which the
statute of limitations in respect to Taxes have not expired and with respect to
such taxable years, those periods for which examinations have been completed,
those periods for which examinations are presently being conducted, those
periods for which examinations have not been initiated and those years for which
the required Returns have not yet been filed;
(xiv) the Company is not, as of the date of this Agreement,
under audit with respect to any taxable period for any federal, state, local or
foreign Tax by the Internal Revenue Service (the "IRS") or the applicable Tax
authority in each such state, local, or foreign jurisdiction;
(xv) the Company has not agreed to make nor is it required to
make any adjustments under Section 481(a) of the Code by reason of a change in
accounting method or otherwise, other than as a result of the transactions
contemplated hereby;
(xvi) the Company has not participated in and will not
participate in an international boycott within the meaning of Section 999 of the
Code;
(xvii) the Company is not a party to any agreement, contract,
arrangement, or plan that resulted or would result separately or in the
aggregate in the payment of any excess parachute payment within the meaning of
Section 280G of the Code;
(xviii) the Company is not, and has never been, a United
States real property holding corporation as defined in Section 897(c)(2) of the
Code;
(xix) the Company is not a party to any joint venture,
partnership or other arrangement or contract that could be treated as a
partnership for federal income tax purposes;
(xx) the unpaid Taxes of the Company do not exceed the reserve
for tax liability (excluding any reserve for deferred taxes established to
reflect timing differences between book and
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tax income) set forth or included in the Interim Balance Sheet as adjusted for
the passage of time through the date hereof in accordance with the past custom
and practice of the Company; and
(xxi) the Company has been a valid "S corporation," as such
term is defined in Section 1361(a)(1) of the Code for each year since and
including the 1992 tax year. Other than the consummation of the Merger, no facts
exist or have existed with respect to the Company, its capital structure or its
shareholders which at any time during such period would cause a revocation of
its S corporation election or loss of its S corporation status.
(b) For purposes of this Agreement,
(i) "TAX" or "TAXES" shall mean any and all taxes, charges,
fees, levies, and other governmental assessments and impositions of any kind,
payable to any Governmental Entity or taxing authority or agency, including,
without limitation, income, franchise, net worth, profits, gross receipts,
minimum, alternative minimum, estimated, ad valorem, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, medicare, workers
compensation, unemployment compensation, utility, severance, production, excise,
stamp, occupation, premiums, windfall profits, transfer and gains taxes, and
interest, penalties and additions to taxes imposed with respect thereto; and
(ii) "RETURNS" shall mean any and all returns, reports,
information returns and information statements with respect to Taxes required to
be filed by the Company with the IRS or any other Governmental Entity or tax
authority or agency, whether domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns.
SECTION 4.13 INTELLECTUAL PROPERTY RIGHTS. The Company owns, licenses or
possesses the right to use all material patents, patents pending, trademarks,
servicemarks, trade names, service names, slogans, registered copyrights, trade
secrets, computer software and other intellectual property rights it currently
uses (the "INTELLECTUAL PROPERTY"), without any conflict or alleged conflict
with the rights of others or in violation of any license or other agreement with
respect thereto. Each item of Intellectual Property owned or used by the Company
prior to the Closing will be owned or available for use by the Surviving
Corporation on the same terms and conditions immediately following the Closing.
The Company has taken all such actions as are necessary and desirable to
maintain and protect its Intellectual Property. SECTION 4.13 of the Company
Disclosure Schedule lists all of the Intellectual Property rights owned and used
by the Company as well as any intellectual property rights owned by third
parties and used by the Company pursuant to licenses, sublicenses, agreements or
permission other than generally available, off-the-shelf software. All such
licenses, sublicenses, agreements or permissions are valid, binding and in full
force and effect and no default has occurred or notice of default been received
by the Company with respect thereto and the Merger will not give rise to any
such default.
SECTION 4.14 INSURANCE. SECTION 4.14 of the Disclosure Schedule lists (a) all
policies and binders of insurance for professional liability, directors and
officers, property and casualty, fire,
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liability, worker's compensation and other customary matters held by or on
behalf of the Company (the "INSURANCE POLICIES"), and (b) a description of all
claims made by the Company under any Insurance Policy during the past three
years. The Insurance Policies are in full force and effect and the Company is
not in default with respect to any provision contained in any Insurance Policy.
No application pursuant to which the Company has obtained any Insurance Policy
contains a materially false statement or fails to state a fact necessary to make
the statements made in such application not materially misleading. The Company
has not failed to give any notice of any claim under any Insurance Policy in due
and timely fashion, nor has any coverage for current claims been denied. The
Company has been covered during the past three years by insurance in scope and
amount customary and reasonable for the activities in which it has engaged and
the assets it has owned during this five year period. A true and complete copy
of each such Insurance Policy has been previously provided to Acquiror.
SECTION 4.15 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or the Shareholders.
SECTION 4.16 TITLE TO PROPERTIES. (a) The Company does not own any real
property.
(b) All of the real property leased by the Company (the "LEASED REAL
PROPERTY") is described in SECTION 4.16(B) of the Company Disclosure Schedule.
The leases for the Leased Real Property are in full force and effect and the
Company holds a valid and existing leasehold interest under each of the leases.
The Company has delivered to Acquiror complete and accurate copies of each of
the leases for the Leased Real Property, and none of such leases has been
modified in any respect, except to the extent that such modifications are
disclosed by the copies delivered to Acquiror. Neither the Company nor, to the
knowledge of the Company and the Shareholders, the lessor is in default under,
and to the knowledge of the Company and the Shareholders no circumstances exist
which, if unremedied, would, either with or without notice or the passage of
time or both, result in the Company's default under any of such leases.
(c) There are no pending or, to the knowledge of the Company and the
Shareholders, threatened condemnation proceedings, lawsuits, or administrative
actions relating to the Leased Real Property or other matters affecting the
current use, occupancy, or value thereof.
(d) All of the Company's Leased Real Property facilities have received
all approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof, other than such approvals,
licenses or permits which if not obtained would not, individually or in the
aggregate, result in a Company Material Adverse Effect under applicable Laws and
the Company's leases and have been operated and maintained in all material
respects in accordance with applicable Laws and, if applicable, as required
under the Company's leases.
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(e) To the knowledge of the Company and the Shareholders, there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any party or parties other than the Company the right of use or
occupancy of any portion of the Leased Real Property.
(f) There are no parties (other than the Company) in possession of any
of the Company's Leased Real Property.
(g) All facilities located on the Leased Real Property are supplied
with utilities and the services necessary for the operation of such facilities
in a manner consistent with current use, including gas, electricity, water,
telephone, sanitary sewer.
(h) Each parcel of Leased Real Property abuts on and has direct
vehicular access to a public road.
(i) To the knowledge of the Company and the Shareholders, the Company
is not in material violation of any applicable zoning ordinance or other similar
law, regulation or requirement.
(j) The Company has not violated and is not in current violation of any
Environmental Laws with respect to (i) operations and activities of the Company
and its employees; or (ii) the Leased Real Property, any other real property
leased or occupied by the Company at any time or any real property for which the
Company could be liable as a result of the activities or actions of its
employees, which violations, individually or in the aggregate, could have a
Company Material Adverse Effect. The Company is not subject to any liability for
clean up or remediation under any federal, state or local law. To the knowledge
of the Company and the Shareholders, no event has occurred and no fact or
circumstance exists which provides a reasonable basis to believe any
Environmental Law has been violated with respect to any real property for which
the Company would be liable, which violations, individually or in the aggregate,
could have a Company Material Adverse Effect. The Company has not received any
written or oral notification from any Governmental Entity or any lessor or from
any other person regarding (i) existing violations of any Environmental Laws or
(ii) alleged health or safety risks (including, without limitation, allegations
of respiratory or chemical sensitivity effects allegedly attributable to
occupant exposure to indoor environmental conditions, e.g., "sick building
syndrome") with respect to the Leased Real Property or with respect to any other
real property leased or occupied by the Company at any time or with respect to
any real property for which the Company could be liable as a result of the
activities or actions of its employees. The Leased Real Property, and the
businesses conducted thereon, do not contain, generate, handle, treat, store or
dispose of any hazardous materials or substances other than those used in
material compliance with all applicable Environmental Laws. Other than as
disclosed in SECTION 4.16(J) of the Company Disclosure Schedule, the Company
does not operate any underground storage tanks and none of the Company or any
Shareholder has any knowledge of the presence of any underground storage tanks
at, under or on the Leased Real Property or with respect to any other real
property leased or occupied by the Company at any time or with respect to any
real property for which the Company could be liable as a result of the
activities or actions of its
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employees. The Company does not own or possess or control any (i) PCBs or
PCB-contaminated fluids or PCB-contaminated or PCB-containing equipment or (ii)
any asbestos or asbestos-containing material, nor, to the knowledge of the
Company and the Shareholders, does any Leased Real Property contain in or on its
premises any waste, scrap, raw material, work-in-progress, inventory, product,
residue or other material or substance containing PCBs, asbestos or lead-based
paint. The Company has provided the Acquiror with copies of all environmental
audits, assessments, investigations and reports that have been prepared
regarding the real property referred to in this Section 4.16(j) or that have
otherwise been prepared by or at the direction of the Company. A list of such
reports is set forth in SECTION 4.16(J) of the Company Disclosure Schedule.
(k) The Company owns good and marketable title to each item of tangible
personal property reflected in the Interim Financial Statements free and clear
of any Liens, except as described in SECTION 4.16(K) of the Company Disclosure
Schedule and except for properties and assets disposed of in the ordinary course
of business since the date of the Interim Balance Sheet. The Company has
provided to Acquiror an accurate and complete list of all items of tangible
personal property owned by the Company at September 30, 1997.
SECTION 4.17 NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable of
the Company are (i) reflected properly on the Company's books, records and
financial statements; (ii) are valid receivables subject to no contractual
setoffs or, to the knowledge of the Company and the Shareholders, common law
rights of setoff or counterclaim; and (iii) are current and collectible, subject
only to the reserve for bad debts set forth on the face of the Interim Balance
Sheet, as adjusted for the passage of time through the Closing in the ordinary
course.
SECTION 4.18 RELATED PARTIES. Except as set forth in SECTION 4.18 of the Company
Disclosure Schedule, no officer or director of the Company, or any Affiliate of
such officer or director, has, either directly or indirectly, (a) an interest in
any person which furnishes or sells services or products which are similar to
those furnished or sold by the Company, or (b) a beneficial interest in any
contract or agreement to which the Company is a party or by which the Company
may be bound. For purposes of this Section 4.19, there shall be disregarded any
interest which arises solely from ownership of less than a five percent (5%)
equity interest in a corporation whose stock is regularly traded or quoted on a
national securities exchange or over-the-counter market.
SECTION 4.19 DISCLOSURE. No representation or warranty contained in this Article
IV, as qualified by the Company Disclosure Schedule, or in any Schedule or
Exhibit hereto or any closing certificate furnished or to be furnished by either
the Company or the Shareholders to the Acquiror pursuant to this Agreement or in
connection with the Merger contains or, at the Effective Time, will contain any
untrue statement of a material fact, or omits or, at the Effective Time, will
omit to state a material fact necessary to make the statements contained herein
or therein not misleading.
SECTION 4.20 SOLE REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Articles IV and V hereof and in the Schedules and
Exhibits hereto and in any closing certificate delivered in connection herewith,
are the only representations and warranties made by the
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Company and/or the Shareholders in connection with the transactions contemplated
by this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders severally, and not jointly, represents and
warrants to Acquiror that the statements contained in this Article V are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Effective Time (as though made then and as though the Effective Time
were substituted for the date of this Agreement throughout this Article V),
other than those statements made as of a particular date, which will continue to
be true and correct as of such date.
SECTION 5.01 AUTHORITY; ENFORCEABILITY. The Shareholder has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Shareholder, enforceable in accordance with its terms and conditions,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws
limiting creditors' rights generally and to general equitable principles. The
Shareholder need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Entity in order to
consummate the transactions contemplated by this Agreement other than under the
HSR Act. The Shareholder has taken all action required under the applicable
requirements of the New Hampshire Act to adopt and approve this Agreement and
the Merger.
SECTION 5.02 NONCONTRAVENTION. Subject to the filing of the Articles of Merger
and such notices and documents as may be required under the HSR Act, neither the
execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any applicable constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any Governmental Entity, or court to which the
Shareholder is subject or by which he is bound, or (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify, or cancel, or require
any notice under any material agreement, contract, lease, license, instrument,
or other arrangement to which the Shareholder is a party or by which he is bound
or to which any of his assets is subject.
SECTION 5.03 INVESTMENT. Except as may be contemplated by the terms of the
Registration Agreement, the Shareholder (A) is acquiring Acquiror Common Stock
solely for his own account for investment purposes, and not with a view to the
distribution or resale thereof in violation of applicable securities laws, (B)
is an "accredited investor" as defined in Rule 215 of the regulations
promulgated under the Securities Act with knowledge and experience in business
and financial matters, or is a sophisticated investor with sufficient knowledge
and experience to evaluate an
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investment in the Acquiror, (C) has received certain information concerning
Acquiror, including but not limited to, the representations and warranties
contained in this Agreement, the Acquiror's annual report on Form 10-K for the
fiscal year ended December 31, 1996, its Proxy Statement for its 1997 Annual
Meeting of Shareholders and its quarterly report on Form 10-Q for the quarterly
period ended June 30, 1997, and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks of an
investment in Acquiror Common Stock, and (D) agrees to indemnify Acquiror and
Acquiror Sub against any adverse consequences which shall arise as a result of a
sale or distribution of such shares by Shareholder in violation of the
Securities Act and Blue Sky Laws. Shareholder acknowledges that the shares of
Acquiror Common Stock being issued pursuant to the Merger have not been
registered under the Securities Act or Blue Sky Laws and may only be transferred
in compliance with such laws.
SECTION 5.04 COMPANY SHARES. Except as set forth in SECTION 5.04 of the Company
Disclosure Schedule, the Shareholder owns of record and beneficially one hundred
fifty (150) shares of Company Common Stock, free and clear of any Liens,
restrictions on transfer (other than any restrictions under the Securities Act
and Blue Sky Laws), Taxes, options, warrants, purchase rights, contracts,
commitments, claims, demands, rights of first refusal or first offer, voting
agreements or other limitations. Except as set forth in SECTION 5.04 of the
Company Disclosure Schedule, the Shareholder is not a party to any option,
warrant, purchase right, or other contract or commitment that could require the
Shareholder to sell, transfer, or otherwise dispose of any capital stock of the
Company (other than this Agreement). The Shareholder is not a party to any
voting trust, proxy, or other agreement or understanding with respect to the
voting of any capital stock of the Company. The Shareholder acknowledges and
agrees that neither the shares of Company Common Stock owned by him nor, to his
knowledge, any other outstanding stock of the Company, has been issued in
violation of any preemptive or similar rights.
SECTION 5.05 SHARE OWNERSHIP. The Shareholder owns no shares of Acquiror Common
Stock other than those he will receive pursuant to the Merger. The Shareholder
understands that it is the intent of all parties that the Merger constitute a
reorganization pursuant to Code section 368(a), and therefore represents that he
has no present intent to dispose of Acquiror Common Stock received in the
Merger.
SECTION 5.06 DISCLOSURE. No representation or warranty contained in this Article
V or in the Company Disclosure Schedule contains or, at the Effective Time, will
contain any untrue statement of a material fact, or omits or, at the Effective
Time, will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
SECTION 5.07 TAX LIABILITY. The Shareholder has paid all Taxes required to be
paid on account of income of the Company attributable to the Shareholder as a
result of the Company's "S corporation" election under Section 1362(a) of the
Code, other than for the 1997 tax year.
SECTION 5.08 TERMINATION OF SHAREHOLDERS AGREEMENT. The Company and each of the
Shareholders hereby covenants and agrees that (a) that certain Shareholders
Agreement, dated
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January 11, 1995, by and among the Company and each of the Shareholders (the
"SHAREHOLDERS AGREEMENT") shall terminate and be of no further force and effect,
without any further action on the part of the Company or either Shareholder,
upon consummation of the Merger and (b) the provisions of the Shareholders
Agreement shall not apply to the transactions contemplated hereby.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR
Acquiror hereby represents and warrants to the Company that:
SECTION 6.01 ORGANIZATION AND QUALIFICATION. Acquiror is a corporation, duly
incorporated, validly existing and in good standing under the Laws of Florida,
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of the business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, except where the failure to be so
qualified will not have, individually or in the aggregate with any other failure
to be qualified, an Acquiror Material Adverse Effect. On or prior to Closing,
Acquiror Sub will be a corporation duly incorporated, validly existing and in
good standing under the laws of its state of incorporation.
SECTION 6.02 CAPITALIZATION. (a) As September 30, 1997, the authorized capital
stock of Acquiror consisted of the following:
(i) 60,000,000 shares of Acquiror Common Stock of which:
(y) 9,027,569 shares were issued and outstanding; and
(z) 1,337,590 shares were reserved for future
issuance pursuant to Acquiror's stock option and
incentive plans relating to stock options and awards
for certain officers, employees, consultants and
directors (the "ACQUIROR OPTIONS"); and
(ii) 20,000,000 shares of series preferred stock, par value
$.01 per share of which none is issued or outstanding.
(b) As of the date of this Agreement, all shares of Acquiror Common
Stock issued and outstanding are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights, whether created by the
Florida Business Corporation Act (the "FLORIDA ACT") or otherwise and any shares
of Acquiror Common Stock issuable in the Merger, when issued pursuant to this
Agreement, will be duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by the Florida Act
or otherwise.
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(c) As of the Closing, the authorized capital stock of Acquiror Sub
will consist of 1,000 shares of Common Stock, $.01 par value ("ACQUIROR SUB
COMMON STOCK") and will be held by Acquiror of record and beneficially. Acquiror
Sub will be a newly formed Subsidiary of Acquiror with no obligations except as
contemplated by this Agreement.
SECTION 6.03 AUTHORITY. Acquiror has the requisite corporate power and authority
to execute and deliver this Agreement and the related agreements referred to
herein, to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Acquiror
and the consummation by Acquiror of the transactions contemplated hereby have
been duly authorized by all necessary corporate action and no other corporate
proceedings on the part of Acquiror are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby, subject to the corporate and
shareholder approvals of Acquiror Sub (which Acquiror shall cause to be obtained
prior to Closing). This Agreement has been duly executed and delivered by
Acquiror and, assuming the due authorization, execution and delivery by the
other parties hereto, constitutes the legal, valid and binding obligation of
Acquiror, subject to bankruptcy, insolvency, reorganization, moratorium and
other laws affecting creditors' rights generally and to general equitable
principles.
SECTION 6.04 NO CONFLICT, REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by Acquiror does not, and the performance of this
Agreement by Acquiror and Acquiror Sub will not, (i) conflict with or violate
the Articles of Incorporation or By-Laws of Acquiror or Acquiror Sub, (ii)
subject to the filing of the Articles of Merger and such notices and documents
as may be required under the HSR Act, conflict with or violate any Laws
applicable to Acquiror, Acquiror Sub or any of Acquiror's Subsidiaries or by
which any of their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Acquiror
or any of Acquiror's Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
material instrument or obligation to which Acquiror or any of Acquiror's
Subsidiaries is a party or by which Acquiror or any of Acquiror's Subsidiaries
or any of their respective properties is bound or affected, except for any such
conflicts or violations described in clause (ii) or breaches or defaults
described in clause (iii) that would not have an Acquiror Material Adverse
Effect.
SECTION 6.05 REPORTS; FINANCIAL STATEMENTS. (a) Since May 9, 1996, Acquiror and
its Subsidiaries have filed all forms, reports, statements and other documents
required to be filed with the Securities and Exchange Commission (collectively,
the "ACQUIROR SEC REPORTS"). The Acquiror SEC Reports including all such reports
filed after the date of this Agreement and prior to the Effective Time, (i) were
or will be prepared in all material respects in accordance with the requirements
of applicable Law, the Securities Act and the Exchange Act, as the case may be,
and (ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary
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in order to make the statements therein, in the light of the circumstances under
which they were or will be made, not misleading.
(b) Each of the consolidated financial statements (including in each
case, any related notes thereto) contained in the Acquiror SEC Reports,
including any Acquiror SEC Reports filed after the date of this Agreement and
prior to the Effective Time, (i) have been or will be prepared in all material
respects in accordance with the applicable rules and regulations of the
Securities and Exchange Commission (the "SEC"), applicable law and GAAP applied
on a consistent basis throughout the periods involved (except to the extent
required by changes in GAAP or as may be indicated in the notes to such
financial statements) and (ii) fairly present or will fairly present the
consolidated financial position of Acquiror and its Subsidiaries as of the
respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated, except that (1) any unaudited interim financial
statements were or will be subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount and such unaudited
interim financial statements are not or may not be necessarily indicative of
results for the full fiscal year and (2) any pro forma financial information
contained in such consolidated financial statements is not or may not be
necessarily indicative of the consolidated financial position of Acquiror and
its Subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated.
(c) Except as and to the extent set forth on the consolidated balance
sheet of Acquiror at June 30, 1997, including all notes thereto, neither
Acquiror nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether known or unknown, matured or unmatured, and whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of Acquiror or in the notes thereto,
prepared in accordance with the published rules and regulations of the SEC and
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since the date of such balance sheet or as contemplated by the Acquiror
SEC Reports.
SECTION 6.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
there has not been an Acquiror Material Adverse Effect or any change by Acquiror
or its Subsidiaries in their accounting methods, principles or practices, except
any such change after the date of this Agreement required by GAAP or as
described in the Acquiror SEC Reports filed prior to Closing.
SECTION 6.07 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Acquiror.
SECTION 6.08 SOLE REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article VI hereof and in the Schedules and Exhibits
hereto and in any closing certificate delivered in connection herewith, are the
only representations and warranties made by Acquiror in connection with the
transactions contemplated by this Agreement.
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ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 7.01 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or otherwise consented to in writing by Acquiror,
which consent shall not be unreasonably withheld, the Company will:
(a) operate its businesses in the usual and ordinary course and
consistent with past practice;
(b) use commercially reasonable efforts to preserve intact its business
organization and assets, including present operations, physical facilities and
working conditions; maintain its rights and franchises, maintain and/or renew
its licenses, permits, agreements, uses, and governmental approvals, retain the
services of its officers and key employees and maintain relationships with its
customers, lessors, licensors, employees, and suppliers;
(c) use commercially reasonable efforts to keep in full force and
effect liability insurance, workers' compensation insurance, letters of credit
and bonds comparable in amount and scope of coverage to that currently
maintained; and
(d) confer with Acquiror at its reasonable request to report
operational matters of a material nature and to report the general status of the
ongoing operations of the business of the Company.
The Shareholders agree and covenant to cause the Company to
comply with its covenants and agreements set forth in this Section 7.01.
SECTION 7.02 NEGATIVE COVENANTS OF THE COMPANY. Except as expressly contemplated
by this Agreement, described in SECTION 7.02 of the Company Disclosure Schedule
or otherwise consented to in writing by Acquiror, which consent shall not be
unreasonably withheld, from the date of this Agreement until the Effective Time,
the Company shall not, and the Shareholders shall not (whether in their
capacities as shareholders or directors of the Company), and the Shareholders
shall cause the Company not to, do any of the following:
(a) (i) increase the compensation payable or to become payable to any
director or officer of the Company or to any employee other than an employee of
a professional employer organization client of the Company; (ii) grant any
severance or termination pay (other than pursuant to any severance agreement of
the Company described in SECTION 4.11 of the Company Disclosure Schedule), or
enter into any severance agreement with, any director, officer or employee,
(iii) enter into or amend any employment agreement with any director, officer or
employee that would extend
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beyond the Effective Time except on an at-will basis; or (iv) establish, adopt,
enter into or amend any Employee Benefit Plan, except as may be required to
comply with applicable Law;
(b) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock other than Shareholder Tax
Distributions;
(c) effect any reorganization or recapitalization;
(d) issue, deliver, award, grant or sell, or authorize the issuance,
delivery, award, grant or sale (including the grant of any security interests,
liens, claims, pledges, limitations in voting rights, charges or other
encumbrances) of, any shares of any class of its capital stock (including shares
held in treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or options to acquire,
any such shares;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a 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 or agree to
acquire any assets of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with past
practice);
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of any of its assets, except for dispositions in the ordinary
course of business and consistent with past practice not in excess of $10,000 in
the aggregate;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance) any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Competing Transaction
(as such term is defined below), enter into discussions or negotiate with any
person or entity in furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or authorize any
of the officers or directors of the Company to take any such action, and the
Shareholders and the Company shall use their reasonable best efforts to cause
the officers, employees, agents and representatives of the Company (including,
without limitation, any investment banker, financial advisor, attorney or
accountant retained by the Company) not to take any such action. The
Shareholders shall immediately notify Acquiror in writing of any offer, proposal
or communication received by either of them or, to their knowledge, the Company
or any Affiliate, employee or consultant of the Company, of any Competing
Transaction.
For purposes of this Agreement, "COMPETING TRANSACTION" shall mean any of the
following involving the Company (other than the transactions contemplated by
this Agreement): (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of five percent or more of the
assets of the Company in a single transaction or a series of related
transactions or assignment of any contract the
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Company has with any of its clients; or (iii) any tender offer or exchange offer
for twenty percent or more of the outstanding shares of capital stock of the
Company or the filing of a registration statement under the Securities Act in
connection therewith;
(h) adopt any amendments to its Articles of Incorporation or By-Laws;
(i) (A) change any of its methods of accounting in effect at the date
hereof or (B) make or rescind any express or deemed election relating to Taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, or change
any of its methods of reporting income or deductions for federal income Tax
purposes from those employed in the preparation of the federal income Tax
returns for the taxable year ending December 31, 1996, except in either case as
may be required by Law, the IRS or GAAP;
(j) incur, assume or guarantee any obligation for borrowed money or
purchase money indebtedness, whether or not evidenced by a note, bond, debenture
or similar instrument, other than trade payables in the ordinary course of
business consistent with past practice;
(k) fail to renew any agreement favorable to the Company which is used
in the conduct of its business or compromise any obligation or amount owed to
the Company;
(l) incur any Expenses (as defined in Section 10.03) other than
reasonable Expenses which are reasonably related to the Company's participation
in the transaction, including HSR Act filings by the Shareholders. Such Expenses
shall not exceed $350,000;
(m) create, assume or permit the imposition of any Lien with respect to
any assets of the Company other than Liens existing and disclosed in the Company
Disclosure Schedule as of the date hereof, Liens securing indebtedness under
credit facilities existing and disclosed in the Company Disclosure Schedule on
the date hereof, purchase money Liens or statutory Liens arising in the ordinary
course of business;
(n) make capital expenditures or commitments thereof that aggregate in
excess of $10,000 in the aggregate; and
(o) agree in writing or otherwise to do any of the foregoing.
SECTION 7.03 ACCESS AND INFORMATION. Subject to the Confidentiality Agreement
dated September 17, 1997, and the confidentiality provisions of the letter
agreement dated September 17, 1997, each between the Acquiror and the Company
(collectively, the "CONFIDENTIALITY AGREEMENT"), the Company shall afford to
Acquiror and its officers, employees, accountants, consultants, legal counsel
and other representatives reasonable access upon reasonable notice to all
information concerning the business, properties, contracts, records and
personnel of the Company as Acquiror may reasonably request.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01 APPROPRIATE ACTION; CONSENTS; FILINGS. (a) The Company, the
Shareholders and Acquiror shall use reasonable best efforts to (i) take, or
cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Acquiror or the Company in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the transactions contemplated in this Agreement, and (iii) make all necessary
notifications and filings, and thereafter make any other required submissions,
with respect to this Agreement and the Merger required under the Securities Act,
the Exchange Act, any other applicable federal securities Laws or Blue Sky Laws,
the HSR Act and any other applicable Law; provided that, Acquiror and the
Company shall cooperate with each other in connection with all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. The Company and Acquiror
shall furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any applicable
Law in connection with the transactions contemplated by this Agreement. The
Company and each of the Shareholders hereby agree to file their respective
pre-merger notification and report forms as required under the HSR Act on or
prior to the second business day after the date hereof and to request early
termination of their respective filings.
(b) (i) The Company, the Shareholders and Acquiror shall give any
notices to third parties, and use reasonable best efforts to obtain any third
party consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or required to be
disclosed in the Company Disclosure Schedule, or (C) required to prevent a
Company Material Adverse Effect or an Acquiror Material Adverse Effect from
occurring prior to or after the Effective Time.
(ii) If a party to this Agreement fails to obtain any third party
consent described in subsection (b)(i) above, such party shall use reasonable
best efforts, and shall take any such actions reasonably requested by the other
party, to minimize any adverse effect upon the Company and Acquiror and their
respective businesses resulting, or which could reasonably be expected to result
after the Effective Time, from the failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, the
Company shall promptly notify Acquiror in writing of any pending or, to the
knowledge of the Company or the Shareholders, threatened action, proceeding or
investigation by any Governmental Entity or any other person (i) challenging or
seeking material damages in connection with the Merger or (ii) seeking to
restrain or prohibit the consummation of the Merger or otherwise limit the right
of
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Acquiror or its Subsidiaries to own or operate all or any portion of the
businesses or assets of the Company.
(d) From the date of this Agreement until the Effective Time, the
Acquiror shall promptly notify the Company in writing of any pending or, to the
knowledge of Acquiror, threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or seeking material
damages in connection with the Merger or (ii) seeking to restrain or prohibit
the consummation of the Merger or otherwise limit the right of the Acquiror or
its Subsidiaries to own or operate all or any portion of the business or assets
of the Company.
(e) The parties hereto shall do and perform or cause to be done and
performed all such further actions and things and shall execute and deliver all
such other agreements, certificates, instruments or documents as any other party
hereby may reasonably request in order to carry out the intent and purposes of
this Agreement and the consummation of the transactions contemplated hereby,
including, without limitation, negotiating in good faith the lease agreement
contemplated in the closing condition set forth in SECTION 9.01(A)(IV) hereof.
SECTION 8.02 UPDATE DISCLOSURE; BREACHES. From and after the date of this
Agreement until the Effective Time, each party shall promptly notify the other
party hereto by written update of (i) the occurrence or non-occurrence of any
event which would, or would be likely to, cause any condition to the obligations
of any party to effect the Merger and the other transactions contemplated by
this Agreement not to be satisfied, or (ii) the failure of the Company, Acquiror
or Acquiror Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the obligations of
any party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied. In addition, the Company and the Shareholders
shall notify Acquiror in writing of (i) such additional information with respect
to any matters or events discovered subsequent to the date hereof and prior to
the Effective Time, which if existing and known on the date hereof would have
rendered any representation or warranty made by the other party, or any
information contained in any Exhibit hereto, then inaccurate or incomplete and
(ii) any development after the date hereof and prior to the Effective Time
causing a breach of any representation or warranty in Article IV or V above. No
update or additional information provided pursuant to this Section 8.02 shall
affect any claim or right of any party hereto with respect to a breach of any
provision of this Agreement; provided, however, that if the Company or the
Shareholders notify Acquiror in writing of any event occurring after the date
hereof and prior to the Effective Time which would cause a breach of any
warranty contained in Article IV or V above, and Acquiror proceeds with the
Closing of the transactions contemplated hereby, none of the Company or any
Shareholder shall have any liability whatsoever for such breach so long as such
representation or warranty was true and correct as of the date hereof.
SECTION 8.03 AFFILIATE AGREEMENTS; TAX TREATMENT. SECTION 8.03 of the Company
Disclosure Schedule lists all persons who are, in the Company's reasonable
judgment, affiliates of the Company within the meaning of Rule 145 of the rules
and regulations promulgated by the SEC under the
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Securities Act ("Rule 145"). As of the date hereof, the Company has delivered
agreements from Michael Gatsas and Theodore Gatsas (collectively, the "AFFILIATE
AGREEMENTS") in a form attached to this Agreement as EXHIBIT 8.03. Acquiror
shall be entitled to issue appropriate stop transfer instructions to the
transfer agent for Acquiror Common Stock consistent with the terms of the
Affiliate Agreement.
SECTION 8.04 PUBLIC ANNOUNCEMENTS. Acquiror, the Company and the Shareholders
shall consult in good faith with each other before issuing any press release or
otherwise making any public statements with respect to the Merger and none of
Acquiror, the Company or the Shareholders shall issue any such press release or
make any such public statement without the prior written approval of the Company
or Acquiror, as the case may be, unless such disclosure is made by Acquiror and
is required by Law.
SECTION 8.05 NMS LISTING. Acquiror shall cause those shares of Acquiror Common
Stock to be issued in the Merger to be listed on the Nasdaq National Market
System by the time such Acquiror Common Stock has become registered under the
1933 Act in accordance with the provisions of the Registration Agreement,
subject only to official notice of issuance thereof.
SECTION 8.06 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
(a) Notwithstanding any right of any party to the Agreement to fully
investigate the affairs of any other party to the Agreement and notwithstanding
any knowledge of facts determined or determinable by any party pursuant to such
investigation or right of investigation, each party to the Agreement has the
right to rely fully upon the representations and warranties of any other party
to the Agreement contained in this Agreement or in any Schedule or Exhibit or
any closing certificate furnished or to be furnished by any such other party
pursuant to this Agreement or in connection with the Merger.
(b) All representations and warranties of the Company, the Shareholders
and the Acquiror contained herein and in the Schedules and the Exhibits hereto
and in any closing certificates delivered pursuant hereto shall survive the
execution and delivery of this Agreement and the Closing; PROVIDED, HOWEVER,
that, notwithstanding the foregoing, the representations and warranties set
forth in Articles IV, V and VI of this Agreement, and in the Schedules and
Exhibits hereto and in any closing certificate delivered in connection herewith,
relating to matters that would be expected to be resolved by an audit conducted
in accordance with generally accepted auditing standards shall survive the
execution and delivery of this Agreement and the Escrow Agreement and the
Closing until the date of issuance of the report of Acquiror's independent
public accountants with respect to the first audit of financial statements
containing combined operations of Acquiror and the Company (the "AUDIT DATE"),
unless a notice of claim of a breach of such representation or warranty shall
have been given prior to such date; and provided further that all other
representations and warranties set forth in Articles IV, V and VI of this
Agreement and in the Schedules and Exhibits hereto and in any closing
certificate delivered in connection herewith shall survive the execution and
delivery of this Agreement and the Escrow Agreement and the Closing until the
first anniversary of
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the Effective Time, unless a notice of claim of a breach of such representation
or warranty shall have been given prior to such date. Nothing in this Agreement
or the Escrow Agreement shall be deemed to limit any right or remedy of any
party at law or in equity or for criminal activity or fraud.
(c) With respect to claims arising in connection with actions or
omissions of the Company or any of the officers, directors, agents, employees or
shareholders of the Company which occurred prior to the Effective Time or claims
arising in connection with the negotiation and consummation of the transactions
contemplated by this Agreement, in each case only to the extent that such claim
results in a breach of representation or warranty contained herein, each of the
Shareholders hereby agrees that he will not make any claim for indemnification
against the Company by reason of the fact that he was a director, officer,
employee, or agent of any the Company or was serving at the request of the
Company as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by Acquiror or Acquiror Sub against the Shareholder (whether such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
(d) The parties to this Agreement agree to indemnify one another and to
grant each other the respective rights with regard thereto as are set forth in
the Escrow Agreement set forth as EXHIBIT 2.02 to this Agreement.
SECTION 8.07 OBLIGATIONS OF ACQUIROR SUB. Acquiror shall take all action
necessary to cause Acquiror Sub to consummate the Merger on the terms and
conditions set forth in this Agreement.
SECTION 8.08 ACCOUNTING TREATMENT. Acquiror, the Company and the Shareholders
shall use reasonable best efforts and shall cooperate fully to allow the Merger
and other transactions contemplated by this Agreement to be accounted for as a
"pooling of interests" in accordance with GAAP acceptable to the SEC.
SECTION 8.09 GOOD FAITH. Each party shall act in good faith in an attempt to
cause all the conditions precedent to its obligations under this Agreement to be
satisfied. Each party will act in good faith and take all reasonable action
within its capability necessary to render accurate as of the Effective Time its
representations and warranties required to be true as of such time contained in
this Agreement.
SECTION 8.10 PUBLICATION OF POST-MERGER RESULTS. Not later than the date upon
which Acquiror announces its results for the year ended December 31, 1997,
Acquiror shall publish a report of at least one calendar month of post-Merger
combined operations of Acquiror and the Company, sufficient to satisfy SEC rules
governing pooling of interests accounting in such form of publication which
complies with SEC rules.
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SECTION 8.11 LEGEND. Each certificate representing shares of Acquiror Common
Stock issued pursuant to the Merger shall bear a legend substantially in the
following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be offered,
sold or otherwise transferred, pledged or hypothecated unless and until
such shares are registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect that such
registration is not required."
SECTION 8.12 SHAREHOLDER PAYABLES. Each of the Shareholders shall, on or prior
to Closing, repay to the Company, or cause his family members and Affiliates to
repay to the Company, any and all amounts owed to the Company by the Shareholder
and his family members and Affiliates.
SECTION 8.13 SHAREHOLDER RECEIVABLES. The Company shall, when due, repay to each
of the Shareholders approximately $75,000, representing all principal and
interest outstanding under those certain promissory notes of the Company in
aggregate original principal amounts of $634,000 each dated December 31, 1996 in
favor of each Shareholder (the "COMPANY PROMISSORY NOTES"). The Company shall
also, in the ordinary course consistent with past practice, pay to each
Shareholder (a) the $65,000 of salary which has been accrued by the Company for
payment to each Shareholder through the date of this Agreement and (b) an amount
of salary for each of October and November 1997 equal to the amount of salary
earned by the Shareholder in each of October and November 1996.
SECTION 8.14 FILING OF TAX RETURNS.
(a) The Company shall prepare and timely file with the appropriate
authorities at its expense under the direction and control of the Shareholders
and by accountants selected by them all Tax Returns required to be filed for
taxable periods ending on or prior to the Closing Date other than any one day
Return including only the Closing Date (the "ONE DAY C RETURN"). All such Tax
Returns shall be prepared and filed in a manner consistent with prior Tax
Returns (taking into account changes which have occurred in the Company's status
as a C corporation or S corporation).
(b) Acquiror shall be responsible for preparing and filing all Tax
Returns of the Company for Tax periods beginning before and ending after the
Closing Date ("STRADDLE PERIODS") and the One Day C Return; provided, however,
that a draft of any such Tax Return shall be provided to the Shareholders at
least 20 days prior to the deadline for filing the Tax Return in question, and
such Tax Return shall be subject to the Shareholders' review and approval, which
approval shall not be unreasonably withheld or delayed.
(c) The Company, the Shareholders and Acquiror and its affiliates agree
that the income of the Company in its "S termination year" shall be determined
and allocated to the "S Short Year and C Short Year," as all of those terms are
defined in Section 1362 of the Code, based on a closing of the books as of the
last day of the S Short Year, and that any election to be made pursuant to
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Section 1362(e)(3) of the Code or otherwise, or consent thereto, which is
necessary to implement such requirement shall be timely made.
(d) All other Tax Returns shall be filed, to the extent permitted by
applicable law, on the basis that the relevant taxable period ended as of the
Closing Date (or the date prior to the Closing Date if permitted by applicable
law), unless the relevant Governmental Entity will not accept a Tax Return filed
on that basis. To the extent any Governmental Entity requires the consent of the
Shareholders, Acquiror, the Company, or their affiliates to filing on such
basis, such parties shall provide such consent. The Company shall not amend any
Tax Returns for periods ending on or prior to the Closing Date without the
Shareholders' prior written consent.
SECTION 8.15 FUTURE TAX CONTESTS.
(a) Acquiror and the Shareholders shall promptly notify each other in
writing upon receipt by them or their affiliates of notice of any pending or
threatened audit or assessment with respect to federal, state and local income
Taxes for any periods ending on or prior to the Closing Date. The Shareholders
shall have control of such audit and related proceedings, the costs and expenses
of which shall be borne by the Shareholders; provided, however, that the
Shareholders shall provide Acquiror with written notice of any proposed
settlement or compromise of any such audit or proceedings and shall not enter
into any such settlement or compromise which could adversely affect Acquiror or
the Surviving Corporation without Acquiror's prior written consent, which
consent shall not be unreasonably withheld.
(b) Acquiror shall be responsible for handling all Tax matters relating
to the Company, including dealing with and resolving audit issues, for all
Straddle Periods and the One Day C Return; provided, however, that (i) Acquiror
shall promptly notify the Shareholders in writing as to any examination by or
disputes with Taxing Authorities that relate to such periods, and (ii) the
Shareholders shall be kept informed and allowed, at their expense, to
participate therein. No tax matter for such period may be resolved without the
written consent of the Shareholders (which consent shall not be unreasonably
withheld) if the resolution of such matter would have an adverse impact on the
Shareholders, including but not limited to any indemnification obligations under
the Agreement or the Escrow Agreement.
(c) For purposes of indemnification under the Agreement and the Escrow
Agreement, in the case of any Taxes that are imposed on a periodic basis and are
payable for a Straddle Period, the portion of such Tax which relates to the
portion of such taxable period ending on the Closing Date shall (x) in the case
of any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
taxable period, and (y) in the case of any Tax based upon or related to income
or receipts, be deemed equal to the amount which would be payable if the
relevant taxable period ended on the Closing Date and the Effective Time. Any
credits relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations
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necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice of the Company. In no event shall the
Shareholders be liable for indemnification under this Agreement or the Escrow
Agreement for any Taxes with respect to (i) Taxes due with respect to the One
Day C Return or (ii) Taxes arising on account of any Section 481 of the Code
adjustments resulting from the transactions contemplated hereby.
SECTION 8.16 COOPERATION AND RECORD RETENTION. The Company will retain, and
Acquiror will cause the Company to retain, all relevant Tax Returns, schedules
and work papers, and all related material records or other documents until the
expiration of the statute of limitations (including extensions) of the taxable
years to which such Tax Returns and other documents relate, but in any event for
a period of not less than seven years. The Shareholders and Acquiror shall each
provide the other, and each shall cause the Company to provide, as the case may
be, such assistance as may reasonably be requested by any of them in connection
with the preparation of any Tax Return, or any audit or other examination by any
Governmental Entity or judicial or administrative proceeding relating to
liability for Taxes. The Company will make available, and Acquiror will cause
the Company to make available, to the Shareholders and Acquiror all records and
access to employees reasonably requested by them in connection with Taxes.
SECTION 8.17 SHAREHOLDER TAX DISTRIBUTIONS. Acquiror shall cause the Surviving
Corporation to make the Shareholder Tax Distributions on or before December 29,
1997.
SECTION 8.18 HOLIDAY BONUSES. Acquiror shall cause the Surviving Corporation to
pay the employees of the Company (other than leased employees) not less than an
aggregate of $65,000 in holiday bonuses in December 1997.
SECTION 8.19 EMPLOYEE STOCK OPTIONS. Acquiror shall, subject to (i) approval of
the Stock Option Committee of its Board of Directors, (ii) consummation of the
transactions contemplated hereby, and (iii) shareholder approval prior to
September 25, 1998 of the amendment to the 1996 Long Term Incentive Plan adopted
by the Board of Directors of Acquiror on September 25, 1997, grant to each of
the employees of the Company listed on SCHEDULE 8.19 hereto, an option to
purchase the number of shares of Acquiror Common Stock set forth opposite each
such employee's name on such Schedule 8.19 at a per share exercise price equal
to the closing sale price of Acquiror Common Stock as reported on the Nasdaq
National Market on the Closing Date. In addition, Acquiror acknowledges that if
Joseph Williams, Esq. is hired to become an employee of the Surviving
Corporation, and subject to the authorization of the Stock Option Committee of
the Board of Directors, he shall be eligible to receive options to purchase
Acquiror Common Stock.
SECTION 8.20 SEASON TICKETS. Acquiror shall, to the extent permissible by the
terms thereof, cause the Surviving Corporation to assign to Michael J. Gatsas
any season tickets for upcoming seasons of any of the Boston Celtics, Boston Red
Sox, New England Patriots and Boston Bruins that may currently be registered in
the name of the Company.
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<PAGE>
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT.
(a) Subject to waiver as set forth in Section 11.03, the respective
obligations of each party to effect the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(i) There shall not have been instituted and there shall not
be pending any action or proceeding by a Governmental Entity, and no such action
or proceeding shall have been threatened by a Governmental Entity, with
authority to institute such an action or proceeding before any court of
competent jurisdiction or governmental agency or regulatory or administrative
body, and no order or decree shall have been entered in any action or proceeding
before such court, agency or body, (a) imposing or seeking to impose limitations
on the ability of Acquiror to acquire or hold or to exercise full rights of
ownership of any securities of the Company; (b) imposing or seeking to impose
limitations on the ability of Acquiror to combine and operate the business and
assets of the Company with any of Acquiror's Subsidiaries or other operations;
(c) imposing or seeking to impose other sanctions, damages or liabilities
arising out of the Merger on the Acquiror, Acquiror Sub or the Company or any of
their Affiliates; (d) requiring or seeking to require divestiture by the
Acquiror of all or any material portion of the business, assets or property of
the Company; or (e) restraining, enjoining or prohibiting or seeking to
restrain, enjoin or prohibit the consummation of the Merger, which, in the case
of claims (a) through (d) above, would or is reasonably likely to result in a
Company Material Adverse Effect at or prior to the Effective Time or an Acquiror
Material Adverse Effect at, prior to or after the Effective Time or which, with
respect to clauses (a) through (e) above, would or is reasonably likely to
subject any of their respective Affiliates to substantial penalties or criminal
liability; PROVIDED, HOWEVER that prior to invoking this condition the party
seeking to invoke it shall have used its commercially reasonable efforts to have
any such action or proceeding dismissed or such order or decree vacated.
(ii) All consents, waivers, approvals and authorizations
required to be obtained, and all filings or notices required to be made, by
Acquiror and Acquiror Sub and the Company prior to consummation of the
transactions contemplated in this Agreement (other than the filing of Articles
of Merger in accordance with the New Hampshire Act) shall have been obtained
from and made with all required Governmental Entities, except for such consents,
waivers, approvals or authorizations which the failure to obtain, or such
filings or notices which the failure to make, would not have a Company Material
Adverse Effect prior to or after the Effective Time or an Acquiror Material
Adverse Effect after the Effective Time or be reasonably likely to subject the
Company, Acquiror, Acquiror Sub or any of their respective officers or directors
to substantial penalties or criminal liability.
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(iii) Any applicable waiting period imposed by the HSR Act
shall have terminated and no request for additional information under the HSR
Act shall be outstanding.
(iv) A lease agreement for the premises located at 111 Charles
Way, Manchester, New Hampshire, in a form mutually acceptable to the
Shareholders and Acquiror and consistent with the terms set forth on SCHEDULE
9.01(A)(IV) hereto, shall have been negotiated executed by Acquiror Sub and
Staffing Realty LLC.
(b) Subject to waiver as set forth in Section 11.03, the respective
obligations of the Company and the Shareholders to effect the Merger and the
other transactions contemplated by this Agreement shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(i) The Escrow Agreement, substantially in the form of
attached EXHIBIT 2.02, shall have been executed by the
Acquiror.
(ii) The Registration Agreement, substantially in the form of
attached EXHIBIT 2.03, shall have been executed by the
Acquiror.
(iii) Each of the representations and warranties of Acquiror
contained in this Agreement shall be true and correct in all
material respects as of the Effective Time, as though made on
and as of the Effective Time; PROVIDED, HOWEVER, that those
representations and warranties which address matters only as
of a particular date shall remain true and correct in all
material respects as of such date. The Company shall have
received a certificate of Acquiror, executed by each of the
Chief Executive Officer and Chief Financial Officer of
Acquiror, to that effect.
(iv) Acquiror shall have performed or complied in all material
respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior
to the Effective Time. The Company shall have received a
certificate of Acquiror, executed by each of the Chief
Executive Officer and Chief Financial Officer of Acquiror, to
that effect.
(v) There shall not have occurred any Acquiror Material
Adverse Effect since the date of this Agreement and prior to
the earlier of receipt of early termination of Acquiror's HSR
Act pre-merger notification and report forms filed by each of
the Company and the Shareholders or the expiration of the
respective waiting period applicable thereto.
(vi) The Acquiror shall have obtained the consents and
approvals necessary to the consummation of the Merger, except
those for which failure to obtain such consents and approvals
would not have an Acquiror Material Adverse Effect after the
Effective Time.
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<PAGE>
(vii) All other certificates, instruments and documents
required by law to effect the Merger will have been received
in form and substance satisfactory to the Company and the
Shareholders.
(viii) The Shareholders shall have received an opinion dated
as of the Closing of Steel Hector & Davis LLP, in a form
mutually acceptable to the Shareholders and Steel Hector &
Davis LLP.
(ix) The Board of Directors of Acquiror shall have authorized,
subject to consummation of the Merger and to shareholder
approval prior to September 25, 1998 of the amendment to the
1996 Long Term Incentive Plan adopted by the Board of
Directors of Acquiror on September 25, 1997, the grant to each
of the Shareholders of an option to purchase 15,000 shares of
Acquiror Common Stock at a per share exercise price equal to
the closing sale price of the Acquiror Common Stock as
reported on the Nasdaq National Market on the Closing Date,
and shall have directed the proper officers of Acquiror to
execute, and a proper officer of Acquiror shall within one
business day of the Closing Date execute, a stock option
agreement in substantially the form attached hereto as
SCHEDULE 9.01(B)(IX) to evidence such grant.
(c) Subject to waiver as set forth in Section 11.03, the obligations of
the Acquiror to effect the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(i) The Escrow Agreement, substantially in the form of
attached EXHIBIT 2.02, shall have been executed by the
Shareholders.
(ii) The Registration Agreement, substantially in the form of
attached EXHIBIT 2.03, shall have been executed by the
Shareholders.
(iii) Each of the representations and warranties of the
Company and the Shareholders contained in this Agreement that
is qualified as to materiality shall be true and correct as of
the Effective Time as though made on and as of the Effective
Time, and each of the representations and warranties of the
Company and the Shareholders that is not so qualified shall be
true and correct in all material respects as of the Effective
Time, as though made on and as of the Effective Time;
PROVIDED, HOWEVER, that those representations and warranties
which address matters only as of a particular date shall
remain true and correct in all material respects as of such
date. Acquiror shall have received a certificate of the
Shareholders to that effect and a certificate of the Company,
executed by the Chief Executive Officer of the Company, to
that effect.
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<PAGE>
(iv) The Company and the Shareholders shall have performed or
complied in all material respects with all agreements and
covenants required by this Agreement to be performed or
complied with on or prior to the Effective Time. Acquiror
shall have received a certificate of the Shareholders to that
effect and a certificate of the Company, executed by the Chief
Executive Officer of the Company, to that effect.
(v) The Company shall have obtained the consents and approvals
set forth in SECTION 4.05 of the Company Disclosure Schedule
and any other consents and approvals of third parties
necessary to the consummation of the Merger, except those for
which failure to obtain such consents and approvals would not
have a Company Material Adverse Effect prior to or after the
Effective Time or an Acquiror Material Adverse Effect after
the Effective Time.
(vi) There shall not have occurred any Company Material
Adverse Effect since the date of this Agreement and prior to
the earlier of receipt of early termination of the HSR Act
pre-merger notification and report forms filed by each of the
Company and the Shareholders or the expiration of the
respective waiting period applicable thereto.
(vii) All other certificates, opinions, instruments and
documents required by law to effect the Merger will have been
received in form and substance satisfactory to Acquiror.
(viii) The related party agreements set forth in SECTION 4.18
of the Company Disclosure Schedule shall have been terminated
and all obligations of the Company thereunder shall have been
deemed to be fully satisfied or cancelled and the Acquiror
shall have received evidence to such effect reasonably
satisfactory thereto.
(ix) On or prior to the Closing, the Company's line of credit
with Fleet Bank-New Hampshire ("FLEET BANK") shall be
terminated and all liens, encumbrances and restrictions on the
assets or stock of the Company in favor of Fleet Bank securing
such line of credit, shall have been released and copies of
executed UCC-3 Statements of Change terminating such liens,
encumbrances and restrictions shall have been provided to
Acquiror, and the Company shall have been fully and
unconditionally released from all obligations and liability
under any promissory note(s) related thereto.
(x) Acquiror shall have received an opinion dated as of the
Closing of Hutchins, Wheeler & Dittmar, in a form mutually
acceptable to Steel Hector & Davis LLP and Hutchins, Wheeler &
Dittmar and an opinion dated as of the Closing of New
Hampshire local counsel reasonably satisfactory to Acquiror,
in a form mutually acceptable to Steel Hector & Davis LLP and
such counsel.
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<PAGE>
(xi) The Company shall have been fully and unconditionally
released from all obligations and liabilities under any and
all guarantees by the Company of any obligations or
indebtedness of either Shareholder or any affiliate thereof,
including, without limitation, Staffing Realty Limited
Liability Corp.
(xii) All amounts owed to the Company by either Shareholder,
or by any family member or Affiliate thereof, shall have been
paid in full.
(xiii) That certain Employment Agreement dated as of October
1, 1995, by and between Richard L. Fish and the Company, as
amended through the date hereof, shall have been terminated
and shall be of no further force and effect.
(xiv) The Company shall have agreed in writing with Business
Contract Staffing, Inc. and Complete Temporary Service, Inc.
that the balance of all principal and interest remaining
outstanding under the four promissory notes of the Company
dated October 1, 1995 in favor of such entities in aggregate
principal amounts of $216,680, $650,000, $108,330, and
$324,990 shall, notwithstanding the occurrence of a change in
control of the Company upon consummation of the transactions
contemplated hereby, be due and payable on January 1, 1998.
ARTICLE X
TERMINATION; AMENDMENT
SECTION 10.01 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of Acquiror and the Company;
(b) (i) by Acquiror, if there has been a breach by the Company or the
Shareholders of any of their respective covenants or agreements contained in
this Agreement or if any of the representations and warranties of the Company or
the Shareholders shall have become untrue; or
(ii) by the Company, if there has been a breach by Acquiror of
any of its covenants or agreements contained in this Agreement or if any of the
representations and warranties of Acquiror shall have become untrue;
(c) by either Acquiror or the Company if any decree, permanent
injunction, judgment, order or other action by any court of competent
jurisdiction or any Governmental Entity preventing or prohibiting consummation
of the Merger shall have become final and nonappealable; or
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<PAGE>
(d) by either Acquiror or the Company if the Merger shall not have been
consummated before December 1, 1997.
SECTION 10.02 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 10.01, this Agreement shall forthwith become void,
and there shall be no liability under this Agreement on the part of Acquiror or
the Company or any of their respective stockholders, officers or directors and
all rights and obligations of each party hereto shall cease, except that nothing
shall relieve any party hereto from any liability for breach of this Agreement
(including, without limitation, liability for certain Expenses as provided in
Section 10.03 hereof). Notwithstanding anything herein to the contrary, the
parties agree that if this Agreement is terminated, the obligations of the
parties pursuant to the Confidentiality Agreement shall survive the termination
of this Agreement.
SECTION 10.03 FEES AND EXPENSES.
(a) All Expenses (as defined below) incurred by the parties shall be
borne solely and entirely by the party which has incurred the same, except that
in the event of a termination of this Agreement pursuant to Section 10.01(b),
the non-terminating party shall reimburse the terminating party for all
Expenses.
(b) "EXPENSES" as used in this Agreement shall include all reasonable
out-of-pocket expenses (including without limitation, all reasonable fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party and its Affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the solicitation of stockholder approvals and all
other matters related to the consummation of the transactions contemplated by
this Agreement.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, on the third business day after
deposit in the mail if mailed by registered or certified mail (postage prepaid,
return receipt requested) or on the day of delivery by Federal Express or other
nationally recognized
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<PAGE>
courier to the parties at the following addresses (or at such other address for
a party as shall be specified by like changes of address) or sent by electronic
transmission to the telecopier number specified below:
<TABLE>
<CAPTION>
<S> <C>
If to Acquiror: The Vincam Group, Inc.
2850 Douglas Road
Coral Gables, FL 22134
Telecopier No.: (305) 460-2396
Attention: General Counsel
With a copy to: Steel Hector & Davis LLP
200 South Biscayne Boulevard, 40th Floor
Miami, Florida 33131-2398
Telecopier No.: (305) 577-7001
Attention: Ira N. Rosner, P.A.
If to the Company: Staffing Network, Inc.
111 Charles Way
Manchester, NH 03108-6430
Telecopier No.: (603) 627-7680
Attention: Michael J. Gatsas
With a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopier No.: (617) 951-1295
Attention: James Westra, Esq.
If to Michael J. Gatsas: 477 Kearney Circle
Manchester, NH 03104
If to Theodore L. Gatsas: 105 Birchwood Road
Manchester, NH 03104
In each case with a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopier No.: (617) 951-1295
Attention: James Westra, Esq.
</TABLE>
SECTION 11.02 AMENDMENT. Subject to applicable provisions of the New Hampshire
Act or the Florida Act, this Agreement may be amended by the parties by action
taken by or pursuant to the
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authorization of their respective Boards of Directors at any time prior to the
Effective Time. This Agreement may not be amended except by an instrument in
writing signed by the parties.
SECTION 11.03 WAIVER. At any time prior to the Effective Time, any party may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties to be performed for the benefit of the waiving party, (b)
waive any inaccuracies in the representations and warranties of the other
parties contained in this Agreement or in any document delivered pursuant to
this Agreement for the benefit of the waiving party and (c) waive compliance by
the other parties with any of the agreements or conditions compliance with which
is for the benefit of the waiving party contained in this Agreement (to the
extent permitted by law). Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by the party or parties to be bound
thereby. The waiver by any party hereto of any inaccuracy in a representation
and warranty or of compliance with any agreement or condition for its benefit
shall not be deemed a waiver of any other inaccuracy or of compliance with any
other provision hereof.
SECTION 11.04 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 11.05 SEVERABILITY. If any term or other provision of this Agreement is
finally adjudicated by a court of competent jurisdiction to be invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 11.06 ENTIRE AGREEMENT. This Agreement (together with the Exhibits, the
Schedules and any closing certificates) is intended as a full integration of the
parties' understandings, constitutes the entire agreement of the parties and
supersedes all prior agreements and undertakings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof.
SECTION 11.07 ASSIGNMENT. This Agreement shall not be assigned without the
written consent of the other parties hereto.
SECTION 11.08 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party and to that party's permitted
successors, assigns, heirs and personal representatives, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
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<PAGE>
SECTION 11.09 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the Laws of the State of Florida, regardless of the Laws
that might otherwise govern under applicable principles of conflicts of law.
SECTION 11.10 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be executed
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement. The
parties hereby acknowledge and agree that facsimile signatures of this Agreement
and any Exhibit hereto shall have the same force and effect as original
signatures.
SECTION 11.11 ATTORNEYS' FEES. If any party shall commence any action or
proceeding against another party in order to enforce the provisions hereof, or
to recover damages as the result of the alleged breach of any of the provisions
hereof, the prevailing party therein shall be entitled to recover all reasonable
costs incurred in connection therewith, including, but not limited to,
reasonable attorneys' fees and expenses.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, Acquiror, Company and the Shareholders have caused
this Agreement to be executed as of the date first written above by their
respective officers duly authorized.
THE VINCAM GROUP, INC.
By: /S/ CARLOS A. SALADRIGAS
-------------------------------
Name: CARLOS A. SALADRIGAS
Title: CHAIRMAN AND CEO
STAFFING NETWORK, INC.
By: /S/ MICHAEL J. GATSAS
--------------------------------
Name: MICHAEL J. GATSAS
Title: PRESIDENT
SHAREHOLDERS
/S/ MICHAEL J. GATSAS
- ---------------------------------------
Michael J. Gatsas
/S/ THEODORE L. GATSAS
- ---------------------------------------
Theodore L. Gatsas
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