<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
COMMISSION FILE NO. 0-21963
THE JUDGE GROUP, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1726661
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
TWO BALA PLAZA, SUITE 800
BALA CYNWYD, PENNSYLVANIA 19004
(Address of principal executive offices, including zip code)
(610) 667-7700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of August 6, 1999, 13,940,647 shares of the Registrant's Common
Stock, $0.01 par value, were outstanding.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
THE JUDGE GROUP, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NUMBER PAGE(S)
- ------ -------
PART I - FINANCIAL INFORMATION
------------------------------
<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1999 AND DECEMBER 31, 1998 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998 3
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 6-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS 17
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 17
</TABLE>
i
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 10,547 $ 43,568
Accounts receivable, net 21,356,344 21,767,995
Inventories 125,483 1,185,302
Prepaid income taxes and deferred taxes 4,373,563 1,909,919
Other 3,041,796 977,295
----------- -----------
TOTAL CURRENT ASSETS 28,907,733 25,884,079
----------- -----------
PROPERTY AND EQUIPMENT
Property and Equipment 5,285,845 8,166,048
Less: accumulated depreciation and amortization 2,087,882 3,220,212
----------- -----------
NET PROPERTY AND EQUIPMENT 3,197,963 4,945,836
----------- -----------
OTHER ASSETS
Deposits and other 1,270,790 716,634
Covenant not to compete, net of accumulated amortization of $59,984, 1999 and
$37,490, 1998 29,992 52,486
Goodwill, net of accumulated amortization of $12,153,659, 1999 and $4,731,788, 8,940,940 16,286,392
1998
Net Assets to be disposed of 420,000 --
----------- -----------
TOTAL OTHER ASSETS 10,661,722 17,055,512
----------- -----------
TOTAL ASSETS $42,767,418 $47,885,427
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 1,030,779 $ 743,677
Accounts payable and accrued expenses 9,363,781 8,679,519
Payroll and sales taxes 676,205 576,562
Other liabilities 130,000 2,634,954
Deferred revenue 304,333 1,035,558
----------- -----------
TOTAL CURRENT LIABILITIES 11,505,098 13,670,270
----------- -----------
LONG-TERM LIABILITIES
Note payable, Bank 14,315,999 9,881,595
Deferred rent obligation 722,095 666,879
Debt obligations, net of current portion 1,313,568 585,490
----------- -----------
TOTAL LONG-TERM LIABILITIES 16,351,662 11,133,964
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000 shares authorized; at June 30, 1999,
13,984,373 issued and 13,944,373 outstanding; at December 31, 1998, 13,541,302 139,843 135,412
shares issued and 13,501,302 outstanding
Preferred stock, $.01 par value, 10,000,000 shares authorized -- --
Additional paid-in capital 23,905,057 24,900,474
Deficit (8,914,242) (1,734,693)
----------- -----------
15,130,658 23,301,193
Less treasury stock, 40,000 shares; at cost 220,000 220,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 14,910,658 23,081,193
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $42,767,418 $47,885,427
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET REVENUES $58,329,194 $44,575,287
----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of items shown separately below) 38,978,064 29,897,154
Selling and operating 10,852,836 7,946,885
General and administrative 6,481,066 4,425,195
----------- -----------
TOTAL COSTS AND EXPENSES 56,311,966 42,269,234
----------- -----------
INCOME FROM OPERATIONS 2,017,228 2,306,053
Other income (expense), net (255,832) 57,776
----------- -----------
Income before income tax expense 1,761,396 2,363,829
Income tax expense 737,933 971,556
----------- -----------
Income from continuing operations 1,023,463 1,392,273
Discontinued operations:
Loss from discontinued operations (net of income tax benefit of
$989,111, 1999 and $346,872, 1998) (1,920,040) (519,627)
Loss on disposal of discontinued operations, including provision of $188,000
for operating losses during phase-out period (net of income tax benefit of $1,998,908) (6,282,972) 0
----------- -----------
NET INCOME (LOSS) ($ 7,179,549) $ 872,646
=========== ===========
NET INCOME (LOSS) PER SHARE: (1)
BASIC
Weighted Average Shares Outstanding 13,574,739 13,419,350
=========== ===========
Basic income per share from continuing operations $0.08 $0.10
Basic loss per share from discontinued operations ($0.14) ($0.03)
Basic loss per share from disposal of discontinued operations ($0.47) $0.00
----------- -----------
Basic income (loss) per share ($0.53) $0.07
=========== ===========
DILUTED
Weighted Average Shares Outstanding 13,630,789 13,442,390
=========== ===========
Diluted income per share from continuing operations $0.08 $0.10
Diluted loss per share from discontinued operations ($0.14) ($0.03)
Diluted loss per share from disposal of discontinued operations ($0.47) $0.00
----------- -----------
Diluted income (loss) per share ($0.53) $0.07
=========== ===========
</TABLE>
(1) Earnings (Loss) per share amounts are rounded
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
NET REVENUES $29,756,882 $23,530,177
----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of items shown separately below) 19,763,987 15,416,339
Selling and operating 5,571,121 4,329,937
General and administrative 3,370,202 2,439,791
----------- -----------
TOTAL COSTS AND EXPENSES 28,705,310 22,186,067
----------- -----------
INCOME FROM OPERATIONS 1,051,572 1,344,110
Other income (expense), net (154,767) (3,690)
----------- -----------
Income before income tax expense 896,805 1,340,420
Income tax expense 374,081 531,847
----------- -----------
Income from continuing operations 522,724 808,573
Discontinued operations:
Loss from operations of discontinued IMS (net of income tax benefit of
$432,422, 1999 and $199,828, 1998) (839,410) (299,061)
Loss on disposal of IMS, including provision of $188,000 for operating
losses during phase-out period (net of income tax benefit of $1,998,908) (6,282,972) 0
----------- -----------
NET INCOME (LOSS) ($ 6,599,658) $ 509,512
=========== ===========
NET INCOME (LOSS) PER SHARE: (1)
BASIC
Weighted Average Shares Outstanding 13,647,369 13,468,958
=========== ===========
Basic income per share from continuing operations $0.04 $0.06
Basic loss per share from discontinued operations ($0.06) ($0.02)
Basic loss per share from disposal of discontinued operations ($0.46) $0.00
----------- -----------
Basic income (loss) per share ($0.48) $0.04
=========== ===========
DILUTED
Weighted Average Shares Outstanding 13,703,419 13,491,998
=========== ===========
Diluted income per share from continuing operations $0.04 $0.06
Diluted loss per share from discontinued operations ($0.06) ($0.02)
Diluted loss per share from disposal of discontinued operations ($0.46) $0.00
----------- -----------
Diluted income (loss) per share ($0.48) $0.04
=========== ===========
</TABLE>
(1) Earnings (Loss) per share amounts are rounded
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Common Stock
-------------------------- Additional Retained Treasury
Shares Amount Paid-In Capital Earnings Stock Total
---------- -------- --------------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 13,541,302 $135,412 $24,900,474 ($1,734,693) ($220,000) $23,081,193
Acquisition transactions 443,071 4,431 (4,431) -- -- --
Contingent Stock Price Payable
-- -- (461,875) -- -- (461,875)
Forfeited Earnout Stock
Payable -- -- (529,111) -- -- (529,111)
Net Income (Loss) -- -- -- ($7,179,549) -- ($ 7,179,549)
---------- -------- ----------- ---------- -------- -----------
Balance, June 30, 1999 13,984,373 $139,843 $23,905,057 ($8,914,242) ($220,000) $14,910,658
========== ======== =========== ========== ======== ===========
</TABLE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Common Stock
-------------------------- Additional Retained Treasury
Shares Amount Paid-In Capital Earnings Stock Total
---------- -------- --------------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 13,347,969 $133,479 $22,758,517 $3,382,300 $ -- $26,274,296
Acquisition transactions 183,333 1,833 865,874 -- -- 867,707
Purchase treasury stock -- -- -- -- (220,000) (220,000)
Net Income
-- -- -- 872,646 -- 872,646
---------- -------- ----------- ---------- -------- -----------
Balance, June 30, 1998 13,531,302 $135,312 $23,624,391 $4,254,946 ($220,000) $27,794,649
========== ======== =========== ========== ======== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) for the period ($7,179,549) $ 872,646
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation 714,604 452,121
Amortization 380,189 290,953
Loss on disposal of discontinued operations 6,282,972 --
Deferred rent (19,784) (1,278)
Provision for losses on accounts receivable 514,183 47,890
Loss on disposal of equipment 200,175 --
Changes in operating assets and liabilities:
(Increase) decrease in:
Short term investments -- 5,500,000
Accounts receivable (3,678,792) (2,202,153)
Inventories (270,336) 386,026
Deposits and other (66,391) (374,133)
Prepaid income taxes (464,736) --
Other current assets (202,622) (965,312)
Increase (decrease) in:
Accounts payable and accrued expenses (582,214) 4,099,543
Payroll and sales taxes 99,643 483,879
Deferred revenue (77,409) (68,522)
Income taxes payable 0 (263,945)
--------- ----------
Net cash provided by (used in) operating activities (4,350,067) 8,257,715
--------- ----------
INVESTING ACTIVITIES
Purchases of property and equipment (603,413) (1,721,903)
Purchase of companies -- (6,869,109)
Covenant not to compete -- (89,976)
--------- ----------
Net cash used in investing activities (603,413) (8,680,988)
--------- ----------
FINANCING ACTIVITIES
Cash acquired in business combination -- 159,068
Proceeds from (repayments of) notes payable, bank, net 4,479,404 2,500,000
Proceeds (repayments) of bank overdrafts 1,518,626 --
Proceeds from lease payable, bank 1,425,000 --
Principal payments on long-term debt (487,571) (337,721)
Repayment of bank note payable related to company acquired -- (476,576)
Advances receivable related to company acquired -- (319,620)
Purchase of Treasury Stock -- (220,000)
Contingent stock payable (2,015,000) --
--------- ----------
Net cash provided by financing activities 4,920,459 1,305,151
--------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (33,021) 881,878
CASH AND CASH EQUIVALENTS, BEGINNING 43,568 1,684,482
--------- ----------
CASH AND CASH EQUIVALENTS, ENDING $10,547 $2,566,360
========= ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for Interest $264,000 $25,000
========= ==========
Cash paid during the year for Income taxes $396,000 $876,000
========= ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NOTE 1. DESCRIPTION OF BUSINESS
The Judge Group, Inc. (the "Company") a Pennsylvania corporation founded in
1970, provides information technology ("IT") and engineering professionals to
its clients on both a temporary basis (through its "Contract Placement"
business) and a permanent basis (through its "Permanent Placement" business) as
well as IT training (through its "IT Training" business) on a range of software
and network applications to corporate, governmental and individual clients. The
Company also provides computer network and document management system
integration, implementation, maintenance and training (through its "Information
Management Solutions" business ("IMS")). On June 15, 1999 the Company adopted a
plan to dispose of the IMS business through sale of substantially all of the
assets of that business (See Note 3). At June 30, 1999, the Company's continuing
operations, headquartered in Bala Cynwyd, Pennsylvania, operated 16 regional
offices in twelve states in the United States. A substantial portion of the
Company's revenues are derived from customers located in the Mid-Atlantic
corridor of the United States.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and the Company's wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
The financial statements as of June 30, 1999 and for the three months and six
months ended June 30, 1999 and 1998 are unaudited; however, in the opinion of
management, such statements include all adjustments, consisting solely of normal
recurring adjustments, necessary for a fair presentation of the results for the
periods presented.
The interim financial statements should be read in conjunction with the
financial statements for the fiscal year ended December 31, 1998 and the notes
thereto.
Risks and Uncertainties
The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for future interim periods or for the full
year ending December 31, 1999.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Intangible Assets - Goodwill
Goodwill represents the excess of the cost of businesses acquired by the Company
over the fair value of their net assets at the date of acquisition and is being
amortized on the straight-line method over terms ranging from ten years to
twenty-five years. Amortization of goodwill is based upon management's
estimates, and it is reasonably possible that such estimates may change in the
near term. Amortization of goodwill for the three months ended June 30, 1999 and
1998 was approximately $101,000 and $97,000, respectively, and for the six
months ended June 30, 1999 and 1998 was approximately $202,000 and $144,000,
respectively, and is included in general and administrative expense in the
consolidated statements of operations. An additional $7,063,000 of goodwill was
written off as part of the disposal of the IMS business, and is included in the
loss on disposal of IMS in the accompanying consolidated statements of
operations.
6
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Interim Financial Reporting
For interim financial reporting purposes, costs and expenses are accounted for
in accordance with Accounting Principles Board Opinion No. 28 ("APB 28").
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
Statement established standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
established standards for related disclosures about products and services,
geographic areas and major customers. The Company adopted this statement in
1998. Effective June 1999 with the disposal of the IMS segment, the Company's
continuing operations consist of only one segment, IT Staffing, comprised of the
Contract Placement business, Permanent Placement business, and IT Training
business.
Earnings Per Share
Basic earnings (loss) per share amounts are computed based on net income (loss)
divided by the weighted average number of shares actually outstanding, and
reduced by treasury shares of the Company. The number of shares used in the
computation for the six months ended June 30, 1999 and 1998 were approximately
13,575,000, and 13,419,000, respectively. The number of shares used in the
computation for the three months ended June 30, 1999 and 1998 were approximately
13,647,000 and 13,469,000, respectively.
Diluted earnings (loss) per share amounts for the three months and six months
ended June 30, 1999 and 1998 are based on the weighted average number of shares
calculated for basic earnings (loss) per share purposes increased by the number
of shares that would be outstanding assuming the exercise of all outstanding
stock options issued by the Company. The number of shares used in the
computation for the six months ended June 30, 1999 and 1998 were approximately
13,631,000 and 13,442,000, respectively. The number of shares used in the
computation for the three months ended June 30, 1999 and 1998 were approximately
13,703,000 and 13,492,000, respectively. Outstanding options to purchase
1,981,550 common shares in 1999 and 1,190,750 common shares in 1998 were not
included in the computation of diluted earnings per share because the option
exercise price was greater than the average market price of the Company's common
shares.
On February 26, 1998 the Company repurchased 40,000 common shares at a price of
$5.50 per share, which shares are considered treasury stock.
NOTE 3. DISCONTINUED OPERATIONS
On June 15, 1999 the Company adopted a formal plan to sell the Information
Management Solutions ("IMS") business. Effective June 30, 1999 a significant
portion of the net assets of the IMS business were sold for total consideration
of $3,400,584 consisting of cash, note receivable, and forgiveness of amounts
payable to the buyer. The remainder of the net assets to be disposed of, at
their net realizable values, are separately classified in the accompanying
balance sheet at June 30, 1999. The December 31, 1998 balance sheet has not been
restated. Assets sold or to be sold consisted primarily of accounts receivable,
inventory, and property and equipment. Liabilities assumed or to be assumed by
the respective purchasers consist primarily of accounts payable, accrued
expenses, and equipment leases payable.
The loss on disposal of the IMS business of $6,282,972 represents the actual and
estimated loss on the disposal of the assets and a provision of $188,000 for
expected operating losses during the phase-out period from July 1, 1999 through
July 31, 1999.
7
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NOTE 3. DISCONTINUED OPERATIONS (continued)
Operating results of the IMS business for the three and six months ended June
30, 1999 are shown separately in the accompanying income statements. The income
statements for the respective periods in 1998 have been restated and operating
results of the IMS business are also shown separately.
Net revenues of the IMS business for the three and six months ended June 30,
1999 were $6,820,193 and $3,814,884, respectively. Net revenues for the
corresponding periods in 1998 were $8,290,710 and $4,246,004, respectively.
These amounts are not included in net revenues in the accompanying income
statements for the respective periods.
NOTE 4. NOTE PAYABLE, BANK
Note payable, Bank, consists of advances to the Company under a $25,000,000 line
of credit facility. The line of credit bears interest at the bank's prime rate
(7.75% at June 30, 1999) or, at the option of the Company, a portion of the
outstanding balance bears interest at 200 basis points over the London
Inter-Bank Offering Rate. Maximum permitted borrowings thereunder are the lesser
of $25,000,000 or 85% of qualified accounts receivable, as defined in the line
of credit agreement. The line of credit is collateralized by substantially all
of the Company's assets, expires May 31, 2003 and is subject to certain
covenants which from time to time have been reset by the Bank, including
financial covenants requiring certain levels of net worth, debt service ratios,
fixed charge coverage and limiting capital expenditures. In addition, the
Company and all of its subsidiaries are jointly and severally responsible for
all of the debt outstanding under the line.
Included in accounts payable and accrued expenses at June 30, 1999 were
approximately $3,104,000 of bank overdrafts.
NOTE 5. LONG-TERM DEBT
At June 30, 1999 long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30, 1999
-------------
<S> <C>
Note Payable; payable in various monthly installments plus interest at 8%, through March 2000 $ 100,000
Note Payable; payable in 24 monthly installments of $12,500 plus interest at 8%, through March 2000 100,000
Note Payable; payable in 8 quarterly payments of $102,333 including interest at 8%, through December 2000 573,210
Note Payable; payable in 36 monthly installments of $6,944 plus interest at 8%, through October 2001 187,500
Capital lease obligation; payable in monthly installments of $41,987, including interest and taxes,
through March 2002; and a final payment of $213,750 in April 2002; the lease transfers ownership of
certain office equipment to the Company at the end of the lease term 1,326,540
Capital lease obligations; payable in monthly installments aggregating $1,338, including interest and
taxes, through May 2004; the leases transfer ownership of certain computer equipment to the Company at
the end of the respective leases 57,097
----------
2,344,347
Less: Current portion (1,030,779)
----------
Long-term portion $1,313,568
==========
</TABLE>
8
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NOTE 5. LONG-TERM DEBT (continued)
Maturities of long-term debt are as follows:
Year Ending June 30, Amount
-------------------- ------
2000 $1,030,779
2001 702,525
2002 585,833
2003 13,612
2004 11,598
----------
$2,344,347
==========
Interest expense charged to operations was approximately $157,000 and $15,000
for the three months ended June 30, 1999 and 1998, respectively, and
approximately $260,000 and $25,000 for the six months ended June 30, 1999 and
1998, respectively.
NOTE 6. INCOME TAXES
The Company files a consolidated Federal income tax return with its wholly-owned
subsidiaries. State income taxes are determined on the basis of filing separate
returns for each subsidiary as required by applicable state regulations.
In accordance with Accounting Principles Board Opinion No. 28 (Interim Financial
Reporting), income taxes (benefit) are calculated at the estimated effective
annual (federal and state) tax rates.
The effective tax (benefit) rate for 1999 and 1998 is higher (lower) than the
applicable federal statutory tax rate of 34% due to the Company's state tax
liabilities (benefit) and certain expenses that were not deductible for tax
purposes.
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is aware of the issues associated with the programming code in many
existing computer systems as the year 2000 approaches. The "Year 2000" problem
is pervasive and complex, as many computer systems will be affected in some way
by the rollover of the two-digit year value to 00. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The "Year 2000" issue creates risk for the Company from unforeseen
problems in its own computer systems and from those of its suppliers as well as
third parties for whom the Company implements "Year 2000" solutions on their
computer systems.
The Company believes its recently implemented financial information system is
"Year 2000" compliant. Further, the Company is currently in the process of
replacing its candidate and client databases utilized in its Contract Placement
and Permanent Placement business with software systems that are represented to
be "Year 2000" compliant. The Company is analyzing its remaining computer
systems to identify any potential "Year 2000" issues and will take appropriate
corrective action based on the results of such analysis. Management does not
expect that total incremental spending by the Company to deal with the "Year
2000" problem will be material. Management believes, based on its available
information, that it will be able to manage its total "Year 2000" transition
without any material adverse effects on its business operations or financial
condition.
9
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
NOTE 8. SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE
Stock Option Plan
On September 4, 1996 the Company adopted the 1996 Incentive Stock Option and
Non-Qualified Stock Option Plan (the "Incentive Plan") for key employees and
non-employee directors. Options may be granted under the Incentive Plan to
purchase up to a maximum of 3,500,000 of the Company's common shares, subject to
certain adjustments and restrictions. The price of each option is the fair
market value of the Company's common shares on the date of the grant. The
options granted are generally subject to a four-year vesting schedule in equal
increments annually and are exercisable any time after vesting up to 10 years
from the grant date. The 204,300 options previously granted to employees in the
discontinued IMS segment vested 100% on August 2, 1999 pursuant to the Incentive
Plan and the various asset purchase agreements. The former IMS employees, all of
whom were terminated by the Company, have until November 1, 1999 to exercise
their options before they expire.
During the six months ended June 30, 1999, the Company granted options to
purchase 211,500 common shares at a weighted average exercise price of $1.56 per
common share. No options were exercised during the period ended June 30, 1999.
The Company accounts for its Incentive Plan in accordance with Accounting
Principles Board Opinion No. 25 and related interpretations. Accordingly, no
compensation expense has been recognized for the Incentive Plan.
NOTE 9. STATEMENT OF CASH FLOWS
Supplemental disclosure of non-cash investing and financing transactions:
During the six months ended June 30, 1999, the Company entered into the
following non-cash transactions.
o entered into certain lease arrangements for the purchase of equipment in the
amount of approximately $345,700
o recorded the following with respect to the disposition of the IMS segment:
reduced contingent stock price payables which were forgiven in the amount of
approximately $952,000
reduced earnouts payable which were forgiven in the amount of approximately
$718,000
recorded note and advances receivable of $2,223,000 related to disposition
proceeds
wrote off approximately $7,063,000 of goodwill
During the six months ended June 30, 1998, the Company entered into the
following non-cash transactions:
o incurred long-term debt ($890,000) for certain business combinations;
o incurred goodwill of $2,390,000 in the business combination with ISI; and
o incurred goodwill of $750,000 in the business combination with Cella.
o incurred goodwill of $710,000 in the business combination with On-Site.
o incurred goodwill of $998,000 in the business combination with AOP.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
The following discussion should be read in conjunction with the condensed
consolidated financial statements of The Judge Group, Inc. (the "Company") and
related notes thereto appearing elsewhere in this Report and in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and the
Company's Report on Form 10-Q for the quarter ended March 31, 1999.
OVERVIEW
In January 1999 the Company reorganized its four operating units into two
business segments to enable financial analysis that more closely tracks its
lines of business. The Company's Contract Placement, Permanent Placement and IT
Training operating units were consolidated within the IT Staffing segment. The
Information Management Solutions ("IMS") business was the other segment, which
the Company adopted a plan to dispose of on June 15, 1999. Through sales
occurring in June through August 1999, the Company divested substantially all of
the assets of the IMS business. As of June 30, 1999 a significant portion of
those assets had been sold for total consideration of approximately $3,400,000
consisting of cash, note receivable, and forgiveness of amounts payable to the
buyer. The remainder of the assets to be sold are separately classified on the
accompanying balance sheet at June 30, 1999 at their net realizable value.
Assets sold, or to be sold, consisted primarily of accounts receivable,
inventory, and property and equipment. Liabilities assumed or to be assumed
consist primarily of trade accounts payable, accrued expenses, and equipment
leases payable. The Company incurred a loss on disposal of the IMS business of
$6,282,972, net of tax effect of $1,998,908. Included in such loss was the write
off of approximately $7,063,000 of goodwill representing the unamortized balance
of goodwill recorded in 1998 when the Company purchased all or substantially all
of the business of three IMS companies. Also included in such loss is an
estimated loss for operations during the phase out period of approximately
$188,000 for the remaining business which was sold in July 1999.
Operating results of the IMS business for the three and six months ended June
30, 1999 and 1998 (restated) are shown separately in the accompanying statements
of operations. Net revenues of the IMS business for the three months ended June
30, 1999 and 1998 were approximately $3,815,000 and $4,246,000 respectively. The
IMS business incurred losses from operations in the three months ended June 30,
1999 and 1998 of $839,410 and $299,061 respectively. For the six months ended
June 30, 1999 and 1998 net revenues of the IMS business were approximately
$6,820,000 and $8,291,000 respectively. The IMS business incurred losses from
operations in the six months ended June 30, 1999 and 1998 of $1,920,040 and
$519,627 respectively.
The Company's IT Staffing segment achieved revenue growth of 30.9% for the six
months ended June 30, 1999 compared to the prior year period. This revenue
growth was primarily due to increased revenues in offices open over one year,
which represented 79% of the increase, as well as to acquisitions and revenues
from offices open less than one year. For the three months ended June 30, 1999
the IT Staffing segment achieved revenue growth of 26.5% compared to the prior
year period, of which 79% was attributable to offices open over one year and the
remainder represented revenues from acquisitions and offices open less than one
year. During the first quarter of 1999 the IT Staffing segment relocated its
staff from Foxborough, Massachusetts to Providence, Rhode Island to better serve
the Providence area. The Company anticipates that the relocation will assist it
in continuing to attract and retain experienced staff and enable it to better
service its clients.
The following discussion of continuing operations reflects the operations of the
IT Segment only.
11
<PAGE>
RESULTS OF CONTINUING OPERATIONS
The following table sets forth certain statement of continuing operations data
as a percentage of consolidated net revenues for each of the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Cost of Sales (exclusive of items shown
separately below) 66.5 65.5 66.8 67.1
Selling and Operating 18.7 18.4 18.6 17.8
General and Administrative 11.3 10.4 11.1 9.9
----- ----- ----- -----
Total Costs and Expenses 96.5 94.3 96.5 94.8
----- ----- ----- -----
Income (Loss) From Continuing Operations 3.5 5.7 3.5 5.2
Interest Income (Expense) and Other, Net (0.5) (0.0) (0.5) 0.1
----- ----- ----- -----
Income (Loss) From Continuing Operations
Before Income Taxes 3.0% 5.7% 3.0% 5.3%
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
Net Revenues. Consolidated net revenues increased by 26.5% or approximately $6.2
million, for the three months ended June 30, 1999 compared to the prior year
period. Of such increase approximately $4.9 million, or 79% of the increased
revenues, was attributable to offices open over one year. The rate of increase
in revenues in offices open over one year was 23.9%. In particular the Company's
offices in Bala Cynwyd, Pennsylvania, Edison, New Jersey, and its National
division located in Providence, Rhode Island contributed the greatest increases
in revenues. Also contributing to the revenue increase was approximately $1.3
million in revenue from businesses acquired during 1998 and from offices opened
less than one year. The increased revenues in offices open over one year was due
primarily to increased marketing efforts in those markets. In addition the
Company's Contract Placement business increased its average hourly billing rate
to $55.59 in the quarter ended June 30, 1999 compared to $48.49 for the prior
year period, an increase of 14.6%.
Cost of Sales. Consolidated cost of sales increased by 28.2%, or approximately
$4.3 million, for the three months ended June 30, 1999 compared to the prior
year period. Cost of sales as a percentage of consolidated net revenues
increased to 66.5% from 65.5% in the respective comparable periods. The increase
as a percentage of revenues was primarily due to the increased revenues noted
above being in the Contract Placement business instead of the Permanent
Placement business, which has no cost of sales. In other words, the Permanent
Placement business represented a smaller percentage of net revenues in 1999
(11.4%) than it did in 1998 (13.8%). In the Contract Placement business cost of
sales as a percentage of revenues decreased to 75.8% as of June 30, 1999
compared to 76.8% the prior year period. This decrease was attributable to
increased marketing efforts focusing on higher margin services.
Selling and Operating. Consolidated selling and operating expenses increased by
28.7%, or approximately $1.2 million, for the three months ended June 30, 1999
compared to the prior year period. Of the $1.2 million increase in selling and
operating expense, approximately $547,000, or 46%, was due to businesses
acquired in 1998 and to offices open less than one year. Selling and operating
expenses as a percentage of consolidated net revenues increased to 18.7% from
18.4% for the three months ended June 30, 1999 compared to the prior year
period. The increase in selling and operating expenses was primarily due to
increased salary and commissions paid on the increased revenues as well as the
higher costs associated with businesses acquired in 1998 and offices open less
than one year. The Company also incurred losses of approximately $193,000 on
accounts receivable deemed uncollectible in the period ended June 30, 1999 which
increased its bad debt expense.
12
<PAGE>
General and Administrative. Consolidated general and administrative expenses
increased 38.1%, or approximately $930,000, for the three months ended June 30,
1999 compared to the prior year period. Of the $930,000 increase, approximately
$243,000, or 26%, relates to businesses acquired and offices open less than one
year. General and administrative expenses as a percentage of consolidated net
revenues, increased to 11.3% from 10.4% for the three months ended June 30, 1999
compared to the prior year period. Contributing to this increase was the
expansion of the Company's corporate staff, and administrative personnel to
adequately service the increased business. In addition, the Company incurred
losses totaling approximately $177,000 in connection with the disposal of
computer equipment which was replaced by new equipment the Company is installing
to improve its database information system utilized by salespeople and
recruiters. The Company believes that the budgetary process and controls
implemented for 1999 will assist in reducing future increases in general and
administrative expenses.
Other. Other expense represents primarily interest expense net of interest
income. Interest expense was approximately $157,000 and $15,000 for the three
months ended June 30, 1999 and 1998, respectively. Interest income was
approximately $3,000 and $12,000 for the three months ended June 30, 1999 and
1998, respectively. This increase in interest expense and decrease in interest
income was attributable to the Company's use of its short term investments and
its bank borrowings to fund the expansion of the business through both
acquisitions and opening of offices in 1998.
Income Taxes. The effective tax rates for the three months ended June 30, 1999
and 1998 are higher than the applicable federal statutory tax rate of 34%
primarily due to the Company's state tax liabilities and certain expenses not
deductible for tax purposes.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Net Revenues. Consolidated net revenues increased by 30.9%, or approximately
$13.8 million, for the six months ended June 30, 1999 compared to the prior year
period. Of such increase approximately $10.9 million, or 79% of the increased
revenues, was attributable to offices open over one year. The rate of increase
in revenues in offices open over one year was 24.3%. Also contributing to the
increased revenues was approximately $2.9 million in revenue from businesses
acquired in 1998 and offices open less than one year. Of the offices open over
one year, the Company's offices in Bala Cynwyd, Pennsylvania, Edison, New
Jersey, and the National division located in Providence, Rhode Island
contributed the greatest increases in revenues. Such increases were attributable
to increased marketing efforts in those markets. In addition, the Company's
Contract Placement business increased its average hourly billing rate to $54.84
in the six months ended June 30, 1999 compared to $49.64 in the prior year
period, an increase of 10.5%.
Cost of Sales. Consolidated cost of sales increased by 30.4%, or approximately
$9.1 million, for the six months ended June 30, 1999 compared to the prior year
period. Cost of sales as a percentage of consolidated net revenues decreased to
66.8% from 67.1% in the respective comparable periods. In the Company's Contract
Placement business, cost of sales as a percentage of its revenue decreased to
76.1% from 77.3% primarily as a result of the Contract Placement business
focusing its sales efforts on higher margin services. The decline in cost of
sales as a percentage of consolidated net revenues was also attributable to an
increase in revenue for the Permanent Placement business, which has no cost of
sales.
Selling and Operating. Consolidated selling and operating expenses increased by
36.6%, or approximately $2.9 million, for the six months ended June 30, 1999
compared to the prior year period. Of the approximately $2.9 million increase in
consolidated selling and operating expense, approximately $1.5 million, or
51.7%, was due to businesses acquired in 1998 and to offices open less than one
year. Selling and operating expenses as a percentage of consolidated net
revenues increased to 18.6% from 17.8% for the six months ended June 30, 1999
compared to the prior year period. The increase in selling and operating
13
<PAGE>
expenses was primarily due to increased salary and commissions paid on the
increased revenues as well as higher costs associated with businesses acquired
in 1998 and offices open less than one year. The Company also incurred losses of
approximately $193,000 on accounts receivable deemed uncollectible in the period
ended June 30, 1999, which increased its bad debt expense.
General and Administrative. Consolidated general and administrative expenses
increased 46.5%, or approximately $2.1 million, for the six months ended June
30, 1999 compared to the prior year period. Of the approximately $2.1 million
increase, approximately $729,000 relates to businesses acquired and offices open
less than one year. General and administrative expenses as a percentage of
consolidated net revenues increased to 11.1% from 9.9% for the six months ended
June 30, 1999 compared to the prior year period. Contributing to this increase
was the expansion of the Company's corporate staff and additional administrative
personnel to adequately service the expanded business. In addition, the
amortization of goodwill increased by $58,000 in the six months ended June 30,
1999 compared to the prior year period due to a full six months of amortization
of goodwill from the acquisitions completed at the end of the first quarter of
1998. Rent expense increased by approximately $489,000 for the six months ended
June 30, 1999 compared to the prior year period, due primarily to expanded space
in Needham, Massachusetts, Providence, Rhode Island, and Bala Cynwyd,
Pennsylvania offices as well as the businesses acquired in 1998. The Company
incurred losses of approximately $177,000 in connection with the disposal of
computer equipment which was replaced by new equipment the Company is installing
to improve its database information system utilized by salespeople and
recruiters. The Company believes that the budgetary process and controls
implemented for 1999 will assist in reducing future increases in general and
administrative expenses.
Other. Other expense represents primarily interest expense net of interest
income. Interest expense was approximately $260,000 and $25,000 for the six
months ended June 30, 1999 and 1998, respectively. Interest income was
approximately $4,000 and $82,000 for the six months ended June 30, 1999 and
1998, respectively. This increase in interest expense and decrease in interest
income reflects the Company's use of its short term investments in 1998 and its
bank borrowings in 1999 to fund the expansion of the business through both
acquisitions and opening of offices in 1998.
Income Taxes. The effective tax rates for the six months ended June 30, 1999 and
1998 are higher than the applicable federal statutory tax rate of 34% primarily
due to the Company's state tax liabilities and certain expenses not deductible
for tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's need for working capital has increased as its revenues have grown
and it has used borrowings under its credit facility to fund working capital. In
June 1998 the Company began using its line of credit to fund the cost of its
acquisitions and for working capital, and as of June 30, 1999 approximately
$14.3 million was owing on the line. The Company typically maintains minimal
cash balances, as reflected in the balance of approximately $10,000 as of June
30, 1999. The Company redeemed its short term investments of approximately $5.5
million during the first quarter of 1998 and used the proceeds for acquisitions.
The Company used approximately $4.4 million cash in operations in the six months
ended June 30, 1999 compared to cash generated from operations of $8.3 million
for the six months ended June 30, 1998. This result is primarily attributable to
an increase in accounts receivable due to increased revenues, and the redemption
of the short term investments mentioned above. Additionally, the Company
incurred a net loss, excluding the loss on disposal of the IMS segment, of
approximately $896,000 in the six months ended June 30, 1999 as opposed to a
profit of approximately $873,000 in the prior year period.
14
<PAGE>
Cash purchases of fixed assets for the six months ended June 30, 1999 were
approximately $603,000 compared to purchases of approximately $1.7 million in
the comparable period in the prior year. This decrease reflects management's
implementation of stricter capital expenditures budgeting. These purchases were
related primarily to the purchases of computers, software, and imaging equipment
to upgrade the Company's technology infrastructure, and the furnishing of new
office facilities. In the six months ended June 30, 1998 the Company used $6.9
million to complete all of its acquisitions and an additional $477,000 to repay
the bank debts assumed in two of its acquisitions.
The Company borrowed approximately $6.0 million through its line of credit and
overdraft proceeds facilities in the six months ended June 30, 1999, compared to
borrowings of approximately $2.5 million in the six months ended June 30, 1998.
In the six months ended June 30, 1999 the Company paid approximately $2.0
million related to its guarantee that common shares issued in connection with
two of its acquisitions would equal or exceed a specified price at the
anniversary date of the issuance. Additional amounts may be payable in the
future to meet similar guaranties that have been reflected in "Other
Liabilities" on the June 30, 1999 accompanying balance sheet. However, there can
be no assurance that the Company may be required to make payments in excess of
the amount accrued. The Company also completed a sale/lease back of certain of
its fixed assets with PNC Leasing Corp., an affiliate of PNC Bank, N.A. in the
six months ended June 30, 1999. The lease obligation is approximately $1.4
million repayable in 36 equal monthly rental payments. In the six months ended
June 30, 1998 the Company repaid the remaining $238,000 balance outstanding on
the notes payable related to the acquisition of the IT Training business, and
repurchased 40,000 common shares (now accounted for as treasury stock), at a
price of $5.50 per share from the sellers of the IT Training business.
Since April 24, 1998, the Company has had availability under a $25.0 million
revolving advance facility (the "Line of Credit") with PNC Bank, N.A. The Line
of Credit expires on May 31, 2003. This facility allows the Company to borrow
the lesser of 85% of eligible accounts receivable or $25.0 million. As of June
30, 1999 the Company had approximately $14.3 million outstanding against the
Line of Credit. The Line of Credit is secured by substantially all of the
Company's assets and contains customary restrictive covenants which from time to
time have been reset by the Bank, including limitations on loans the Company may
extend to officers and employees, the incurrence of additional debt and the
payment of dividends on the Company's common shares. The Line of Credit bears
interest, at the Company's option, at either the bank's prime rate or 200 basis
points over the London Inter-Bank Offered Rate ("LIBOR"). At June 30, 1999 the
Company was in violation of certain of its covenants including Tangible Net
Worth and Ratio of Cash Flow Coverage, which the Bank has waived.
The Company anticipates that its primary uses of capital in future periods will
be to finance additional acquisitions, fund increases in accounts receivable and
to support internal growth by financing new offices. The Company believes that
its Line of Credit, or other credit facilities which may be available to the
Company in the future, will be sufficient to meet the Company's capital needs
for at least the next twelve months.
FORWARD LOOKING INFORMATION
This report and other reports and statements filed by the Company from time to
time with the Securities and Exchange Commission (collectively, "SEC Filings")
contain or may contain certain forward-looking statements and information that
are based on beliefs of, and information currently available to, the Company's
management as well as estimates and assumptions made by the Company's
management. The words "anticipate," "believe," "estimate," "expect," "future,"
"intend," "plan" and similar expressions as they relate to the Company or the
Company's management, identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events and are
subject to certain risks, uncertainties and assumptions relating to the
Company's operations and results of operations, competitive factors and pricing
pressures, shifts in market demand, the performance and needs of the industries
served by the Company, and other risks and uncertainties, including, in addition
to any uncertainties specifically identified in the text surrounding such
statements and those identified below, uncertainties with respect to changes or
developments in social, economic, business, industry, market, legal and
15
<PAGE>
regulatory circumstances and conditions and actions taken or omitted to be taken
by third parties, including the Company's stockholders, customers, suppliers,
business partners, competitors, and legislative, regulatory, judicial and other
governmental authorities and officials. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may vary significantly from those anticipated, believed,
estimated, expected, intended or planned. A list of factors that may affect
future performance can be found in the Company's Report on Form 10-K for the
year ended December 31, 1998 and in the Company's Report on Form 10-Q for the
period ended March 31, 1999.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
16
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On June 15, 1999 the Annual Meeting of Shareholders of the Company was held at
the Company's principal place of business. The purpose of the meeting was to
elect directors and to ratify the selection of the independent public
accountants for the Company for the fiscal year ended December 31, 1999. At the
meeting, the shareholders voted as follows to elect the directors to serve until
the Company's next Annual Meeting of Shareholders:
Nominee In Favor Against Abstain
------- --------- ------- -------
Randolph J. Angermann 10,244,610 0 19,893
Michael A. Dunn 10,244,410 0 20,093
Richard T. Furlano 10,244,410 0 20,093
James C. Hahn 10,244,610 0 19,893
Martin E. Judge, Jr. 10,234,860 0 29,643
In the vote to ratify the appointment of Rudolph, Palitz LLC as the Company's
independent public accountants, 10,251,108 shareholders voted in favor of
ratification, 3,801 shareholders voted against ratification and 9,894
shareholders abstained.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this Quarterly Report on Form
10-Q.
Exhibit No. Description of Document
10.1 Asset Purchase Agreement by and among Judge Imaging Systems,
Inc., Automated Office Products of Western New York, Inc.
d/b/a AOP Solutions, Paul F. Eckert and Suzanne Eckert
10.2 Asset Purchase Agreement by and among Systems Solutions,
Inc., Judge Imaging Systems, Inc., AOP Acquisition Corp.,
Paul F. Eckert and Suzanne Eckert
10.3 Asset Purchase Agreement by and among Judge Imaging Systems,
Inc., The Judge Group, Inc. and AOP Morristown Corp.
11.1 Statement re Computation of Earnings Per Share.
27.1 Financial Data Schedule.
(b) No reports were filed by the Registrant on Form 8-K during the quarter ended
June 30, 1999.
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,
Dated: August 16, 1999
<TABLE>
<CAPTION>
<S> <C>
THE JUDGE GROUP, INC. THE JUDGE GROUP, INC.
/s/John M. Work /s/Martin E. Judge, Jr.
--------------- -----------------------
Chief Accounting Officer Chairman of the Board and Chief Executive Officer
</TABLE>
17
<PAGE>
Exhibit 10.1
ASSET PURCHASE AGREEMENT
by and among
JUDGE IMAGING SYSTEMS, INC.,
AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC.
d/b/a AOP SOLUTIONS,
PAUL F. ECKERT
and
SUZANNE ECKERT
SECTION 1. ACQUISITION OF ASSETS
1.1 Sale and Purchase of Assets
1.2 Excluded Assets
1.3 Assumption of Liabilities
1.4 Consents
SECTION 2. PURCHASE AND SALE
2.1 Purchase Price
2.2 Allocation of Consideration
2.3 Closing Costs
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization and Good Standing
3.2 Power and Authorization
3.3 No Conflicts
3.4 Brokers
3.5 Title; Liens
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Good Standing
4.2 Power and Authorization
4.3 No Conflicts
4.4 Brokers
4.5 Financial Condition
SECTION 5. CLOSING; CERTAIN COVENANTS
5.1 Closing and Effectiveness
5.2 Deliveries at the Closing
5.3 Use of Name
5.4 Remittance of Payments
5.5 Affiliate Payments
SECTION 6. EMPLOYEE BENEFITS AND EMPLOYMENT
6.1 Employment
6.2 Employee Pension Benefit Plans
6.3 Employee Welfare Benefit Plans
6.4 Health Continuation Coverage
6.5 Health Insurance Portability and Accountability Act ("HIPAA")
6.6 Reporting and Disclosure Requirements
6.7 Employee Records
SECTION 7. INDEMNIFICATION
7.1 Indemnification by Seller
7.2 Indemnification by Buyer
7.3 Inter-Party Claims
7.4 Third Party Claims
7.5 Limitations and Requirements
SECTION 8. MISCELLANEOUS
8.1 Survival of Representations and Warranties
8.2 Further Assurances
8.3 Costs and Expenses
20
<PAGE>
8.4 Acknowledgment of Warranty Disclaimer
8.5 Acknowledgment of Warranty Disclaimer
8.6 Public Announcements
8.7 Notices
8.8 Assignment and Benefit
8.9 Amendment, Modification and Waiver
8.10 Governing Law; Consent to Jurisdiction
8.11 Section Headings and Defined Terms
8.12 Invalidity/Severability
8.13 Counterparts
8.14 Entire Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of May 31,
1999, (the "Effective Date") by and among Judge Imaging Systems, Inc., a
Pennsylvania corporation ("Seller"), Automated Office Products of Western New
York, Inc. d/b/a AOP Solutions, a New York corporation ("Buyer"), Paul F. Eckert
("P. Eckert") and Suzanne Eckert ("S. Eckert"). An index of defined terms is
attached as an appendix hereto. Buyer, Seller, P. Eckert and S. Eckert are
collectively referred to herein as the "Parties".
BACKGROUND
The Parties desire to provide for, among other things, the acquisition
by Buyer from Seller and the sale by Seller to Buyer of the Assets (as defined
below) relating to the document solutions and information management business
(the "Business") which Seller purchased from Buyer pursuant to an Asset Purchase
Agreement dated as of June 29, 1998, as amended by an Amendment and Settlement
Agreement dated as of August 3, 1998 (the "First Agreement"), upon the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ACQUISITION OF ASSETS
Sale and Purchase of Assets. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as hereinafter defined), Seller
shall sell, transfer and deliver to Buyer the Assets (as defined below) and
Buyer shall purchase the Assets from Seller for the consideration set forth in
Section 2 hereof. As used herein the term "Assets" shall mean the following
assets of the Business as of the Effective Date:
All accounts receivable, including, without limitation, all
receivables identified on Schedule 1.1(a);
All supplies, machinery, furniture, equipment and other
personal property;
All inventions, whether or not patented, know-how, domestic
and foreign letters patents, patent applications, patent licenses, software
licenses and know-how licenses (including but not limited to the names "AOP",
"AOP Solutions" and "Always Offering Profitable Solutions"), trade secrets
(including but not limited to all results of research and development), trade
names, trademarks, service-marks, copyrights, trademark registrations and
applications, service mark registrations and applications, copyright
registrations and applications and rights-to-use (collectively "Intellectual
Property") which were part of the "Purchased Assets" under the First Agreement;
To the extent assignable, all right, title and interest in, to
and under all purchase orders, sales agreements, equipment leases, distribution
agreements, licensing agreements and other contracts, agreements and commitments
("Contracts") of the Business;
Copies of all books and records predominately relating to the
Business and the Assets (including such books and records as are contained in
computerized storage media), including all inventory, purchasing, accounting,
sales, export, import, manufacturing, marketing, banking and shipping records
and all files, contractor, consultant, customer/client and supplier lists,
records, literature and correspondence, and marketing materials excluding tax
returns;
21
<PAGE>
The lease (the "Lease") related to the facility at 105 Brisbane
Building, 403 Main Street, Buffalo, New York 14203 (the "Facility");
Any other assets of the Business which are of a nature not customarily
reflected in the books and records of a business, such as assets which have been
written off for accounting purposes but which are still used by or of value to
the Business;
To the extent assignable, all permits, licenses and authorizations
("Authorizations") associated with the Business and its operations;
All intangible assets and goodwill associated with the Business and
its operations;
All pre-paid expenses; All notes receivable;
All deposits in the hands of third parties; and
Any other assets of Seller which are located at the Facility.
Excluded Assets. The Assets being sold, assigned, and transferred to
Buyer hereunder do not include:
Cash and cash equivalents;
Any assets or rights used both for the Business and other
operations of Seller, which were not part of the "Purchased Assets" under the
First Agreement; or
Any name or mark which includes "Judge";
Any rights, claims or counterclaims under this Agreement, the
Transaction Documents or the First Agreement and Transaction Documents, as
defined therein; or
Any other assets not specifically referred to in Section 1.1 above
(collectively, the "Excluded Assets").
Assumption of Liabilities. Buyer will assume, as of the Closing (as
defined herein), and thereafter fully perform, pay and satisfy, all debts,
liabilities (including contingent liabilities), claims, obligations, and
commitments, known and unknown ("Liabilities"), of Seller relating to the
Business (the "Assumed Liabilities"), including, but not limited to, the
following:
all Liabilities of Seller under the Contracts;
all accounts payable of Seller relating to or arising out of the
operation of the Business (except as provided in Section 1.4);
vacation, severance and similar employment liabilities (except as
provided in Section 6);
unearned revenues and customer deposits; and
all liabilities reflected in the balance sheet of the Business as
of April 30, 1999, attached hereto as Schedule 1.3(e) (the May 31, 1999 balance
sheet of the Business not being available as of the date hereof).
Consents. Notwithstanding anything in this Agreement to the contrary,
if any Contract or Authorization included in the Assets may not be transferred
without the consent, approval or waiver ("Consent") of a third party (including,
without limitation, any governmental authority) and such transfer or attempted
transfer would constitute a breach thereof or a violation of any law, nothing in
this Agreement or any Transaction Document shall constitute a transfer or
attempted transfer thereof. Buyer will use its best efforts to obtain each such
Consent before or as soon as possible after the Closing Date, but to the extent
not obtained, Seller and Buyer shall cooperate (a) in endeavoring to obtain such
Consent promptly, and (b) if any such Consent is unobtainable, in any reasonable
arrangement so that Buyer has all of the benefits and assumes all of the
liabilities and obligations under any such Contract or Authorization as if such
Contract and Authorization had been duly assigned to Buyer.
PURCHASE AND SALE
Purchase Price. In full consideration for the sale by Seller to Buyer
of the Assets pursuant to Section 1.1 hereof, and the other agreements by Seller
and Buyer herein, Buyer shall release all claims against Seller and The Judge
Group, Inc., a Pennsylvania corporation (the "Parent"), pursuant to a
Settlement, Release and Termination Agreement executed by the parties on the
date hereof (the "Mutual Release").
Allocation of Consideration. The consideration for the Assets shall be
allocated to the Seller and among the Assets as specified on Schedule 2.2
hereto. Within 90 days following the Closing, Buyer shall prepare and submit to
Seller Internal Revenue Form 8594 (relating to purchase price allocation),
prepared in accordance with such allocation. Seller and Buyer shall prepare
their respective federal, state and local tax returns and reports employing the
22
<PAGE>
allocation made pursuant to this Section and shall not take a position in any
tax proceeding or audit or otherwise that is inconsistent with such allocation;
provided, that nothing contained herein shall require Seller or Buyer to
contest, beyond the exhaustion of its administrative remedies before any taxing
authority or agency, and Seller and Buyer shall not be required to litigate
before any court, including, without limitation, the United States Tax Court,
any proposed deficiency or adjustment by any taxing authority or agency that
challenges such allocation. Seller and Buyer shall give prompt notice to each
other promptly upon becoming aware of the commencement or threat of any tax
audit or the threatened assertion of any proposed deficiency or adjustment by
any tax authority or agency that challenges such allocation.
Closing Costs. Buyer shall be responsible for the payment of (a) all
documentary, use, filing, sales and other taxes and fees due or payable as a
result of the transfer and delivery of the Assets from Seller to Buyer, and (b)
all of its attorney, consultant, accounting and other fees and any and all other
expenses contemplated to be paid by Buyer under this Agreement and the other
agreements, documents and instruments related hereto (this Agreement and such
related agreements, documents and instruments, collectively, the "Transaction
Documents") or incurred by Buyer in connection with the First Agreement or
various claims and discussions relating thereto.
REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby represents and warrants to Buyer as of the date of this
Agreement and as of the Closing Date as follows (except, in each case, to the
extent Buyer has knowledge or belief that any such representation and/or
warranty is incorrect as a result of Buyer's due diligence, or Buyer's
familiarity with the Business or otherwise):
Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has all necessary power and authority to carry on its business
as presently conducted, to own and lease the assets which it owns and leases and
to perform all its obligations under each agreement and instrument by which it
is bound.
Power and Authorization. Seller has the corporate power and authority
to enter into and perform its obligations under this Agreement and under the
other agreements and documents required to be delivered by Seller prior to or at
the Closing in connection herewith (such agreements and documents, collectively,
the "Seller Transaction Documents"). The execution, delivery and performance by
Seller of this Agreement and the Seller Transaction Documents have been duly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in accordance with the
terms hereof. When executed and delivered as contemplated herein, each of the
Seller Transaction Documents shall constitute the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with the terms
thereof.
No Conflicts.
The execution, delivery and performance of this Agreement and the
Seller Transaction Documents do not and will not (with or without the passage of
time or the giving of notice):
violate or conflict with Seller's certificate or articles of
formation or organization or partnership agreement, any statute, law,
regulation, permit, license, or certificate, or any judgment, order, award or
other decision or requirement of any arbitrator, court, government or
governmental agency or instrumentality (domestic or foreign) binding upon Seller
or Seller's properties or assets (such statutes, laws, regulations, permits,
licenses, certificates, judgments, orders, awards and other decisions or
requirements, collectively, "Laws"); or
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under, any material agreement or
other material obligation to which Seller is a party.
No consents or approvals of, or registrations, notifications, filings
and/or declarations with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person or entity ("Consent or
Approval") are required to be given or made by Seller in connection with the
execution, delivery and performance of this Agreement and the other agreements,
documents and instruments contemplated herein, other than such as have been
obtained or made and are in full force and effect.
There are no actions, proceedings or investigations ("Actions") pending
or, to the knowledge of Seller, threatened, that question any of the
transactions contemplated by, or the validity of, this Agreement or any of the
other Transaction Documents or which, if adversely determined, could reasonably
be expected to have an adverse affect upon the ability of Seller or Buyer to
enter into or perform its respective obligations under this Agreement or any of
the other Transaction Documents. Seller has not, on behalf of itself or Buyer,
received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby.
23
<PAGE>
Notwithstanding anything in this Section to the contrary, Seller
makes no representation or warranty as to any law, agreement, obligation,
Consent or Approval or Action which relates to the Business and not Seller as a
whole.
Brokers. No person acting on behalf of Seller or any of Seller's
affiliates or under the authority of any of the foregoing, is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of the parties in connection with any of the
transactions contemplated by this Agreement.
Title; Liens. Seller has such title to the Assets which it received
from Buyer at the Closing under the First Agreement (the "First Closing"), free
and clear of all liens, pledges, charges, claims, encumbrances, proscriptions,
restrictions, conditions, covenants, and easements of any kind ("Liens") which
relate to any business or operations of Seller or Parent other than the Business
being sold hereunder.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as of the date of this
Agreement and as of the Closing Date as follows (except, in each case, to the
extent Seller has knowledge or belief that any such representation and/or
warranty is incorrect as a result of Seller's due diligence, or Seller's
familiarity with the Business or otherwise):
Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
and has all necessary power and authority to carry on its business as presently
conducted, to own and lease the assets which it owns and leases and to perform
all its obligations under each agreement and instrument by which it is bound.
Power and Authorization. Buyer has the corporate power and authority to
enter into and perform its obligations under this Agreement and under the other
agreements, documents and instruments (collectively, the "Buyer Transaction
Documents") required to be delivered by it prior to or at the Closing. The
execution, delivery and performance by Buyer of this Agreement and the Buyer
Transaction Documents have been duly authorized by all necessary corporate
action. This Agreement has been duly and validly executed and delivered by Buyer
and constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with the terms hereof. When executed and delivered
as contemplated herein, each of the Buyer Transaction Documents shall constitute
the legal, valid and binding obligation of Buyer, enforceable in accordance with
the terms thereof.
No Conflicts.
The execution, delivery and performance of this Agreement and the Buyer
Transaction Documents do not and will not (with or without the passage of time
or the giving of notice):
violate or conflict with Buyer's certificate or articles of
formation or organization or partnership agreement or any Laws; or
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under, any material agreement or
other material obligation to which Buyer is a party.
No Consent or Approval is required to be given or made by Buyer in
connection with the execution, delivery and performance of this Agreement and
the other agreements, documents and instruments contemplated herein, other than
such as have been obtained or made and are in full force and effect.
There are no actions, proceedings or investigations pending or, to the
knowledge of Buyer, threatened, that question any of the transactions
contemplated by, or the validity of, this Agreement or any of the other
Transaction Documents or which, if adversely determined, could reasonably be
expected to have an adverse affect upon the ability of Buyer or Seller to enter
into or perform its respective obligations under this Agreement or any of the
other Transaction Documents. Buyer has not, on behalf of itself or Seller,
received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby.
Brokers. No person acting on behalf of Buyer or any of its affiliates
or under the authority of any of the foregoing is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee, directly or
indirectly, from any of the parties in connection with any of the transactions
contemplated by this Agreement.
Financial Condition. Immediately after Closing, Buyer's Assets and
Liabilities will consist solely of the Assets purchased and the Assumed
Liabilities assumed under this Agreement.
24
<PAGE>
CLOSING; CERTAIN COVENANTS.
Closing and Effectiveness. The closing of the purchase and sale of the
Assets and the assignment and assumption of the Assumed Liabilities (the
"Closing") pursuant to this Agreement shall be effective as of the close of
business on May 31, 1999.
Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
Seller shall deliver, or shall cause to be delivered, to Buyer the
following:
a Bill of Sale, Assignment and Assumption and the Mutual Release,
in form satisfactory to Buyer;
a closing certificate and secretary's certificate, dated the
Closing Date and signed by the Chief Executive Officer or President of Seller,
satisfactory to Buyer;
copies of the resolutions of the board of directors of Seller
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents, certified as of the Closing by the Secretary of
Seller;
such other documents and instruments as Buyer may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
Buyer shall deliver, or shall cause to be delivered, to Seller the
items described below:
a Bill of Sale, Assignment and Assumption and a Mutual Release,
executed by Buyer, P. Eckert and S. Eckert, all in form satisfactory to Seller;
a closing certificate and secretary's certificate, dated the
Closing Date signed by the President or a Vice President of the general partner
of Buyer, satisfactory to Seller;
a copy of the resolutions of the board of directors or
corresponding governing body of Buyer authorizing the execution, delivery and
performance by Buyer of this Agreement and the other Transaction Documents,
certified as of the Closing by the Secretary of Buyer;
such other documents and instruments as Seller may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
<PAGE>
Use of Name. From and after the Closing, Buyer shall not have or use or
permit any affiliate of Buyer to have or use any name or mark which includes a
reference to Judge Group or Seller, and no such name or mark or rights thereto
shall be included in the Assets; provided that, Buyer shall be permitted to use
the Judge name on Buyer's Internet web site and on an awning at the Facility for
a period of thirty (30) days after the Closing Date. On request, Buyer shall
deliver to Seller evidence (which shall be satisfactory to Seller) of compliance
with this Section. Buyer acknowledges that breach of this section will give rise
to irreparable injury to Seller and Parent and that as a result money damages
are inadequate. Accordingly, Buyer irrevocably acknowledges and agrees that
Seller and Parent may each seek and obtain injunctive relief and other equitable
remedies with respect to any breach or threatened breach of this section, in
addition to any other remedies which may be available at law. In the event of
any alleged breach of this section, Buyer will be responsible for the legal fees
and costs incurred by Seller and Parent. In the event any such allegation is
made incorrectly, as adjudicated by a court or arbitrator, Seller and Parent
will be responsible for the legal fees and costs incurred by Buyer.
Remittance of Payments. From and after the Effective Date, Seller shall
immediately remit to Buyer, in the form received, any payments that it or any
affiliate may receive (such as payments of accounts receivable) which properly
belong to Buyer, and Buyer shall immediately remit to Seller, in the form
received, any payments that Buyer or any affiliate may receive which properly
belong to Seller. In particular, Seller shall immediately remit to Buyer any
cash remitted by a customer on or after the Effective Date that is attributable
to a receivable, which was part of the Assets purchased hereunder. Neither Party
may set off against any amount due under this section any amount owed to or
allegedly owed to such Party.
Affiliate Payments. From and after the closing, subject to applicable
law (including fraudulent conveyance law and law related to dividends and
distributions) that may restrict payments, until all of the obligations of Buyer
hereunder and all of the Assumed Liabilities which constitute trade accounts
payable have been paid and satisfied in full, Buyer will not make any
distribution, dividend or other similar payment, make any loan to or investment
in any Affiliate or make any payment to or transfer any asset or right to any
Affiliate, except for reasonable salary for services rendered and distributions
necessary for Buyer's shareholders to pay income taxes arising because of
Buyer's status as an S corporation under the Internal Revenue Code of 1986, as
amended (the "Code"). For purposes hereof, "Affiliate" shall mean any direct or
indirect equity holder of Buyer, any director, officer or employee of Buyer or
of any such equity holder, any spouse or relative of any of the foregoing which
is a natural person and any business entity of which any of the foregoing is a
director.
25
<PAGE>
EMPLOYEE BENEFITS AND EMPLOYMENT.
Employment.
Buyer will determine which employees of the Business to whom it will
offer employment and identify such employees by name to Seller not later than
June 20, 1999. Employees who accept such employment shall be referred to as
"Transferred Employees" for purposes of this Agreement. Seller shall be
responsible for any severance pay obligations with respect to those individuals
employed in the Business who are not Transferred Employees and whose employment
with Seller is terminated. Seller shall also notify such individuals about the
termination of their employment and such notification may inform those
individuals not identified by Buyer as among those to whom Buyer will offer
employment that Buyer has decided not to offer employment to them. Anything
contained in or implied by the provisions of this Section 6.1 to the contrary
notwithstanding, the provisions of this Section shall not create any third-party
beneficiary rights in any person, including any Transferred Employee.
Employee Pension Benefit Plans. The benefits under any Employee Pension
Benefit Plan (as defined in Section 3(2) of ERISA) maintained by Seller which
have accrued to any Transferred Employee as of the Closing Date shall be frozen
as of a date not later than 15 days after the Closing Date and no further
benefits shall accrue under any such Employee Pension Benefit Plan with respect
to such Transferred Employee. Buyer assumes no responsibility with respect to
any such Employee Pension Benefit Plan.
Employee Welfare Benefit Plans. Buyer shall be responsible for
establishing such Employee Welfare Benefit Plans (as defined in Section 3(1) of
ERISA) for Transferred Employees as it determines to be appropriate. Buyer shall
have no responsibility for any Employee Welfare Benefit Plan of Seller. Subject
to Section 1.3 hereof, Seller shall remain responsible and liable for any acts
or omissions by Seller with respect to such Employee Welfare Benefit Plans
occurring prior to the Closing Date.
Health Continuation Coverage. Buyer shall be responsible for all health
continuation coverage requirements of the Code, and ERISA for all Transferred
Employees and their beneficiaries in periods on and subsequent to the Closing
Date. Seller shall be responsible for notifying employees who are not
Transferred Employees (and the beneficiaries of such employees) of their right
to continue their health care coverage under Seller's health care plan at their
own cost pursuant to the relevant provisions of Federal Law.
Health Insurance Portability and Accountability Act ("HIPAA"). Buyer
shall be responsible for all health insurance obligations imposed by HIPAA with
respect to any Employee Welfare Benefit Plan which is a group health plan (as
defined under Section 5000(b)(1) of the Code or Part 6 of Subtitle B of Title I
of ERISA) for all periods on and subsequent to the Closing Date.
Reporting and Disclosure Requirements. Seller shall be responsible for
filing all annual reports and satisfying all other reporting and disclosure
requirements with respect to any Employee Benefit Plan for all Plan Years ending
prior to the Closing Date.
Employee Records Buyer shall grant Seller full access to all employee
records relating to the Transferred Employees to the extent necessary to enable
Seller to comply with its obligations hereunder.
INDEMNIFICATION
Indemnification by Seller. Subject to Sections 7.5 and 8.4, Seller
shall indemnify and hold Buyer and its officers, directors and shareholders
harmless against and in respect of any and all losses, costs, expenses, claims,
damages, obligations and liabilities, including interest, penalties and
reasonable attorneys' fees and disbursements, but not including any
consequential damages (such losses, costs, expenses, claims, damages,
obligations and liabilities, including interest, penalties and reasonable
attorney's fees and disbursements, but not including any consequential damages,
collectively, "Damages"), which Buyer or any such person may suffer, incur or
become subject to arising out of, based upon or otherwise in respect of (in each
case except to the extent relating to a breach of representation or covenant of
Buyer under the First Agreement or any related document):
26
<PAGE>
any inaccuracy in or breach of any representation or warranty of
Seller made in or pursuant to this Agreement or any Transaction Document; and
any breach or nonfulfillment of any covenant or obligation of
Seller contained in this Agreement or any Transaction Document.
Indemnification by Buyer. Buyer shall indemnify, defend and hold Seller
and its affiliates and their officers, directors and shareholders harmless
against and in respect of any and all Damages which Seller or any such entity or
person may suffer, incur or become subject to arising out of, based upon or
otherwise in respect of:
any inaccuracy in or breach of any representation or warranty of
Buyer made in or pursuant to this Agreement or any Transaction Document;
any breach or nonfulfillment of any covenant or obligation of Buyer
contained in this Agreement or any Transaction Document; and
the Assumed Liabilities.
Inter-Party Claims. Any party seeking indemnification pursuant to this
Section (the "Indemnified Party") shall notify in writing the other party or
parties from whom such indemnification is sought (the "Indemnifying Party") of
the Indemnified Party's assertion of such claim for indemnification, specifying
the basis of such claim, including all relevant facts and circumstances and the
section(s) of this Agreement under which such claim arises. The Indemnified
Party shall thereupon give the Indemnifying Party reasonable access to the
books, records and assets of the Indemnified Party which evidence or support
such claim or the act, omission or occurrence giving rise to such claim and the
right, upon prior notice during normal business hours, to interview any
appropriate personnel of the Indemnified Party related thereto.
Third Party Claims.
Each Indemnified Party shall promptly notify in writing the
Indemnifying Party of the assertion by any third party of any claim with respect
to which the indemnification set forth in this Section relates (which shall also
constitute the notice required by Section 7.3), specifying the basis of such
claim including all relevant facts and circumstances and the section(s) of this
Agreement under which such claim arises. The Indemnifying Party shall have the
right, upon notice to the Indemnified Party within sixty (60) business days
after the receipt of any such notice, to undertake the defense of or, with the
consent of the Indemnified Party (which consent shall not unreasonably be
withheld), to settle or compromise such claim. The failure of the Indemnifying
Party to give such notice and to undertake the defense of or to settle or
compromise such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 7.4(a) and in the absence of gross negligence or
willful misconduct on the part of the Indemnified Party shall preclude the
Indemnifying Party from disputing the manner in which the Indemnified Party may
conduct the defense of such claim or the reasonableness of any amount paid by
the Indemnified Party in satisfaction of such claim.
The election by the Indemnifying Party, pursuant to Section 7.4(a), to
undertake the defense of a third-party claim shall not preclude the party
against which such claim has been made also from participating or continuing to
participate in such defense, so long as such party bears its own legal fees and
expenses for so doing.
1.1 Limitations and Requirements.
Seller shall have no obligation to indemnify Buyer or any other person
against Damages pursuant to Section 7.1 of this Agreement unless and until the
aggregate of all such Damages suffered or incurred by Buyer and such persons
exceeds $20,000; in which event Buyer and such persons shall be entitled to
indemnification for all Damages in excess of such amount.
Except as may otherwise expressly be provided in this Agreement, no
claim arising out of or based upon any inaccuracy in or breach of any
representation or warranty contained in this Agreement or any Transaction
Document shall be made unless facts exist giving rise to a claim, and written
notice pursuant to Section 7.3 is delivered to the Indemnifying Party, within
the applicable statute of limitations period.
The indemnification obligations of Seller contained herein are intended
to be exclusive and preclude all other claims, rights or remedies against Seller
which may exist at law (whether statutory or otherwise) or in equity with
respect to the matters covered by such indemnification obligations.
27
<PAGE>
MISCELLANEOUS
Survival of Representations and Warranties. Subject to Section 7.5(b)
above, the representations and warranties made by the parties in this Agreement
and in the certificates, documents and schedules delivered pursuant hereto shall
survive the consummation of the transactions herein contemplated.
Further Assurances. Each party hereto shall use commercially reasonable
efforts to comply with all requirements imposed hereby on such party and to
cause the transactions contemplated hereby to be consummated as contemplated
hereby and shall, from time to time and without further consideration, either
before or after the Closing, execute such further instruments and take such
other actions as any other party hereto shall reasonably request in order to
fulfill its obligations under this Agreement and to effectuate the purposes of
this Agreement and to provide for the orderly and efficient transition of the
ownership of the Assets to, and the assumption of the Assumed Liabilities by,
Buyer. Buyer and Seller shall, for two years after the Closing, retain the
various books and records relating to the Business and shall, upon prior notice,
provide the other party and its authorized representatives reasonable access
thereto. Each party shall promptly notify the other party of any event or
circumstance known to such party that could prevent or delay the consummation of
the transactions contemplated hereby or which would indicate a breach or
non-compliance with any of the terms, conditions, representations, warranties or
agreements of any of the parties to this Agreement.
Costs and Expenses. Except as otherwise expressly provided herein, each
party shall bear its own expenses in connection herewith.
Acknowledgment of Warranty Disclaimer. Buyer acknowledges and agrees
that
Through the status of P. Eckert and S. Eckert as employees of the
Business, and otherwise, Buyer has had access to the assets, properties (real
and personal, owned and leased), permits, licenses, agreements, instruments,
documents and other contracts (oral and written), and the books and records
related to the Business and has had opportunity to inspect the same;
Buyer has decided to acquire the Assets and assume the Assumed
Liabilities based upon such access and inspection and the representations,
warranties and covenants of Seller specifically made in this Agreement;
accordingly the representations made by Seller in Section 3 hereof are
the sole representations and warranties made by Seller with respect to itself,
its assets and its liabilities and obligations, AND SELLER MAKES NO OTHER
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED,
EITHER HEREIN OR OTHERWISE, AS TO THE ASSETS, PROPERTIES (REAL AND PERSONAL,
OWNED AND LEASED), AGREEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL
AND WRITTEN), LIABILITIES AND/OR BUSINESS OF SELLER OR AS TO, THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING;
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OF THE
ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED), AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN ), BUSINESS, AND
BUSINESS PROSPECTS OF SELLER, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE; and
in furtherance and not limitation of the foregoing, Seller makes no
representation that Seller has, or that Buyer will have, all the licenses,
permits or other Authorizations or contracts required to carry on the operation
of the Business or that any of such licenses or permits or other Authorizations
or contracts are transferable, and Buyer shall be responsible for all such
matters.
Except as and to the extent set forth in this Agreement and the
certificates and schedules delivered under this Agreement, Seller hereby
disclaims all liability and responsibility for any statement or information made
or communicated in any way to Buyer or any agent, employee or representative
thereof (including, without limitation, any opinion, information or advice
provided by any officer, director, employee, agent, consultant or other
representative of Seller or any affiliate of Seller), and Buyer acknowledges
such disclaimer. No representation or warranty contained in Section 3 shall be
deemed to be untrue to the extent that Buyer had knowledge on the date hereof
that such representation or warranty was not correct as stated herein or, after
the date hereof and on or before the Closing Date, gave prior approval to an act
of the Seller or one of its subsidiaries which caused such representation or
warranty to be incorrect as stated herein.
28
<PAGE>
Acknowledgment of Warranty Disclaimer. Seller acknowledges and
agrees that
The representations made by Buyer in Section 4 hereof are the sole
representations and warranties made by Buyer with respect to itself, its assets
and its liabilities and obligations, AND BUYER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER HEREIN OR
OTHERWISE, AS TO THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED),
AGREEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN),
LIABILITIES AND/OR BUSINESS OF BUYER OR AS TO, THE TRANSACTIONS CONTEMPLATED
HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING;
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER DISCLAIMS
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OF
THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED), AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN ), BUSINESS, AND
BUSINESS PROSPECTS OF BUYER, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE; and
Except as and to the extent set forth in this Agreement and the
certificates and schedules delivered under this Agreement, Buyer hereby
disclaims all liability and responsibility for any statement or information made
or communicated in any way to Seller or any agent, employee or representative
thereof (including, without limitation, any opinion, information or advice
provided by any officer, director, employee, agent, consultant or other
representative of Buyer or any affiliate of Buyer), and Seller acknowledges such
disclaimer. No representation or warranty contained in Section 4 shall be deemed
to be untrue to the extent that Seller had knowledge on the date hereof that
such representation or warranty was not correct as stated herein or, after the
date hereof and on or before the Closing Date, gave prior approval to an act of
the Buyer or one of its subsidiaries which caused such representation or
warranty to be incorrect as stated herein.
Public Announcements. Prior to the Closing, neither Seller nor
Buyer shall make any public announcement or disclosure relating to the
transactions contemplated herein without the prior agreement of the other party
hereto, provided that each party shall use its best efforts to consult with the
other in advance of any disclosure required by law, but in such case the
agreement of the other party hereto shall not be required.
Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
To Seller: With a copy to:
Judge Imaging Systems, Inc. Drinker Biddle & Reath LLP
2 Bala Plaza, Suite 405 1100 PNB Building
Bala Cynwyd, PA 19004 Broad & Chestnut Streets
Attention: Amy Feldman, Esquire Philadelphia, PA 19107
Phone (215) 988-2700
Telecopy (215) 988-2757
Attention: Samuel Mason, Esquire
To Buyer: With a copy to:
Automated Office Products of Cohen Swados Wright Hanifin
Western New York, Inc. Bradford & Brett LLP
105 Brisbane Building 70 Niagara Street
403 Main Street Buffalo, NY 14202
Buffalo, New York 14203 Attention: John Dee, Esquire
Attention: Paul F. Eckert
Assignment and Benefit.
No party shall assign this Agreement or any rights hereunder, or
delegate any obligations hereunder, without prior written consent of the other
party hereto. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto, and each of their respective successors and assigns.
29
<PAGE>
This Agreement shall not be construed as giving any person, other than
the parties hereto and their permitted successors and assigns, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any of
the provisions herein contained, this Agreement and all provisions and
conditions hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors and assigns and for the
benefit of no other person or entity.
Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect, provided that any such amendment shall be in
writing. The waiver by a party of any breach of any provision of this Agreement
shall not constitute or operate as a waiver of any other breach of such
provision or of any other provision hereof, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other provision
hereof.
Governing Law; Consent to Jurisdiction.
This Agreement is made pursuant to, and shall be construed and enforced
in accordance with, the internal laws of the Commonwealth of Pennsylvania (and
United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.
Any legal action, suit or proceeding arising out of or relating to this
Agreement which is brought by Buyer shall be instituted in a court in the
Eastern District of Pennsylvania, and each party waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding in, and irrevocably submits to the jurisdiction of, any such
court. Any and all service of process and any other notice in any such action,
suit or proceeding shall be effective against any party if made by certified or
registered mail, or by a nationally recognized overnight courier, directed to
Seller or Buyer, as the case may be, at the address provided for herein and
service so made shall be deemed to be completed upon actual receipt thereof, or
the next day following deposit of such notice with a nationally recognized
overnight courier.
Any legal action, suit or proceeding arising out of or relating to this
Agreement which is brought by Seller shall be instituted in a court in the
Western District of New York, and each party waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding in, and irrevocably submits to the jurisdiction of, any such
court. Any and all service of process and any other notice in any such action,
suit or proceeding shall be effective against any party if made by certified or
registered mail, or by a nationally recognized overnight courier, directed to
Seller or Buyer, as the case may be, at the address provided for herein and
service so made shall be deemed to be completed upon actual receipt thereof, or
the next day following deposit of such notice with a nationally recognized
overnight courier.
Nothing herein contained shall be deemed to affect the right of any
party to serve process in any other manner permitted by law.
Section Headings and Defined Terms. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement. The terms defined herein and in
any agreement executed in connection herewith include the plural as well as the
singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
Invalidity/Severability. The invalidity or unenforceability of this
Agreement or any particular provision, or part of any provision, of this
Agreement in one jurisdiction shall not affect the validity or enforceability of
this Agreement or any particular provision or part of any provision of this
Agreement in any other jurisdiction and the invalidity or unenforceability of
any particular provision or part of any provision shall not affect the other
provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
30
<PAGE>
Entire Agreement. This Agreement, together with the agreements,
exhibits, schedules and certificates referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with respect
to the purchase and sale of the Assets and the assumption of the Assumed
Liabilities and supersedes all prior agreements and understandings. The
submission of a draft of this Agreement or portions or summaries thereof does
not constitute an offer to purchase or sell the Assets, it being understood and
agreed that neither Buyer nor Seller shall be legally obligated with respect to
such a purchase or sale or to any other terms or conditions set forth in such
draft or portion or summary unless and until this Agreement has been duly
executed and delivered by all parties. Buyer's rights and remedies with respect
to the transactions contemplated by this Agreement and the other Transaction
Documents shall be controlled by and subject to the provisions of this
Agreement, and Buyer shall have no other rights or remedies except as set forth
in this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Asset Purchase Agreement, under seal, all as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
Attest JUDGE IMAGING SYSTEMS, INC.
/s/ Katharine A. Wiercinski, Secretary /s/ Martin E. Judge, Jr., Chief Executive Officer
- --------------------------- ------------------------
[Seal]
Attest AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC.
/s/ Robert W. Patterson, Esquire /s/ Paul Eckert, President
- ----------------------- ---------------
[Seal]
</TABLE>
The undersigned execute this Agreement solely for purposes of making
the representation set forth in Section 4.6 and joining in the covenant sets
forth in Section 5.5, in each case jointly and severally with the Buyer.
/s/ Paul F. Eckert
- ------------------
/s/ Suzanne Eckert
- -------------------
31
<PAGE>
Exhibit 10.2
ASSET PURCHASE AGREEMENT
by and among
SYSTEMS SOLUTIONS, INC.,
JUDGE IMAGING SYSTEMS, INC.,
AOP ACQUISITION CORP.,
PAUL F. ECKERT
and
SUZANNE ECKERT
SECTION 1. ACQUISITION OF ASSETS
1.1 Sale and Purchase of Assets
1.2 Excluded Assets
1.3 Assumption of Liabilities
1.4 Consents
SECTION 2. PURCHASE AND SALE
2.1 Purchase Price
2.2 Allocation of Consideration
2.3 Closing Costs
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization and Good Standing
3.2 Power and Authorization
3.3 No Conflicts
3.4 Brokers
3.5 Title; Liens
3.6 Accounts Payable and Accrued Liabilities
3.7 Accounts and Notes Receivable
3.8 Contracts
3.9 Tax Matters
3.10 Financial Statements
3.11 Material Adverse Changes
3.12 Undisclosed Liabilities
3.13 Legal Proceedings
3.14 Customers
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Good Standing
4.2 Power and Authorization
4.3 No Conflicts
4.4 Brokers
SECTION 5. CLOSING; CERTAIN COVENANTS
5.1 Closing and Effectiveness
5.2 Deliveries at the Closing
5.3 Use of Name
5.4 Remittance of Payments
5.5 Affiliate Payments
SECTION 6. EMPLOYEE BENEFITS AND EMPLOYMENT
6.1 Employment
6.2 Employee Pension Benefit Plans
6.3 Employee Welfare Benefit Plans
6.4 Health Continuation Coverage
6.5 Health Insurance Portability and Accountability Act ("HIPAA")
6.6 Reporting and Disclosure Requirements
6.7 Employee Records
32
<PAGE>
SECTION 7. INDEMNIFICATION
7.1 Indemnification by Seller
7.2 Indemnification by Buyer
7.3 Inter-Party Claims
7.4 Third Party Claims
7.5 Limitations and Requirements
SECTION 8. MISCELLANEOUS
8.1 Survival of Representations and Warranties
8.2 Further Assurances
8.3 Costs and Expenses
8.4 Acknowledgment of Warranty Disclaimer
8.5 Acknowledgment of Warranty Disclaimer
8.6 Public Announcements
8.7 Notices
8.8 Assignment and Benefit
8.9 Amendment, Modification and Waiver
8.10 Bill of Sale
8.11 Governing Law; Consent to Jurisdiction
8.12 Section Headings and Defined Terms
8.13 Invalidity/Severability
8.14 Counterparts
8.15 Entire Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is effective as of
June 30, 1999, (the "Effective Date") by and among Systems Solutions, Inc., a
Washington corporation ("Seller"), Judge Imaging Systems, Inc., a Pennsylvania
corporation ("Judge Imaging"), AOP Acquisition Corp., a New York corporation
("Buyer"), Paul F. Eckert ("P. Eckert") and Suzanne Eckert ("S. Eckert"). Buyer,
Seller, Judge Imaging, P. Eckert and S. Eckert are collectively referred to
herein as the "Parties".
BACKGROUND
The Parties desire to provide for, among other things, the acquisition
by Buyer from Seller and the sale by Seller to Buyer of certain Assets (as
defined below) and the assumption by Buyer of certain liabilities relating to
the document solutions and information management business (the "Business") of
Seller upon the terms and subject to the conditions set forth in this Agreement.
Judge Imaging is the sole shareholder of Seller as a result of a Stock Purchase
Agreement dated as of June 5, 1998 (the "First Agreement").
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ACQUISITION OF ASSETS
Sale and Purchase of Assets. Upon the terms and subject to the
conditions of this Agreement, Seller hereby sells, transfers and delivers to
Buyer the Assets (as defined below) and Buyer hereby purchases the Assets from
Seller for the consideration set forth in Section 2 hereof. As used herein the
term "Assets" shall mean the following assets of the Business as of the
Effective Date:
All accounts receivable of the Business, including all receivables
identified on Schedule 3.7;
All supplies, machinery, furniture, furnishings, motor vehicles,
equipment and other personal property and tangible assets located at the
Business or used exclusively by the Business regardless of location;
All of Seller's rights to the names "Systems Solutions" and
"Corebridge Technology";
To the extent assignable, all right, title and interest in, to and
under all purchase orders, sales agreements, equipment leases, distribution
agreements, licensing agreements and other contracts, agreements and commitments
("Contracts") of the Business, including those set forth on Schedule 1.1(d);
33
<PAGE>
Prepaid expenses;
Copies of all books and records exclusively relating to the
Business or the Assets (including such books and records as are contained in
computerized storage media), including all inventory, purchasing, accounting,
sales, export, import, manufacturing, marketing, banking and shipping records
and all files, contractor, consultant, customer/client and supplier lists,
records, literature and correspondence, and marketing materials excluding tax
returns;
The lease (the "Lease") related to the facility at 8105 166th
Avenue NE, Suite 102, Redmond, Washington (the "Facility");
Any other assets of the Business which are of a nature not
customarily reflected in the books and records of a business, such as assets
which have been written off for accounting purposes but which are still used by
or of value to the Business;
To the extent assignable, all permits, licenses and authorizations
("Authorizations") associated with the Business and its operations which are
identified on Schedule 1.1(i);
All intangible assets and goodwill exclusively related to the
Business and its operations;
All deposits in the hands of third parties; and
All other assets of the Business exclusively related to the
Business and its operations other than "Excluded Assets" defined in Section 1.2.
Excluded Assets. The Assets being sold, assigned, and transferred to
Buyer hereunder do not include any other assets of Seller, including:
Cash and cash equivalents;
Any assets or rights used both for the Business and other
operations of Judge Imaging, which were not part of the "Purchased Assets" under
the First Agreement; or
Any name or mark which includes "Judge" or "On Site Solutions" or;
Any rights, claims or counterclaims under this Agreement or the
Transaction Documents (collectively, the "Excluded Assets").
<PAGE>
Assumption of Liabilities. Buyer hereby assumes, and thereafter will
fully perform, pay and satisfy, all of the following debts, liabilities
(including contingent liabilities), claims, obligations, and commitments, known
and unknown ("Liabilities"), of Seller relating to the Business (the "Assumed
Liabilities") as of the Effective Date:
all obligations of Seller that are executory as of the Closing Date
under Contracts of the Business that are part of the Assets assigned to Buyer
and Seller's obligations under the Lease (rent under the Lease will be prorated
to the Closing Date);
all accounts payable of Seller relating to or arising out of the
operation of the Business (except as provided in Section 1.4), including all
payables set forth on Schedule 3.6;
vacation, severance and similar employment liabilities with respect
to Transferred Employees (except as provided in Section 6);
unearned revenues and customer deposits;
all liabilities of the Business arising after the Closing Date; and
all liabilities reflected in the balance sheet of the Business as
of June 30, 1999, attached hereto as
Schedule 1.3(f).
Buyer does not assume and shall not be liable for any other Liabilities,
including but not limited to (i) any Liability arising out of the First
Agreement; (ii) Taxes relating to periods prior to the Closing Date; or (iii)
any other Liability arising out of the operation of the Business prior to the
Closing Date.
Consents. Notwithstanding anything in this Agreement to the contrary,
if any Contract or Authorization included in the Assets may not be transferred
without the consent, approval or waiver ("Consent") of a third party (including,
without limitation, any governmental authority) and such transfer or attempted
transfer would constitute a breach thereof or a violation of any law, nothing in
this Agreement or any Transaction Document shall constitute a transfer or
attempted transfer thereof. Seller and Buyer will use reasonable efforts to
obtain each such Consent before or as soon as possible after the Closing Date,
but to the extent not obtained, Seller and Buyer shall cooperate (a) in
endeavoring to obtain such Consent promptly, and (b) if any such Consent is
unobtainable, in any reasonable arrangement so that Buyer has all of the
benefits and assumes all of the executory obligations under any such Contract or
Authorization as if such Contract and Authorization had been duly assigned to
Buyer.
34
<PAGE>
PURCHASE AND SALE
Purchase Price. In full consideration for the sale by Seller to Buyer
of the Assets pursuant to Section 1.1 hereof, and the other agreements by Seller
and Buyer herein, the aggregate purchase price for the Assets shall be
Forty-Five Thousand Dollars ($45,000) (the "Purchase Price") and shall be
payable by Buyer to Seller by means of wire transfer prior to or at the Closing.
Allocation of Consideration. The consideration for the Assets shall be
allocated to the Seller and among the Assets as specified on Schedule 2.2
hereto. Within 90 days following the Closing, Buyer shall prepare and submit to
Seller Internal Revenue Form 8594 (relating to purchase price allocation),
prepared in accordance with such allocation. Seller and Buyer shall prepare
their respective federal, state and local tax returns and reports employing the
allocation made pursuant to this Section and shall not take a position in any
tax proceeding or audit or otherwise that is inconsistent with such allocation;
provided, that nothing contained herein shall require Seller or Buyer to
contest, beyond the exhaustion of its administrative remedies before any taxing
authority or agency, and Seller and Buyer shall not be required to litigate
before any court, including, without limitation, the United States Tax Court,
any proposed deficiency or adjustment by any taxing authority or agency that
challenges such allocation. Seller and Buyer shall give prompt notice to each
other promptly upon becoming aware of the commencement or threat of any tax
audit or the threatened assertion of any proposed deficiency or adjustment by
any tax authority or agency that challenges such allocation.
Closing Costs. Buyer and Seller shall divide equally all documentary,
use, filing, sales and other taxes and fees due or payable as a result of the
transfer and delivery of the Assets from Seller to Buyer. Each of Buyer and
Seller shall pay all of its respective attorney, consultant, accounting and
other fees and any and all other expenses contemplated to be paid by Buyer or
Seller under this Agreement and the other agreements, documents and instruments
related hereto (this Agreement and such related agreements, documents and
instruments, collectively, the "Transaction Documents").
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Judge Imaging hereby jointly and severally represent and
warrant to Buyer as of the Closing Date as follows (except, in each case, to the
extent Buyer has knowledge or belief that any such representation and/or
warranty is incorrect as a result of Buyer's due diligence, or Buyer's
familiarity with the Business or otherwise):
Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington,
and has all necessary power and authority to carry on its business as presently
conducted, to own and lease the assets which it owns and leases and to perform
all its obligations under each agreement and instrument by which it is bound.
Power and Authorization. Seller and Judge Imaging have the corporate
power and authority to enter into and perform their respective obligations under
this Agreement and under the other agreements and documents required to be
delivered by Seller and/or Judge Imaging prior to or at the Closing in
connection herewith (such agreements and documents, collectively, the "Seller
Transaction Documents"). The execution, delivery and performance by Seller and
Judge Imaging of this Agreement and the Seller Transaction Documents have been
duly authorized by all necessary corporate action. This Agreement has been duly
and validly executed and delivered by Seller and Judge Imaging and constitutes a
legal, valid and binding obligation of Seller and Judge Imaging, enforceable
against Seller and Judge Imaging in accordance with the terms hereof. When
executed and delivered as contemplated herein, each of the Seller Transaction
Documents shall constitute the legal, valid and binding obligation of Seller and
Judge Imaging, enforceable against Seller and Judge Imaging in accordance with
the terms thereof.
No Conflicts.
The execution, delivery and performance of this Agreement and the
Seller Transaction Documents do not and will not (with or without the passage of
time or the giving of notice):
violate or conflict with Seller's certificate or articles of
incorporation or by-laws, any statute, law, regulation, permit, license, or
certificate, or any judgment, order, award or other decision or requirement of
any arbitrator, court, government or governmental agency or instrumentality
(domestic or foreign) binding upon Seller or Seller's properties or assets (such
statutes, laws, regulations, permits, licenses, certificates, judgments, orders,
awards and other decisions or requirements, collectively, "Laws"); or
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under, any material agreement or
other material obligation to which Seller is a party; or
35
<PAGE>
cause Buyer to become subject to or liable for any tax other than
taxes required to be prorated hereunder and/or sales tax due on this
transaction.
No Consents or registrations, notifications, filings and/or
declarations with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person or entity are required to be
given or made by Seller in connection with the execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated herein, other than such as have been obtained or made
and are in full force and effect.
There are no actions, proceedings or investigations ("Actions")
pending or, to the knowledge of Seller, threatened, that question any of the
transactions contemplated by, or the validity of, this Agreement or any of the
other Transaction Documents or which, if adversely determined, could reasonably
be expected to have a material adverse effect upon the Business or the ability
of Seller to enter into or perform its respective obligations under this
Agreement or any of the other Transaction Documents. Seller has not, on behalf
of itself or Buyer, received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
Notwithstanding anything in this Agreement to the contrary, Seller
makes no representation or warranty as to any law, agreement, obligation,
Consent or Approval or Action which relates to the Business and not Seller as a
whole.
Brokers. No person acting on behalf of Seller or any of Seller's
affiliates or under the authority of any of the foregoing, is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of the parties in connection with any of the
transactions contemplated by this Agreement.
Title; Liens. Except as described on Schedule 3.5, Seller has title to
the Assets free and clear of all liens, pledges, charges, claims, encumbrances,
proscriptions, restrictions, conditions, covenants, and easements of any kind
("Liens").
Accounts Payable and Accrued Liabilities. Schedule 3.6 contains a
correct and complete aging of all accounts payable and accrued liabilities of
Seller outstanding as of the date thereof. Seller has paid all accounts payable
in accordance with their terms, other than accounts payable which Seller is
disputing in good faith and which are identified on Schedule 3.6 as disputed.
Accounts and Notes Receivable. Schedule 3.7 contains a correct and
complete aging of all accounts and notes receivable of Seller as of the date set
forth thereon. All such accounts and notes receivable of Seller represent valid
obligations from sales made or services rendered in the ordinary course of
business. To the knowledge of Seller and Judge Imaging, there are no
counterclaims or rights of set-off with respect to any accounts and notes
receivable of the Business.
Contracts. All Contracts included in the Assets have been entered into
on an arms length basis and are on terms reflecting fair value for the assets or
services provided thereunder. Seller has made available to Buyer complete copies
of all Seller's written Contracts. Except as disclosed on Schedule 3.8, no event
has occurred which constitutes or, with the passage of time or the giving of
notice, or both, would constitute a material default by Seller or, to the
knowledge of Seller, by any other person under any Contracts, or which would
give any other person under such Contract the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Contract. Judge Imaging has not received
from any other person under any such Contract any notice or other communication
regarding any actual or alleged breach of any Contract. To the knowledge of
Judge Imaging, there are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to Seller
under any Contracts.
Tax Matters. All reports, returns or other information required to be
supplied to any federal, state, local or other governmental authority, or any
political subdivision thereof, and any governmental, judicial, public or
statutory instrumentality, tribunal agency, authority, body or entity having
legal jurisdiction over any matter in question with respect to taxes ("Tax
Returns") required to be filed by, or with respect to, the Assets have been
filed. Payment has been made of all taxes required to be paid in respect of the
periods covered by such Tax Returns (except where the failure to pay would not,
in the aggregate, have a material adverse effect on the Assets). No deficiency
for any taxes has been proposed, asserted or assessed in connection with the
Assets that has not been resolved or paid in full. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Tax Returns in connection with the Assets.
36
<PAGE>
Financial Statements. Seller has delivered to Buyer:
an unaudited balance sheet of the Business as of June 30, 1999;
an unaudited profit and loss statement for the six months ended
June 30, 1999;
listings of accounts payable and accounts receivable of the
Business as of June 30, 1999.
The financial statements referred to in subsections (a) and (b) fairly present
the financial condition and the results of operations of the Business as at June
30, 1999 and for the six month period then ended, all in accordance with GAAP,
consistently applied, except as provided in Schedule 3.10. The listings
described in subsection (c) are complete and accurate.
Material Adverse Changes. Since June 30, 1999, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Business, and no event has occurred or circumstance
exists that may result in such a material adverse change.
Undisclosed Liabilities. Seller has, with respect to the Business, no
liabilities or obligations of any nature other than (i) those on the unaudited
balance sheet of the Business as of June 30, 1999, (ii) those incurred since
June 30, 1999 in the ordinary course of business, or (iii) those of a type that
GAAP does not require to be reported on a balance sheet.
Legal Proceedings. Except as set forth on Schedule 3.13, there are no
pending or, to the best knowledge of Seller or Judge Imaging, threatened
actions, claims or proceedings (i) that have been commenced by or against the
Business or that otherwise relate to or may affect the Business, or (ii) that
challenge, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, the Closing. To the knowledge of Seller and Judge
Imaging no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such proceeding.
Customers. Schedule 3.14 sets forth a complete and accurate list of all
customers of the Business.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller and/or Judge Imaging as
of the date of this Agreement as follows (except, in each case, to the extent
Seller and/or Judge Imaging has knowledge or belief that any such representation
and/or warranty is incorrect as a result of Seller's and/or Judge Imaging's due
diligence, or Seller's and/or Judge Imaging's familiarity with the Business or
otherwise):
Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
and has all necessary power and authority to carry on its business as presently
conducted, to own and lease the assets which it owns and leases and to perform
all its obligations under each agreement and instrument by which it is bound.
<PAGE>
Power and Authorization. Buyer has the corporate power and authority to
enter into and perform its obligations under this Agreement, the Note and under
the other agreements, documents and instruments (collectively, the "Buyer
Transaction Documents") required to be delivered by it prior to or at the
Closing. The execution, delivery and performance by Buyer of this Agreement and
the Buyer Transaction Documents have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with the terms hereof. When
executed and delivered as contemplated herein, each of the Buyer Transaction
Documents shall constitute the legal, valid and binding obligation of Buyer,
enforceable in accordance with the terms thereof.
No Conflicts.
The execution, delivery and performance of this Agreement and the Buyer
Transaction Documents do not and will not (with or without the passage of time
or the giving of notice):
violate or conflict with Buyer's certificate or articles of
formation or organization or partnership agreement or any Laws; or
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under, any material agreement or
other material obligation to which Buyer is a party.
No Consents or registrations, notifications, filings and/or
declarations with any court, government or governmental agency or
instrumentality, creditor, lessor or other person or entity are required to be
given or made by Buyer in connection with the execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated herein, other than such as have been obtained or made
and are in full force and effect.
There are no actions, proceedings or investigations pending or, to the
knowledge of Buyer, threatened, that question any of the transactions
contemplated by, or the validity of, this Agreement or any of the other
37
<PAGE>
Transaction Documents or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the ability of Buyer or Seller
to enter into or perform its respective obligations under this Agreement or any
of the other Transaction Documents. Buyer has not, on behalf of itself or
Seller, received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby.
Brokers. No person acting on behalf of Buyer or any of its affiliates
or under the authority of any of the foregoing is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee, directly or
indirectly, from any of the parties in connection with any of the transactions
contemplated by this Agreement.
CLOSING; CERTAIN COVENANTS
Closing and Effectiveness. The closing of the purchase and sale of the
Assets and the assignment and assumption of the Assumed Liabilities (the
"Closing") pursuant to this Agreement shall be effective as of the close of
business on June 30, 1999 and shall take place on the date hereof (the "Closing
Date").
Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
Seller shall deliver, or shall cause to be delivered, to Buyer the
following:
a closing certificate and secretary's certificate, dated the
Closing Date and signed by the Chief Executive Officer or President or a Vice
President of Seller and by the Secretary of Seller, satisfactory to Buyer;
a copy of the resolutions of the board of directors of Seller
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents, certified as of the Closing by the Secretary of
Seller;
the written consent of the landlord with respect to the assignment
to Buyer of the Lease;
UCC-3 termination statements effecting the termination or release
of all assets from the security interests identified in Schedule 3.5;
A release from PNC Bank, National Association, of the Assets from
all security interests of the bank; and
such other documents and instruments as Buyer may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
<PAGE>
Buyer shall deliver, or shall cause to be delivered, to Seller the
items described below:
a closing certificate and secretary's certificate, dated the
Closing Date signed by the President or a Vice President of Buyer and by the
Secretary of Buyer, satisfactory to Seller;
a copy of the resolutions of the board of directors or
corresponding governing body of Buyer authorizing the execution, delivery and
performance by Buyer of this Agreement and the other Transaction Documents,
certified as of the Closing by the Secretary of Buyer;
such other documents and instruments as Seller may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
Use of Name. From and after thirty days after the Closing, Buyer shall
not have or use or permit any affiliate of Buyer to have or use any name or mark
which includes a reference to The Judge Group, Inc., a Pennsylvania corporation
("Judge Group"), or Judge Imaging, or On Site Solutions, or any name or mark
similar thereto, and no such name or mark or rights thereto shall be included in
the Assets. On request, Buyer shall deliver to Seller evidence (which shall be
reasonably satisfactory to Seller) of compliance with this Section. Buyer
acknowledges that breach of this Section will give rise to irreparable injury to
Seller, Judge Imaging and Judge Group and that as a result money damages are
inadequate. Accordingly, Buyer irrevocably acknowledges and agrees that Seller,
Judge Imaging and Judge Group may each seek and obtain injunctive relief and
other equitable remedies with respect to any breach or threatened breach of this
Section, in addition to any other remedies which may be available at law. In the
event of any alleged breach of this Section, Buyer will be responsible for the
legal fees and costs incurred by Seller, Judge Imaging and Judge Group. In the
event any such allegation is made incorrectly, as adjudicated by a court or
arbitrator, Seller and Judge Imaging will be responsible for the legal fees and
costs incurred by Buyer.
Remittance of Payments. From and after the Effective Date, Seller shall
immediately remit to Buyer, in the form received, any payments that it or any
affiliate may receive (such as payments of accounts receivable) which properly
belong to Buyer, and Buyer shall immediately remit to Seller, in the form
received, any payments that Buyer or any affiliate may receive which properly
belong to Seller. In particular, Seller shall immediately remit to Buyer any
cash remitted by a customer on or after the Effective Date that is attributable
to a receivable, which was part of the Assets purchased hereunder. Neither Party
may set off against any amount due under this section any amount owed to or
allegedly owed to such Party.
38
<PAGE>
Affiliate Payments. From and after the Closing, subject to applicable
law (including fraudulent conveyance law and law related to dividends and
distributions) that may restrict payments, until all of the obligations of Buyer
hereunder and under the Note and all of the Assumed Liabilities which constitute
trade accounts payable have been paid and satisfied in full, Buyer will not make
any distribution, dividend or other similar payment, make any loan to or
investment in any Affiliate or make any payment to or transfer any asset or
right to any Affiliate, except for reasonable salary for services rendered and
distributions necessary for Buyer's shareholders to pay income taxes arising
because of Buyer's status as an S corporation under the Internal Revenue Code of
1986, as amended (the "Code"). For purposes hereof, "Affiliate" shall mean any
direct or indirect equity holder of Buyer, any director, officer or employee of
Buyer or of any such equity holder, any spouse or relative of any of the
foregoing which is a natural person and any business entity of which any of the
foregoing is a director.
EMPLOYEE BENEFITS AND EMPLOYMENT
Employment.
Buyer will determine which employees of the Business to whom it will
offer employment and identify such employees by name to Seller not later than
July 12, 1999. Buyer shall offer employment to such individuals effective as of
the Closing. Employees who accept such employment shall be referred to as
"Transferred Employees" for purposes of this Agreement. Seller shall be
responsible for any severance pay obligations with respect to those individuals
employed in the Business who are not Transferred Employees and whose employment
with Seller is terminated. Seller shall also notify such individuals about the
termination of their employment and such notification may inform those
individuals not identified by Buyer as among those to whom Buyer will offer
employment that Buyer has decided not to offer employment to them. Anything
contained in or implied by the provisions of this Section 6.1 to the contrary
notwithstanding, the provisions of this Section shall not create any third-party
beneficiary rights in any person, including any Transferred Employee.
At Closing, Buyer shall assume the Employment Agreement, dated as of
June 5, 1999, between James Turner and Seller.
Employee Pension Benefit Plans. The benefits under any Employee Pension
Benefit Plan (as defined in Section 3(2) of ERISA) maintained by Seller which
have accrued to any Transferred Employee as of the Closing Date shall be frozen
as of a date not later than 15 days after the Closing Date and no further
benefits shall accrue under any such Employee Pension Benefit Plan with respect
to such Transferred Employee. Buyer assumes no responsibility with respect to
any such Employee Pension Benefit Plan.
Employee Welfare Benefit Plans. Buyer shall be responsible for
establishing such Employee Welfare Benefit Plans (as defined in Section 3(1) of
ERISA) for Transferred Employees as it determines to be appropriate. Buyer shall
have no responsibility for any Employee Welfare Benefit Plan of Seller. Subject
to Section 1.3 hereof, Seller shall remain responsible and liable for any acts
or omissions by Seller with respect to such Employee Welfare Benefit Plans
occurring prior to the Closing Date.
Health Continuation Coverage. Buyer shall be responsible for all health
continuation coverage requirements of the Code, and ERISA for all Transferred
Employees and their beneficiaries in periods on and subsequent to the Closing
Date. Seller shall be responsible for notifying employees who are not
Transferred Employees (and the beneficiaries of such employees) of their right
to continue their health care coverage under Seller's health care plan at their
own cost pursuant to the relevant provisions of Federal Law.
Health Insurance Portability and Accountability Act ("HIPAA"). Buyer
shall be responsible for all health insurance obligations imposed by HIPAA with
respect to any Employee Welfare Benefit Plan which is a group health plan (as
defined under Section 5000(b)(1) of the Code or Part 6 of Subtitle B of Title I
of ERISA) for all periods on and subsequent to the Closing Date.
Reporting and Disclosure Requirements. Seller shall be responsible for
filing all annual reports and satisfying all other reporting and disclosure
requirements with respect to any Employee Benefit Plan for all Plan Years ending
prior to the Closing Date.
39
<PAGE>
Employee Records Buyer shall grant Seller full access to all employee
records relating to the Transferred Employees to the extent necessary to enable
Seller to comply with its obligations hereunder.
INDEMNIFICATION
Indemnification by Seller. Subject to Sections 7.5 and 8.4, Seller and
Judge Imaging shall indemnify and hold Buyer and its officers, directors and
shareholders harmless against and in respect of any and all losses, costs,
expenses, claims, damages, obligations and liabilities, including interest,
penalties and reasonable attorneys' fees and disbursements, but not including
any indirect or consequential damages (such losses, costs, expenses, claims,
damages, obligations and liabilities, including interest, penalties and
reasonable attorney's fees and disbursements, but not including any indirect or
consequential damages, collectively, "Damages"), which Buyer or any such person
may suffer, incur or become subject to arising out of, based upon or otherwise
in respect of:
any inaccuracy in or breach of any representation or warranty of
Seller and/or Judge Imaging made in or pursuant to this Agreement or any
Transaction Document;
any breach or nonfulfillment of any covenant or obligation of
Seller and/or Judge Imaging contained in this Agreement or any Transaction
Document; and
other than the Assumed Liabilities, any liability arising out of
the operation of the Business prior to the Closing Date.
The liabilities of Seller and Judge Imaging under this Section 7.1 shall be
joint and several.
Indemnification by Buyer. Buyer shall indemnify, defend and hold Seller
and Judge Imaging and its affiliates and their officers, directors and
shareholders harmless against and in respect of any and all Damages which Seller
and Judge Imaging or any such entity or person may suffer, incur or become
subject to arising out of, based upon or otherwise in respect of:
any inaccuracy in or breach of any representation or warranty of
Buyer made in or pursuant to this Agreement or any Transaction Document;
any breach or nonfulfillment of any covenant or obligation of Buyer
contained in this Agreement or any Transaction Document;
the Assumed Liabilities; and
any liability arising out of the operation of the Business after
the Closing Date.
Inter-Party Claims. Any party seeking indemnification pursuant to this
Section (the "Indemnified Party") shall notify in writing the other party or
parties from whom such indemnification is sought (the "Indemnifying Party") of
the Indemnified Party's assertion of such claim for indemnification, specifying
the basis of such claim, including all relevant facts and circumstances and the
section(s) of this Agreement under which such claim arises. The Indemnified
Party shall thereupon give the Indemnifying Party reasonable access to the
books, records and assets of the Indemnified Party which evidence or support
such claim or the act, omission or occurrence giving rise to such claim and the
right, upon prior notice during normal business hours, to interview any
appropriate personnel of the Indemnified Party related thereto.
Third Party Claims.
Each Indemnified Party shall promptly notify in writing the
Indemnifying Party of the assertion by any third party of any claim with respect
to which the indemnification set forth in this Section relates (which shall also
constitute the notice required by Section 7.3), specifying the basis of such
claim including all relevant facts and circumstances and the section(s) of this
Agreement under which such claim arises. The Indemnifying Party shall have the
right, upon notice to the Indemnified Party within sixty (60) business days
after the receipt of any such notice, to undertake the defense of or, with the
consent of the Indemnified Party (which consent shall not unreasonably be
withheld), to settle or compromise such claim. The failure of the Indemnifying
Party to give such notice and to undertake the defense of or to settle or
compromise such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 7.4(a) and in the absence of gross negligence or
willful misconduct on the part of the Indemnified Party shall preclude the
Indemnifying Party from disputing the manner in which the Indemnified Party may
conduct the defense of such claim or the reasonableness of any amount paid by
the Indemnified Party in satisfaction of such claim.
The election by the Indemnifying Party, pursuant to Section 7.4(a), to
undertake the defense of a third-party claim shall not preclude the party
against which such claim has been made also from participating or continuing to
participate in such defense, so long as such party bears its own legal fees and
expenses for so doing.
40
<PAGE>
1.2 Limitations and Requirements.
Seller shall have no obligation to indemnify Buyer or any other
person against Damages pursuant to Section 7.1 of this Agreement unless and
until the aggregate of all such Damages suffered or incurred by Buyer and such
persons exceeds $20,000; in which event Buyer and such persons shall be entitled
to indemnification for all Damages in excess of such amount.
Except as may otherwise expressly be provided in this Agreement, no
claim arising out of or based upon any inaccuracy in or breach of any
representation or warranty contained in this Agreement or any Transaction
Document shall be made unless facts exist giving rise to a claim, and written
notice pursuant to Section 7.3 is delivered to the Indemnifying Party, within
the applicable statute of limitations period.
The indemnification obligations of Seller contained herein are
intended to be exclusive and preclude all other claims, rights or remedies
against Seller which may exist at law (whether statutory or otherwise) or in
equity with respect to the matters covered by such indemnification obligations.
MISCELLANEOUS
Survival of Representations and Warranties. Subject to Section 7.5(b)
above, the representations and warranties made by the parties in this Agreement
and in the certificates, documents and schedules delivered pursuant hereto shall
survive the consummation of the transactions herein contemplated.
Further Assurances. Each party hereto shall use commercially reasonable
efforts to comply with all requirements imposed hereby on such party and to
cause the transactions contemplated hereby to be consummated as contemplated
hereby and shall, from time to time and without further consideration, either
before or after the Closing, execute such further instruments and take such
other actions as any other party hereto shall reasonably request in order to
fulfill its obligations under this Agreement and to effectuate the purposes of
this Agreement and to provide for the orderly and efficient transition of the
ownership of the Assets to, and the assumption of the Assumed Liabilities by,
Buyer. Buyer and Seller shall, for two years after the Closing, retain the
various books and records relating to the Business and shall, upon prior notice,
provide the other party and its authorized representatives reasonable access
thereto. Each party shall promptly notify the other party of any event or
circumstance known to such party that could prevent or delay the consummation of
the transactions contemplated hereby or which would indicate a breach or
non-compliance with any of the terms, conditions, representations, warranties or
agreements of any of the parties to this Agreement.
Costs and Expenses. Except as otherwise expressly provided herein, each
party shall bear its own expenses in connection herewith.
Acknowledgment of Warranty Disclaimer. Buyer acknowledges and agrees
that
Buyer has had access to the assets, properties (real and personal,
owned and leased), permits, licenses, agreements, instruments, documents and
other contracts (oral and written), and the books and records related to the
Business and has had opportunity to inspect the same;
Buyer has decided to acquire the Assets and assume the Assumed
Liabilities based upon such access and inspection and the representations,
warranties and covenants of Seller specifically made in this Agreement;
accordingly the representations made by Seller in Section 3 hereof
are the sole representations and warranties made by Seller with respect to
itself, its assets and its liabilities and obligations, AND SELLER MAKES NO
OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR
IMPLIED, EITHER HEREIN OR OTHERWISE, AS TO THE ASSETS, PROPERTIES (REAL AND
PERSONAL, OWNED AND LEASED), AGREEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER
CONTRACTS (ORAL AND WRITTEN), LIABILITIES AND/OR BUSINESS OF SELLER OR AS TO,
THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF
THE FOREGOING;
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER DISCLAIMS
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OF
THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED), AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN ), BUSINESS, AND
BUSINESS PROSPECTS OF SELLER, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE; and
41
<PAGE>
in furtherance and not limitation of the foregoing, Seller makes no
representation that Seller has, or that Buyer will have, all the licenses,
permits or other Authorizations or contracts required to carry on the operation
of the Business or that any of such licenses or permits or other Authorizations
or contracts are transferable, and Buyer shall be responsible for all such
matters.
Except as and to the extent set forth in this Agreement and the
certificates and schedules delivered under this Agreement, Seller hereby
disclaims all liability and responsibility for any statement or information made
or communicated in any way to Buyer or any agent, employee or representative
thereof (including, without limitation, any opinion, information or advice
provided by any officer, director, employee, agent, consultant or other
representative of Seller or any affiliate of Seller), and Buyer acknowledges
such disclaimer. No representation or warranty contained in Section 3 shall be
deemed to be untrue to the extent that Buyer had knowledge on the date hereof
that such representation or warranty was not correct as stated herein or, after
the date hereof and on or before the Closing Date, gave prior approval to an act
of the Seller or one of its subsidiaries which caused such representation or
warranty to be incorrect as stated herein.
Acknowledgment of Warranty Disclaimer. Seller acknowledges and agrees
that
The representations made by Buyer in Section 4 hereof are the sole
representations and warranties made by Buyer with respect to itself, its assets
and its liabilities and obligations, AND BUYER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER HEREIN OR
OTHERWISE, AS TO THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED),
AGREEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN),
LIABILITIES AND/OR BUSINESS OF BUYER OR AS TO, THE TRANSACTIONS CONTEMPLATED
HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING;
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER DISCLAIMS
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OF
THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED), AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN ), BUSINESS, AND
BUSINESS PROSPECTS OF BUYER, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE; and
Except as and to the extent set forth in this Agreement and the
certificates and schedules delivered under this Agreement, Buyer hereby
disclaims all liability and responsibility for any statement or information made
or communicated in any way to Seller or any agent, employee or representative
thereof (including, without limitation, any opinion, information or advice
provided by any officer, director, employee, agent, consultant or other
representative of Buyer or any affiliate of Buyer), and Seller acknowledges such
disclaimer. No representation or warranty contained in Section 4 shall be deemed
to be untrue to the extent that Seller had knowledge on the date hereof that
such representation or warranty was not correct as stated herein or, after the
date hereof and on or before the Closing Date, gave prior approval to an act of
the Buyer or one of its subsidiaries which caused such representation or
warranty to be incorrect as stated herein.
Public Announcements. Prior to the Closing, neither Seller nor Buyer
shall make any public announcement or disclosure relating to the transactions
contemplated herein without the prior agreement of the other party hereto,
provided that each party shall use its best efforts to consult with the other in
advance of any disclosure required by law, but in such case the agreement of the
other party hereto shall not be required.
Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
To Seller: With a copy to:
Systems Solutions, Inc. Drinker Biddle & Reath LLP
2 Bala Plaza, Suite 405 One Logan Square
Bala Cynwyd, PA 19004 18th and Cherry Streets
Attention: Amy Feldman, Esquire Philadelphia, PA 19103-6996
Phone (215) 988-2700
Telecopy (215) 988-2757
Attn: F. Douglas Raymond, Esquire
To Buyer: With a copy to:
AOP Acquisition Corp. Cohen Swados Wright Hanifin
105 Brisbane Building Bradford & Brett LLP
403 Main Street 70 Niagara Street
Buffalo, New York 14203 Buffalo, NY 14202
Attention: Paul F. Eckert Phone (716) 856-4600
Telecopy (716) 856-5228
Attention: John Dee, Esquire
42
<PAGE>
Assignment and Benefit.
No party shall assign this Agreement or any rights hereunder, or
delegate any obligations hereunder, without prior written consent of the other
party hereto. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto, and each of their respective successors and assigns.
This Agreement shall not be construed as giving any person, other than
the parties hereto and their permitted successors and assigns, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any of
the provisions herein contained, this Agreement and all provisions and
conditions hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors and assigns and for the
benefit of no other person or entity.
Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect, provided that any such amendment shall be in
writing. The waiver by a party of any breach of any provision of this Agreement
shall not constitute or operate as a waiver of any other breach of such
provision or of any other provision hereof, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other provision
hereof.
Bill of Sale. To the extent required by applicable law or statute, this
Agreement shall constitute a Bill of Sale.
Governing Law; Consent to Jurisdiction.
This Agreement is made pursuant to, and shall be construed and enforced
in accordance with, the internal laws of the Commonwealth of Pennsylvania (and
United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.
Any legal action, suit or proceeding arising out of or relating to this
Agreement which is brought by Buyer shall be instituted in a court in the
Eastern District of Pennsylvania, and each party waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding in, and irrevocably submits to the jurisdiction of, any such
court. Any and all service of process and any other notice in any such action,
suit or proceeding shall be effective against any party if made by certified or
registered mail, or by a nationally recognized overnight courier, directed to
Seller or Buyer, as the case may be, at the address provided for herein and
service so made shall be deemed to be completed upon actual receipt thereof, or
the next day following deposit of such notice with a nationally recognized
overnight courier.
Any legal action, suit or proceeding arising out of or relating to this
Agreement which is brought by Seller shall be instituted in a court in the
Western District of New York, and each party waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding in, and irrevocably submits to the jurisdiction of, any such
court. Any and all service of process and any other notice in any such action,
suit or proceeding shall be effective against any party if made by certified or
registered mail, or by a nationally recognized overnight courier, directed to
Seller or Buyer, as the case may be, at the address provided for herein and
service so made shall be deemed to be completed upon actual receipt thereof, or
the next day following deposit of such notice with a nationally recognized
overnight courier.
Nothing herein contained shall be deemed to affect the right of any
party to serve process in any other manner permitted by law.
Section Headings and Defined Terms. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement. The terms defined herein and in
any agreement executed in connection herewith include the plural as well as the
singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
43
<PAGE>
Invalidity/Severability. The invalidity or unenforceability of this
Agreement or any particular provision, or part of any provision, of this
Agreement in one jurisdiction shall not affect the validity or enforceability of
this Agreement or any particular provision or part of any provision of this
Agreement in any other jurisdiction and the invalidity or unenforceability of
any particular provision or part of any provision shall not affect the other
provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
Entire Agreement. This Agreement, together with the agreements,
exhibits, schedules and certificates referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with respect
to the purchase and sale of the Assets and the assumption of the Assumed
Liabilities and supersedes all prior agreements and understandings. The
submission of a draft of this Agreement or portions or summaries thereof does
not constitute an offer to purchase or sell the Assets, it being understood and
agreed that neither Buyer nor Seller shall be legally obligated with respect to
such a purchase or sale or to any other terms or conditions set forth in such
draft or portion or summary unless and until this Agreement has been duly
executed and delivered by all parties. Buyer's rights and remedies with respect
to the transactions contemplated by this Agreement and the other Transaction
Documents shall be controlled by and subject to the provisions of this
Agreement, and Buyer shall have no other rights or remedies except as set forth
in this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Asset Purchase Agreement, under seal, all as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
Attest SYSTEMS SOLUTIONS, INC.
/s/ James Turner, Secretary /s/ Martin E. Judge, Jr., Chief Executive Officer
- ---------------- ------------------------
[Seal]
Attest JUDGE IMAGING SYSTEMS, INC.
/s/ Katharine A. Wiercinski, Secretary /s/ Martin E. Judge, Jr., Chief Executive Officer
- --------------------------- ------------------------
[Seal]
Attest AOP ACQUISITION CORP.
/s/ Suzanne L. Eckert, Secretary /s/ Paul Eckert, President
- --------------------- ---------------
[Seal]
</TABLE>
The undersigned does hereby unconditionally, absolutely and irrevocably
guarantee to Seller and Judge Imaging the performance by Buyer of all of Buyer's
obligations contained in the Agreement, subject only to the terms, conditions
and limitations contained herein. The undersigned hereby waives presentation,
demand of payment and protest of any such obligation of Buyer, and further
waives any right to require that resort be had by Seller and/or Judge Imaging to
Buyer with respect to any such obligation before demanding performance thereof
by the undersigned.
The undersigned further agrees that this guaranty shall inure to the
benefit of and may be enforced by Seller and/or Judge Imaging, its successors
and permitted assigns, and shall be binding upon and enforceable against the
undersigned and its permitted successors or assigns and that this guaranty shall
remain in full force and effect as to any and all modifications of the Agreement
that may be effected in accordance with the terms thereof after the date hereof.
AUTOMATED OFFICE PRODUCTS OF WESTERN NEW YORK, INC.
/s/ Paul Eckert, President
- ---------------
The undersigned execute this Agreement for purposes of joining in the
covenants set forth in Section 5.5, jointly and severally with the Buyer.
/s/ Paul F. Eckert
- ------------------
/s/ Suzanne Eckert
- ------------------
44
<PAGE>
Exhibit 10.3
ASSET PURCHASE AGREEMENT
by and among
JUDGE IMAGING SYSTEMS, INC.,
THE JUDGE GROUP, INC.
and
AOP MORRISTOWN CORP.
SECTION 1. ACQUISITION OF ASSETS
1.1 Sale and Purchase of Assets
1.2 Excluded Assets
1.3 Assumption of Liabilities
1.4 Consents
SECTION 2. PURCHASE AND SALE
2.1 Purchase Price
2.2 Allocation of Consideration
2.3 Closing Costs
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization and Good Standing
3.2 Power and Authorization
3.3 No Conflicts
3.4 Brokers
3.5 Title; Liens
3.6 Accounts Payable and Accrued Liabilities
3.7 Accounts and Notes Receivable
3.9 Contracts
3.10 Tax Matters
3.11 Financial Statements
3.12 Material Adverse Changes
3.13 Undisclosed Liabilities
3.14 Legal Proceedings
3.15 Customers
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Good Standing
4.2 Power and Authorization
4.3 No Conflicts
4.4 Brokers
SECTION 5. CLOSING; CERTAIN COVENANTS
5.1 Closing and Effectiveness
5.2 Deliveries at the Closing
5.3 Use of Name
5.4 Accounting Software
5.5 Remittance of Payments
SECTION 6. EMPLOYEE BENEFITS AND EMPLOYMENT
6.1 Employment
6.2 Employee Pension Benefit Plans
6.3 Employee Welfare Benefit Plans
6.4 Health Continuation Coverage
6.5 Health Insurance Portability and Accountability Act ("HIPAA")
6.6 Reporting and Disclosure Requirements
6.7 Employee Records
SECTION 7. INDEMNIFICATION
7.1 Indemnification by Seller
7.2 Indemnification by Buyer
7.3 Inter-Party Claims
7.4 Third Party Claims
7.5 Limitations and Requirements
45
<PAGE>
SECTION 8. MISCELLANEOUS
8.1 Survival of Representations and Warranties
8.2 Further Assurances
8.3 Costs and Expenses
8.4 Acknowledgment of Warranty Disclaimer
8.5 Acknowledgment of Warranty Disclaimer
8.6 Public Announcements
8.7 Notices
8.8 Assignment and Benefit
8.9 Amendment, Modification and Waiver
8.10 Bill of Sale
8.11 Governing Law; Consent to Jurisdiction
8.12 Section Headings and Defined Terms
8.13 Invalidity/Severability
8.14 Counterparts
8.15 Entire Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is effective as of
June 30, 1999, (the "Effective Date") by and among Judge Imaging Systems, Inc.,
a Pennsylvania corporation ("Seller"), The Judge Group, Inc., a Pennsylvania
corporation ("Judge Group"), and AOP Morristown Corp., a New York corporation
("Buyer"). Buyer, Judge Group and Seller are collectively referred to herein as
the "Parties".
BACKGROUND
The Parties desire to provide for, among other things, the acquisition
by Buyer from Seller and the sale by Seller to Buyer of certain Assets (as
defined below) and the assumption by Buyer of certain liabilities relating to
the document solutions and information management business (the "Business")
which Seller operates in (i) Hartford, Connecticut, (ii) Needham, Massachusetts,
and (iii) Moorestown, New Jersey upon the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ACQUISITION OF ASSETS
Sale and Purchase of Assets. Upon the terms and subject to the
conditions of this Agreement, Seller hereby sells, transfers and delivers to
Buyer the Assets (as defined below) and Buyer hereby purchases the Assets from
Seller for the consideration set forth in Section 2 hereof. As used herein the
term "Assets" shall mean the following assets of the Business:
All accounts receivable of the Business as of the Effective Date or
earned thereafter in the ordinary course, including all receivables identified
on Schedule 3.7;
All supplies, machinery, furniture, furnishings, motor vehicles,
equipment and other personal property and tangible assets located at the
Business or used exclusively by the Business regardless of location;
To the extent assignable, all right, title and interest in, to and
under all purchase orders, sales agreements, equipment leases, distribution
agreements, licensing agreements and other contracts, agreements and commitments
("Contracts") of the Business, including those set forth on Schedule 1.1(c);
Prepaid expenses;
Copies of all books and records exclusively relating to the
Business or the Assets (including such books and records as are contained in
computerized storage media), including all inventory, purchasing, accounting,
sales, export, import, manufacturing, marketing, banking and shipping records
and all files, contractor, consultant, customer/client and supplier lists,
records, literature and correspondence, and marketing materials excluding tax
returns;
46
<PAGE>
The lease (the "Connecticut Lease") related to the facility at 1010
Wethersfield Avenue, Suite 305, Hartford, Connecticut 06114;
The three leases (the "New Jersey Leases") related to the
facilities at 102 Executive Drive, Suites 6, 7 and 8, Moorestown, New Jersey
08057;
The lease (the "Florida Lease") related to the facility at Office
No. 705, 100 Rialto Place, Melbourne, Florida 32901;
Any other assets of the Business which are of a nature not
customarily reflected in the books and records of a business, such as assets
which have been written off for accounting purposes but which are still used by
or of value to the Business;
To the extent assignable, all permits, licenses and authorizations
("Authorizations") associated with the Business and its operations which are
identified on Schedule 1.1(j);
All intangible assets and goodwill exclusively related to the
Business and its operations;
All deposits in the hands of third parties; and
All other assets of the Business exclusively related to the
Business and its operations other than "Excluded Assets" defined in Section 1.2.
Excluded Assets. The Assets being sold, assigned, and transferred to
Buyer hereunder do not include any other assets of Seller, including:
An amount equal to the cash and cash equivalents reflected on the
June 30 Balance sheet;
Any assets or rights used both for the Business and other
operations of Judge Imaging;
Any name or mark which includes "Judge";
Any rights, claims or counterclaims under this Agreement or the
Transaction Documents; or
Assets listed on Schedule 1.2 (collectively, the "Excluded
Assets").
Assumption of Liabilities. Buyer hereby assumes, and thereafter will
fully perform, pay and satisfy, all of the following debts, liabilities
(including contingent liabilities), claims, obligations, and commitments, known
and unknown ("Liabilities"), of Seller relating to the Business (the "Assumed
Liabilities"):
all obligations of Seller that are executory as of the Closing Date
under Contracts of the Business that are part of the Assets assigned to Buyer
and Seller's obligations under the Connecticut Lease, the New Jersey Leases and
the Florida Lease (rent under the Connecticut Lease, the New Jersey Leases and
the Florida Lease will be prorated to the Closing Date);
all accounts payable of Seller reflected on the June 30 Balance
Sheet or relating to or arising out of the operation of the Business thereafter
in the ordinary course, including all payables set forth on Schedule 3.6;
all purchase accruals of Seller relating to or arising out of the
operation of the Business, including all purchase accruals set forth on Schedule
3.8, except that Seller will be responsible for all accrued commissions owed to
Rick Green and Tony Unger;
vacation, severance and similar employment liabilities with respect
to Transferred Employees (except as provided in Section 6);
unearned revenues and customer deposits;
all liabilities of the Business arising after the Closing Date; and
all liabilities reflected on (and not excluded by) the June 30
Balance Sheet and all liabilities arising in the ordinary course of operating
the Business after the Effective Date.
<PAGE>
Buyer does not assume and shall not be liable for any other Liabilities,
including but not limited to (i) Taxes relating to periods prior to the Closing
Date or (ii) any other Liability arising out of the operation of the Business
prior to the Closing Date. In addition, Buyer shall not be liable for Seller's
payroll expense from July 1, 1999 through July 21, 1999.
Consents. Notwithstanding anything in this Agreement to the contrary,
if any Contract or Authorization included in the Assets may not be transferred
without the consent, approval or waiver ("Consent") of a third party (including,
without limitation, any governmental authority) and such transfer or attempted
transfer would constitute a breach thereof or a violation of any law, nothing in
this Agreement or any Transaction Document shall constitute a transfer or
attempted transfer thereof. Seller and Buyer will use reasonable efforts to
obtain each such Consent before or as soon as possible after the Closing Date,
but to the extent not obtained, Seller and Buyer shall cooperate (a) in
endeavoring to obtain such Consent promptly, and (b) if any such Consent is
unobtainable, in any reasonable arrangement so that Buyer has all of the
benefits and assumes all of the executory obligations under any such Contract or
Authorization as if such Contract and Authorization had been duly assigned to
Buyer.
47
<PAGE>
PURCHASE AND SALE
Purchase Price. In full consideration for the sale by Seller to Buyer
of the Assets pursuant to Section 1.1 hereof, and the other agreements by Seller
and Buyer herein, the aggregate purchase price for the Assets shall be Two
Million Two Hundred and Twenty-Three Thousand Dollars ($2,223,000) (the
"Purchase Price"), which shall be payable by Buyer to Seller by means of wire
transfer prior to or at the Closing. In addition, Buyer shall pay Seller
Eighty-Eight Thousand Dollars and Fifty-Seven Cents ($88,000.57) in connection
with the July 30, 1999 payment by Seller of salaries and health care coverage
premiums and other benefits for the employees of the Business plus Four Hundred
and Nineteen Thousand Dollars ($419,000) to reimburse Seller for the payment,
between July 1, 1999 and August 2, 1999, by Seller of certain accounts payable
of the Business, without a right on the part of Buyer to set-off, not later than
September 16, 1999, pursuant to the terms of a promissory note bearing interest
at 8.0% and secured by substantially all the assets of Buyer and Automated
Office Products of Western New York, Inc., a New York corporation (the
"Guarantor"), to be entered into by Buyer prior to or at the Closing,
substantially in the form attached hereto as Exhibit A-1 (the "Note").
Allocation of Consideration. The consideration for the Assets shall be
allocated to the Seller and among the Assets as specified on Schedule 2.2
hereto. Within 90 days following the Closing, Buyer shall prepare and submit to
Seller Internal Revenue Form 8594 (relating to purchase price allocation),
prepared in accordance with such allocation. Seller and Buyer shall prepare
their respective federal, state and local tax returns and reports employing the
allocation made pursuant to this Section and shall not take a position in any
tax proceeding or audit or otherwise that is inconsistent with such allocation;
provided, that nothing contained herein shall require Seller or Buyer to
contest, beyond the exhaustion of its administrative remedies before any taxing
authority or agency, and Seller and Buyer shall not be required to litigate
before any court, including, without limitation, the United States Tax Court,
any proposed deficiency or adjustment by any taxing authority or agency that
challenges such allocation. Seller and Buyer shall give prompt notice to each
other promptly upon becoming aware of the commencement or threat of any tax
audit or the threatened assertion of any proposed deficiency or adjustment by
any tax authority or agency that challenges such allocation.
Closing Costs. Buyer and Seller shall divide equally all documentary,
use, filing, sales and other taxes and fees due or payable as a result of the
transfer and delivery of the Assets from Seller to Buyer. Each of Buyer and
Seller shall pay all of its respective attorney, consultant, accounting and
other fees and any and all other expenses contemplated to be paid by Buyer or
Seller under this Agreement, the Note and the other agreements, documents and
instruments related hereto (this Agreement, the Note and such related
agreements, documents and instruments, collectively, the "Transaction
Documents").
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Judge Group hereby represent and warrant to Buyer as of the
Closing Date as follows (except, in each case, to the extent Buyer has actual
knowledge or belief that any such representation and/or warranty is incorrect as
a result of Buyer's due diligence, or Buyer's familiarity with the Business or
otherwise):
Organization and Good Standing. Each of Seller and Judge Group is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania, and Seller is qualified to do business in
the States of Connecticut, Massachusetts and New Jersey, and each of Seller and
Judge Group has all necessary power and authority to carry on its business as
presently conducted, to own and lease the assets which it owns and leases and to
perform all its obligations under each agreement and instrument by which it is
bound.
Power and Authorization. Each of Seller and Judge Group has the
corporate power and authority to enter into and perform its obligations under
this Agreement and under the other agreements and documents required to be
delivered by Seller prior to or at the Closing in connection herewith (such
agreements and documents, collectively, the "Seller Transaction Documents"). The
execution, delivery and performance by Seller and Judge Group of this Agreement
and the Seller Transaction Documents have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by Seller and Judge Group and constitutes a legal, valid and binding
obligation of Seller and Judge Group, enforceable against Seller and Judge Group
in accordance with the terms hereof. When executed and delivered as contemplated
herein, each of the Seller Transaction Documents shall constitute the legal,
valid and binding obligation of Seller and Judge Group, enforceable against
Seller and Judge Group in accordance with the terms thereof.
48
<PAGE>
No Conflicts.
The execution, delivery and performance of this Agreement and the
Seller Transaction Documents do not and will not (with or without the passage of
time or the giving of notice):
violate or conflict with Seller's or Judge Group's certificate or
articles of incorporation or by-laws, any statute, law, regulation, permit,
license, or certificate, or any judgment, order, award or other decision or
requirement of any arbitrator, court, government or governmental agency or
instrumentality (domestic or foreign) binding upon Seller and Judge Group and
their properties or assets (such statutes, laws, regulations, permits, licenses,
certificates, judgments, orders, awards and other decisions or requirements,
collectively, "Laws"); or
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under, any material agreement or
other material obligation to which Seller or Judge Group is a party; or
cause Buyer to become subject to or liable for any tax liability of
Seller or Judge Group other than taxes required to be prorated hereunder and/or
sales tax due on this transaction.
Except as described on Schedule 3.3(b), no Consents or registrations,
notifications, filings and/or declarations with, any court, government or
governmental agency or instrumentality, creditor, lessor or other person or
entity are required to be given or made by Seller or Judge Group in connection
with the execution, delivery and performance of this Agreement and the other
agreements, documents and instruments contemplated herein, other than such as
have been obtained or made and are in full force and effect.
There are no actions, proceedings or investigations ("Actions") pending
or, to the knowledge of Seller or Judge Group, threatened, that question any of
the transactions contemplated by, or the validity of, this Agreement or any of
the other Transaction Documents or which, if adversely determined, could
reasonably be expected to have a material adverse effect upon the Business or
the ability of Seller to enter into or perform its respective obligations under
this Agreement or any of the other Transaction Documents. Seller has not, on
behalf of itself or Buyer, received any request from any governmental agency or
instrumentality for information with respect to the transactions contemplated
hereby.
Brokers. No person acting on behalf of Seller or Judge Group or any of
their affiliates or under the authority of any of the foregoing, is or will be
entitled to any brokers' or finders' fee or any other commission or similar fee,
directly or indirectly, from any of the parties in connection with any of the
transactions contemplated by this Agreement.
Title; Liens. Except as described on Schedule 3.5, Seller has the
Assets free and clear of all liens, pledges, charges, claims, encumbrances,
proscriptions, restrictions, conditions, covenants, and easements of any kind
("Liens") other than Liens included in the Assumed Liabilities.
Accounts Payable and Accrued Liabilities. Schedule 3.6 contains a
correct and complete list and aging report of all accounts payable and accrued
liabilities of Seller outstanding as of the Effective Date. Seller has paid all
prior accounts payable in accordance with their terms, other than accounts
payable which Seller is disputing in good faith and which are identified on
Schedule 3.6 as disputed.
Accounts and Notes Receivable. Schedule 3.7 contains a correct and
complete list and aging report of all accounts and notes receivable of Seller as
of the Effective Date. All such accounts and notes receivable of Seller
represent valid obligations from sales made or services rendered in the ordinary
course of business. To the knowledge of Seller, there are no counterclaims or
rights of set-off with respect to any accounts and notes receivable of the
Business.
Purchase Accruals. Schedule 3.8 contains a correct and complete list of
all purchase accruals of Seller as of the Effective Date.
Contracts. All Contracts included in the Assets have been entered into
on an arms length basis and are on terms reflecting fair value for the assets or
services provided thereunder. Seller has made available to Buyer complete copies
of all Seller's written Contracts and has provided information to Buyer
concerning all of Seller's oral Contracts. Except as disclosed on Schedule 3.9,
no event has occurred which constitutes or, with the passage of time or the
giving of notice, or both, would constitute a material default by Seller or, to
the knowledge of Seller, by any other person under any Contracts, or which would
give any other person under such Contract the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Contract. Seller has not received from any
other person under any such Contract any notice or other communication regarding
any actual or alleged breach of any Contract. To the knowledge of Seller, there
are no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to Seller under any Contracts.
49
<PAGE>
Tax Matters. All reports, returns or other information required to be
supplied to any federal, state, local or other governmental authority, or any
political subdivision thereof, and any governmental, judicial, public or
statutory instrumentality, tribunal agency, authority, body or entity having
legal jurisdiction over any matter in question with respect to taxes ("Tax
Returns") required to be filed by, or with respect to, the Assets have been
filed. Payment has been made of all taxes required to be paid in respect of the
periods covered by such Tax Returns (except where the failure to pay would not,
in the aggregate, have a material adverse effect on the Assets). No deficiency
for any taxes has been proposed, asserted or assessed in connection with the
Assets that has not been resolved or paid in full. No audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Tax Returns in connection with the Assets.
Financial Statements. Seller has delivered to Buyer, as attached hereto
as Schedule 3.11:
an unaudited balance sheet of the Business as of the Effective Date
(the "June 30 Balance Sheet");
an unaudited profit and loss statement of the Business for the six
months ended as of the Effective Date; and
listings of accounts payable and accounts receivable of the
Business as of the Effective Date.
The financial statements referred to in subsections (a) and (b) fairly present
the financial condition and the results of operations of the Business as at the
Effective Date and for the six month period then ended, all in accordance with
GAAP, consistently applied, except as provided in Schedule 3.11. The listings
described in subsection (c) are complete and accurate.
Material Adverse Changes. Since the Effective Date, there has not been
any material adverse change in the business, operations, properties, prospects,
assets, or condition of the Business, and, to the knowledge of Seller, no event
has occurred or circumstance exists that might reasonably be expected to result
in such a material adverse change.
Undisclosed Liabilities. Seller has, with respect to the Business, no
liabilities or obligations of any nature other than (i) those on the unaudited
balance sheet of the Business as of the Effective Date, (ii) those incurred
since the Effective Date in the ordinary course of business, or (iii) those of a
type that GAAP does not require to be reported on a balance sheet.
Legal Proceedings. Except as set forth on Schedule 3.14, there are no
pending or, to the best knowledge of Seller, threatened actions, claims or
proceedings (i) that have been commenced by or against the Business or that
otherwise relate to or may affect the Business, or (ii) that challenge, or that
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, the Closing. To the knowledge of Seller no event has occurred
or circumstance exists that may give rise to or serve as a basis for the
commencement of any such proceeding.
Customers. Schedule 3.15 sets forth a complete and accurate list of all
material customers of the Business.
Seller's Knowledge. For purposes of this Agreement, "to the knowledge
of Seller" or words of similar import shall be conclusively deemed to be only
that knowledge actually possessed by those persons identified in Schedule 3.16.
Seller shall not be deemed to have actual or constructive knowledge of any fact,
circumstance or occurrence known to any person other than as set forth in the
preceding sentence.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as of the date of this
Agreement as follows (except, in each case, to the extent Seller has knowledge
or belief that any such representation and/or warranty is incorrect as a result
of Seller's due diligence, or Seller's familiarity with the Business or
otherwise):
Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
and has all necessary power and authority to carry on its business as presently
conducted, to own and lease the assets which it owns and leases and to perform
all its obligations under each agreement and instrument by which it is bound.
Power and Authorization. Buyer has the corporate power and authority to
enter into and perform its obligations under this Agreement, the Note and under
the other agreements, documents and instruments (collectively, the "Buyer
Transaction Documents") required to be delivered by it prior to or at the
Closing. The execution, delivery and performance by Buyer of this Agreement and
the Buyer Transaction Documents have been duly authorized by all necessary
corporate action. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with the terms hereof. When
executed and delivered as contemplated herein, each of the Buyer Transaction
Documents shall constitute the legal, valid and binding obligation of Buyer,
enforceable in accordance with the terms thereof.
50
<PAGE>
No Conflicts.
The execution, delivery and performance of this Agreement and the Buyer
Transaction Documents do not and will not (with or without the passage of time
or the giving of notice):
violate or conflict with Buyer's certificate or articles of
formation or organization or partnership agreement or any Laws; or
violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under, any material agreement or
other material obligation to which Buyer is a party.
No Consents or registrations, notifications, filings and/or
declarations with any court, government or governmental agency or
instrumentality, creditor, lessor or other person or entity are required to be
given or made by Buyer in connection with the execution, delivery and
performance of this Agreement and the other agreements, documents and
instruments contemplated herein, other than such as have been obtained or made
and are in full force and effect.
There are no actions, proceedings or investigations pending or, to
the knowledge of Buyer, threatened, that question any of the transactions
contemplated by, or the validity of, this Agreement or any of the other
Transaction Documents or which, if adversely determined, could reasonably be
expected to have a material adverse effect upon the ability of Buyer or Seller
to enter into or perform its respective obligations under this Agreement or any
of the other Transaction Documents. Buyer has not, on behalf of itself or
Seller, received any request from any governmental agency or instrumentality for
information with respect to the transactions contemplated hereby.
Brokers. No person acting on behalf of Buyer or any of its affiliates
or under the authority of any of the foregoing is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee, directly or
indirectly, from any of the parties in connection with any of the transactions
contemplated by this Agreement.
CLOSING; CERTAIN COVENANTS
Closing and Effectiveness. The closing of the purchase and sale of the
Assets and the assignment and assumption of the Assumed Liabilities (the
"Closing") pursuant to this Agreement shall be effective as of the close of
business on the Effective Date and shall take place on August 2, 1999 (the
"Closing Date").
Deliveries at the Closing. At the Closing, in addition to the other
actions contemplated elsewhere herein:
Seller shall deliver, or shall cause to be delivered, to Buyer the
following:
a closing certificate and secretary's certificate, dated the
Closing Date and signed by the Chief Executive Officer or President or a Vice
President of Seller and by the Secretary of Seller, satisfactory to Buyer;
a copy of the resolutions of the board of directors of Seller
authorizing the execution, delivery and performance of this Agreement and the
other Transaction Documents, certified as of the Closing by the Secretary of
Seller;
UCC-3 termination statements effecting the termination or release
of all Assets from the security interests identified in Schedule 3.5;
a release from PNC Bank, National Association, in form reasonably
satisfactory to Buyer, of the Assets from all security interests of the bank in
the Assets;
a written consent of the landlord with respect to the assignment to
Buyer of the Connecticut Lease;
a written consent of the landlord with respect to the assignment to
Buyer of the New Jersey Leases;
a written consent of the landlord with respect to the assignment to
Buyer of the Florida Lease; and
such other documents and instruments as Buyer may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement;
provided that, Seller shall have no liability under this Section if it cannot
deliver the consents referred to in (v), (vi) and (vii) above, but it will use
reasonable efforts to obtain such consents as promptly as possible.
Buyer shall deliver, or shall cause to be delivered, to Seller the
items described below:
51
<PAGE>
a closing certificate and secretary's certificate, dated the
Closing Date signed by the President or a Vice President of Buyer and by the
Secretary of Buyer, satisfactory to Seller;
a copy of the resolutions of the board of directors or
corresponding governing body of Buyer authorizing the execution, delivery and
performance by Buyer of this Agreement and the other Transaction Documents,
certified as of the Closing by the Secretary of Buyer;
the Note and collateral security documentation related thereto,
executed by Buyer;
a guaranty of Buyer's obligations hereunder and under the Note,
executed by Guarantor, substantially in the form attached hereto as Exhibit A-2;
such other documents and instruments as Seller may reasonably
request to effectuate or evidence the transactions contemplated by this
Agreement.
Use of Name. From and after thirty days after the Closing, Buyer shall
not have or use or permit any affiliate of Buyer to have or use any name or mark
which includes a reference to Judge Group, or Seller, or any name or mark
similar thereto, and no such name or mark or rights thereto shall be included in
the Assets. On request, Buyer shall deliver to Seller evidence (which shall be
reasonably satisfactory to Seller) of compliance with this Section. Buyer
acknowledges that breach of this Section will give rise to irreparable injury to
Seller and Judge Group and that as a result money damages are inadequate.
Accordingly, Buyer irrevocably acknowledges and agrees that Seller and Judge
Group may each seek and obtain injunctive relief and other equitable remedies
with respect to any breach or threatened breach of this Section, in addition to
any other remedies which may be available at law. In the event of any alleged
breach of this Section, Buyer will be responsible for the legal fees and costs
incurred by Seller and Judge Group. In the event any such allegation is made
incorrectly, as adjudicated by a court or arbitrator, Seller and Judge Group
will be responsible for the legal fees and costs incurred by Buyer.
Accounting Software. From and after the Closing Date until December 31,
1999, to the extent permitted under any applicable licenses or permits, Seller
shall permit Buyer to use the accounting software that Seller used prior to the
Closing Date to generate the financial statements of the Business, provided that
Buyer's use of such accounting software does not interfere with the operations
of Seller and/or Judge Group after the Closing Date.
Remittance of Payments. From and after the Effective Date, Seller shall
immediately remit to Buyer, in the form received, any payments that it or any
affiliate may receive (such as payments of accounts receivable) which properly
belong to Buyer, and Buyer shall immediately remit to Seller, in the form
received, any payments that Buyer or any affiliate may receive which properly
belong to Seller. In particular, Seller shall immediately remit to Buyer any
cash remitted by a customer on or after the Effective Date that is attributable
to a receivable, which was part of the Assets purchased hereunder. Neither Party
may set off against any amount due under this section any amount owed to or
allegedly owed to such Party.
EMPLOYEE BENEFITS AND EMPLOYMENT
Employment. Buyer will determine which employees of the Business to
whom it will offer employment and identify such employees by name to Seller not
later than July 30, 1999. Buyer shall offer employment to such individuals
effective as of the Closing Date. Employees who accept such employment and
become employed by Buyer shall be referred to as "Transferred Employees" for
purposes of this Agreement. Buyer shall offer employment to Gerald LaJoix at a
nominal annual salary, and, if Mr. LaJoix accepts such employment and it is
permitted by Buyer's insurers, Buyer shall ensure that Mr. LaJoix remains
eligible for health insurance benefits offered by Buyer to employees of the
Business (if Mr. LaJoix pays his individual annual premiums for such benefits)
until such time as Mr. LaJoix is eligible to receive Medicare benefits. Judge
Group shall pay any cost or expense incurred by Buyer as a result of any illness
of Mr. LaJoix for the remainder of the life of Mr. LaJoix. Each of Seller, Judge
Group and any affiliate thereof shall not solicit the employment of any of Paul
Dimouro, Mike Cislo or Rich Romanski for a period of two years after the Closing
Date, and each of Seller, Judge Group and any affiliate thereof shall not
solicit the employment of any other Transferred Employee for a period of one
year after the Closing Date. Seller shall be responsible for any severance pay
obligations with respect to (i) those individuals employed in the Business who
are not Transferred Employees and whose employment with Seller is terminated or
(ii) Transferred Employees who are terminated by Buyer within 30 days after the
Closing Date. Seller shall also notify such individuals about the termination of
their employment and such notification may inform those individuals not
identified by Buyer as among those to whom Buyer will offer employment that
Buyer has decided not to offer employment to them. Anything contained in or
implied by the provisions of this Section 6.1 to the contrary notwithstanding,
the provisions of this Section shall not create any third-party beneficiary
rights in any person, including any Transferred Employee.
52
<PAGE>
Employee Pension Benefit Plans. The benefits under any Employee Pension
Benefit Plan (as defined in Section 3(2) of ERISA) maintained by Seller which
have accrued to any Transferred Employee as of the Closing Date shall be frozen
as of a date not later than 15 days after the Closing Date and no further
benefits shall accrue under any such Employee Pension Benefit Plan with respect
to such Transferred Employee. Buyer assumes no responsibility with respect to
any such Employee Pension Benefit Plan.
Employee Welfare Benefit Plans. Buyer shall be responsible for
establishing such Employee Welfare Benefit Plans (as defined in Section 3(1) of
ERISA) for Transferred Employees as it determines to be appropriate. Buyer shall
have no responsibility for any Employee Welfare Benefit Plan of Seller. Subject
to Section 1.3 hereof, Seller shall remain responsible and liable for any acts
or omissions by Seller with respect to such Employee Welfare Benefit Plans
occurring prior to the Closing Date.
Health Continuation Coverage. Buyer shall be responsible for all health
continuation coverage requirements of the Code, and ERISA for all Transferred
Employees and their beneficiaries in periods on and subsequent to the Closing
Date. Seller shall be responsible for notifying employees who are not
Transferred Employees (and the beneficiaries of such employees) of their right
to continue their health care coverage under Seller's health care plan at their
own cost pursuant to the relevant provisions of Federal Law.
Health Insurance Portability and Accountability Act ("HIPAA"). Buyer
shall be responsible for all health insurance obligations imposed by HIPAA with
respect to any Employee Welfare Benefit Plan which is a group health plan (as
defined under Section 5000(b)(1) of the Code or Part 6 of Subtitle B of Title I
of ERISA) for all periods on and subsequent to the Closing Date.
Reporting and Disclosure Requirements. Seller shall be responsible for
filing all annual reports and satisfying all other reporting and disclosure
requirements with respect to any Employee Benefit Plan for all Plan Years ending
prior to the Closing Date.
Employee Records Buyer shall grant Seller full access to all employee
records relating to the Transferred Employees to the extent necessary to enable
Seller to comply with its obligations hereunder.
INDEMNIFICATION
Indemnification by Seller. Subject to Sections 7.5 and 8.4, Seller and
Judge Group shall jointly and severally indemnify and hold Buyer and its
officers, directors and shareholders harmless against and in respect of any and
all losses, costs, expenses, claims, damages, obligations and liabilities,
including interest, penalties and reasonable attorneys' fees and disbursements,
but not including any indirect or consequential damages (such losses, costs,
expenses, claims, damages, obligations and liabilities, including interest,
penalties and reasonable attorney's fees and disbursements, but not including
any indirect or consequential damages, collectively, "Damages"), which Buyer or
any such person may suffer, incur or become subject to arising out of, based
upon or otherwise in respect of:
any inaccuracy in or breach of any representation or warranty of
Seller made in or pursuant to this Agreement or any Transaction Document;
any breach or nonfulfillment of any covenant or obligation of
Seller contained in this Agreement or any Transaction Document; and
other than the Assumed Liabilities, any liability arising out of
the operation of the Business prior to the Closing Date.
The indemnification provided for in Section 7.1 shall be limited to claims
asserted by Buyer and claim notices delivered with respect thereto to Seller on
or before the 270th day after the Closing Date.
Indemnification by Buyer. Buyer shall indemnify, defend and hold Seller
and its affiliates and their officers, directors and shareholders harmless
against and in respect of any and all Damages which Seller or any such entity or
person may suffer, incur or become subject to arising out of, based upon or
otherwise in respect of:
any inaccuracy in or breach of any representation or warranty of
Buyer made in or pursuant to this Agreement or any Transaction Document;
any breach or nonfulfillment of any covenant or obligation of Buyer
contained in this Agreement or any Transaction Document;
the Assumed Liabilities;
53
<PAGE>
any liability arising out of the use by Buyer of accounting
software pursuant to Section 5.4 of this Agreement; and
any liability arising out of the operation of the Business after
the Closing Date.
Inter-Party Claims. Any party seeking indemnification pursuant to this
Section (the "Indemnified Party") shall notify in writing the other party or
parties from whom such indemnification is sought (the "Indemnifying Party") of
the Indemnified Party's assertion of such claim for indemnification, specifying
the basis of such claim, including all relevant facts and circumstances and the
section(s) of this Agreement under which such claim arises. The Indemnified
Party shall thereupon give the Indemnifying Party copies of the records and
documents which evidence or support such claim or the act, omission or
occurrence giving rise to such claim.
Third Party Claims.
Each Indemnified Party shall promptly notify in writing the
Indemnifying Party of the assertion by any third party of any claim with respect
to which the indemnification set forth in this Section relates (which shall also
constitute the notice required by Section 7.3), specifying the basis of such
claim including all relevant facts and circumstances and the section(s) of this
Agreement under which such claim arises. The Indemnifying Party shall have the
right, upon notice to the Indemnified Party within sixty (60) business days
after the receipt of any such notice, to undertake the defense of or, with the
consent of the Indemnified Party (which consent shall not unreasonably be
withheld), to settle or compromise such claim. The failure of the Indemnifying
Party to give such notice and to undertake the defense of or to settle or
compromise such a claim shall constitute a waiver of the Indemnifying Party's
rights under this Section 7.4(a) and in the absence of gross negligence or
willful misconduct on the part of the Indemnified Party shall preclude the
Indemnifying Party from disputing the manner in which the Indemnified Party may
conduct the defense of such claim or the reasonableness of any amount paid by
the Indemnified Party in satisfaction of such claim.
The election by the Indemnifying Party, pursuant to Section 7.4(a), to
undertake the defense of a third-party claim shall not preclude the party
against which such claim has been made also from participating or continuing to
participate in such defense, so long as such party bears its own legal fees and
expenses for so doing.
1.3 Limitations and Requirements.
Seller shall have no obligation to indemnify Buyer or any other
person against Damages pursuant to Section 7.1 of this Agreement unless and
until the aggregate of all such Damages suffered or incurred by Buyer and such
persons exceeds $100,000, in which event Buyer and such persons shall be
entitled to indemnification for all Damages in excess of such amount; provided
that (i) such limitation shall not apply to damages arising by reason of Liens
on the Assets shown by a New Jersey UCC search to be provided by Seller; (ii)
any litigation arising under this provision shall be conducted in Buffalo, New
York; and (iii) in any litigation arising under this provision, Seller and/or
Judge Group shall pay Buyer's reasonable attorney's fees.
Except as may otherwise expressly be provided in this Agreement, no
claim arising out of or based upon any inaccuracy in or breach of any
representation or warranty contained in this Agreement or any Transaction
Document shall be made unless facts exist giving rise to a claim, and written
notice pursuant to Section 7.3 is delivered to the Indemnifying Party, within
the applicable statute of limitations period.
The indemnification obligations of Seller contained herein are
intended to be exclusive and preclude all other claims, rights or remedies
against Seller which may exist at law (whether statutory or otherwise) or in
equity with respect to the matters covered by such indemnification obligations.
<PAGE>
MISCELLANEOUS
Survival of Representations and Warranties. Subject to Section
7.5(b) above, the representations and warranties made by the parties in this
Agreement and in the certificates, documents and schedules delivered pursuant
hereto shall survive the consummation of the transactions herein contemplated as
set forth in Section 7.
Further Assurances. Each party hereto shall use commercially
reasonable efforts to comply with all requirements imposed hereby on such party
and to cause the transactions contemplated hereby to be consummated as
contemplated hereby and shall, from time to time and without further
consideration, either before or after the Closing, execute such further
instruments and take such other actions as any other party hereto shall
reasonably request in order to fulfill its obligations under this Agreement and
to effectuate the purposes of this Agreement and to provide for the orderly and
efficient transition of the ownership of the Assets to, and the assumption of
the Assumed Liabilities by, Buyer. Buyer and Seller shall, for two years after
the Closing, retain the various books and records relating to the Business and
shall, upon prior notice, provide the other party and its authorized
representatives reasonable access thereto. Each party shall promptly notify the
other party of any event or circumstance known to such party that could prevent
or delay the consummation of the transactions contemplated hereby or which would
indicate a breach or non-compliance with any of the terms, conditions,
representations, warranties or agreements of any of the parties to this
Agreement.
54
<PAGE>
Costs and Expenses. Except as otherwise expressly provided herein, each
party shall bear its own expenses in connection herewith.
Acknowledgment of Warranty Disclaimer. Buyer acknowledges and agrees
that
Buyer has had access to the assets, properties (real and personal,
owned and leased), permits, licenses, agreements, instruments, documents and
other contracts (oral and written), and the books and records related to the
Business and has had opportunity to inspect the same;
Buyer has decided to acquire the Assets and assume the Assumed
Liabilities based upon such access and inspection and the representations,
warranties and covenants of Seller specifically made in this Agreement;
accordingly the representations made by Seller in Section 3 hereof
(including the Schedules identified in Section 3 hereof) are the sole
representations and warranties made by Seller with respect to itself, its assets
and its liabilities and obligations, AND SELLER MAKES NO OTHER REPRESENTATIONS
OR WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER HEREIN OR
OTHERWISE, AS TO THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED),
AGREEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN),
LIABILITIES AND/OR BUSINESS OF SELLER OR AS TO, THE TRANSACTIONS CONTEMPLATED
HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING;
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS SET
FORTH IN SECTION 3 AND THE SCHEDULES REFERRED TO THEREIN, SELLER DISCLAIMS ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OF THE
ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED), AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN ), BUSINESS, AND
BUSINESS PROSPECTS OF SELLER, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE; and
in furtherance and not limitation of the foregoing, Seller makes no
representation that Seller has, or that Buyer will have, all the licenses,
permits or other Authorizations or contracts required to carry on the operation
of the Business or that any of such licenses or permits or other Authorizations
or contracts are transferable, and Buyer shall be responsible for all such
matters.
Except as and to the extent set forth in this Agreement and the
certificates and schedules delivered under this Agreement, Seller hereby
disclaims all liability and responsibility for any statement or information made
or communicated in any way to Buyer or any agent, employee or representative
thereof (including, without limitation, any opinion, information or advice
provided by any officer, director, employee, agent, consultant or other
representative of Seller or any affiliate of Seller), and Buyer acknowledges
such disclaimer. No representation or warranty contained in Section 3 shall be
deemed to be untrue to the extent that Buyer had knowledge on the date hereof
that such representation or warranty was not correct as stated herein or, after
the date hereof and on or before the Closing Date, gave prior approval to an act
of the Seller or one of its subsidiaries which caused such representation or
warranty to be incorrect as stated herein.
For purposes of this Section 8.4: (i) Buyer shall be deemed to have had
knowledge of a fact, event or circumstance only if and when Paul Eckert or
Suzanne Eckert had such knowledge; and (ii) Buyer shall be deemed to have given
its approval to an act of Seller only if and when Paul Eckert or Suzanne Eckert
gave such approval.
Acknowledgment of Warranty Disclaimer. Seller acknowledges and agrees
that
The representations made by Buyer in Section 4 hereof are the sole
representations and warranties made by Buyer with respect to itself, its assets
and its liabilities and obligations, AND BUYER MAKES NO OTHER REPRESENTATIONS OR
WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, EITHER HEREIN OR
OTHERWISE, AS TO THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED),
AGREEMENTS, INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN),
LIABILITIES AND/OR BUSINESS OF BUYER OR AS TO, THE TRANSACTIONS CONTEMPLATED
HEREBY OR ANY OTHER MATTER PERTAINING TO ANY OF THE FOREGOING;
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER DISCLAIMS
ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, AS TO THE CONDITION OF
THE ASSETS, PROPERTIES (REAL AND PERSONAL, OWNED AND LEASED), AGREEMENTS,
INSTRUMENTS, DOCUMENTS AND OTHER CONTRACTS (ORAL AND WRITTEN ), BUSINESS, AND
BUSINESS PROSPECTS OF BUYER, INCLUDING, WITHOUT LIMITATION, THE WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE; and
55
<PAGE>
Except as and to the extent set forth in this Agreement and the
certificates and schedules delivered under this Agreement, Buyer hereby
disclaims all liability and responsibility for any statement or information made
or communicated in any way to Seller or any agent, employee or representative
thereof (including, without limitation, any opinion, information or advice
provided by any officer, director, employee, agent, consultant or other
representative of Buyer or any affiliate of Buyer), and Seller acknowledges such
disclaimer. No representation or warranty contained in Section 4 shall be deemed
to be untrue to the extent that Seller had knowledge on the date hereof that
such representation or warranty was not correct as stated herein or, after the
date hereof and on or before the Closing Date, gave prior approval to an act of
the Buyer or one of its subsidiaries which caused such representation or
warranty to be incorrect as stated herein.
Public Announcements. Prior to the Closing, neither Seller, Buyer nor
Guarantor shall make any public announcement or disclosure relating to the
transactions contemplated herein without the prior agreement of the other party
hereto, provided that each party shall use its best efforts to consult with the
other in advance of any disclosure required by law, but in such case the
agreement of the other party hereto shall not be required.
Notices. All notices or other communications permitted or required
under this Agreement shall be in writing and shall be sufficiently given if and
when hand delivered to the persons set forth below or if sent by documented
overnight delivery service or registered or certified mail, postage prepaid,
return receipt requested, or by telegram, telex or telecopy, receipt
acknowledged, addressed as set forth below or to such other person or persons
and/or at such other address or addresses as shall be furnished in writing by
any party hereto to the others. Any such notice or communication shall be deemed
to have been given as of the date received, in the case of personal delivery, or
on the date shown on the receipt or confirmation therefor in all other cases.
To Seller: With a copy to:
Judge Imaging Systems, Inc. Drinker Biddle & Reath LLP
2 Bala Plaza, Suite 405 One Logan Square
Bala Cynwyd, PA 19004 18th and Cherry Streets
Attention: Amy Feldman, Esquire Philadelphia, PA 19103-6996
Phone (215) 988-2700
Telecopy (215) 988-2757
Attention: Samuel Mason, Esquire
To Buyer: With a copy to:
AOP Morristown Corp. Cohen Swados Wright Hanifin
105 Brisbane Building Bradford & Brett LLP
403 Main Street 70 Niagara Street
Buffalo, New York 14203 Buffalo, NY 14202
Attention: Paul F. Eckert Phone (716) 856-4600
Telecopy (716) 856-5228
Attention: John Dee, Esquire
Assignment and Benefit.
No party shall assign this Agreement or any rights hereunder, or
delegate any obligations hereunder, without prior written consent of the other
party hereto. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto, and each of their respective successors and assigns.
This Agreement shall not be construed as giving any person, other than
the parties hereto and their permitted successors and assigns, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any of
the provisions herein contained, this Agreement and all provisions and
conditions hereof being intended to be, and being, for the sole and exclusive
benefit of such parties, and permitted successors and assigns and for the
benefit of no other person or entity.
Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect, provided that any such amendment shall be in
writing. The waiver by a party of any breach of any provision of this Agreement
shall not constitute or operate as a waiver of any other breach of such
provision or of any other provision hereof, nor shall any failure to enforce any
provision hereof operate as a waiver of such provision or of any other provision
hereof.
56
<PAGE>
Bill of Sale. To the extent required by applicable law or statute, this
Agreement shall constitute a Bill of Sale.
Governing Law; Consent to Jurisdiction.
This Agreement is made pursuant to, and shall be construed and enforced
in accordance with, the internal laws of the Commonwealth of Pennsylvania (and
United States federal law, to the extent applicable), irrespective of the
principal place of business, residence or domicile of the parties hereto, and
without giving effect to otherwise applicable principles of conflicts of law.
Any legal action, suit or proceeding arising out of or relating to this
Agreement which is brought by Buyer shall be instituted in a court in the
Eastern District of Pennsylvania, and each party waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding in, and irrevocably submits to the jurisdiction of, any such
court. Any and all service of process and any other notice in any such action,
suit or proceeding shall be effective against any party if made by certified or
registered mail, or by a nationally recognized overnight courier, directed to
Seller or Buyer, as the case may be, at the address provided for herein and
service so made shall be deemed to be completed upon actual receipt thereof, or
the next day following deposit of such notice with a nationally recognized
overnight courier.
Any legal action, suit or proceeding arising out of or relating to this
Agreement which is brought by Seller shall be instituted in a court in the
Western District of New York, and each party waives any objection which such
party may now or hereafter have to the laying of the venue of any such action,
suit or proceeding in, and irrevocably submits to the jurisdiction of, any such
court. Any and all service of process and any other notice in any such action,
suit or proceeding shall be effective against any party if made by certified or
registered mail, or by a nationally recognized overnight courier, directed to
Seller or Buyer, as the case may be, at the address provided for herein and
service so made shall be deemed to be completed upon actual receipt thereof, or
the next day following deposit of such notice with a nationally recognized
overnight courier.
Nothing herein contained shall be deemed to affect the right of any
party to serve process in any other manner permitted by law.
Section Headings and Defined Terms. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement. The terms defined herein and in
any agreement executed in connection herewith include the plural as well as the
singular and the singular as well as the plural, and the use of masculine
pronouns shall include the feminine and neuter. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith.
Invalidity/Severability. The invalidity or unenforceability of this
Agreement or any particular provision, or part of any provision, of this
Agreement in one jurisdiction shall not affect the validity or enforceability of
this Agreement or any particular provision or part of any provision of this
Agreement in any other jurisdiction and the invalidity or unenforceability of
any particular provision or part of any provision shall not affect the other
provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.
Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original; and any person may
become a party hereto by executing a counterpart hereof, but all of such
counterparts together shall be deemed to be one and the same instrument. It
shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
Entire Agreement. This Agreement, together with the agreements,
exhibits, schedules and certificates referred to herein or delivered pursuant
hereto, constitutes the entire agreement between the parties hereto with respect
to the purchase and sale of the Assets and the assumption of the Assumed
Liabilities and supersedes all prior agreements and understandings. The
submission of a draft of this Agreement or portions or summaries thereof does
not constitute an offer to purchase or sell the Assets, it being understood and
agreed that neither Buyer nor Seller shall be legally obligated with respect to
such a purchase or sale or to any other terms or conditions set forth in such
draft or portion or summary unless and until this Agreement has been duly
executed and delivered by all parties. Buyer's rights and remedies with respect
to the transactions contemplated by this Agreement and the other Transaction
Documents shall be controlled by and subject to the provisions of this
Agreement, and Buyer shall have no other rights or remedies except as set forth
in this Agreement.
57
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Asset Purchase Agreement, under seal, all as of the date first
above written.
<TABLE>
<CAPTION>
<S> <C>
Attest JUDGE IMAGING SYSTEMS, INC.
/s/ Katharine A. Wiercinski, Secretary /s/ Martin E. Judge, Jr., Chief Executive Officer
- ---------------------------- -------------------------
[Seal]
Attest THE JUDGE GROUP, INC.
/s/ Katharine A. Wiercinski, Secretary /s/ Martin E. Judge, Jr., Chief Executive Officer
- ---------------------------- -------------------------
[Seal]
Attest AOP MORRISTOWN CORP.
/s/ Suzanne L. Eckert, Secretary /s/ Paul Eckert, President
- ---------------------- ----------------
[Seal]
</TABLE>
58
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED JUNE 30
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Income from continuing operations $ 522,724 $ 808,573
Loss from operations of discontinued JIMS (839,410) (299,061)
Loss on disposal of JIMS (6,282,972) 0
------------ -----------
Net Income (Loss) ($ 6,599,658) $ 509,512
============ ===========
Basic: *
Weighted Average Shares Outstanding 13,647,369 13,468,958
============ ===========
Basic income per share from continuing operations $ 0.04 $ 0.06
Basic loss per share from discontinued operations ($ 0.06) ($ 0.02)
Basic loss per share from disposal of JIMS ($ 0.46) $ 0.00
------------ -----------
Basic income (loss) per share ($ 0.48) $ 0.04
============ ===========
Diluted: *
Weighted Average Shares Outstanding 13,703,419 13,491,998
============ ===========
Diluted income per share from continuing operations $ 0.04 $ 0.06
Diluted loss per share from discontinued operations ($ 0.06) ($ 0.02)
Diluted loss per share from disposal of JIMS ($ 0.46) $ 0.00
------------ -----------
Diluted income (loss) per share ($ 0.48) $ 0.04
============ ===========
</TABLE>
(1) Options on 1,981,550 shares and 1,190,750 shares in 1999 and 1998,
respectively, not included in computing diluted earnings per share because
their effects are anti-dilutive.
(2) In 1998 options to purchase 205,000 shares, less 182,000 shares to be
purchased under the Treasury Stock method, are included in weighted average
shares outstanding.
(3) Excludes 40,000 shares of Treasury Stock from its date of purchase on
February 28, 1998.
* Earnings per share amounts are rounded.
COMPUTATION OF EARNINGS PER SHARE
SIX MONTHS ENDED JUNE 30
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Income from continuing operations $ 1,023,463 $ 1,392,273
Loss from operations of discontinued JIMS (1,920,040) (519,627)
Loss on disposal of JIMS (6,282,972) 0
------------ -----------
Net Income (Loss) ($ 7,179,549) $ 872,646
============ ===========
Basic: *
Weighted Average Shares Outstanding 13,574,739 13,419,350
============ ===========
Basic income per share from continuing operations $ 0.08 $ 0.10
Basic loss per share from discontinued operations ($ 0.14) ($ 0.03)
Basic loss per share from disposal of JIMS ($ 0.47) $ 0.00
------------ -----------
Basic income (loss) per share ($ 0.53) $ 0.07
============ ===========
Diluted: *
Weighted Average Shares Outstanding 13,630,789 13,442,390
============ ===========
Diluted income per share from continuing operations $ 0.08 $ 0.10
Diluted loss per share from discontinued operations ($ 0.14) ($ 0.03)
Diluted loss per share from disposal of JIMS ($ 0.47) $ 0.00
------------ -----------
Diluted income (loss) per share ($ 0.53) $ 0.07
============ ===========
</TABLE>
(1) Options on 1,981,550 shares and 1,190,750 shares in 1999 and 1998,
respectively, not included in computing diluted earnings per share because
their effects are anti-dilutive.
(2) In 1998 options to purchase 205,000 shares, less 182,000 shares to be
purchased under the Treasury Stock method, are included in weighted average
shares outstanding.
(3) Excludes 40,000 shares of Treasury Stock from its date of purchase on
February 28, 1998.
* Earnings per share amounts are rounded.
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE JUDGE GROUP, INC. QUARTERLY REPORT ON FORM
10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 10,547
<SECURITIES> 0
<RECEIVABLES> 22,316,945
<ALLOWANCES> 960,601
<INVENTORY> 125,483
<CURRENT-ASSETS> 28,907,733
<PP&E> 5,285,845
<DEPRECIATION> 2,087,882
<TOTAL-ASSETS> 42,767,418
<CURRENT-LIABILITIES> 11,505,098
<BONDS> 0
0
0
<COMMON> 139,843
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 42,767,418
<SALES> 0
<TOTAL-REVENUES> 58,329,194
<CGS> 38,978,064
<TOTAL-COSTS> 56,311,966
<OTHER-EXPENSES> 255,832
<LOSS-PROVISION> 514,183
<INTEREST-EXPENSE> 260,031
<INCOME-PRETAX> 1,761,396
<INCOME-TAX> 737,933
<INCOME-CONTINUING> 1,023,463
<DISCONTINUED> (8,203,012)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,179,549)
<EPS-BASIC> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
