<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 10, 1998
Preferred Employers Holdings, Inc.
----------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware
----------------------------------------------------------
(State or other jurisdiction of incorporation)
1-12677 65-0698779
(Commission File Number) (I.R.S. Employer Identification No.)
10800 Biscayne Blvd., Miami, Florida 33161
- ---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 893-4040
Not Applicable
----------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 10, 1998, Preferred Healthcare Staffing, Inc. ("Preferred
Staffing"), a wholly-owned subsidiary of Preferred Employers Holdings, Inc. (the
"Company"), acquired through a "pooling of interests" all of the outstanding
capital stock of National Explorers and Travelers Healthcare, Inc. ("NET
Healthcare") in exchange for 517,085 shares of common stock (the "Transaction
Shares") of the Company (the "Acquisition") pursuant to a stock purchase
agreement, dated as of July 10, 1998, by and among the Company, Preferred
Staffing and Debbie Bender-Balazich, Steven Barth, Steven Jones, and Steven M.
McLaughlin (collectively, the "Sellers").
Out of the 517,085 Transaction Shares issued to the Sellers, 172,362
shares were delivered to the Sellers at closing; 293,015 shares are being
held in escrow and will be released to the Sellers on December 31, 1998; and
51,708 shares are being held in escrow for one year for the purpose of
satisfying any applicable indemnification claims. The exchange ratio was
based upon a formula relating to the net income of NET Healthcare after
interest expense and income taxes.
In connection with the Acquisition, as of August 10, 1998 Preferred
Staffing entered into employment agreements with Debbie Bender-Balazich and
Stephen M. McLaughlin, former shareholders, officers and directors of NET
Healthcare pursuant to which Ms. Bender-Balazich was retained as Executive
Vice-President for a period of one year at an annual salary of $150,000, plus a
bonus tied to certain performance objectives, and Mr. McLaughlin was retained as
Vice President of Information Technology for a period of one year at an annual
salary of $102,000, plus a bonus tied to certain performance objectives. In
addition, the Company granted to Ms. Bender-Balazich and Mr. McLaughlin options
to purchase 50,000 and 20,000 shares, respectively, of the Company's common
stock at an exercise price of $8.625 per share pursuant to the Company's 1996
Stock Option Plan.
The Company and the Sellers also entered into a registration rights
agreement pursuant to which the Company agreed to use reasonable efforts to file
a Registration Statement under the Securities Act of 1933, as amended (the
"Act"), covering the Transaction Shares by no later than October 24, 1998, and
to use reasonable efforts to have the Registration Statement declared effective
as soon as practicable thereafter. The Company further agreed to maintain the
effectiveness of the Registration Statement under the Act for a period of either
nine months or for a shorter period of time that will terminate when all the
securities covered by the Registration Statement have been disposed of.
Organized in January 1996, NET Healthcare provides registered nurses and
other professional medical personnel, often referred to as "travel nurses,"
primarily to client hospitals in the United States and the Caribbean on a
contractual basis, for periods generally ranging from 8 to 52 weeks. During
1997, NET Healthcare placed nurses in more than 1,000 positions and currently
has orders for nurses for more than 1,800 positions.
-2-
<PAGE>
For the years ended December 31, 1996 and 1997, NET Healthcare had
revenues of approximately $2,614,000 and $11,594,000, respectively, and
incurred a net loss of approximately $625,000 and $599,000, respectively.
For the three months ended March 31, 1998, NET Healthcare had revenues of
approximately $4,510,000 and net income of approximately $274,000 without
giving effect to income taxes because NET Healthcare was a Subchapter S
corporation.
With the acquisition of NET Healthcare, Preferred Staffing has more than
600 nurses, surgical technologists and therapists currently under contract and
is expected to serve more than 1,000 client facilities in the continental United
States and the Caribbean.
The Company hereby incorporates by reference herein the matters announced
in the Company's press release dated August 12, 1998 (such press release is
filed as Exhibit 99.1 hereto).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS. The following documents are being filed herewith by the
Company as exhibits to this Current Report on Form 8-K:
2.1 Stock Purchase Agreement, dated as of July 10, 1998, by and among
Preferred Employers Holdings, Inc., Preferred Healthcare
Staffing, Inc. and Debbie Bender-Balazich, Steven Barth, Steven
Jones and Stephen M. McLaughlin.
10.1 Employment Agreement, dated as of August 10, 1998, between
Preferred Healthcare Staffing, Inc. and Debbie Bender-Balazich.
10.2 Stock Option Agreement, dated as of August 10, 1998, between
Preferred Employers Holdings, Inc. and Debbie Bender-Balazich.
10.3 Employment Agreement, dated as of August 10, 1998, between
Preferred Healthcare Staffing, Inc. and Stephen M. McLaughlin.
10.4 Stock Option Agreement, dated as of August 10, 1998, between
Preferred Employers Holdings, Inc. and Stephen M. McLaughlin.
10.5 Registration Rights Agreement, dated as of August 10, 1998,
by and among Preferred Employers Holdings, Inc. and Debbie
Bender-Balazich, Steven Barth, Steven Jones and Stephen M.
McLaughlin.
99.1 Press release of the Company dated August 12, 1998.
-3-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PREFERRED EMPLOYERS HOLDINGS, INC.
Date: August 19, 1998 By: /s/ William R. Dresback
-----------------------------
William R. Dresback
Senior Vice President,
Chief Financial Officer
and Secretary
(Principal Financial and
Accounting Officer)
-4-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. EXHIBITS PAGE NO.
2.1 Stock Purchase Agreement, dated as of July 10, 1998,
by and among Preferred Employers Holdings, Inc.,
Preferred Healthcare Staffing, Inc. and Debbie Bender-
Balazich, Steven Barth, Steven Jones and
Stephen M. McLaughlin.
10.1 Employment Agreement, dated as of August 10, 1998, between
Preferred Healthcare Staffing, Inc. and Debbie
Bender-Balazich.
10.2 Stock Option Agreement, dated as of August 10, 1998,
between Preferred Employers Holdings, Inc. and Debbie
Bender-Balazich.
10.3 Employment Agreement, dated as of August 10, 1998, between
Preferred Healthcare Staffing, Inc. and Stephen M.
McLaughlin.
10.4 Stock Option Agreement, dated as of August 10, 1998, between
Preferred Employers Holdings, Inc. and Stephen M. McLaughlin.
10.5 Registration Rights Agreement, dated as of August 10, 1998,
by and among Preferred Employers Holdings, Inc. and Debbie
Bender-Balazich, Steven Barth, Steven Jones and Stephen M.
McLaughlin.
99.1 Press release of the Company dated August 12, 1998.
-5-
<PAGE>
Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
PREFERRED HEALTHCARE STAFFING, INC. ("BUYER")
AND
DEBBIE BENDER-BALAZICH, STEVEN BARTH, STEVEN JONES AND STEPHEN M. MCLAUGHLIN
(COLLECTIVELY "SELLERS")
DATED AS OF JULY 10, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I SALE AND PURCHASE; CLOSING . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Purchase and Sale of Purchased Shares. . . . . . . . . . . 1
SECTION 1.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.3 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.5 Delivery of Schedules. . . . . . . . . . . . . . . . . . . 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS . . . . . . . . . . 4
SECTION 2.1 Capitalization . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.2 Title to the Shares. . . . . . . . . . . . . . . . . . . . 4
SECTION 2.3 Authority Relative to this Agreement . . . . . . . . . . . 4
SECTION 2.4 No Conflicts; Consents . . . . . . . . . . . . . . . . . . 5
SECTION 2.5 Corporate Existence and Power. . . . . . . . . . . . . . . 5
SECTION 2.6 Charter Documents and Corporate Records. . . . . . . . . . 6
SECTION 2.7 Financial Information. . . . . . . . . . . . . . . . . . . 6
SECTION 2.8 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.9 Company Receivables. . . . . . . . . . . . . . . . . . . . 7
SECTION 2.10 Absence of Certain Changes . . . . . . . . . . . . . . . . 7
SECTION 2.11 Leased Real Property. . . . . . . . . . . . . . . . . . . 8
SECTION 2.12 Personal Property; Assets . . . . . . . . . . . . . . . . 9
SECTION 2.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.14 Intangible Property . . . . . . . . . . . . . . . . . . . 10
SECTION 2.15 Claims and Proceedings. . . . . . . . . . . . . . . . . . 10
SECTION 2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.17 Employee Benefits Plans . . . . . . . . . . . . . . . . . 13
SECTION 2.18 Employee-Related Matters. . . . . . . . . . . . . . . . . 15
SECTION 2.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.20 Compliance with Laws. . . . . . . . . . . . . . . . . . . 16
SECTION 2.21 Permits . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.22 Environmental Matters . . . . . . . . . . . . . . . . . . 17
SECTION 2.23 Finders Fees. . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.24 Depositaries; Powers of Attorney, etc . . . . . . . . . . 18
SECTION 2.25 Related Party Transactions. . . . . . . . . . . . . . . . 18
SECTION 2.26 Restrictions on Business Activities . . . . . . . . . . . 19
SECTION 2.27 Customers . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.28 Absence of Certain Business Practices . . . . . . . . . . 19
SECTION 2.29 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.30 Transaction Shares. . . . . . . . . . . . . . . . . . . . 20
i
<PAGE>
SECTION 2.31 Ability to Conduct Business . . . . . . . . . . . . . . . 20
SECTION 2.32 Potential Conflicts of Interest . . . . . . . . . . . . . 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND
PARENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.1 Authority Relative to this Agreement . . . . . . . . . . . 21
SECTION 3.2 No Conflicts; Consents . . . . . . . . . . . . . . . . . . 21
SECTION 3.3 Corporate Existence and Power. . . . . . . . . . . . . . . 22
SECTION 3.4 Finders Fees . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.5 Parent Reports . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.6 Transaction Shares . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IV COVENANTS AND AGREEMENTS. . . . . . . . . . . . . . . . . . . 22
SECTION 4.1 Conduct of Business of the Company . . . . . . . . . . . . 22
SECTION 4.2 Corporate Examinations and Investigations. . . . . . . . . 24
SECTION 4.3 Additional Financial Statements. . . . . . . . . . . . . . 24
SECTION 4.4 Filings and Authorizations . . . . . . . . . . . . . . . . 24
SECTION 4.5 Efforts to Consummate. . . . . . . . . . . . . . . . . . . 25
SECTION 4.6 Negotiations With Others . . . . . . . . . . . . . . . . . 25
SECTION 4.7 Notices of Certain Events. . . . . . . . . . . . . . . . . 25
SECTION 4.8 Public Announcements . . . . . . . . . . . . . . . . . . . 26
SECTION 4.9 Confidentiality. . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.10 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.11 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 4.12 Covenant Not-to-Compete . . . . . . . . . . . . . . . . . 27
SECTION 4.13 Employee Matters. . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.14 Further Assurances. . . . . . . . . . . . . . . . . . . . 29
SECTION 4.15 Registration Rights . . . . . . . . . . . . . . . . . . . 30
SECTION 4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.17 Pooling of Interests. . . . . . . . . . . . . . . . . . . 30
SECTION 4.18 Self-Insurance. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.19 Joint Venture Agreement . . . . . . . . . . . . . . . . . 30
SECTION 4.20 Offers of Employment. . . . . . . . . . . . . . . . . . . 31
ARTICLE V CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.1 Conditions to the Obligations of the Parties . . . . . . . 31
SECTION 5.2 Conditions to the Obligations of Sellers . . . . . . . . . 31
SECTION 5.3 Conditions to the Obligations of Buyer . . . . . . . . . . 32
ARTICLE VI INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 35
ii
<PAGE>
SECTION 6.1 Survival of Representations and Warranties . . . . . . . . 35
SECTION 6.2 Obligation of Sellers to Indemnify . . . . . . . . . . . . 35
SECTION 6.3 Obligation of Buyer to Indemnify . . . . . . . . . . . . . 36
SECTION 6.4 Notice and Opportunity to Defend Third Party Claims. . . . 36
SECTION 6.5 Limits on Indemnification. . . . . . . . . . . . . . . . . 37
SECTION 6.6 Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII SPECIFIC PERFORMANCE; TERMINATION . . . . . . . . . . . . . . 37
SECTION 7.1 Specific Performance . . . . . . . . . . . . . . . . . . . 37
SECTION 7.2 Termination. . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.3 Effect of Termination; Right to Proceed. . . . . . . . . . 39
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.5 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . 41
SECTION 8.6 Binding Effect; No Assignment. . . . . . . . . . . . . . . 41
SECTION 8.7 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.10 Third Parties . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . 48
iii
<PAGE>
SCHEDULES
Schedule 2.1 -- List of Shareholders
Schedule 2.4 -- Sellers Required Consents
Schedule 2.5 -- Investments
Schedule 2.7A -- Financial Statements
Schedule 2.7B -- Unusual or Nonrecurring Expense/Income
Schedule 2.8 -- Liabilities
Schedule 2.9 -- Company Receivables
Schedule 2.10 -- Absence of Certain Changes
Schedule 2.11 -- Leased Real Property
Schedule 2.12 -- Personal Property; Assets
Schedule 2.13 -- Contracts
Schedule 2.14 -- Intangible Property
Schedule 2.15 -- Claims and Proceedings
Schedule 2.16 -- Taxes
Schedule 2.17 -- Employee Benefits Plans
Schedule 2.18 -- Employer-Related Matters
Schedule 2.19 -- Insurance
Schedule 2.21 -- Permits
Schedule 2.24 -- Depositaries
Schedule 2.25 -- Related Party Transactions
Schedule 2.27 -- Suppliers and Customers
Schedule 3.2 -- Buyer Required Consents
Schedule 5.3B - Amounts Owed
EXHIBITS
Exhibit 1.3A - NET Escrow Agreement
Exhibit 1.3B -- Escrow Agreement
Exhibit 4.15 -- Registration Rights Agreement
Exhibit 4.21 -- Employment Agreements
Exhibit 5.2A -- Form of Legal Opinion of Buyer's Counsel
Exhibit 5.3A -- Form of Legal Opinion of Sellers' Counsel
Exhibit 5.3B -- Non-Compete Agreement with Dale Balazich
iv
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of July 10, 1998, by and among Preferred
Healthcare Staffing, Inc., a Delaware corporation ("BUYER"), Debbie
Bender-Balazich, Steven Barth, Steven Jones and Stephen M. McLaughlin (each a
"SELLER", and collectively, "SELLERS").
W I T N E S S E T H:
WHEREAS, each Seller desires to sell to Buyer, and Buyer desires to
purchase from each Seller, all of the shares of common stock, no par value per
share (the "COMMON STOCK"), of National Explorers and Travelers Healthcare,
Inc., a Florida corporation (the "COMPANY"), set forth opposite such Seller's
name on SCHEDULE 2.1 (collectively, the "PURCHASED SHARES");
WHEREAS, each of the parties hereto hereby confirms its desire and intent
that the purchase and sale of the Purchased Shares and the consummation of the
Contemplated Transactions be treated as a "pooling of interests" and a tax-free
reorganization in accordance with GAAP and all applicable Tax Laws; and
WHEREAS, all defined terms used herein and not otherwise defined within the
body of this Agreement shall have the meaning attributed to them in Article IX
hereof.
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
SALE AND PURCHASE; CLOSING
SECTION 1.1 PURCHASE AND SALE OF PURCHASED SHARES. Subject to the terms
and conditions set forth herein, at the Closing each Seller shall sell, transfer
and deliver to Buyer, and Buyer shall purchase and accept from each Seller, all
of the Purchased Shares.
SECTION 1.2 PURCHASE PRICE. The aggregate purchase price (the "PURCHASE
PRICE") for the Purchased Shares shall be equal to the following:
(A) 10.25 times the sum of (i) the Company's audited net operating income
for the three months ended March 31, 1998 (the "FIRST QUARTER") as determined by
Coopers & Lybrand LLP, LESS the income tax expense of the Company for the First
Quarter assuming it was a "C corporation" (the "INCOME TAX EXPENSE") as
determined by Coopers & Lybrand LLP, LESS the interest expense of the Company
(the "INTEREST EXPENSE") for the First Quarter; PLUS (ii) the
1
<PAGE>
Company's reviewed net operating income for the month ended April 30, 1998 (the
"APRIL 1998 PERIOD") as determined by Coopers & Lybrand LLP, LESS the Company's
Income Tax Expense for the April 1998 Period as determined by Coopers & Lybrand
LLP, LESS the amount of Interest Expense for the April 1998 Period, multiplied
by three (3); PLUS (iii) the Company's audited net operating income for the
First Quarter as determined by Coopers & Lybrand LLP, LESS the Income Tax
Expense for the First Quarter (without the benefit of any interest expense of
the Company for the First Quarter) as determined by Coopers & Lybrand LLP,
multiplied by 2, LESS
(B) (i) the aggregate amount of outstanding principal and accrued interest
owed by the Company to First Capital Services, Inc., Steven Barth and any other
holders of indebtedness of the Company, whether secured or unsecured, as of the
Closing Date (collectively, the "DEBT"), and (ii) the aggregate amount of (a)
all Sellers' legal fees and expenses in connection with the Contemplated
Transactions (in form and substance reasonably acceptable to Buyer)
(collectively, the "COUNSEL EXPENSES"), PLUS (b) all costs and expenses of the
Company to obtain and maintain Insurance Policies for medical malpractice on an
occurrence basis and to obtain and maintain "tail coverage" for its "claims
made" Insurance Policies for two (2) years after the date of the Claim
(collectively, the "INSURANCE EXPENSE"), PLUS (c) all expenses of the Company
incurred prior to Closing, to pay all "run-out" fees and liabilities which may
be owed to Great-West Life and Annuity Insurance Company or any other person in
connection with the Company's Self Insurance Programs (collectively, the
"SELF-INSURANCE EXPENSE"). In no event shall the sum of the Purchase Price, the
Debt (with accrued interest thereon), the Counsel Expenses, the Insurance
Expense and the Self-Insurance Expense, exceed $10,000,000. The Purchase Price
shall be payable to Sellers in shares (the "TRANSACTION SHARES") of common
stock, par value $.01 per share, of the Parent, which shares when issued will
not be registered under Section 5 of the Securities Act (as defined herein) (the
"PARENT STOCK"), in proportion to each Seller's ownership interest in the
Company, as set forth on SCHEDULE 2.1. The number of Transaction Shares payable
by Buyer to Sellers shall be determined by averaging the closing sales price of
the Parent Stock (or, in case no reported sales take place on such day, the
average of the closing bid and ask prices on such day) on the Nasdaq SmallCap
Market for the five (5) consecutive trading days prior to the Closing Date. On
the Closing Date, the Purchase Price shall be payable as follows: (i) Buyer
shall deliver to Sellers 331/3% of the Purchase Price in Transaction Shares,
registered in the name of each respective Seller in proportion to such Seller's
ownership interest in the Company as set forth on SCHEDULE 2.1, (ii) Buyer shall
deliver 10% of the Purchase Price to the Escrow Agent in Transaction Shares
("INDEMNIFICATION SHARES") for the purpose of complying with Section 1.4 and
Article VI hereof, pursuant to the terms of the Escrow Agreement and (iii) Buyer
shall deliver the remaining 562/3% of the Purchase Price to the Escrow Agent in
Transaction Shares, registered in the name of each respective Seller in
proportion to such Seller's ownership interest in the Company as set forth on
SCHEDULE 2.1 ("ESCROW SHARES") to be delivered to Sellers on December 31, 1998
pursuant to the terms of the Escrow Agreement.
2
<PAGE>
SECTION 1.3 ESCROW.
(a) On the date hereof, Buyer, each Seller and an escrow agent
selected by Buyer and Sellers ("NET ESCROW AGENT") shall execute and deliver an
escrow agreement ("NET ESCROW AGREEMENT") in the form of EXHIBIT 1.3A hereto
pursuant to which Sellers shall, on the date hereof, deliver to the NET Escrow
Agent the Purchased Shares. The Purchased Shares shall be held in escrow until
the Closing Date at which time they will be delivered to Buyer, pursuant to the
terms of the NET Escrow Agreement.
(b) On the Closing Date, Buyer, each Seller and an escrow agent
selected by Buyer and Sellers ("ESCROW AGENT") shall execute and deliver an
escrow agreement ("ESCROW AGREEMENT") substantially in the form of EXHIBIT 1.3B
hereto pursuant to which Buyer shall deliver to Escrow Agent the number of
Transaction Shares determined in accordance with Section 1.2. The Escrow Shares
shall be held in escrow until December 31, 1998 (subject to the terms of the
Escrow Agreement). The Indemnification Shares shall be held for a period of
twelve (12) months following the Closing Date, unless disbursed earlier to Buyer
for Claims pursuant to this Agreement. Other than for Claims of fraud, the
Indemnification Shares or, in the event such shares are sold, the value thereof
as determined in accordance with this Section 1.3(b), shall be Buyer's sole
remedy for the payment of any Losses for which Buyer may be entitled to
indemnification as and to the extent provided in Article VI hereof. The value
of any Indemnification Shares paid to Buyer pursuant to the terms of the Escrow
Agreement shall be determined by averaging the closing sales price of the Parent
Stock (or, in case no reported sales take place on such day, the average of the
closing bid and ask prices on such day) on the Nasdaq SmallCap Market for the
five (5) consecutive trading days prior to the Closing Date.
SECTION 1.4 CLOSING. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Purchased Shares and the consummation of
the other transactions contemplated hereby (the "CLOSING") shall take place at
10:00 a.m., local time, at the offices of Buyer, 10800 Biscayne Boulevard,
Miami, Florida 33161 no later than the fifth business day following the
satisfaction of all of the conditions specified in Article V hereof (other than
the conditions requiring the delivery of the Purchase Price, certificates
representing the Purchased Shares, the Transaction Shares or closing
certificates and other instruments and documents referred to in
Sections 5.2(e)(i) through (iv) or 5.3(e)(i) through (iv)) (the "CLOSING DATE").
It is understood that the purchase of the Purchased Shares shall be deemed to
take place effective as of the time at which the Closing actually occurs on the
Closing Date.
SECTION 1.5 DELIVERY OF SCHEDULES. Sellers shall deliver to Buyer within
ten (10) Business Days of the date of this Agreement true and complete
Schedules. The Schedules shall be in a form reasonably acceptable to Buyer and
shall conform in all material respects to the information provided to Buyer
prior to the date hereof. If the delivered Schedules are not in a form
reasonably acceptable to Buyer or do not conform in all respects with the
information provided to Buyer prior to the date hereof, Buyer shall have the
option to terminate this
3
<PAGE>
Agreement without further liability of any party thereunder except to the extent
that such party shall have materially breached any covenant or agreement of such
party hereunder prior to such termination or shall have made a material
misrepresentation under the Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent, warrant and covenant to Buyer as
follows and acknowledge that Buyer is relying upon such representations and
warranties in connection with the Contemplated Transactions:
SECTION 2.1 CAPITALIZATION. The authorized capital stock of the Company
consists of 15,000 shares of Common Stock, of which 10,000 shares are issued and
outstanding. The Company has no shares of Common Stock in its treasury.
SCHEDULE 2.1 sets forth the name of each record and beneficial shareholder of
the Company and the number of Purchased Shares held by each such person. Except
as set forth on SCHEDULE 2.1, the Company does not and, at the Closing, the
Company will not, have outstanding any capital stock or other securities or any
rights, warrants or options to acquire securities of the Company or any
convertible or exchangeable securities and, other than pursuant to this
Agreement, no person has or, at Closing will have, any right to purchase or
otherwise acquire any securities of the Company. There are, and at Closing will
be, no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any securities of the Company. All of the Purchased Shares are, and at
Closing will be, duly authorized, duly and validly issued, fully paid and
non-assessable, and none were issued in violation of any preemptive rights,
rights of first refusal or any other contractual or legal restrictions of any
kind.
SECTION 2.2 TITLE TO THE SHARES. Each Seller is the sole record and
beneficial owner and holds good and valid title to its Purchased Shares free and
clear of any Lien of any kind. Upon consummation of the Contemplated
Transactions (as hereinafter defined), Buyer will own all of the issued and
outstanding shares of capital stock of the Company, free and clear of any Lien.
At the Closing, Sellers will deliver the Purchased Shares to Buyer free and
clear of any Lien, other than restrictions imposed by the Securities Act of
1933, as amended, and applicable state securities Laws.
SECTION 2.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each Seller has full
power, capacity and authority to execute and deliver each Transaction Document
to which such Seller is or, at Closing, will be, a party and to consummate the
transactions contemplated hereby and thereby (the "CONTEMPLATED TRANSACTIONS").
The execution, delivery and performance of each Transaction Document and the
consummation of the Contemplated Transactions to which any Seller is or, at
Closing, will be, a party have been duly and validly authorized by such Seller,
and no other acts on the part of any Seller (or any other person) are necessary
or required to authorize the execution, delivery and performance by such Seller
of each Transaction Document
4
<PAGE>
or the consummation of the Contemplated Transactions to which such Seller is or,
at Closing, will be, a party. This Agreement has been and, at Closing, the
other Transaction Documents to which any Seller is a party will have been, duly
and validly executed and delivered by such Seller, and (assuming the valid
execution and delivery thereof by the other parties thereto) constitutes, or
will at Closing, constitute, as the case may be, the legal, valid and binding
agreements of such Seller, enforceable against such Seller in accordance with
their respective terms, except as such obligations and their enforceability may
be limited by applicable bankruptcy and other similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
equitable remedies is subject to the discretion of the court before which any
proceeding therefor may be brought (whether at law or in equity).
SECTION 2.4 NO CONFLICTS; CONSENTS. The execution, delivery and
performance by each Seller of each Transaction Document to which such Seller is
or, at Closing, will be, a party and the consummation of the Contemplated
Transactions to which any Seller is or, at Closing, will be, a party, do not and
will not (i) violate any provision of the Articles of Incorporation or By-Laws
of the Company; (ii) require any Seller or the Company to obtain any consent,
approval or action of or waiver from, or make any filing with, or give any
notice to, any Governmental Body or any other person, except as set forth on
SCHEDULE 2.4 (the "SELLERS REQUIRED CONSENTS"); (iii) if Sellers Required
Consents are obtained prior to Closing, violate, conflict with or result in a
breach or default under (with or without the giving of notice or the passage of
time or both), or permit the suspension or termination of, any Contract
(including any Real Property Lease) to which any Seller or the Company is a
party or by which any of them or any of their assets may be bound or subject, or
result in the creation of any Lien upon any of the Purchased Shares or upon any
of the Assets of the Company; (iv) if Sellers Required Consents are obtained
prior to Closing, violate any Law or Order of any Governmental Body against, or
binding upon, any Seller or the Company or upon any of their respective assets
or the Business; or (v) if Sellers Required Consents are obtained prior to
Closing, violate or result in the revocation or suspension of any Permit.
SECTION 2.5 CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite powers, authority and all Permits
required to own and/or operate its Assets and to carry on the Business as now
conducted, including all qualifications under any "nurse staffing" statutes in
effect in any state in which the Company operates its Business or provides
employees under any "employee leasing" or "employee staffing" arrangement. The
Company is duly qualified to do business and is in good standing in each state
of the United States and in each other jurisdiction where the character of the
property owned or leased by it or the nature of its activities makes such
qualification necessary. Except as set forth on SCHEDULE 2.5, the Company has
no Subsidiaries and does not directly or indirectly own any equity or other
interest or investment in any other person.
5
<PAGE>
SECTION 2.6 CHARTER DOCUMENTS AND CORPORATE RECORDS. Sellers have
heretofore delivered to Buyer true and complete copies of the Articles of
Incorporation, By-Laws and minute books, or comparable instruments, of the
Company as in effect on the date hereof. The stock transfer books of the
Company have been made available to Buyer for its inspection and are true and
complete in all material respects.
SECTION 2.7 FINANCIAL INFORMATION. (a) SCHEDULE 2.7A sets forth true,
complete and correct copies of (i) the Company's audited financial statements at
and for the years ended December 31, 1997 and 1996 (the "ANNUAL STATEMENTS"),
(ii) the Company's unaudited financial statements at and for the quarter ended
March 31, 1998 and at and for the month ended April 30, 1998 (the "INTERIM
STATEMENTS"), (iii) when delivered, the Company's audited financial statements
for the First Quarter and the reviewed financial statements for the April 1998
Period (collectively, the "AUDITED INTERIM STATEMENTS"), and (iv) all management
letters, management representation letters and attorney audit response letters
issued in connection with the Annual Statements and the Audited Interim
Statements. Each of the Annual Statements, Interim Statements and Audited
Interim Statements has been prepared, or when provided will have been prepared,
in accordance with GAAP consistently applied (except for the absence of
footnotes, in the case of the Company's unaudited financial statements). To the
extent of any conflict between GAAP and the consistency of application of
accounting principles with respect to any financial statements or other
information concerning the Company provided hereby, GAAP has been applied and
will govern any conflict. SCHEDULE 2.7B reflects all contingencies that,
whether or not required to be disclosed or booked in accordance with GAAP, in
all reasonable likelihood may have a financial impact on the financial
statements referred to in SCHEDULE 2.7A. The Annual Statements were audited,
and the Audited Interim Statements when provided, will have been audited or
reviewed, as the case may be, by Coopers & Lybrand LLP (without qualification or
exceptions). Each of the Annual Statements and the Interim Statements present
fairly and accurately, and the Audited Interim Statements when provided will
present fairly and accurately, the financial position of the Company as of its
date, and the earnings, changes in stockholders' equity and cash flows thereof
for the periods then ended. Each balance sheet contained therein or delivered
pursuant hereto fully sets forth all consolidated Assets and Liabilities of the
Company existing as of its date which, under GAAP, should be set forth therein,
and each statement of earnings contained therein or delivered pursuant hereto
sets forth the items of income and expense of the Company which should be set
forth therein in accordance with GAAP.
(b) All financial, business and accounting books, ledgers, accounts
and official and other records relating to the Company have been properly and
accurately kept and completed, and there are no inaccuracies or discrepancies
contained or reflected therein. There are no records, systems, Contracts, data
or information of the Company, recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which are not under the Company's exclusive ownership and direct control.
6
<PAGE>
(c) Any items of income or expense which are unusual or of a
non-recurring nature, except as provided in SCHEDULE 2.7B, are separately
disclosed in the financial statements.
SECTION 2.8 LIABILITIES. Except to the extent reflected in the Interim
Statements of the Company at April 30, 1998 (referred to in Section 2.7(a)) (the
"LATEST BALANCE SHEET DATE"), the Company did not have any Liabilities, and
except as described in SCHEDULE 2.8 hereto, the Company has not incurred any
Liabilities since the Latest Balance Sheet Date except (i) current Liabilities
for trade or business obligations incurred in connection with the purchase of
goods or services in the ordinary course of the Business and consistent with
past practice, (ii) Liabilities reflected on any balance sheet included in the
Interim Statements referred to in Section 2.7(a), and (iii) Liabilities or
obligations of continued performance under Contracts entered into in the
ordinary course of the Business not required to be reflected in financial
statements under GAAP.
SECTION 2.9 COMPANY RECEIVABLES. Except to the extent of the amount of
the allowance for doubtful accounts reflected in the Interim Statements or as
set forth in SCHEDULE 2.9, all the Receivables of the Company reflected therein,
and all Receivables that have arisen since the Latest Balance Sheet Date (except
Receivables that have been collected since such date) are valid and enforceable
Claims, and constitute bona fide Receivables resulting from the sale of goods
and services in the ordinary course of the Business. The Receivables are not
subject to any defenses, offsets, returns, allowances or credits of any kind.
SECTION 2.10 ABSENCE OF CERTAIN CHANGES. (a) Since the Latest Balance
Sheet Date, except as disclosed in SCHEDULE 2.10, the Company has conducted the
Business in the ordinary course consistent with past practice and there has not
been:
(i) Any material adverse change in the Condition of the
Business or any event, occurrence or circumstance that could reasonably be
expected to cause such a material adverse change;
(ii) Any transaction or Contract with respect to the purchase,
acquisition, lease, disposition or transfer of any Assets or any capital
expenditure by the Company (in each case, other than in the ordinary course of
the Business consistent with past practice);
(iii) Any declaration, setting aside or payment of any dividend
or other distribution with respect to the Common Stock or any other capital
stock of the Company or any loan or advance to any officer, director or
stockholder of the Company (except for reasonable travel and business expense
payments, or guaranteed or pledged collateral to support any loan or advance
made to an officer, director or stockholder of the Company);
7
<PAGE>
(iv) Any damage, destruction or other casualty loss (whether
or not covered by insurance), condemnation or other taking affecting the
Business or the Assets of the Company;
(v) Any change in any method of accounting or accounting
practice by the Company;
(vi) Any increase in the compensation, commission, bonus or
other direct or indirect remuneration paid, payable or to become payable to any
officer, stockholder, director, consultant, agent or employee of the Company, or
any alteration in the benefits payable or provided to any thereof;
(vii) Any adverse change in the relationship of the Company
with its customers, suppliers or vendors;
(viii) Except for any changes made in the ordinary course of
Business, any change in any of the Company's business policies, including
advertising, marketing, selling, pricing, purchasing, personnel, returns or
budget policies;
(ix) Except in the ordinary course of the Business, consistent
with past practice, or as disclosed in SCHEDULE 2.10, any payment, directly or
indirectly, of any Liability of the Company before the same became due in
accordance with its terms; or
(x) Any agreement or arrangement whether written or oral to
do any of the foregoing.
(b) Except as set forth on SCHEDULE 2.10, the Company has no
Liability that is past due.
SECTION 2.11 LEASED REAL PROPERTY. (a) The Company has no fee interest,
purchase options or rights of first refusal in any real property and the Company
has no leasehold or other interest in any real property, except as set forth on
SCHEDULE 2.11 (the "LEASED REAL PROPERTY"), and all leases including all
amendments, modifications, extensions, renewals and/or supplements thereto
(collectively, "REAL PROPERTY LEASES") are described on SCHEDULE 2.11. Sellers
have delivered to Buyer a true and complete copy of Real Property Leases. The
Company is the sole tenant under, and has a valid and existing leasehold
interest in, each parcel of Leased Real Property pursuant to the respective Real
Property Lease, which interest is free and clear of all Liens except Permitted
Liens.
(b) To Sellers' knowledge, there are no facts, circumstances, events
or conditions which would now, or with the giving of notice or passage of time
may, in any way materially and adversely affect the Leased Real Property and/or
the Company's use or operations thereat.
8
<PAGE>
(c) Each Real Property Lease is valid, binding and in full force and
effect and enforceable in accordance with its respective terms.
(d) There are no existing defenses or offsets which any landlord
under any Real Property Lease (individually, a "LANDLORD"; collectively, the
"LANDLORDS") has now, or with the giving of notice or passage of time may have,
against the enforcement by the Company of any Real Property Lease, and neither
the Company nor, to Sellers' knowledge, any Landlord, is in default under any
applicable Real Property Lease, nor have any events, conditions, facts or
circumstances occurred which, with the giving of notice or passage of time or
both, would constitute a default under such applicable Real Property Lease by
the Company, nor, to Sellers' knowledge, any Landlord party thereto.
SECTION 2.12 PERSONAL PROPERTY; ASSETS. The Company has good and valid
title to (or valid leasehold interest in) all of its personal property and
Assets, free and clear of all Liens, except Permitted Liens and as indicated on
SCHEDULE 2.12. The machinery, equipment, computer software and other tangible
personal property constituting part of the Assets and all other Assets (whether
owned or leased) have been well-maintained in accordance with industry
standards, are in good condition and repair (subject to normal wear and tear)
and are reasonably sufficient and adequate in quantity and quality for the
operation of the Business as previously and presently conducted. SCHEDULE 2.12
contains a list and description of all tangible personal property owned or
leased by the Company with a book value (before depreciation) of $1,000 or more.
The Assets constitute all of the assets which are necessary to operate the
Business of the Company.
SECTION 2.13 CONTRACTS. (a) SCHEDULE 2.13 sets forth an accurate and
complete list of all Contracts to which the Company is a party or by which it or
its Assets are bound or subject. All Contracts with persons who are Affiliates
of the Company or any Seller are listed on SCHEDULE 2.13, with an asterisk
indicating such contracts. True and complete copies of all written Contracts
(including all amendments thereto and waivers in respect thereof) listed on such
Schedule and summaries of the material provisions of all oral Contracts so
listed have been made available to Buyer.
(b) All Contracts listed on SCHEDULE 2.13 are valid, subsisting, in
full force and effect and binding upon the Company and, to Sellers' knowledge,
the other parties thereto, in accordance with their terms. Except as set forth
in SCHEDULE 2.13, the Company is not in default (or alleged default) under any
such Contract, nor, to Sellers' knowledge, is any other party thereto in default
thereunder, nor does any condition exist that with notice or the lapse of time
or both would constitute a default by the Company (or give rise to a termination
right) thereunder, nor, to Sellers' knowledge, does any condition exist that
with notice or the lapse of time or both would constitute a default by any other
party thereto (or give rise to a termination right) thereunder. To Sellers'
knowledge, none of the other parties to any such Contract intends to terminate
or materially alter the provisions thereof by reason of the Contemplated
Transactions or otherwise. Since the Latest Balance Sheet Date, the Company has
not waived any material right under any such Contract, materially amended or
extended beyond
9
<PAGE>
June 30, 1998 any such Contract or terminated or failed to renew (or received
notice of termination or failure to renew with respect to) any such Contract.
Except as set forth on SCHEDULE 2.13, no approval or consent of any person is
required in order for the Contracts required to be disclosed on SCHEDULE 2.13 to
continue in full force and effect after the Closing.
SECTION 2.14 INTANGIBLE PROPERTY. SCHEDULE 2.14 sets forth all patents,
patent applications, trademarks, copyrights, service marks and trade names owned
or used by the Company, all applications for any of the foregoing, and all
permits, grants and licenses or other rights running to or from the Company
relating to any of the foregoing (the "INTELLECTUAL PROPERTY RIGHTS"), and there
are no other patents, patent applications, trademarks, copyrights, service marks
and trade names that are material to the Business. The Contemplated
Transactions will not adversely affect the right, title and interest of the
Company in and to the Intellectual Property Rights. To Sellers' knowledge, the
Intellectual Property Rights do not infringe on or conflict with the rights or
intellectual property of third parties.
SECTION 2.15 CLAIMS AND PROCEEDINGS. Except as set forth on
SCHEDULE 2.15, there are no outstanding Orders of any Governmental Body against
or involving the Company, its Assets, the Business, the Purchased Shares or any
Seller with respect to the Purchased Shares. Except as set forth on SCHEDULE
2.15, there are no actions, suits, claims or counterclaims, examinations, audits
or legal, administrative, governmental or arbitral proceedings or investigations
(collectively, "CLAIMS") (whether or not the defense thereof or Liabilities in
respect thereof are covered by insurance), pending or, to Sellers' knowledge,
threatened on the date hereof, against or involving the Company, its Assets, the
Business, the Purchased Shares or any Seller with respect to the Purchased
Shares. SCHEDULE 2.15 also indicates those Claims the defense thereof or
Liabilities in respect thereof are covered by insurance. Except as set forth on
SCHEDULE 2.15, to Sellers' knowledge, on the date hereof, there is no fact,
event or circumstance that is reasonably likely to give rise to any Claim. All
notices required to have been given to any insurance company listed as insuring
against any Claim have been timely and duly given and, except as set forth on
SCHEDULE 2.15, no insurance company has asserted that any Claim is not covered
by the applicable policy relating to such Claim. There are no Claims pending
or, to Sellers' knowledge, threatened that would give rise to any right of
indemnification on the part of any director or officer of the Company or the
heirs, executors or administrators of such director or officer, or against the
Company.
SECTION 2.16 TAXES. (a) Except as set forth in SCHEDULE 2.16:
(i) the Company and its stockholders have timely filed or, if
not yet due, will timely file all Tax Returns required to be filed by it for all
taxable periods ending on or before the Closing Date and all such Tax Returns
are or, if not yet filed, will be, upon filing, true, correct and complete;
(ii) the Company and its stockholders have paid, or if payment
is not yet due, will promptly pay when due to each appropriate Tax Authority,
all Taxes of the Company for all taxable periods ending on or before the Closing
Date;
10
<PAGE>
(iii) the accruals for Taxes currently payable as well as for
deferred Taxes shown on the financial statements of the Company as of the Latest
Balance Sheet Date or the date of any financial statements delivered hereunder
(A) adequately provide for all contingent Tax Liabilities of the Company as of
the date thereof, and (B) accurately reflect, as of the date thereof, all unpaid
Taxes of the Company whether or not disputed;
(iv) no extension of time has been requested or granted for
the Company to file any Tax Return that has not yet been filed or to pay any Tax
that has not yet been paid and the Company has not granted a power of attorney
that remains outstanding with regard to any Tax matter;
(v) the Company has not received notice of a determination by
a Tax Authority that Taxes are owed by the Company (such determination to be
referred to as a "TAX DEFICIENCY") and, to Sellers' knowledge, no Tax Deficiency
is proposed or threatened;
(vi) all Tax Deficiencies have been paid or finally settled
and all amounts determined by settlement to be owed have been paid;
(vii) there are no Tax Liens on or pending against the Company
or any of the Assets;
(viii) there are no presently outstanding waivers or extensions
or requests for waiver or extension of the time within which a Tax Deficiency
may be asserted or assessed;
(ix) no issue has been raised in any examination,
investigation, audit, suit, action, claim or proceeding relating to Taxes (a
"TAX AUDIT") which, by application of similar principles to any past, present or
future period, would result in a Tax Deficiency for such period;
(x) there are no pending or, to Sellers' knowledge,
threatened Tax Audits of the Company;
(xi) the Company has not ever been required to include in
income any adjustment pursuant to section 481 of the Code or pursuant to a
closing agreement as defined in section 7121 of the Code and no Tax Authority
has ever made or proposed any such adjustment;
(xii) the Company does not own any property that is tax-exempt
use property within the meaning of section 168(b) of the Code or that is
described in section 168(f)(8) of the Internal Revenue Code as in effect prior
to its amendment by the Tax Reform Act of 1986;
11
<PAGE>
(xiii) the Company has not filed a consent pursuant to section
341(f) of the Code;
(xiv) the Company is not now nor has ever been (a) an
includable member of an "affiliated group" within the meaning of section 1504(a)
of the Code, (b) a member of any consolidated, combined or unitary Tax Return
filing group, (c) a party to an agreement that obligates it to make any payment
computed by reference to the Taxes, taxable income or tax losses of any other
individual or entity, (d) a personal holding company as defined in section 542
of the Code, (e) the owner of an interest in an entity that is or is treated as
a partnership, trust, regulated investment company as defined in section 851 of
the Code, real estate investment trust as defined in section 856 of the Code or
foreign personal holding company as defined in section 552(a) of the Code, (f) a
United States shareholder as defined in section 951(b) of the Code of a
controlled foreign corporation as defined in section 957 of the Code or (g) a
United States real property holding company within the meaning of section
897(c)(2) of the Code;
(xv) the Company has no deferred intercompany gains or losses
that have not been fully taken into income for income Tax purposes;
(xvi) there are no transfer or other taxes (other than income
taxes) imposed by any state on any Seller, the Company or Buyer by virtue of the
Contemplated Transactions;
(xvii) no claim has been made by any Tax Authority that the
Company is subject to Tax in a jurisdiction in which the Company is not then
paying Tax of the type asserted; and
(xviii) the Company has been, at all times since its inception,
an "S corporation" having elected that status pursuant to section 1362 of the
Code.
Each reference to a provision of the Code in this Section 2.16 shall be treated
for state and local Tax purposes as a reference to analogous or similar
provisions of state and local law.
(b) SCHEDULE 2.16 contains (i) a schedule of the filing dates of all
Tax Returns required to be filed by the Company, (ii) a description of all past
Tax Audits involving the Company, (iii) a list of all elections made by the
Company relating to Taxes, and (iv) a description of accounting methods employed
by the Company and any changes in such accounting methods that occurred during a
year for which the statute of limitations remains open. Except as set forth in
SCHEDULE 2.16, the Company has retained all supporting and backup papers,
receipts, spreadsheets and other information necessary for (i) the preparation
of all Tax Returns that have not yet been filed and (ii) the defense of all Tax
Audits involving taxable periods from the date of inception of the Company to
the Closing Date or from which there are unutilized net operating loss, capital
loss or investment tax credit carryovers.
12
<PAGE>
(c) Except as set forth in SCHEDULE 2.16, the Company has collected
and remitted to the appropriate Tax Authority all sales and use or similar Taxes
required to be collected on or prior to the Closing Date and has been furnished
properly completed exemption certificates for all exempt transactions. The
Company has maintained and has in its possession all records, supporting
documents and exemption certificates required by applicable sales and use Tax
statutes and regulations to be retained in connection with the collection and
remittance of sales and use Taxes for all periods up to and including the
Closing Date. With respect to sales made by the Company prior to the Closing
Date for which sales and use Taxes are not yet due as of the Closing Date, all
applicable sales and use Taxes payable with respect to such sales will have been
collected or billed by the Company and will be included in the Assets of the
Company as of the Closing Date.
SECTION 2.17 EMPLOYEE BENEFITS PLANS. (a) Except as set forth on
SCHEDULE 2.17, neither Sellers, the Company nor any Affiliate of Sellers, the
Company, nor the Business, nor any portion of the Business (all of the above
hereinafter individually and collectively called the "ENTITY"), nor any other
company or entity which together with the Entity constitutes a member of the
Entity's "controlled group" or "affiliated service group" (within the meaning of
Sections 4001(a)(14) and/or (b) of ERISA and/or Sections 414(b), (c), (m) or (o)
of the Code (such group or groups and each member thereof hereinafter referred
to individually and collectively as the "GROUP")), has at any time adopted or
maintained, has any Liability or is a fiduciary with respect to or has any
present or future obligation to contribute to or make payment under (i) any
employee benefit plan (as defined in Section 3(3) of ERISA), or (ii) any other
benefit plan, program, contract or arrangement of any kind whatsoever (whether
for the benefit of present, former, retired or future employees, officers,
directors or consultants of the Entity or the Group, or for the benefit of any
other person or persons) including, without limitation, arrangements providing
for contributions, benefits or payments in the event of a change of ownership or
control in whole or in part of the Entity or the Group, or with respect to
disability, relocation, child care, educational assistance, deferred
compensation, pension, retirement, profit sharing, thrift, savings, stock
ownership, stock bonus, restricted stock, health, dental, medical, life,
hospitalization, stock purchase, stock option, incentive, bonus, sabbatical
leave, vacation, severance or other contribution, benefit or payment of any
kind, or (iii) any employment, consulting, service or other contract or
agreement of any kind whatsoever (all such employee benefit plans and other
benefit plans, programs, contracts or arrangements and such employment,
consulting, service or other contracts or agreements whether written or oral
hereinafter individually and collectively called the "EMPLOYEE BENEFIT
PLAN(S)"). No Employee Benefit Plan is subject to Title IV of ERISA. No Entity
and no Group has completely or partially withdrawn within the meaning of Title
IV of ERISA from any "multiemployer plan" within the meaning of Section 3(37) of
ERISA.
(b) In addition, except as set forth in SCHEDULE 2.17 hereof,
(i) there have been no "prohibited transactions" within the meaning of Section
406 of ERISA or Section 4975 of the Code with respect to the Employee Benefit
Plans; (ii) no Liability has been or is expected to be incurred by the Entity or
the Group under Title IV of ERISA with respect to the Employee Benefit Plans;
(iii) any and all amounts which the Entity or the Group are required
13
<PAGE>
to pay as contributions or otherwise, or with respect to the Employee Benefit
Plans have been timely paid; (iv) no Employee Benefit Plan has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, and no Entity or Group has provided, or
is required to provide, security to any Employee Benefit Plan; (v) the current
value of all "benefit liabilities" within the meaning of Section 4001(a)(16) of
ERISA under each Employee Benefit Plan which is subject to Title IV of ERISA or
otherwise, does not exceed the current value of the assets of such Employee
Benefit Plan allocable to such benefit liabilities; (vi) each of the Employee
Benefit Plans has been established, maintained, operated and administered in
accordance with its terms and all applicable Laws; (vii) each of the Employee
Benefit Plans which is intended to be "qualified" within the meaning of Sections
401(a) and 501(a) of the Code has been determined by the IRS to be so qualified
and continues to be so qualified; (viii) there are no pending, threatened or
anticipated Claims involving any of the Employee Benefit Plans other than
routine claims for benefits pursuant to the terms thereof; (ix) the Entity and
the Group have not incurred and will not incur any withdrawal liability with
respect to a multiemployer plan under Title IV of ERISA; (x) no notice of a
"reportable event" within the meaning of Section 4043 of ERISA has been or is
required to be filed with respect to any Employee Benefit Plan; (xi) neither the
Entity nor the Group is a party to, or participates in, or has any Liability or
contingent Liability with respect to any multiemployer plan within the meaning
of Section 3(37) of ERISA; (xii) neither the execution and delivery of this
Agreement nor the consummation of the Contemplated Transactions will (either
alone or upon the occurrence of additional events or acts) accelerate vesting or
any benefits or any payments or increase the amount or value of any benefit or
payment under any Employee Benefit Plan; and (xiii) neither the Entity nor the
Group has any obligation or commitment to establish, maintain, operate or
administer any Employee Benefit Plan not set forth on SCHEDULE 2.17 or to amend
any Employee Benefit Plan so as to increase benefits thereunder or otherwise.
(c) A true and correct copy of each of the Employee Benefit Plans
(and all amendments thereto, whether currently effective or to become effective
at a later date) and all contracts and agreements relating thereto, or to the
funding thereof (including, without limitation, all trust agreements, insurance
Contracts, investment management agreements, subscription and participation
agreements, administration and recordkeeping agreements) have been provided to
Buyer. Each Employee Benefit Plan sponsored or maintained by the Company, and
all contracts and agreements relating thereto or to the funding thereof, can be
unilaterally terminated without penalty by the Company on no more than thirty
(30) days' notice, and all obligations of the Company with respect to all other
Employee Benefit Plans can be unilaterally terminated without penalty by the
Company on no more than thirty (30) days' notice. In the case of any Employee
Benefit Plan which is not in written form, an accurate and complete description
of such Employee Benefit Plan has been provided to Buyer. With respect to each
Employee Benefit Plan, Buyer has been provided with a true and complete copy of
each of (i) the three most recent annual reports (IRS Form 5500 series), Pension
Benefit Guaranty Corporation filings and actuarial reports, and (ii) the most
recent summary plan description (including summaries of material modification),
IRS determination letter and/or ruling, and, in the case of any funded Employee
Benefit Plan, a current schedule of Assets (and the fair market
14
<PAGE>
value thereof assuming liquidation of any asset which is not readily tradeable)
held with respect thereto, and there have been no material changes in the
financial condition in the respective Employee Benefit Plans (or other
information provided hereunder) from that stated in such annual report,
actuarial reports and schedule of assets.
SECTION 2.18 EMPLOYEE-RELATED MATTERS. (a) SCHEDULE 2.18 contains a true
and correct list, by category, of all directors, full-time employees, part-time
and other employees and consultants of the Company, including any understandings
or any oral or written agreements relating thereto, and a description of the
rate and nature of all compensation payable or accrued by the Company to, and
the amount of vacation, sick days, personal days and other leave accrued by,
each such person or entity. SCHEDULE 2.18 also contains a description of all
existing severance, accrued vacation or other leave policies or retiree benefits
of any current or former director, officer, employee or consultant. Except as
set forth on SCHEDULE 2.18, the employment or consulting arrangement of all such
persons is, subject to applicable laws involving the wrongful termination of
employees, terminable at will (without the imposition of damages) by the
Company. Buyer has been provided with true and complete (i) copies of all
manuals and handbooks applicable to any current or former director, officer,
employee or consultant of the Company, (ii) copies of all standard forms of
employee trade secret, non-compete, non-disclosure and invention assignment
agreements, together with a list of all agreements that deviate therefrom and a
description of such deviation, and (iii) descriptions of all existing severance,
accrued vacation or other leave policies or retiree benefits of any such
director, officer, employee or consultant.
(b) Except as set forth on SCHEDULE 2.18, (i) the Company is not a
party to any Contract with any labor organization or other representative of
their employees; (ii) there is no unfair labor practice charge or complaint
pending or, to Sellers' knowledge, threatened against the Company; (iii) the
Company has not experienced any labor strike, slowdown, work stoppage or similar
labor controversy within the past five years and, to Sellers' knowledge, no such
labor strike, slow down, work stoppage or similar labor controversy is
threatened; (iv) no representation question has been raised respecting any of
the Company's employees working within the past five years, nor, to Sellers'
knowledge, are there any organizing activities or campaigns being conducted to
solicit authorization from the Company's employees to be represented by any
labor organization and no such activity or campaign is threatened; (v) no Claim
before any Governmental Body brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of employees is pending or, to Sellers' knowledge, threatened
against the Company; (vi) the Company is not a party to, or otherwise bound by,
any Order relating to its employees or employment practices; (vii) except with
respect to ongoing disputes of a routine nature involving immaterial amounts,
the Company has paid in full to all of its employees all wages, salaries,
commissions, bonuses, benefits and other compensation due and payable to such
employees; and (viii) the Company is in compliance with all applicable Laws
affecting employment and employment practices.
15
<PAGE>
(c) No current employee of the Company is (i) absent on a military
leave of absence and eligible for rehire under the terms of the Uniformed
Services Employment and Reemployment Rights Act, or (ii) absent on a leave of
absence under the Family and Medical Leave Act. SCHEDULE 2.18 contains a true
and correct list of (1) each qualified beneficiary (within the meaning of
Section 4980B(g)(1) of the Code) of any group health plan (within the meaning of
Section 4980B(g)(2) of the Code) which is an Employee Benefit Plan who as of the
date hereof, is eligible for continuation of group health plan coverage under
any Employee Benefit Plan on account of a qualifying event (within the meaning
of Section 4980B(f)(3) of the Code) occurring on or prior to the Closing Date,
and (2) with respect to each such qualified beneficiary, the date and nature of
such qualifying event.
SECTION 2.19 INSURANCE. SCHEDULE 2.19 sets forth a list of all insurance
policies, fidelity and surety bonds and fiduciary liability policies (the
"INSURANCE POLICIES"), as well as all self-insurance programs, covering the
Assets, the Business, operations, employees, officers and directors of the
Company and true and complete copies of all such Insurance Policies and
self-insurance programs ("SELF-INSURANCE PROGRAMS") have been delivered to
Buyer. SCHEDULE 2.19 also sets forth (a) with respect to each Insurance Policy
the applicable deductible amounts and any material limitations on coverage, (b)
any letter of credit relating to any such Insurance Policy and all inspections
and reports delivered to the Company by any insurer with respect to such
Insurance Policies, copies of which have been delivered to Buyer and (c) a true
and complete list of Claims made in respect of each Insurance Policy or
Self-Insurance Program during the two (2) years prior to the date hereof. True
and correct copies of all loss runs with respect to such period have been
delivered to Buyer. There is no Claim by the Company pending under any of such
Insurance Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such Insurance Policies or requirement by any insurer to
perform work which has not been satisfied. No premiums payable under such
Insurance Policies are overdue and the Company is in compliance in all respects
with the terms and conditions of all such Insurance Policies. All Insurance
Policies are in full force and effect. Each Insurance Policy is of the type and
in amounts customarily carried by persons conducting a business similar to that
of the Company. The insurance in effect with respect to any Leased Real
Property is in an amount of the full replacement value of such Leased Real
Property, including the buildings and improvements thereon. No Seller knows of
any threatened termination of, premium increase with respect to, or uncompleted
requirements under any Insurance Policy. No premiums are or will be payable
under Insurance Policies after the Closing in respect of insurance provided for
periods prior to the Closing Date. Claims under all such Insurance Policies are
payable on an "claims made basis."
SECTION 2.20 COMPLIANCE WITH LAWS. Neither the Company nor any Seller is
in violation of any order, judgment, injunction, award, citation, decree,
consent decree or writ (collectively, "ORDERS"), or any law, statute, code,
ordinance, rule, regulation or other requirement (collectively, "LAWS"), of any
government, municipality or political subdivision thereof, whether federal,
state, local or foreign, or any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality or public
body, or any court, arbitrator, administrative tribunal or public utility
(collectively, "GOVERNMENTAL
16
<PAGE>
BODIES") affecting the Company, the Purchased Shares or the Business. No Seller
is aware of any proposed Orders, Laws or other proceedings which would be
applicable to the Business, operations or properties of the Company.
SECTION 2.21 PERMITS. The Company has obtained all licenses, permits,
certificates, certificates of occupancy, orders, authorizations and approvals
(collectively, "PERMITS"), and has made all required registrations and filings
with any Governmental Body that are necessary to the ownership of the Assets,
the use and occupancy of the Leased Real Property, as presently used and
operated, and the conduct of the Business or otherwise required to be obtained
by the Company, including, without limitation, all registrations and filings
required to be made with the Commissioner of Commerce and/or the Department of
Labor of any state and any nursing pool agency licenses. All Permits required
to be obtained or maintained by the Company are listed on SCHEDULE 2.21 and are
in full force and effect; no violations are or have been recorded, nor have any
notices or violations thereof been received, in respect of any Permit; and no
proceeding is pending or, to Sellers' knowledge, threatened to revoke or limit
any Permit; and the consummation of the Contemplated Transactions will not (or
with the giving of notice or the passage of time or both will not) cause any
Permit to be revoked or limited.
SECTION 2.22 ENVIRONMENTAL MATTERS. (a) With respect to environmental
matters, the following are true and correct:
(i) No part of the Leased Real Property has ever been used by
the Company or any Seller or, to Sellers' knowledge, by any previous owners
and/or operators of the Leased Real Property (i) for generating, manufacturing,
refining, treating, storing, processing, releasing or disposing of any Hazardous
Substances, (ii) as a landfill, dump or Hazardous Substances disposal or storage
facility, (iii) as a facility for industrial, military or manufacturing
purposes, or (iv) as a gasoline service station, automobile repair shop or for
the handling or storage of petroleum or petroleum products.
(ii) No Hazardous Substances have been Released by the Company
or any Seller, or, to Sellers' knowledge, by any third party, on, at or under
any part of the Leased Real Property and, to Sellers' knowledge, no
Environmental Condition exists on the Leased Real Property or with respect to
any activities conducted at the Leased Real Property or with respect to premises
adjacent to the Leased Real Property, which threatens to contaminate the Leased
Real Property or which may give rise to any Regulatory Action or Environmental
Liability.
(iii) The Leased Real Property is not included or, to Sellers'
knowledge, proposed to be included on the United States Environmental Protection
Agency's National Priorities List issued pursuant to CERCLA or any other list
maintained by any Governmental Body concerning sites on or from which there is
or has been any Contamination or a Release or threatened Release of any
Hazardous Substances.
17
<PAGE>
(iv) The Leased Real Property and all structures and
operations on the Leased Real Property are presently, and, to Sellers'
knowledge, have been at all times in the past, in full compliance with all
applicable Environmental Laws. All Permits required by any Environmental Laws
in connection with the Company or any Seller, the Leased Real Property and the
Business have been obtained, are in full force and effect and have not been
violated.
(v) There is no pending or, to Sellers' knowledge, threatened
Claim, including without limitation Regulatory Actions, or Environmental
Liability, or, to Sellers' knowledge, any existing condition or basis which may
give rise to any such Claim or Environmental Liability, or which, to Sellers'
knowledge, may otherwise result in the imposition of a Lien or forfeiture of the
Leased Real Property, or otherwise prohibit, restrict or materially interfere
with its use as presently conducted.
(vi) No Environmental Law requires any environmental testing,
cleanup, removal or work, repairs, construction or expenditures with respect to
any part of the Leased Real Property or activities conducted at the Leased Real
Property and neither the Company nor any Seller has received any notice of any
such requirement.
(vii) No underground storage tanks presently exist or, to
Sellers' knowledge, have ever existed at the Leased Real Property.
(viii) No part of the Leased Real Property (and neither the
Company nor any Seller has received written documentation stating or indicating
that any part of the Leased Real Property) is wetlands or in a flood plain.
(b) Each Seller's representations and warranties in this Section 2.22
are based upon its respective investigations of the Leased Real Property, and
Buyer is entitled to rely thereon notwithstanding any independent investigations
by Buyer or its Representatives.
SECTION 2.23 FINDERS FEES. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of any Seller or the Company who might be entitled to any fee or
commission from any Seller or the Company in connection with the consummation of
the Contemplated Transactions.
SECTION 2.24 DEPOSITARIES; POWERS OF ATTORNEY, ETC. SCHEDULE 2.24 sets
forth (i) the name of each bank, financial institution or similar entity in
which the Company has an account, lock box or safe deposit box and the names of
all persons authorized to draw thereon or to have access thereto; and (ii) the
name of each person holding a general or special power of attorney from the
Company and a description of the terms thereof.
SECTION 2.25 RELATED PARTY TRANSACTIONS. SCHEDULE 2.25 sets forth all
Contracts or other agreements or arrangements (whether or not in writing) of any
nature between the Company, on the one hand, and any Affiliate of the Company or
any officer, director or
18
<PAGE>
stockholder of the Company or any Affiliate of the Company (each a "RELATED
PARTY") on the other hand ("RELATED PARTY CONTRACTS"), including but not limited
to any Contract for money owed by or to any of them. Except as set forth on
SCHEDULE 2.25 hereto, no Related Party has any Claim against or Liability to the
Company and the Company has no Claim against or Liability to any Related Party
and, to Sellers' knowledge, no fact or circumstance exists which is reasonably
likely to give rise to any such Claim against or by or Liability to or from any
Related Party under any Related Party Contract or otherwise.
SECTION 2.26 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no Law, Order
or Contract binding upon the Company which has had or could reasonably be
expected to have the effect of prohibiting or adversely affecting
(i) competition by the Company, (ii) any existing business practice of the
Company, (iii) any acquisition of property by the Company, or (iv) the Condition
of the Business.
SECTION 2.27 CUSTOMERS. SCHEDULE 2.27 lists for the year ended
December 31, 1997 and for the four months ended April 30, 1998, the twenty-five
largest customers (by dollar amount) of the Company. There has not occurred any
material adverse change in the relationship of the Company with any of its
customers since December 31, 1997 and, except as and to the extent set forth on
SCHEDULE 2.27, to Sellers' knowledge, there are no facts or circumstances
(including, without limitation, the Contemplated Transactions) that could
reasonably be expected to have a material adverse effect on the Company's
relationship with any of its customers. Since December 31, 1997, (i) no
customer has cancelled or terminated, or threatened to cancel, or otherwise
terminate, its relationship with the Company or (ii) no customer has threatened
to decrease or limit materially its relationship with the Company.
SECTION 2.28 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company
nor any officer, employee or agent of the Company, nor any other person acting
on its own behalf, has, directly or indirectly, within the two (2) years prior
to the date hereof given or agreed to give any gift or similar benefit to any
customer, supplier, governmental employee or other person who is or may be in a
position to help or hinder the Business (or assist any Seller in connection with
any actual or proposed transaction) which (a) might subject Buyer to any damage
or penalty in any civil, criminal or governmental litigation or proceeding,
(b) if not given in the past, might have had a material adverse effect on the
Assets, Business or operations of the Company or (c) if not continued in the
future, might adversely affect any Assets, Business, operations or prospects or
which might subject Buyer to suit or penalty in any private or governmental
litigation or proceeding.
SECTION 2.29 DISCLOSURE. Neither this Agreement, the Schedules hereto,
nor any audited or unaudited financial statements, documents or certificates
furnished or to be furnished to Buyer by or on behalf of the Company or any
Seller pursuant to this Agreement contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein not
19
<PAGE>
misleading. No Seller has knowledge of any events, transactions or other facts
which, either individually or in the aggregate, may give rise to circumstances
or conditions which would have a material adverse effect on the general affairs
or Condition of the Business.
SECTION 2.30 TRANSACTION SHARES. Each Seller represents and warrants to
Buyer that the Transaction Shares are being acquired by such Seller for its own
account and not with a view to the distribution, resale or other transfer
thereof, except in compliance with the Securities Act and applicable state
securities laws. Each Seller has (i) reviewed carefully the Parent Reports,
(ii) such knowledge and experience in financial, tax and business matters so as
to enable it to make an informed investment decision with respect to the
Transaction Shares and (iii) overall commitments to investments which are not
readily marketable as are reasonable in relation to such Seller's net worth.
SECTION 2.31 ABILITY TO CONDUCT BUSINESS. The Assets are sufficient and
adequate to permit the continued operation of the Business as it has been
conducted since the inception of the Company and, assuming all Sellers Required
Consents are obtained, the consummation of the Contemplated Transactions hereby
will enable Buyer to conduct the Business as it has been conducted since the
Company's inception.
SECTION 2.32 POTENTIAL CONFLICTS OF INTEREST. No Seller, or any spouse of
a Seller, and no entity controlled by one or more of the foregoing:
(a) owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of, any person which is, or is engaged in
business as, a direct or indirect competitor, lessor, lessee, supplier,
distributor, sales agent or customer of the Company, except for Stephen
McLaughlin's interest in FX Media, Inc. which provides internet website hosting
services to the Company at a cost of less than $250 per month;
(b) owns, directly or indirectly, in whole or in part, any material
property that the Company uses in the conduct of the Business; or
(c) has any material cause of action or other claim whatsoever
against, or owes any amount to, the Company.
20
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Buyer and Parent represent and warrant to Sellers that:
SECTION 3.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Buyer and
Parent has full power and authority to execute and deliver each Transaction
Document to which it is or, at Closing, will be, a party and to consummate the
Contemplated Transactions. The execution, delivery and performance of each
Transaction Document and the consummation of the Contemplated Transactions to
which each of Buyer and/or Parent is or, at Closing, will be, a party have been
duly and validly authorized and approved by the board of directors thereof, as
the case may be, and no other corporate proceedings on the part of Buyer and/or
Parent are necessary to authorize the execution, delivery and performance by
Buyer and/or Parent of each Transaction Document or the consummation of the
Contemplated Transactions to which Buyer and/or Parent is or, at Closing, will
be a party. This Agreement has been and, at Closing, the other Transaction
Documents to which Buyer and/or Parent is a party will have been, duly and
validly executed and delivered by Buyer and/or Parent and (assuming the valid
execution and delivery thereof by the other parties thereto) constitutes, or
will, at the Closing, constitute, as the case may be, the legal, valid and
binding agreements of Buyer and/or Parent, enforceable against Buyer and/or
Parent in accordance with their respective terms, except as such obligations and
their enforceability may be limited by applicable bankruptcy and other similar
Laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought (whether at law or in
equity).
SECTION 3.2 NO CONFLICTS; CONSENTS. The execution, delivery and
performance by Buyer and/or Parent of each Transaction Document to which Buyer
and/or Parent is or, at Closing, will be, a party and the consummation of the
Contemplated Transactions to which Buyer and/or Parent is or, at Closing, will
be, a party do not and will not (i) violate any provision of the certificate of
incorporation or by-laws of Buyer and/or Parent; (ii) require Buyer and/or
Parent to obtain any consent, approval or action of or waiver from, or make any
filing with, or give any notice to, any Governmental Body or any other person,
except as set forth on SCHEDULE 3.2 (the "BUYER REQUIRED CONSENTS"); (iii) if
Buyer Required Consents are obtained prior to the Closing, violate, conflict
with or result in the breach or default under (with or without the giving of
notice or the passage of time), or permit the suspension or termination of, any
material Contract to which Buyer or Parent is a party or by which either of them
or their assets may be bound or subject; or (iv) if Buyer Required Consents are
obtained prior to the Closing, violate any Law or Order of any Governmental Body
against, or binding upon, Buyer or Parent or upon any of their respective assets
or business.
21
<PAGE>
SECTION 3.3 CORPORATE EXISTENCE AND POWER. Each of Buyer and Parent is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, and has all requisite corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 3.4 FINDERS FEES. Other than Strategica Group, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Buyer or Parent who might be entitled to
any fee or commission from Buyer or Parent in connection with the consummation
of the Contemplated Transactions.
SECTION 3.5 PARENT REPORTS. Buyer and Parent have delivered to Sellers
true and correct copies of (a) Parent's Annual Report on Form 10-KSB for the
year ended December 31, 1997, as amended, and (b) Parent's Quarterly Report on
Form 10-QSB for the quarter ended March 31, 1998 (collectively, the "PARENT
REPORTS"). The Parent Reports, taken as a whole, did not at the time they were
filed contain an untrue statement of material fact, nor omit to state a material
fact necessary to make the statements made therein not misleading.
SECTION 3.6 TRANSACTION SHARES. The Transaction Shares have been duly
authorized by Parent and, when issued to Sellers, will be duly issued, fully
paid and non-assessable shares of Parent Stock. The Transaction Shares will not
be issued in violation of any preemptive rights, rights of first refusal or,
other than as set forth in this Agreement, contractual restrictions of any kind,
and Sellers will receive good title to the Transaction Shares free and clear of
all Liens.
ARTICLE IV
COVENANTS AND AGREEMENTS
Sellers, jointly and severally, covenant to Buyer and Buyer covenants to
Sellers that:
SECTION 4.1 CONDUCT OF BUSINESS OF THE COMPANY. From the date hereof
through the Closing Date, Sellers, jointly and severally, agree to cause the
Company:
(i) To conduct its operations according to the ordinary and
usual course of the Business consistent with past practice, to preserve intact
its present business organization and structure, to keep available the services
of its present officers, agents and employees, to preserve and maintain its
Assets and the good will of the Business and to preserve its relationships with
customers and others having business dealings with the Company.
22
<PAGE>
(ii) To maintain in the ordinary course of the Business,
consistent with past practice and in accordance with all Contracts, the Leased
Real Property, all its material structures, equipment, the Assets and other
tangible property in their present repair, order and condition, subject to
ordinary wear and tear.
(iii) Not to incur any Liability (other than Liabilities
incurred in the ordinary course of the Business, consistent with past practice,
which are not in the aggregate material thereto), nor enter into any Contract of
a type required to be disclosed on any Schedule hereto.
(iv) Not to undertake (nor permit to be undertaken) any of the
actions specified in Section 2.10.
(v) Not to pay, discharge or satisfy any material Claim or
Liability, other than the payment, discharge or satisfaction in the ordinary
course of the Business of Claims or Liabilities incurred in the ordinary course
of Business, consistent with past practice.
(vi) Not to enter into, amend, modify, terminate, renew,
extend, or waive any material right under, any leases, licenses, occupancy
agreements or other Contracts concerning the Leased Real Property or any other
real property or permit any person to occupy the Leased Real Property, nor enter
into any mortgage, pledge or other encumbrance, or other Contract affecting
title to, or the use, possession, occupancy, operation and/or maintenance of the
Leased Real Property.
(vii) To pay all Taxes and other charges required with respect
to the Assets and comply with all Laws, including all Environmental Laws.
(viii) To maintain insurance coverage in the amounts and types
as are currently in existence and more specifically described on SCHEDULE 2.19
annexed hereto and made a part hereof.
(ix) Not to withdraw, settle or otherwise compromise any
pending Tax reduction proceeding without the prior written consent of Buyer.
(x) Not to make any request of any Governmental Body without
the prior written consent of Buyer and to keep Buyer informed of all notices
received from, or any correspondence with, respect to any such Governmental
Body.
(xi) To comply with its obligations under the Contracts,
including, but not limited to the Real Property Leases and any Permitted Liens,
to which it is a party, and send to Buyer copies of all notices of default
delivered pursuant to any of the Contracts, promptly upon receipt thereof.
23
<PAGE>
(xii) On or prior to the Closing Date, the Company shall, at
its sole cost and expense, cause all Liens, other than Permitted Liens, to be
discharged, removed and/or released of record. As of the Closing, there shall
be no outstanding Contracts made by the Company or any Seller for the
construction or repair of any improvements to the Leased Real Property that have
not been fully paid for, and the Company shall cause to be discharged all
mechanics, materialmen's and other Liens arising from any labor or materials
furnished to the Leased Real Property on or prior to the Closing Date.
SECTION 4.2 CORPORATE EXAMINATIONS AND INVESTIGATIONS. (a) Prior to the
Closing Date, Sellers, jointly and severally, agree that Buyer shall be
entitled, through its directors, officers, Affiliates, employees, attorneys,
accountants, representatives, lenders, consultants and other agents
(collectively, "REPRESENTATIVES") to make such investigation of the Assets, the
Business and operations of the Company and the Purchased Shares, and such
examination of the books, records and financial condition of the Company, as
Buyer reasonably deems necessary for the purpose of effecting and considering
the Contemplated Transactions. Any such investigation and examination shall be
conducted at reasonable times, under reasonable circumstances and upon
reasonable notice, and Sellers shall cooperate fully therein. In that
connection, Sellers shall make available to the Representatives of Buyer during
such period, all such information and copies of such documents and records
concerning the affairs of the Company and the Purchased Shares as such
Representatives may reasonably request, shall permit the Representatives of
Buyer access to the Assets of the Company and all parts thereof and to its
employees, customers, suppliers, contractors and others, and shall cause the
Company's Representatives to cooperate fully in connection with such review and
examination. No investigation by Buyer shall diminish or obviate any of the
representations, warranties, covenants or agreements of Sellers contained in
this Agreement.
SECTION 4.3 ADDITIONAL FINANCIAL STATEMENTS. (a) On or prior to July 31,
1998, Sellers shall furnish Buyer with the Company's audited financial
statements at and for the quarter ended March 31, 1998, together with a review
letter from Coopers & Lybrand LLP with respect to the Company's unaudited
financial statements for the month ended April 30, 1998.
(b) Prior to the Closing Date, as soon as available and in any event
within fifteen (15) calendar days after the end of each monthly accounting
period of the Company ending after April 30, 1998, Sellers shall furnish Buyer
with an unaudited financial statement of the Company for such month in form and
substance comparable to the Interim Statements and with such other financial or
other information routinely prepared by the Company.
SECTION 4.4 FILINGS AND AUTHORIZATIONS. Sellers will pay when due all
Taxes imposed upon the Company and/or Sellers, as the case may be, by Law
arising out of the Contemplated Transactions. The parties hereto shall
cooperate and use their respective best efforts to make, or cause to be made,
all registrations, filings, applications and submissions, to give all notices
and to obtain all governmental or other third party consents, transfers,
approvals, Orders and waivers necessary or desirable for the consummation of the
Contemplated
24
<PAGE>
Transactions in accordance with the terms of this Agreement and shall furnish
copies thereof to each other party prior to such filing and shall not make any
such registration, filing, application or submission to which Buyer or Sellers,
as the case may be, reasonably objects in writing. All such filings shall
comply in form and content in all material respects with applicable Law. The
parties hereto also agree to furnish each other with copies of such filings and
any correspondence received from any Governmental Body in connection therewith.
SECTION 4.5 EFFORTS TO CONSUMMATE. Subject to the terms and conditions
herein, each party hereto, without payment or further consideration, shall use
its good faith efforts to take or cause to be taken all action and to do or
cause to be done all things necessary, proper or advisable to consummate and
make effective, as soon as reasonably practicable, the Contemplated
Transactions, including, but not limited to, the obtaining of all Sellers
Required Consents and Buyer Required Consents, respectively, and Permits or
consents of any third party, whether private or governmental, which are
necessary for the consummation of the Contemplated Transactions, to effect all
necessary registrations and filings, and each party hereto shall cooperate fully
with the others in all of the foregoing.
SECTION 4.6 NEGOTIATIONS WITH OTHERS. From and after the date hereof
unless and until this Agreement shall have terminated in accordance with its
terms, Sellers, jointly and severally, agree that neither Sellers, the Company,
any Affiliate of any of them, nor any Representative of any of them, will
directly or indirectly (i) solicit, engage in discussions or engage in
negotiations with any person (other than Buyer or any of its Affiliates) with
respect to an Acquisition Proposal; (ii) provide information to any person
(other than Buyer, any of its Representatives or the Company's Representatives)
in connection with an Acquisition Proposal; (iii) enter into any transaction
with any person (other than Buyer or any of its Affiliates) with respect to an
Acquisition Proposal; or (iv) agree to do any of the foregoing. If any Seller,
the Company, any Affiliate or Representative thereof receives any offer or
proposal to enter into discussions or negotiations relating to any of the above,
Sellers will immediately notify Buyer in writing as to the identity of the
offeror or the party making any such proposal and the specific terms of such
offer or proposal.
SECTION 4.7 NOTICES OF CERTAIN EVENTS. Prior to the Closing Date, each
Seller, on the one hand, and Buyer, on the other, shall promptly notify the
other of:
(a) any notice or other communication from any person alleging that
the consent, approval, authorization or waiver of such person is or may be
required in connection with the Contemplated Transactions;
(b) any material adverse change in the Condition of the Business;
(c) any notice or other communication from any Governmental Body in
connection with the Contemplated Transactions; and
25
<PAGE>
(d) any event, condition or circumstance occurring from the date
hereof through the Closing Date that would constitute a material violation or
breach of any representation or warranty of such party, whether made as of the
date hereof or as of the Closing Date, or that would constitute a material
violation or breach of any covenant of any such party contained in this
Agreement.
SECTION 4.8 PUBLIC ANNOUNCEMENTS. Prior to the Closing Date, each Seller,
on the one hand, and Buyer, on the other, will consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Contemplated Transactions, and will not issue any such press release or
make any such public statement without the prior approval of Buyer or Sellers,
as the case may be, except as may be required by applicable Law in which event
the other party shall have the right to review and comment upon (but not
approve) any such press release or public statement prior to its issuance.
SECTION 4.9 CONFIDENTIALITY. (a) Each party hereto shall hold in strict
confidence, and shall use its best efforts to cause all of its Representatives
to hold in strict confidence, unless compelled to disclose by judicial or
administrative process, or by other requirements of Law, all information
concerning any other party which it has obtained from such party prior to, on,
or after the date hereof in connection with the Contemplated Transactions, and
each party shall not use or disclose to others, or permit the use of or
disclosure of, any such information so obtained, and will not release or
disclose such information to any other person, except its Representatives who
need to know such information in connection with this Agreement and who shall be
advised of the provisions of this Section 4.9. The foregoing provision shall
not apply to any such information to the extent (i) known by any party prior to
the date such information was provided to such party in connection with the
Contemplated Transactions, (ii) made known to any party from a third party not
in breach of any confidentiality requirement or (iii) made public through no
fault of such party or any of its Representatives.
(b) If the Contemplated Transactions are not consummated and if
requested, each party hereto shall return to the appropriate party all tangible
evidence of such information.
SECTION 4.10 EXPENSES. Except as otherwise specifically provided in this
Agreement, Buyer and Sellers shall bear their respective expenses, in each case,
incurred in connection with the preparation, execution and performance of the
Transaction Documents and the Contemplated Transactions, including, without
limitation, all fees and expenses of their respective Representatives, and the
Company shall not bear any of the fees and expenses of any Seller's
Representatives. Notwithstanding the foregoing, Sellers shall prior to Closing
pay all expenses associated with switching the Company's Insurance Policies from
a "claims made basis" to an "occurrence basis." On the Closing Date, Buyer
shall pay all fees and expenses, if any, owed to Strategica Group in connection
with the Contemplated Transactions.
26
<PAGE>
SECTION 4.11 TAX MATTERS. (a) TAX PERIODS ENDING ON OR BEFORE THE
CLOSING DATE. Sellers shall prepare or cause to be prepared and file or cause
to be filed all Tax Returns for the Company for all periods ending on or prior
to the Closing Date. Sellers shall permit Buyer to review and comment on each
such Tax Return described in the preceding sentence prior to filing and shall
make such revisions to such Tax Returns as are reasonably requested by Buyer.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for periods which begin before the Closing Date and
end after the Closing Date.
(c) Refunds or credits of Taxes that were paid by the Company with
respect to any periods shall be for the account of the Company.
(d) Sellers, the Company and Buyer shall reasonably cooperate, and
shall cause their respective Representatives reasonably to cooperate, in
preparing and filing all Tax Returns, including maintaining and making available
to each other all records necessary in connection with the preparation and
filing of Tax Returns, the payment of Taxes and the resolution of Tax Audits and
Tax Deficiencies with respect to all taxable periods. Buyer recognizes that
Sellers and their Affiliates will need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information held by the
Company that pertain to events occurring prior to the Closing Date. Buyer
therefore agrees to cause the Company to allow Sellers and their
Representatives, at times and dates reasonably acceptable to the Company, to
inspect, review and make copies of such records as Sellers and the Company deem
necessary or appropriate, PROVIDED such activities are conducted during normal
business hours on reasonable advance notice.
(e) Buyer and Sellers further agree, upon request, to use their
reasonable efforts to obtain any certificate or other document from any Tax
Authority or any other person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the Contemplated Transactions).
(f) the Company and Sellers will not revoke the Company's election to
be taxed as an "S corporation" within the meaning of Code Sections 1361 and 1362
and will not take or allow any action other than the sale of the Company's stock
pursuant to this Agreement that would result in the termination of the Company's
status as a validly electing "S corporation" within the meaning of Code Sections
1361 and 1362.
SECTION 4.12 COVENANT NOT-TO-COMPETE. (a) During the period commencing
from the Closing Date and ending on the later of (i) three (3) years thereafter
or (ii) two (2) years after the termination of such Seller's employment with the
Company, pursuant to the terms of any employment agreement between Buyer and
Seller or otherwise (the "TERM"):
27
<PAGE>
(i) In order to preserve the Business and the value of the
Assets, each Seller agrees that it will not, directly or indirectly, as a
partner, officer, employee, director, stockholder, investor, lender, proprietor,
other equity owner, consultant, representative, agent or otherwise become or be
interested in, or associate with or render assistance to, any person (other than
Buyer) engaged in the business of placing or recruiting travel nurses or
staffing hospitals with medical personnel in the United States, Canada, Bermuda
or the Philippines. The foregoing provisions shall not, however, prohibit any
Seller from acquiring, solely as an investment, securities of any person which
are registered under Section 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), and which are publicly traded, so long as
such Seller is not part of any group required to make any filing under Section
13(d) of the Exchange Act (or any successor rule) in respect of such person and
such securities do not constitute 2% or more of any class of outstanding
securities of such person.
(ii) Each Seller agrees that it will not, directly or
indirectly, during the Term, for its own benefit or for the benefit of any other
person (A) influence or attempt to influence any person to either terminate or
modify his employment or other professional relationship with the Company, Buyer
or any Affiliate of Buyer or (B) employ, consult or otherwise retain, directly
or indirectly, any person who is (or during the twelve months prior thereto was)
employed, consulting to, or otherwise retained by the Company, Buyer or any
Affiliate of Buyer.
(b) Sellers will not, directly or indirectly, use, disclose or make
available to any person (other than Buyer) any confidential information
concerning the ownership and/or operation of the Business (the "CONFIDENTIAL
INFORMATION"). The term Confidential Information includes, without limitation,
the business practices, financial information, customer, prospective customer,
travel nurse and prospective travel nurse names and information, suppliers and
prospective suppliers names, leads and account information, mailing lists,
computer programs, advertising campaigns (including, without limitation,
displays, drawings, memoranda, designs, styles or devices), marketing,
promotional and pricing information, employee names, compensation and benefit
information, Contracts, Permits, and Real Property Leases of the Company
pertaining to the Business. The term Confidential Information excludes only
information which is publicly available through no fault of Sellers or any of
their Representatives.
(c) The parties agree that a violation of the foregoing agreements
not to compete or disclose, or any provision thereof, will cause irreparable
damage to Buyer, and Buyer shall be entitled (without any requirement of posting
a bond or other security), in addition to any other rights and remedies which it
may have, at law or in equity, to an injunction enjoining and restraining
Sellers from doing or continuing to do any such act or any other violations or
threatened violations of this Section 4.12.
(d) The parties hereto agree that the covenant set forth in this
Section 4.12 is reasonable with respect to its duration, geographical area and
scope and in all other respects. If the final judgment of a court of competent
jurisdiction declares that any term or
28
<PAGE>
provision of this Section 4.12 is invalid or unenforceable, the parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
SECTION 4.13 EMPLOYEE MATTERS. From the date hereof through the Closing
Date, Sellers, jointly and severally, agree to cause the Company:
(a) Not to (1) adopt, enter into, terminate or amend any Employee
Benefit Plan, (2) completely or partially withdraw (within the meaning of
Section 4201 of ERISA) from any multiemployer plan (within the meaning of
Section 3(37) of ERISA, (3) increase in any manner the compensation or fringe
benefit of any director, officer, employee or consultant of the Company, (4) pay
any benefit not required under the terms of any Employee Benefit Plan, (5) grant
any discretionary awards under any Employee Benefit Plan or other bonus,
incentive, performance or other compensation plan or arrangement, (6) take any
action to fund or in any other way secure the payment of compensation or
benefits to any director, officer, employee or consultant of the Company or
under any Employee Benefit Plan, except to the extent required under applicable
Laws, (7) adopt, enter into or amend any contract, agreement, commitment or
arrangement to do any of the foregoing.
(b) To fully satisfy all obligations, on a timely basis, under each
Employee Benefit Plan, including, without limitation, all contribution
obligations, and to administer, operate and maintain each Employee Benefit Plan
in accordance with its terms and all applicable Laws.
(c) Not to incur a "plant closing" or "mass layoff", within the
meaning of the Worker Adjustment and Retraining Notification Act.
(d) Not to take any action that interferes with Buyer's relationship
with the Company's employees and not to be a direct or indirect party to any
action or activity which would deprive Buyer of the services of such employees.
SECTION 4.14 FURTHER ASSURANCES. At any time and from time to time after
the Closing Date, upon the request of Buyer, each Seller, jointly and severally,
shall do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged or delivered, all such further documents, instruments or
assurances, as may be necessary, desirable or proper to carry out the intent and
accomplish the purposes of this Agreement. Sellers and Buyer will each,
respectively, bear their or its own costs and expenses incurred in compliance
with the first sentence of this Section 4.14.
29
<PAGE>
SECTION 4.15 REGISTRATION RIGHTS. The parties acknowledge and agree that
the Transaction Shares are being issued pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") provided in Section 4(2) thereof and constitute "restricted
securities" within the meaning of the Securities Act. Sellers may not transfer
the Transaction Shares absent compliance with the provisions of the Securities
Act, applicable state securities laws and Section 4.16 herein, and all stock
certificates evidencing the Transaction Shares shall bear a legend to such
effect and to the effect that such shares are subject to the terms and
provisions of this Agreement. At the Closing, Buyer and Sellers shall enter
into a registration rights agreement (the "REGISTRATION RIGHTS AGREEMENT")
substantially in the form of EXHIBIT 4.15 hereto. The Registration Rights
Agreement will provide that Buyer will file a registration statement with the
Securities and Exchange Commission on Form SB-2 or other such form (the
"REGISTRATION STATEMENT") to register the sale by Sellers of the Transaction
Shares no later than seventy-five (75) Business Days following the Closing Date,
will pay all costs in respect thereto (other than fees and expenses of counsel
to Sellers and discounts, fees or commissions upon resale of the Transaction
Shares) and will use reasonable efforts to have the Registration Statement
declared effective by the Securities and Exchange Commission as soon as
practicable following the filing thereof.
SECTION 4.16 INSURANCE. Prior to Closing, the Sellers shall cause the
Company to obtain, and as of the Closing Date, Sellers shall cause the Company
to maintain Insurance Policies on an occurrence basis and shall obtain "tail
coverage" for its "claims made" Insurance Policies for two (2) years after the
date of the Claim, and all such amounts shall be deducted from the Purchase
Price.
SECTION 4.17 POOLING OF INTERESTS. The parties hereto acknowledge and
agree that the Contemplated Transactions shall be treated for accounting
purposes as a "pooling of interests." Each of Sellers and Buyer further
covenant not to take any action or cause any event to occur, either prior to or
after the Closing, that may jeopardize, compromise or adversely affect the
pooling of interests accounting treatment with respect to the Contemplated
Transactions.
SECTION 4.18 SELF-INSURANCE. Prior to Closing, the Sellers shall cause
the Company to pay all "run-out" fees and liabilities which may be owed to
Great-West Life and Annuity Insurance Company or any other person in connection
with the Company's Self Insurance Programs, and all such amounts shall be
deducted from the Purchase Price.
SECTION 4.19 JOINT VENTURE AGREEMENT. At Closing, each Seller shall cause
the Joint Venture Agreement to be terminated and such Agreement shall have no
further force or effect.
30
<PAGE>
SECTION 4.20 OFFERS OF EMPLOYMENT. Buyer shall make an offer of
employment to each of Debbie Bender-Balazich and Stephen M. McLaughlin,
substantially in the form of EXHIBIT 4.21 hereto.
ARTICLE V
CONDITIONS TO CLOSING
SECTION 5.1 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES. The obligations
of Sellers and Buyer to consummate the Contemplated Transactions are subject to
the satisfaction of the following conditions:
(a) NO INJUNCTION. No provision of any applicable Law and no Order
shall prohibit the consummation of the Contemplated Transactions.
(b) NO PROCEEDINGS OR LITIGATION. No Claim instituted by any person
(other than Buyer, the Company, Sellers or their respective Affiliates) shall
have been commenced or pending against any Seller, the Company, Buyer or any of
their respective Affiliates, officers or directors, which Claim seeks to
restrain, prevent, change or delay in any respect the Contemplated Transactions
or seeks to challenge any of the terms or provisions of this Agreement or seeks
damages in connection with any of such transactions.
SECTION 5.2 CONDITIONS TO THE OBLIGATIONS OF SELLERS. The obligations of
Sellers hereunder to consummate the Contemplated Transactions are subject, at
the option of Sellers, to the fulfillment prior to or at the Closing of each of
the following further conditions:
(a) PERFORMANCE. Buyer shall have performed and complied in all
material respects with all agreements, obligations and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement and in any certificate or other
writing delivered by Buyer pursuant hereto shall be true in all material
respects at and as of the Closing Date as if made at and as of such time (except
for those representations and warranties made as of a specific date which shall
be true in all material respects as of the date made).
(c) PURCHASE PRICE. Buyer shall have delivered that portion of the
Purchase Price in accordance with Section 1.2(a) hereof.
(d) BUYER REQUIRED CONSENTS. All Buyer Required Consents shall have
been obtained; and
(e) DOCUMENTATION. There shall have been delivered to Sellers the
following:
31
<PAGE>
(i) A certificate, dated the Closing Date, of the Chairman of
the Board, the President or Chief Financial Officer of Buyer confirming the
matters set forth in Section 5.2(a) and (b) hereof;
(ii) Stock certificates, registered in the name of each Seller
(with the appropriate restrictive legends), evidencing satisfaction of that
portion of the Purchase Price in accordance with Section 1.2(a);
(iii) A certificate, dated the Closing Date, of the Secretary
or Assistant Secretary of Buyer certifying, among other things, that attached or
appended to such certificate (i) is a true and correct copy of its certificate
of incorporation and all amendments thereto, if any, as of the date thereof
certified by the Secretary of the State of Delaware; (ii) is a true and correct
copy of its by-laws as of the date thereof; (iii) is a true copy of all
resolutions of its board of directors authorizing the execution, delivery and
performance of the Transaction Documents and the Contemplated Transactions; and
(iv) are the names and signatures of its duly elected or appointed officers who
are authorized to execute and deliver the Transaction Documents and any
certificate, document or other instrument in connection herewith;
(iv) Evidence of the good standing and corporate existence of
Buyer and Parent issued by the Secretary of State of the State of Delaware;
(v) A signed opinion of Buyer's counsel, dated the Closing
Date and addressed to Sellers, substantially in the form annexed as EXHIBIT 5.2A
hereto;
(vi) Copies of all Buyer Required Consents;
(vii) An executed copy of the Escrow Agreement; and
(viii) An executed copy of the Registration Rights Agreement.
SECTION 5.3 CONDITIONS TO THE OBLIGATIONS OF BUYER. All obligations of
Buyer to consummate the Contemplated Transactions hereunder are subject, at the
option of Buyer, to the fulfillment prior to or at the Closing of each of the
following further conditions:
(a) PERFORMANCE. Each Seller shall have performed and complied in
all material respects with all agreements, obligations and covenants required by
this Agreement to be performed or complied with by them at or prior to the
Closing Date.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers contained in this Agreement and in any certificate or
other writing delivered by any Seller pursuant hereto shall be true in all
material respects at and as of the Closing Date as if made at and as of such
time (except for those representations and warranties made as of a specific date
which shall be true in all material respects as of the date made).
32
<PAGE>
(c) SELLERS REQUIRED CONSENTS. All Sellers Required Consents shall
have been obtained in form and substance reasonably satisfactory to Buyer, and
shall be in full force and effect.
(d) CLAIMS. Subsequent to the date of this Agreement, there shall not
have arisen any Claims (other than Claims the substance of which are disclosed
on a Schedule to this Agreement) (whether or not the defense thereof or
Liabilities in respect thereof are covered by insurance), asserted or threatened
against or involving the Company, any Seller, any of the Assets, the Business or
the Purchased Shares, other than Claims that, individually or in the aggregate,
together with all other Claims existing or threatened on the Closing Date, could
not reasonably be expected to have a material adverse effect on the Condition of
the Business or the Purchased Shares. There shall exist no fact, event or
circumstance on the Closing Date known to any Seller that could give rise to any
Claim (other than Claims the substance of which is disclosed on a Schedule to
this Agreement) that, if pending or threatened on the Closing Date, could,
individually or in the aggregate, together with all other Claims existing or
threatened on such date, reasonably be expected to have a material adverse
effect on the Condition of the Business or the Purchased Shares.
(e) DOCUMENTATION. There shall have been delivered to Buyer the
following:
(i) A certificate dated the Closing Date, executed by each
Seller, confirming the matters set forth in Sections 5.3(a) and (b);
(ii) A certificate, dated the Closing Date, of the Secretary
or Assistant Secretary of the Company certifying, among other things, that
attached or appended to such certificate (i) is a true and correct copy of the
Company's Articles of Incorporation and all amendments thereto, if any, as of
the date thereof certified by the Secretary of State of its state of
incorporation; and (ii) is a true and correct copy of the Company's by-laws as
of the date thereof;
(iii) Evidence of the good standing and corporate existence of
the Company issued by the Secretary of State of its state of incorporation and
evidence that the Company is qualified to transact business as a foreign
corporation and is in good standing in each state of the United States and in
each other jurisdiction where the character of the property owned or leased by
it or the nature of its activities makes such qualification necessary;
(iv) A signed opinion of Sellers' counsel, Akerman, Senterfitt
& Eidson, P.A., dated the Closing Date and addressed to Buyer, substantially in
the form annexed hereto as EXHIBIT 5.3A;
(v) Copies of all Sellers Required Consents;
33
<PAGE>
(vi) A copy of the Escrow Agreement executed by all parties
thereto;
(vii) An executed copy of the Registration Rights Agreement;
(viii) Stock Certificates of each Seller representing the number
of Purchased Shares set forth opposite such Seller's name on SCHEDULE 2.1, duly
endorsed in blank or accompanied by stock powers duly endorsed in blank and in
suitable form for transfer to Buyer by delivery;
(ix) Possession and control of the Assets of the Company
(including all corporate books, seals, bank accounts, records and documents);
(x) The resignations, dated the Closing Date, of such
directors and officers of the Company and each fiduciary of any plan of the
Company, as previously may have been requested by Buyer;
(xi) A release of the Company, without any liability to
Company and in form and substance reasonably acceptable to Buyer, of Aldo
Rodriguez as to all sums owed to him in connection with his employment by the
Company;
(xii) Evidence of termination, without any liability to Company
and in form and substance reasonably acceptable to Buyer, of all written and
oral employment agreements and arrangements with all directors, officers and
consultants of the Company, including those listed on SCHEDULE 2.18;
(xiii) A termination agreement executed by each Seller
terminating the Joint Venture Agreement;
(xiv) An executed non-compete agreement with Dale Balazich, in
the form attached hereto as EXHIBIT 5.3B; and
(xv) A schedule attached hereto as SCHEDULE 5.3B, listing the
amounts owed to each of First Capital Services, Inc. and Steven Barth as of the
Closing Date.
(f) ACCOUNTING TREATMENT. The Buyer shall have received from KPMG
Peat Marwick LLP, in form and substance satisfactory to Buyer, and addressed to
Buyer and Parent, a letter to the effect that the Contemplated Transactions
qualify for "pooling of interests" accounting treatment.
(g) DUE DILIGENCE. Buyer, in its absolute discretion, shall be
satisfied with the results of its due diligence findings concerning the Audited
Interim Statements.
34
<PAGE>
(h) FINANCIAL STATEMENTS. There shall have been delivered to Buyer
the Audited Interim Statements.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Notwithstanding any right of Buyer fully to investigate the affairs of the
Company and notwithstanding any knowledge of facts determined or determinable by
Buyer pursuant to such investigation or right of investigation, Buyer has the
right to rely fully upon the representations, warranties, covenants and
agreements of Sellers contained in this Agreement, or listed or disclosed on any
Schedule hereto or in any instrument delivered in connection with or pursuant to
any of the foregoing. All such representations, warranties, covenants and
agreements shall survive the execution and delivery of this Agreement and the
Closing hereunder. Notwithstanding the foregoing, all representations and
warranties of Sellers contained in this Agreement, on any Schedule hereto or in
any instrument delivered in connection with or pursuant to this Agreement shall
terminate and expire twelve (12) months after the Closing Date; PROVIDED,
HOWEVER, that the liability of Sellers shall not terminate as to any specific
claim or claims of the type referred to in Section 6.2 hereof, whether or not
fixed as to Liability or liquidated as to amount, with respect to which Sellers
have been given specific notice on or prior to the date on which such
Liabilities would otherwise terminate pursuant to the terms of this
Section 6.1(a) or which arise or result from or are related to a Claim for
fraud;
(b) All representations and warranties of Buyer shall terminate and
expire twelve (12) months after the Closing Date; PROVIDED, HOWEVER, that the
liability of Buyer shall not terminate as to any specific claim or claims of the
type referred to in Section 6.3 hereof, whether or not fixed as to Liability or
liquidated as to amount, with respect to which Buyer has been given specific
notice on or prior to the date on which such Liability would otherwise terminate
pursuant to the terms of this Section 6.1(b).
SECTION 6.2 OBLIGATION OF SELLERS TO INDEMNIFY. Each Seller, jointly and
severally, agrees to indemnify, defend and hold harmless Buyer (and its
directors, officers, employees, Affiliates, successors and assigns) from and
against all Claims, losses, Liabilities, Regulatory Actions, damages,
deficiencies, judgments, settlements, costs of investigation or other expenses
(including Taxes, interest, penalties and reasonable attorneys' fees and fees of
other experts and disbursements and expenses incurred in enforcing this
indemnification) (collectively, the "LOSSES") suffered or incurred by Buyer, the
Company, or any of the foregoing persons in any action or proceeding between
Buyer (or any other indemnified person) and any Seller, or between Buyer (or any
other indemnified person) and any third party or otherwise, arising out of
(i) any breach of the representations and warranties of any Seller contained in
this Agreement or in the Schedules or any other Transaction Document, (ii) any
breach of the
35
<PAGE>
covenants and agreements of any Seller contained in this Agreement or in the
Schedules or any other Transaction Document, (iii) any Claim pending or
threatened prior to the Closing Date as set forth on SCHEDULE 2.15.
SECTION 6.3 OBLIGATION OF BUYER TO INDEMNIFY. Buyer agrees to indemnify,
defend and hold harmless each Seller (and any successor or assignee thereof)
from and against any Losses suffered or incurred by such Seller or any of the
foregoing persons arising out of any breach of the representations and
warranties of Buyer or of the covenants and agreements of Buyer contained in
this Agreement or in the Schedules or any other Transaction Document.
SECTION 6.4 NOTICE AND OPPORTUNITY TO DEFEND THIRD PARTY CLAIMS.
(a) Promptly after receipt by any party hereto (the "INDEMNITEE") of notice of
any demand, claim, circumstance or Tax Audit which would or might give rise to a
claim by, or the commencement (or threatened commencement) of any action,
proceeding or investigation that may result in a Loss (an "ASSERTED LIABILITY"),
the Indemnitee shall give notice thereof (the "CLAIMS NOTICE") to the party or
parties obligated to provide indemnification pursuant to Sections 6.2 or 6.3
(collectively, the "INDEMNIFYING PARTY"). The Claims Notice shall describe the
Asserted Liability in reasonable detail and shall indicate the amount
(estimated, if necessary, and to the extent feasible) of the Loss that has been
or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own expense
and with its own counsel, any Asserted Liability unless (i) the Asserted
Liability seeks an Order, injunction or other equitable or declaratory relief
against the Indemnitee or (ii) the Indemnitee shall have reasonably concluded
that (x) there is a conflict of interest between the Indemnitee and the
Indemnifying Party in the conduct of such defense or (y) the Indemnitee shall
have one or more defenses not available to the Indemnifying Party. If the
Indemnifying Party elects to defend such Asserted Liability, it shall within ten
days (or sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the defense of such Asserted Liability.
If the Indemnifying Party elects not to defend the Asserted Liability, is not
permitted to defend the Asserted Liability by reason of the first sentence of
this Section 6.4(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement with
respect to such Asserted Liability, the Indemnitee may pay, compromise or defend
such Asserted Liability at the sole cost and expense of the Indemnifying Party.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any claim over the reasonable written objection of the
other, PROVIDED that the Indemnitee may settle or compromise any claim as to
which the Indemnifying Party has failed to notify the Indemnitee of its election
under this Section 6.4(b) or as to which the Indemnifying Party is contesting
its indemnification obligations hereunder. In the event the Indemnifying Party
elects to defend any Asserted Liability, the Indemnitee may participate, at its
own expense, in the defense of such Asserted Liability. If the Indemnifying
Party chooses to defend any Asserted Liability, the Indemnitee shall make
available to the Indemnifying Party any books,
36
<PAGE>
records or other documents within its control that are necessary or appropriate
for such defense. Any Losses of any Indemnitee for which an Indemnifying Party
is liable for indemnification hereunder shall be paid upon written demand
therefor.
SECTION 6.5 LIMITS ON INDEMNIFICATION. (a) Buyer's remedies with respect
to Losses specified in Section 6.2 shall be limited to the return of the
Indemnification Shares or, in the event such shares are sold the value thereof
as determined in accordance with Section 1.3(b), in accordance with the terms
hereof; PROVIDED, HOWEVER, that if such Losses arise out of any fraud related
matter on the part of any Seller or the Company, then each Seller, jointly and
severally, shall be obligated to indemnify Buyer in respect of all such Losses,
including those not otherwise satisfied by delivery to Buyer of the
Indemnification Shares or the value thereof (as determined in accordance with
Section 1.3(b)), in accordance with the provisions of this Article VI.
(b) Sellers shall not be liable to indemnify Buyer pursuant to
Section 6.2 above, and Buyer shall not be liable to indemnify Sellers pursuant
to Section 6.3 above, in respect of any individual Loss of less than $5,000. In
addition, the parties hereto agree to indemnify the other pursuant to
Sections 6.2 or 6.3, as the case may be, in the event that the aggregate of all
such individual Losses of less than $5,000 suffered by either Buyer or Sellers,
as the case may be, exceeds $50,000. When a party's Losses total $50,000 or
more, such party shall be entitled to indemnification for all amounts for which
indemnification is available, including but not limited to the first $50,000 of
any such claim. Notwithstanding the foregoing, Seller shall be liable for any
and all Losses arising out of the matters referred to in Section 6.2(iii)
without regard to a minimum dollar amount.
SECTION 6.6 EXCLUSIVE REMEDY. Except as provided in Article VII and any
Claims for fraud (for which such indemnification provisions of this Article VI
shall not constitute the sole or exclusive remedy of any party hereto in respect
of this Agreement and the Contemplated Transactions and that each party hereto
shall be entitled to seek any other remedy to which such party is entitled,
whether at law or in equity), the parties agree that the indemnification
provisions of this Article VI shall constitute the sole and exclusive remedy of
any party hereto in respect of this Agreement and the Contemplated Transactions.
ARTICLE VII
SPECIFIC PERFORMANCE; TERMINATION
SECTION 7.1 SPECIFIC PERFORMANCE. Sellers acknowledge and agree that, if
Sellers fail to proceed with the Closing in any circumstance other than those
described in clauses (a), (b), (d) or (e) of Section 7.2 below, Buyer will not
have adequate remedies at law with respect to such breach. In such event, and
in addition to Buyer's right to terminate this Agreement, Buyer shall be
entitled, without the necessity or obligation of posting a bond or other
security, to seek injunctive relief, to commence a suit in equity to obtain
specific
37
<PAGE>
performance of each Seller's obligations under this Agreement or to sue Sellers
for damages, in each case, without first terminating this Agreement. Sellers
specifically affirm the appropriateness of such injunctive, other equitable
relief or damages in any such action.
SECTION 7.2 TERMINATION. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing:
(a) By mutual written consent of Sellers and Buyer;
(b) By Sellers if (i) there has been a misrepresentation or breach of
warranty on the part of Buyer in the representations and warranties contained
herein and such misrepresentation or breach of warranty, if curable, is not
cured within thirty days after written notice thereof from Sellers; (ii) Buyer
has committed a breach of any covenant imposed upon it hereunder and fails to
cure such breach within thirty days after written notice thereof from Sellers;
or (iii) any condition to Sellers' obligations under Section 5.2 becomes
incapable of fulfillment through no fault of Sellers or the Company and is not
waived by Sellers, PROVIDED that, on the date of termination, all conditions to
Buyer's obligations specified in Section 5.3 (other than clause (e) thereof)
shall have been satisfied and Sellers shall then be otherwise ready, willing and
able to proceed with the Closing hereunder;
(c) By Buyer, if (i) there has been a misrepresentation or breach of
warranty on the part of Sellers in the representations and warranties contained
herein and such misrepresentation or breach of warranty, if curable, is not
cured within thirty days after written notice thereof from Buyer; (ii) any
Seller has committed a breach of any covenant imposed upon it hereunder and
fails to cure such breach within thirty days after written notice thereof from
Buyer; (iii) any condition to Buyer's obligations under Section 5.3 becomes
incapable of fulfillment through no fault of Buyer and is not waived by Buyer,
PROVIDED that, on the date of termination, all conditions to Sellers'
obligations hereunder specified in Sections 5.2 (other than clauses (c) and (e)
thereof) shall have been satisfied and Buyer shall then be otherwise ready,
willing and able to proceed with the Closing hereunder; (iii) Sellers fail to
deliver the Schedules in accordance with Section 1.6 hereof; (iv) upon receipt
of the Schedules by Buyer, Buyer is not satisfied in full with the form and
substance of all such Schedules; and (v) Sellers take any action or cause any
event to occur that would adversely effect the accounting treatment of the
Contemplated Transactions as a "pooling of interests;"
(d) By Sellers or by Buyer, if any condition under Section 5.1
becomes incapable of fulfillment through no fault of the party seeking
termination and is not waived by the party seeking termination; and
(e) By either Sellers or Buyer if the Closing shall not have occurred
on or prior to December 31, 1998, PROVIDED that (i) if so terminated by Sellers,
the conditions specified in the proviso of Section 7.2(b) shall have been
satisfied on the date of termination and Sellers shall be then otherwise ready,
willing and able to proceed with the Closing, or (ii) if so
38
<PAGE>
terminated by Buyer, the conditions specified in the proviso of Section 7.2(c)
shall have been satisfied on the date of termination and Buyer shall be then
otherwise ready, willing and able to proceed with the Closing.
SECTION 7.3 EFFECT OF TERMINATION; RIGHT TO PROCEED. Subject to the
provisions of Section 7.1 hereof, in the event that this Agreement shall be
terminated pursuant to Section 7.2, all further obligations of the parties under
this Agreement shall terminate without further liability of any party hereunder
except that (i) the agreements contained in Sections 4.8, 4.9 and 4.10 shall
survive the termination hereof and (ii) termination shall not preclude any party
from seeking relief against any other party for breach of this Agreement. In
the event that a condition precedent to its obligation is not met, nothing
contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
Contemplated Transactions.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand or by recognized overnight courier, or mailed (by registered or certified
mail, postage prepaid return receipt requested) as follows:
(i) If to Buyer, one copy to:
Preferred Healthcare Staffing, Inc.
10800 Biscayne Boulevard
Miami, Florida 33161
Attn: Mr. Mel Harris
with a copy to:
Preferred Employers Holdings, Inc.
10800 Biscayne Boulevard
Miami, Florida 33161
Attn: Mr. Mel Harris
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Donald J. Bezahler, Esq.
39
<PAGE>
(ii) If to a Seller, one copy to such Seller as follows:
(A) If to Debbie Bender-Balazich to:
Ms. Debbie Bender-Balazich
7998 East Country Club Boulevard
Boca Raton, Florida 33434
(B) If to Steven Barth:
Mr. Steven Barth
1004 Basil Road
McLean, Virginia 22101
(C) If to Steven Jones:
Mr. Steven Jones
907 Hyacinth Drive
Delray Beach, Florida 33483
(D) If to Stephen M. McLaughlin:
Mr. Stephen M. McLaughlin
4311 Greenbriar Lane
Weston, Florida 33331
(E) with a copy in each case to:
Akerman, Senterfitt & Eidson, P.A.
SunTrust International Center
One Southeast Third Avenue, 28th Floor
Miami, Florida 33131-1714
Attn: Marshall R. Burack, Esq.
(b) Each such notice or other communication shall be effective when
delivered at the address specified in Section 8.1(a). Any party by notice given
in accordance with this Section 8.1 to the other parties may designate another
address or person for receipt of notices hereunder. Notices by a party may be
given by counsel to such party.
SECTION 8.2 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) and the collateral agreements executed in connection with the
consummation of the Contemplated Transactions contain the entire agreement among
the parties with respect to the subject matter hereof and related transactions
and supersede all prior agreements, written or oral, with respect thereto.
40
<PAGE>
SECTION 8.3 WAIVERS AND AMENDMENTS; NON-CONTRACTUAL REMEDIES; PRESERVATION
OF REMEDIES. This Agreement may be amended, superseded, cancelled, renewed or
extended only by a written instrument signed by Sellers and Buyer. The
provisions hereof may be waived in writing by Sellers or Buyer, as the case may
be. Any such waiver shall be effective only to the extent specifically set
forth in such writing. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof. Nor shall any waiver on the part of any party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege. Except as otherwise provided herein, the
rights and remedies herein provided are cumulative and are not exclusive of any
rights or remedies that any party may otherwise have at law or in equity.
SECTION 8.4 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State, without regard to the
conflict of laws rules thereof.
SECTION 8.5 CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably and voluntarily submits to personal jurisdiction in the State of
Florida and in the Federal and state courts in such state located in Dade County
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of such action or proceeding may be heard and
determined in any such court. Each of the parties further consents and agrees
that such party may be served with process in the same manner as a notice may be
given under Section 8.1. The parties hereto agree that any action or proceeding
instituted by any of them against any other party with respect to this Agreement
will be instituted exclusively in the state courts located in, and in the United
States District Court for Dade County, Florida. Sellers and Buyer irrevocably
and unconditionally waive and agree not to plead, to the fullest extent
permitted by law, any objection that they may now or hereafter have to the
laying of venue or the convenience of the forum of any action or proceeding with
respect to this Agreement in any such courts.
SECTION 8.6 BINDING EFFECT; NO ASSIGNMENT. This Agreement and all of its
provisions, rights and obligations shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, heirs and legal
representatives. This Agreement may not be assigned (including by operation of
Law) by any party hereto without the express written consent of Buyer (in the
case of assignment by the Company or any Seller) or Sellers (in the case of
assignment by Buyer) and any purported assignment, unless so consented to, shall
be void and without effect.
SECTION 8.7 EXHIBITS. All Exhibits and Schedules attached hereto are
hereby incorporated by reference into, and made a part of, this Agreement.
SECTION 8.8 SEVERABILITY. If any provision of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, this Agreement shall be
amended so as to enforce the illegal,
41
<PAGE>
invalid or unenforceable provision to the maximum extent permitted by applicable
law, and the parties shall cooperate in good faith to further modify this
Agreement so as to preserve to the maximum extent possible the intended benefits
to be received by the parties.
SECTION 8.9 COUNTERPARTS. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall bear
the signatures of all of the parties reflected hereon as the signatories.
SECTION 8.10 THIRD PARTIES. Except as specifically set forth or referred
to herein, nothing herein express or implied is intended or shall be construed
to confer upon or give to any person other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement or the Contemplated Transactions.
ARTICLE IX
DEFINITIONS
SECTION 9.1 DEFINITIONS. (a) The following terms, as used herein, have
the following meanings:
"ACQUISITION PROPOSAL" shall mean any proposal involving, directly or
indirectly, (i) the acquisition of, or merger or other business combination
involving the Company, (ii) the sale or other transfer of any capital stock of
the Company, (iii) the sale, lease, transfer or management of the Business, (iv)
the sale or other transfer of any Assets (except in the ordinary course) and
(v) any other transaction inconsistent with the Contemplated Transactions or
which would render any of them impossible or impracticable to consummate.
"ADDITIONAL FINANCIAL STATEMENTS" shall mean each of the financial
statements and any review letters or other documents required to be delivered
pursuant to Section 4.3.
"AFFILIATE" of any person means any other person directly or indirectly
through one or more intermediary persons, controlling, controlled by or under
common control with such person.
"AGREEMENT" or "THIS AGREEMENT" shall mean, and the words "HEREIN",
"HEREOF" and "HEREUNDER" and words of similar import shall refer to, this
agreement as it from time to time may be amended.
"ASSETS" shall mean all cash, instruments, properties, rights, interests
and assets of every kind, real, personal or mixed, tangible and intangible, used
or usable in the Business.
42
<PAGE>
The term "AUDIT" or "AUDITED" when used in regard to financial statements
shall mean an examination of the financial statements by a firm of independent
certified public accountants in accordance with generally accepted auditing
standards for the purpose of expressing an opinion thereon.
"BUSINESS" shall mean the ownership and operation of the business of the
Company.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the City of New York) on which commercial banks and
securities exchanges are open for business in the City of New York.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONDITION OF THE BUSINESS" shall mean the condition (financial or
otherwise), prospects or the results of operations of the Business, the Assets
or the Company.
"CONTAMINATION" shall mean any Release or presence of a Hazardous
Substance; the presence of radon gas above the United States Environmental
Protection Agency action level; and the presence of out of service, abandoned or
leaking underground storage tanks.
"CONTRACT" shall mean any contract, agreement, indenture, note, bond,
lease, conditional sale contract, mortgage, license, franchise, instrument,
commitment or other binding arrangement, whether written or oral.
The term "CONTROL", with respect to any person, shall mean the power to
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other persons by or through stock ownership, agency or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" shall have meanings correlative to the
foregoing.
"ENVIRONMENTAL CONDITION" shall mean (1) any past or present Release of or
Contamination with Hazardous Substances at, in, on, under or above the Leased
Real Property air, soils, surface water, or groundwater, (2) any injury to
health, public safety or the environment relating to the Leased Real Property or
activities conducted at the Leased Real Property, or (3) any violation or
alleged violation of any Environmental Law relating to the Leased Real Property
or activities conducted at the Leased Real Property.
"ENVIRONMENTAL LAWS" shall mean any and all Laws (including common law),
Permits, agreements or any other requirement or restriction promulgated,
imposed, enacted or issued by any Governmental Body relating to human health or
the environment, including the emission, discharge or Release of pollutants,
contaminants, Hazardous Substances or wastes into the environment (which
includes, without limitation, ambient air, surface water, ground water,
43
<PAGE>
or land), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") 42 U.S.C.
Section 9601 ET SEQ.; the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 ET SEQ.; the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 ET SEQ.; the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.; the
Water Pollution Control Act, 33 U.S.C. Section 1251 ET SEQ.; the Toxic
Substances Control Act, 15 U.S.C. Section 2610 ET SEQ.; and the Federal
Technical Standards and Corrective Action Requirements for Owners and Operators
of Underground Storage Tanks, and any applicable corresponding state laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"GAAP" shall mean generally accepted accounting principles in effect on the
date hereof as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States.
"HAZARDOUS SUBSTANCES" shall mean any and all dangerous, toxic,
radioactive, caustic or otherwise hazardous material, pollutant, contaminant,
chemical, waste or substance defined, listed or described as any of such in or
governed by any Environmental Law, including but not limited to
urea-formaldehyde, polychlorinated biphenyls, asbestos or asbestos-containing
materials, radon, explosives, known carcinogens, petroleum and its derivatives,
petroleum products, or any substance which might cause any injury to human
health or safety or to the environment or might subject the owner or operator of
the Leased Real Property to any Regulatory Actions or Claims. "HAZARDOUS
SUBSTANCES" shall include, without limitation, asbestos, airborne asbestos,
polychlorinated biphenyls (PCBs), petroleum products, lead-based paint and
urea-formaldehyde.
"IRS" shall mean the Internal Revenue Service.
"JOINT VENTURE AGREEMENT" shall mean the agreement dated October 20, 1995,
by and among Debbie Bender-Balazich, Steven Barth, Stephen M. McLaughlin and
Steven Jones.
"KNOWLEDGE" with respect to (a) any individual shall mean actual knowledge
and (b) any corporation shall mean the actual knowledge of the directors and the
executive officers of such corporation; and "KNOWS" has a correlative meaning.
The terms "any Seller's knowledge," and "Sellers' knowledge," including any
correlative meanings, shall mean the knowledge of any Seller.
44
<PAGE>
"LIABILITY" shall mean any direct or indirect indebtedness, liability,
assessment, claim, loss, damage, deficiency, obligation or responsibility, fixed
or unfixed, choate or inchoate, liquidated or unliquidated, secured or
unsecured, accrued, absolute, actual or potential, contingent or otherwise
(including any liability under any guaranties, letters of credit, performance
credits or with respect to insurance loss accruals).
"LIEN" shall mean any mortgage, lien (including mechanics, warehousemen,
laborers and landlords liens), claim, pledge, charge, security interest,
preemptive right, right of first refusal, option, judgment, title defect,
covenant, restriction, easement or encumbrance of any kind.
"PARENT" shall mean Preferred Employers Holdings, Inc., a Delaware
corporation.
"PERMITTED LIENS" shall mean (i) Liens for Taxes not yet due and payable
for which adequate liability accruals have been set aside on the books of the
Company and which are reasonably satisfactory to Buyer and (ii) statutory Liens,
such as mechanic's, materialman's, warehouseman's, carrier's or other like
Liens, incurred in good faith in the ordinary course of business, provided that
the underlying obligations relating to such Liens are paid in the ordinary
course of business, or are being contested diligently and in good faith by
appropriate proceedings and as to which the Company has set aside liability
accruals on its books reasonably satisfactory to Buyer, or the payment of which
obligations are otherwise secured in a manner reasonably satisfactory to Buyer.
"PERSON" shall mean an individual, corporation, partnership, joint venture,
limited liability company, association, trust, unincorporated organization or
other entity, including a government or political subdivision or an agency or
instrumentality thereof.
"RECEIVABLES" shall mean as of any date any trade accounts receivable,
notes receivable, sales representative advances and other miscellaneous
receivables of the Company.
"REGULATORY ACTIONS" shall mean any Claim, demand, action, suit, summons,
citation, directive, investigation, litigation, inquiry, enforcement action,
Lien, encumbrance, restriction, settlement, remediation, response, clean-up or
closure arrangement or other remedial obligation or proceeding brought or
instigated by any Governmental Body in connection with any Environmental Law,
including, without limitation, the listing of the Leased Real Property on any
list of contaminated or potentially contaminated sites or potential or verified
Hazardous Waste sites under any Environmental Law, or any civil, criminal and/or
administrative proceedings, whether or not seeking costs, damages, penalties or
expenses.
"RELEASE" shall mean the intentional or unintentional, spilling, leaking,
pumping, pouring, discharging or disturbance of, or emitting, depositing,
injecting, leaching, dumping, disposing, emitting or escaping, or any other
release or threatened release to or from, however defined, any Hazardous
Substance in violation of any Environmental Law.
45
<PAGE>
"SUBSIDIARY" shall mean any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly through one or more intermediaries, or both, by any other entity.
"TAX" (including, with correlative meaning, the terms "TAXES" and
"TAXABLE") shall mean (i)(A) any net income, gross income, gross receipts,
sales, use, ad valorem, transfer, transfer gains, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, rent, recording,
occupation, premium, real or personal property, intangibles, environmental or
windfall profits tax, alternative or add-on minimum tax, customs duty or other
tax, fee, duty, levy, impost, assessment or charge of any kind whatsoever
(including but not limited to taxes assessed to real property and water and
sewer rents relating thereto), together with (B) any interest and any penalty,
addition to tax or additional amount imposed by any Governmental Body (domestic
or foreign) (a "TAX AUTHORITY") responsible for the imposition of any such tax
and interest on such penalties, additions to tax, fines or additional amounts,
in each case, with respect to the Company, the Business or the Assets (or the
transfer thereof); (ii) any liability for the payment of any amount of the type
described in the immediately preceding clause (i) as a result of the Company
being a member of an affiliated or combined group with any other person at any
time on or prior to the Closing Date and (iii) any liability of the Company for
the payment of any amounts of the type described in the immediately preceding
clause (i) as a result of a contractual obligation to indemnify any other
person.
"TAX RETURN" shall mean any return or report (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to any Tax Authority.
"TRANSACTION DOCUMENTS" shall mean, collectively, this Agreement, and each
of the other agreements and instruments to be executed and delivered by all or
some of the parties hereto in connection with the consummation of the
transactions contemplated hereby.
(b) The following terms are defined in the following sections of this
Agreement:
TERM SECTION
---- -------
Annual Statements. . . . . . . . . . . . 2.7(a)
April 1998 Period. . . . . . . . . . . . 1.2
Asserted Liability . . . . . . . . . . . 6.4(a)
Audited Interim Statements . . . . . . . 2.7(a)
Buyer. . . . . . . . . . . . . . . . . . Recital
Buyer Required Consents. . . . . . . . . 3.2
Claims . . . . . . . . . . . . . . . . . 2.15
Claims Notice. . . . . . . . . . . . . . 6.4(a)
Closing. . . . . . . . . . . . . . . . . 1.5
46
<PAGE>
Closing Date . . . . . . . . . . . . . . 1.5
Common Stock . . . . . . . . . . . . . . Recital
Company . . . . . . . . . . . . . . . . Recital
Confidential Information . . . . . . . . 4.12(b)
Contemplated Transactions. . . . . . . . 2.3
Counsel Expenses . . . . . . . . . . . . 1.2
Debt . . . . . . . . . . . . . . . . . . 1.2
Employee Benefit Plan. . . . . . . . . . 2.17(a)
Entity . . . . . . . . . . . . . . . . . 2.17(a)
Escrow Agent . . . . . . . . . . . . . . 1.4
Escrow Agreement . . . . . . . . . . . . 1.4(b)
Escrow Shares. . . . . . . . . . . . . . 1.2
Exchange Act . . . . . . . . . . . . . . 4.12(a)(i)
First Quarter. . . . . . . . . . . . . . 1.2
Governmental Bodies. . . . . . . . . . . 2.20
Group. . . . . . . . . . . . . . . . . . 2.17(a)
Income Tax Expense . . . . . . . . . . . 1.2
Indemnification Shares . . . . . . . . . 1.2
Indemnifying Party . . . . . . . . . . . 6.4(a)
Indemnitee . . . . . . . . . . . . . . . 6.4(a)
Insurance Expense. . . . . . . . . . . . 1.2
Insurance Policies . . . . . . . . . . . 2.19
Intellectual Property Rights . . . . . . 2.14
Interest Expense . . . . . . . . . . . . 1.2
Interim Statements . . . . . . . . . . . 2.7(a)
Landlord . . . . . . . . . . . . . . . . 2.12(d)
Latest Balance Sheet Date. . . . . . . . 2.8
Laws . . . . . . . . . . . . . . . . . . 2.20
Leased Real Property . . . . . . . . . . 2.11(a)
Losses . . . . . . . . . . . . . . . . . 6.2
NET Escrow Agent . . . . . . . . . . . . 1.4(a)
NET Escrow Agreement . . . . . . . . . . 1.4(a)
Notice . . . . . . . . . . . . . . . . . 1.6
Orders . . . . . . . . . . . . . . . . . 2.20
Parent Reports . . . . . . . . . . . . . 3.5
Parent Stock . . . . . . . . . . . . . . 1.2
Permits. . . . . . . . . . . . . . . . . 2.21
Purchase Price . . . . . . . . . . . . . 1.2
Purchased Shares . . . . . . . . . . . . Recital
Real Property Leases . . . . . . . . . . 2.11(a)
Registration Rights Agreement. . . . . . 4.15
Registration Statement . . . . . . . . . 4.15
Related Party. . . . . . . . . . . . . . 2.25
Related Party Contracts. . . . . . . . . 2.25
47
<PAGE>
Representatives. . . . . . . . . . . . . 4.2
Securities Act . . . . . . . . . . . . . 4.15
Self-Insurance Expense . . . . . . . . . 1.2
Self-Insurance Programs. . . . . . . . . 2.19
Sellers. . . . . . . . . . . . . . . . . Recital
Sellers Required Consents. . . . . . . . 2.4
Tax Audit. . . . . . . . . . . . . . . . 2.16(a)(ix)
Tax Deficiency . . . . . . . . . . . . . 2.16(a)(v)
Term . . . . . . . . . . . . . . . . . . 4.12(a)
Transaction Shares . . . . . . . . . . . 1.2
SECTION 9.2 INTERPRETATION. Unless the context otherwise requires, the
terms defined in Section 9.1 shall be applicable to both the singular and plural
forms of any of the terms defined herein. All accounting terms defined in
Section 9.1, and those accounting terms used in this Agreement not defined in
Section 9.1 except as otherwise expressly provided herein, shall have the
meanings customarily given thereto in accordance with GAAP. When a reference is
made in this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. The use of the neuter gender herein shall be
deemed to include the masculine and feminine genders wherever necessary or
appropriate, the use of the masculine gender shall be deemed to include the
neuter and feminine genders and the use of the feminine gender shall be deemed
to include the neuter and masculine genders wherever necessary or appropriate.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
[Remainder of Page Intentionally Left Blank]
48
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as of the date set forth above.
IN WITNESS WHEREOF, the undersigned have executed this Stock Purchase
Agreement as of the date set forth above.
BUYER:
PREFERRED HEALTHCARE STAFFING, INC.
By: /s/ William R. Dresback
--------------------------------
Name: William R. Dresback
Title: Senior Vice President and
Chief Financial Officer
SELLERS:
/s/ Debbie Bender-Balazich
-----------------------------------
Debbie Bender-Balazich
/s/ Steven Barth
-----------------------------------
Steven Barth
/s/ Steven Jones
-----------------------------------
Steven Jones
/s/ Stephen M. McLaughlin
-----------------------------------
Stephen M. McLaughlin
The undersigned is signing this
Agreement solely with respect to
the provisions of Section 1.2 and
Article III hereof:
PREFERRED EMPLOYERS HOLDINGS, INC.
By: /s/ William R. Dresback
--------------------------------
Name: William R. Dresback
Title: Senior Vice President and
Chief Financial Officer
49
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of August 10,
1998, by and between Preferred Healthcare Staffing, Inc., a Delaware
Corporation ("PHS" or the "Company") and Debbie Bender-Balazich ("Bender"),
an individual.
PRELIMINARY STATEMENTS:
A. PHS, on the one hand, and Debbie Bender-Balazich, Steven Barth, Steven
Jones and Stephen McLaughlin ("Sellers"), on the other hand, are parties to
a Stock Purchase Agreement dated as of July 10, 1998 (the "Stock Purchase
Agreement"). Pursuant to the Stock Purchase Agreement, PHS has acquired
one hundred percent (100%) of the stock of National Explorers and Travelers
Health Care, Inc., a Florida corporation ("NET").
B. Bender was a fifty percent (50%) shareholder and President of NET.
C. PHS wishes to employ Bender as an Executive Vice President of PHS subject
to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements and promises hereinafter set forth, the parties hereto agree as
follows:
AGREEMENT
1. TERM; PRIOR AGREEMENTS Bender shall be employed by PHS commencing on the
date hereof and terminating one-year from such date, unless sooner
terminated in accordance with the terms of this Agreement (such period or
any renewal period are referred to herein as the "Term"). This Agreement
can be renewed for successive one-year terms with the mutual written
consent of PHS and Bender. This Agreement supercedes all prior agreements
between Bender and NET or the Company, whether the agreement is oral or in
writing.
2. SERVICES TO BE PERFORMED BY BENDER. During the Term, Bender shall serve as
Executive Vice President and shall perform those duties, including the
interface with other senior executives of the Company, delegated to her by
the President or Chief Executive Officer of the Company and satisfy the
objectives set forth in the Business Plan attached hereto as Exhibit A.
3. COMPENSATION. (a) Bender shall receive an annual salary of $150,000.00
("Annual Salary") during the Term, which shall be payable in the same
manner as the other executives of PHS. Bender shall also receive
perquisites similar to those perquisites made available to other executives
of PHS and shall be reimbursed for all pre-approved reimbursable business
expenses.
<PAGE>
(b) Bender shall also receive a bonus if at least 101% of the objectives
("Objectives") set forth in the Business Plan attached hereto as Exhibit
A are met. Bender's bonus shall be computed as follows:
(i) If the Company achieves less than 100% of the Objectives, Bender
shall not receive any bonus payment;
(ii) If the Company achieves between 100% and 110% of the Objectives,
Bender shall receive a bonus payment equal to two (2) percentage
points times the percentage Objective achieved (expressed as a
whole number) less 100, times her Annual Salary;
(iii) If the Company achieves between 111% and 150% of the Objectives,
Bender shall receive a bonus equal to one half of one percentage
point (1/2 of 1%) times the percentage Objective achieved
(expressed as a whole number) less 110, times her Annual Salary;
(iv) In no event shall Bender be entitled to receive a bonus payment
greater than 40% of her Annual Salary;
(v) Any bonus payment due shall be paid no later than ninety (90)
days after year-end and shall be based on the audited financial
statements of PHS. Bender must be employed by PHS on December
31, 1998 in order to be entitled to receive the bonus. Bender
shall not be entitled to receive a partial bonus.
4. CONFIDENTIALITY. Bender acknowledges that during the course of her
ownership of the stock of Net and her duties as an employee and officer,
she has had and may in the future continue to be given access to or may
become acquainted with Confidential Information and Trade Secrets of
PHS, Preferred Employers Holdings, Inc., Preferred Employers Group, Inc.
and its affiliates (hereinafter collectively referred to as
"Preferred"). As used in this Section 4, Confidential Information and
Trade Secrets means all trade practices, customer lists, member or
beneficiary list for any employee staffing company, professional
employer organization (PEO), self-insurance fund or employee
organization serviced or proposed to be serviced by Preferred, all
marketing plans, financial information, Travel Nurse information, and
all other compilations of information that relate to the business of
Preferred, or its affiliates, travel nurses, customers or suppliers, and
which have not been disclosed by Preferred to the public. Bender
acknowledges that the Confidential Information and Trade Secrets of
Preferred, as such may exist from time to time are valuable,
confidential, special and unique assets of Preferred, expensive to
produce and maintain and essential for the profitable operation of its
businesses. At all times from and after the date of this Agreement,
except with Preferred's express prior written consent, Bender shall not,
directly or indirectly, communicate, disclose or divulge to any person,
or use for her benefit or the benefit of any person, in any manner any
Confidential Information and Trade Secrets acquired before or during
Bender's employment with PHS or NET, including, without limitation, the
terms of this Agreement, except as may be required by law.
2
<PAGE>
5. TIME COMMITMENT. During the Term, Bender shall devote 100% of her full
working time to the operations of PHS.
6. NONCOMPETITION. Bender shall be bound by the provisions of Section 4.12
Covenant Not To Compete, in the Stock Purchase Agreement.
7. STOCK OPTIONS. On the date hereof, Preferred Employers Holdings, Inc.
("PEH") will grant to Bender stock options to purchase up to 50,000
shares of PEH common stock. Such stock options are subject to the
vesting schedule and other terms and conditions contained in the
Company's Stock Option Agreement by and between PEH and Bender, a copy
of which is attached hereto as Exhibit B.
8. BENEFIT PLANS. Bender shall be entitled to participate in PHS' benefit
plans in the same manner and subject to the same terms and conditions as
the other executives of PHS.
9. RELIANCE. Bender acknowledges that her compliance with the terms and
conditions of this Agreement is an essential component of the
transactions contemplated by the Stock Purchase Agreement. Bender
further acknowledges that her compliance with the provisions of Sections
4 and 6 of this Agreement (hereinafter referred to as the "Restrictive
Covenants") is a material element of the consideration bargained for by
PHS hereunder and under the Stock Purchase Agreement, especially in view
of the information disclosed to Bender and in connection with the Stock
Purchase Agreement. Bender agrees to be bound by the provisions of
Sections 4 and 6 of this Agreement to the maximum extent permitted by
law, it being the intent and spirit of the parties that the provisions
of Sections 4 and 6 of this Agreement shall be enforceable even after
the Term. However, the parties further agree that if any portion of any
of the Restrictive Covenants or their application is construed to be
invalid or unenforceable, then the other portions thereof and the other
Restrictive Covenants and their application shall not be affected
thereby and shall be enforceable. If any of the Restrictive Covenants
and their application shall for any reason be held to be excessively
broad as to duration, geographical scope, property, subject or similar
factor, then the court making such determination shall have the power to
reduce or limit such scope, duration, area or other factor so as to be
enforceable to the maximum extent compatible with applicable law, and
such Restrictive Covenant shall then be enforceable in its reduced or
limited form.
10. TERMINATION. (a) This Agreement may be terminated by PHS at any time
"For Cause". For purposes of this Agreement, "For Cause" shall mean the
following: (i) Bender has failed to devote 100% of her full working
time to the operations of PHS, (ii) Bender has been convicted of
(whether or not subject to appeal) or plead "nolo contendere" or has
made any similar plea to any criminal offense involving a violation of
federal or state securities laws or regulations, embezzlement, fraud,
wrongful taking or misappropriation of property, theft, or any other
crime
3
<PAGE>
involving dishonesty, (iii) Bender has violated or breached any
provision of this Agreement, (iv) Bender has taken any action which
directly or indirectly causes PHS to have any license, permit or other
authorization necessary for the operations of its business (a "License")
to be suspended or revoked, (v) PHS has received any notice from any
governmental or other agency which regulates the operations of PHS
which indicates that Bender's employment with PHS could have an adverse
effect on the ability of PHS to retain or obtain any License or to
otherwise conduct its operations in the manner then conducted, (vi)
Bender has materially (defined as not meeting at least 75% of the
Objectives) failed to achieve the objectives of the Business Plan
attached hereto as exhibit A.
11. DISABILITY; DEATH.
(a) If, during the Term, Bender becomes physically or mentally
disabled, whether by injury, illness or otherwise, so that she is
unable to perform her duties for a period of 90 days in any 180
day period, then PHS may, at its option, terminate this Agreement
upon ten days' written notice to Bender without further
obligation.
(b) In the event of Bender's death during the Term, this Agreement
shall terminate and be of no further force and effect, provided
that Bender shall be entitled to all salary and other benefits to
which she is entitled through her date of death.
12. AUTHORITY; NO CONFLICT. Bender represents and warrants to PHS that (a)
she has the full power and authority to enter into this Agreement and to
perform her obligations hereunder, and (b) the execution, delivery and
performance by Bender of this Agreement will not (i) violate, conflict
with, or result in a breach of any contract or other agreement by which
Bender is bound, (ii) require Bender to obtain the consent of, or give
any notice to, or make any filing with, any Federal, state, or local
government, or any agency thereof (a "Governmental Body"), or any other
third person, or (iii) violate any law, statute or other requirement of
any Governmental Body.
13. EQUITABLE RELIEF AND OTHER REMEDIES. Bender acknowledges that any breach
by Bender of any of the Restrictive Covenants will result in irreparable
injury to PHS, for which money damages could not provide adequate
compensation. In the event of any such breach, PHS shall be entitled,
in addition to all other rights and remedies which PHS may have at law
or in equity, to have an injunction issued by any competent court
enjoining and restraining Bender and all other persons involved therein
from continuing such breach. PHS shall be entitled to such injunction
without the necessity of posting any bond, but if a bond is nonetheless
required by the court entertaining the motion for injunction, the
parties hereto agree that a bond in the amount of $1,000.00 is
appropriate. The existence of any claim or cause of action which
Bender, or any other person, may have against PHS or Preferred shall not
constitute a defense or bar to the enforcement of any of
4
<PAGE>
the Restrictive Covenants. If PHS resorts to litigation to enforce any
of the Restrictive Covenants which has a fixed term, then such term
shall be extended for a period of time equal to the period of such
breach, beginning on the date of a final court order (without further
right of appeal) acknowledging the validity of such Restrictive Covenant
or, if later, the last day of the original fixed term of the Restrictive
Covenant.
14. ACKNOWLEDGEMENTS BY BENDER. Bender acknowledges and confirms that the
length of the term of the Restrictive Covenants and the geographical
restrictions contained therein are fair and reasonable and are not the
result of overreaching, duress or coercion of any kind. Bender further
acknowledges and confirms that the full, uninhibited and faithful
observance of each of the Restrictive Covenants contained in this
Agreement shall not cause any undue hardship, financial or otherwise.
Bender acknowledges and confirms that her special knowledge of the
Confidential Information and Trade Secrets of NET and PHS is such as
would cause PHS serious injury and loss if she was to use such knowledge
for the benefit of a competitor of PHS or were to compete with PHS.
15. NONDISPARAGEMENT. Bender agrees not to engage in any conduct that is
injurious to the reputation or interest of Preferred, including but not
limited to disparaging (or inducing or encouraging others to disparage)
Preferred or its officers, directors, employees or shareholders. As
used herein, the term "disparage" includes, without limitation, comments
or statements to the press, any of Preferred's employees or any person
with whom Preferred has a business relationship which would adversely
affect in any manner the reputation of Preferred or any of its officers,
directors, employees or shareholders.
16. INTELLECTUAL PROPERTY AS SOLE PROPERTY OF THE COMPANY. (a) Bender
agrees promptly to disclose to PHS any and all intellectual property,
computer software, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not patentable and
whether or not reduced to practice, conceived or learned by her during
the period of her employment, either alone or jointly with others, which
relate to or result from the actual or anticipated business, work,
research or investigations of NET or PHS, or which result, to any
extent, from use of NET or PHS's premises or property (the work being
hereinafter collectively referred to as the "Intellectual Property").
(b) Bender acknowledges and agrees that all the Intellectual
Property shall be the sole property of PHS, and she hereby assigns to
PHS her entire right of interest in and to all the Intellectual
Property. PHS shall be the sole owner of all domestic and foreign
rights pertaining to the Intellectual Property. Bender further agrees
as to all the Intellectual Property to assist PHS in every way (at PHS's
expense) to obtain and from time to time enforce patents on the
Intellectual Property in any and all countries. To that end, by way of
illustration but not limitation, Bender will testify in any suit or
other proceeding involving any of the Intellectual Property, execute all
documents which PHS reasonably determines to
5
<PAGE>
be necessary or convenient for use in applying for and obtaining patents
thereon and enforcing same, and execute all necessary assignments
thereof to PHS or persons designated by it. Bender's obligation to
assist PHS in obtaining and enforcing patents for the Intellectual
Property shall continue beyond the termination of her employment, but
PHS agrees to compensate Bender at a reasonable rate after such
termination for the time actually spent by Bender at PHS's request on
such assistance.
(c) All inventions, if any, which Bender made prior to her
employment by NET or PHS, all of which are set forth as Exhibit C
attached hereto, are excluded from the scope of this Agreement. Bender
represents and warrants that Exhibit C sets forth a complete list of all
Intellectual Property, discoveries, or improvements which have been made
by Bender prior to her employment with PHS.
17. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior negotiations,
understandings, agreements, arrangements and understandings, both
oral and written, between the parties hereto with respect to such
subject matter.
(b) AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties
hereto.
(c) WAIVERS AND REMEDIES. The waiver by any of the parties hereto of
any other party's prompt and complete performance, or breach or
violation, of any provision of this Agreement shall not operate
nor be construed as a waiver of any subsequent breach or
violation, and the failure by any of the parties hereto to
exercise any right or remedy which it may possess hereunder shall
not operate nor be construed as a bar to the exercise of such
right or remedy by such party upon the occurrence of any
subsequent breach or violation.
(d) DESCRIPTIVE HEADINGS. Descriptive headings contained herein are
for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties hereto in separate
counterparts, each of which shall be deemed to be one and the
same instrument.
(f) NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all
legal process in regard hereto shall be in writing and shall be
deemed to have been duly given, when delivered by hand or Federal
Express or (2) days after deposited in the
6
<PAGE>
United States mail, by registered or certified mail, return
receipt requested, postage prepaid, as follows:
If to PHS, one copy to:
Preferred Healthcare Staffing, Inc.
10800 Biscayne Boulevard, 10th Floor
Miami, Florida 33161
Attn: Mr. Mel Harris
With a copy to:
Preferred Healthcare Staffing, Inc.
10800 Biscayne Boulevard, 10th Floor
Miami, Florida 33161
Attn: Jose M. Menendez, Esq.
If to Bender, one copy to:
Ms. Debbie Bender-Balazich
7998 East Country Club Boulevard
Boca Raton, Florida 33434
Or to such other address as any party hereto may from time to time
designate in writing delivered in a like manner.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective personal representatives, heirs, successors and
assigns.
(h) APPLICABLE LAW. This Agreement shall be governed by, and shall
be construed, interpreted and enforced in accordance with, the
laws of the State of Florida without regard to its conflict of
laws principles to the extent that such principles would require
the application of laws other than the State of Florida.
(i) CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
consents to the exclusive jurisdiction of the federal and state
courts located in Dade County, Florida in any and all actions
between or among any of the parties hereto, whether arising
hereunder or otherwise.
(j) ATTORNEYS' Fees. If any legal action is brought for the
enforcement of any of the provisions of this Agreement, the
prevailing party shall be entitled to recover upon final
judgement on the merits reasonable attorneys' fees (including
attorneys' fees for any appeal) incurred in bringing such action.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have placed their hands as of
the day and year first above written.
PREFERRED HEALTHCARE STAFFING, INC.
By: /s/ William R. Dresback
--------------------------------
Name:
Title:
By: /s/ Debbie Bender-Balazich
--------------------------------
Debbie Bender-Balazich
8
<PAGE>
Exhibit 10.2
PREFERRED EMPLOYERS HOLDINGS, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "AGREEMENT"), dated as of August 10, 1998,
between PREFERRED EMPLOYERS HOLDINGS, INC., a Delaware corporation (the
"COMPANY"), having an address at 10800 Biscayne Boulevard, Penthouse, Miami,
Florida 33161 and DEBBIE BENDER-BALAZICH, having an address at 7998 East Country
Club Boulevard, Boca Raton, Florida 33434 (the "GRANTEE").
In accordance with the Preferred Employers Holdings, Inc. 1996 Stock Option
Plan (the "PLAN"), and, subject to the terms hereof, the Company hereby grants
to the Grantee an incentive stock option (the "OPTION") to purchase all or any
part of an aggregate of 50,000 shares of the Company's common stock, par value
$.01 per share (the "SHARES").
To evidence the Option and to set forth its terms, the Company and the
Grantee agree as follows:
1. CONFIRMATION OF GRANT. The Company hereby evidences and confirms its
grant of the Option to the Grantee on the date of this Agreement.
2. NUMBER OF SHARES. This Option shall be for an aggregate of 50,000
Shares.
3. EXERCISE PRICE. The exercise price shall be 8.625 per share.
4. MEDIUM AND TIME OF PAYMENT. The exercise price of the Option shall be
paid in cash or by check payable to the order of the Company at the time of
exercise. In addition, the Company shall accept full or partial payment in
Shares having a fair market value on the date of exercise equal to the portion
of the exercise price being so paid.
Payment in full shall be required before the issuance of any Shares
pursuant to this Option. In addition, before or concurrently with delivery to
the Grantee of a certificate representing such Shares, the Grantee shall pay any
amount necessary to satisfy applicable federal, state, or local tax
requirements.
5. TERM AND EXERCISE OF THE OPTION. The Option shall expire ten (10)
years from the date of this Agreement and may be exercised at the times and for
the number of Shares as follows:
<PAGE>
(a) on or after the date which is one year after the date hereof, up
to 20% (ignoring fractional shares) of the total number of Shares subject
to this Option;
(b) on or after the date which is two years after the date hereof, up
to an additional 20% (ignoring fractional Shares) of the total number of
Shares subject to this Option;
(c) on or after the date which is three years after the date hereof,
up to an additional 20% (ignoring fractional Shares) of the total number of
Shares subject to this Option;
(d) on or after the date which is four years after the date hereof,
up to an additional 20% (ignoring factional Shares) of the total number of
Shares subject to this Option; and
(e) on or after the date which is five years after the date of the
grant, all of the remaining Shares subject to this Option.
This Option may be exercised only by written notice to the Company
indicating the number of Shares which are being purchased. Such notice must be
signed by the Grantee and be accompanied by full payment of the exercise price.
6. NONTRANSFERABILITY. The Option may be transferred only by will or the
laws of descent and distribution, and the Option may be exercised during the
Grantee's lifetime only by the Grantee or by the Grantee's legal representative.
7. RIGHTS IN THE EVENT OF THE GRANTEE'S DISABILITY. If the Grantee's
employment with the Company or any parent or subsidiary corporation (within the
meaning of Section 424(e) and (f) of the Internal Revenue Code of 1986, as
amended (the "CODE"), ("AFFILIATES")) is terminated on account of permanent and
total disability (as defined in Code Section 22(e)(3)), the Grantee or the
Grantee's legal representative (or the Grantee's estate if the Grantee dies
after termination of employment) may exercise the Option, to the extent
exercisable on the date of the Grantee's termination of employment, at any time
within one year after termination of employment but in no event after the
expiration of the term of the Option. The Grantee's "ESTATE" means the
Grantee's legal representative or any person who acquires the right to exercise
the Option by reason of the Grantee's death.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH. If the Grantee dies while
an employee of the Company or any Affiliate (or within three months after the
Grantee ceases to be such an employee) but while he still has the right to
exercise this Option, his estate may exercise the Option, to the extent
exercisable at the date of the Grantee's death, any time within one year after
the Grantee's death, but in no event after the expiration of the term of the
Option.
-2-
<PAGE>
9. RIGHTS IN THE EVENT OF TERMINATION OF EMPLOYMENT. If Grantee's
employment with the Company or any Affiliate is terminated involuntarily for
"CAUSE" the Grantee's Option shall expire as of the date of termination of
employment. "Cause" under this Agreement shall mean (i) material misconduct by
the Grantee, (ii) any act by the Grantee that is materially adverse to the
Company or any Affiliate, or (iii) breach by the Grantee of any employment or
confidentiality or nondisclosure agreement with the Company or any Affiliate.
"Cause" also shall have the meaning given to that term, or any similar term,
under any employment agreement with the Company or any Affiliate. If the
Grantee's employment is terminated for any reason other than death, disability,
or as described in the preceding sentences of this Section, the Grantee (or the
Grantee's estate, if the Grantee dies after the termination) may exercise the
Option, to the extent exercisable before the termination, within three months
after the termination, but in no event after the expiration of the term of the
Option.
10. ADJUSTMENT IN THE SHARES. If the Shares, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise) or if the number of Shares shall be
increased through the payment of a share dividend, the Grantee shall receive
upon exercise of the Option the number and kind of shares or other securities
into which each outstanding Share shall be so changed, or for which each such
Share shall be exchanged, or to which each such Share shall be entitled, as the
case may be. The exercise price and other terms of the Option shall be
appropriately amended to reflect the foregoing events. If there shall be any
other change in the number or kind of the outstanding Shares, or of any shares
or other securities into which the Shares shall have been changed, or for which
the Shares shall have been exchanged, then, if the Board of Directors shall, in
its sole discretion, determine that such change equitably requires an adjustment
in the Option, such adjustment shall be made in accordance with that
determination. Notice of any adjustment shall be given by the Company to the
Grantee.
11. EFFECT OF TERMINATION OR AMENDMENT OF PLAN. No suspension,
termination, modification, or amendment of the Plan may, without the express
written consent of the Grantee, adversely affect the rights of the Grantee under
this Option.
12. NO LIMITATION ON RIGHTS OF THE COMPANY. The grant of this Option
shall not in any way affect the right or power of the Company to make
adjustments, reclassifications, or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate, sell, or transfer all or any part
of its business or assets.
13. RIGHTS AS A SHAREHOLDER. The Grantee shall have the rights of a
shareholder with respect to the Shares covered by the Option only upon becoming
the holder of record of those Shares.
-3-
<PAGE>
14. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for Shares pursuant to the exercise of the Option,
unless and until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authority, and the requirements of any exchange upon
which Shares are traded. The Company shall in no event be obligated to register
any securities pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended) or to take any other action in order to cause the issuance
and delivery of such certificates to comply with any such law, regulation or
requirement. The Board of Directors may require, as a condition of the issuance
and delivery of such certificates and in order to ensure compliance with such
laws, regulations, and requirements, that the Grantee make such covenants,
agreements, and representations as the Board of Directors, in its sole
discretion, considers necessary or desirable.
15. NO OBLIGATION TO EXERCISE OPTION. The granting of the Option shall
impose no obligation upon the Grantee to exercise the Option.
16. AGREEMENT NOT A CONTRACT OF EMPLOYMENT. This Agreement is not a
contract of employment, and the terms of employment of the Grantee or the
relationship of the Grantee with the Company or any Affiliate shall not be
affected in any way by this Agreement except as specifically provided herein.
The execution of this Agreement shall not be construed as conferring any legal
rights upon the Grantee for a continuation of employment or relationship with
the Company or any Affiliate, nor shall it interfere with the right of the
Company or any subsidiary thereof to discharge the Grantee and to treat him
without regard to the effect which that treatment might have upon him as a
Grantee.
17. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified, registered, or express mail, postage prepaid. Any such notice shall
be deemed given when so delivered personally or, if mailed, four days after the
date of deposit in the United States mails, to each party at its address set
forth above or to such other address as may be designated in a notice given in
accordance with this Section.
18. GOVERNING LAW. Except to the extent preempted by Federal law, this
Agreement shall be construed and enforced in accordance with, and governed by,
Delaware law.
19. RECEIPT OF PLAN. Grantee acknowledges receipt of a copy of the Plan,
and represents that he is familiar with the terms and provisions thereof, and
hereby accepts this Option subject to all the terms and provisions of this
Option and of the Plan. Grantee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board of Directors of the
Company or the Committee, as defined in the Plan, upon any questions rising
under the Plan.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have duly executed this
Agreement as of the date first written above.
PREFERRED EMPLOYERS HOLDINGS, INC.
/s/ Jonathan J. Russo
- ---------------------------- By: /s/ William R. Dresback
Witness -------------------------------
Name:
Title:
/s/ Carlos J. Deupi /s/ Debbie Bender-Balazich
- ---------------------------- ----------------------------------
Witness DEBBIE BENDER-BALAZICH
-5-
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of August 10,
1998, by and between Preferred Healthcare Staffing, Inc., a Delaware
Corporation ("PHS" or the "Company") and Stephen M. McLaughlin
("McLaughlin"), an individual.
PRELIMINARY STATEMENTS:
A. PHS, on the one hand, and Debbie Bender-Balazich, Steven Barth, Steven
Jones and Stephen McLaughlin ("Sellers"), on the other hand, are parties
to a Stock Purchase Agreement dated as of July 10, 1998 (the "Stock
Purchase Agreement"). Pursuant to the Stock Purchase Agreement, PHS has
acquired one hundred percent (100%) of the stock of National Explorers
and Travelers Health Care, Inc., a Florida corporation ("NET").
B. McLaughlin was a five percent (5%) shareholder and Chief Operating
Officer of NET.
C. PHS wishes to employ McLaughlin as Vice President of Information
Technology of PHS subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements and promises hereinafter set forth, the parties hereto agree as
follows:
AGREEMENT
1. TERM; PRIOR AGREEMENTS. McLaughlin shall be employed by PHS commencing
on the date hereof and terminating one-year from such date, unless
sooner terminated in accordance with the terms of this Agreement (such
period or any renewal period are referred to herein as the "Term").
This Agreement can be renewed for successive one-year terms with the
mutual written consent of PHS and McLaughlin. This Agreement supercedes
all prior agreements between McLaughlin and NET or the Company, whether
the agreement is oral or in writing.
2. SERVICES TO BE PERFORMED BY MCLAUGHLIN. During the Term, McLaughlin
shall serve as Vice President of Information Technology and shall
perform those duties, including the interface with other senior
executives of the Company, delegated to him by the President of the
Company. Said duties shall include, but will not be limited to,
developing, designing and implementing a client/server system
specifically tailored to handle the business requirements of the Company
or, at Company's option, assist with the installation of a software
program purchased or licensed from an industry vendor.
<PAGE>
3. COMPENSATION. (a) McLaughlin shall receive an annual salary of
$102,000.00 ("Annual Salary") during the Term, which shall be payable in
the same manner as the other executives of PHS. McLaughlin shall also
receive perquisites similar to those perquisites made available to other
executives of PHS.
(b) McLaughlin shall also receive a bonus 30 days from the end of the
initial Term equal to 20% of his Annual Salary if the objectives
set forth in section 2 of this Agreement are met, at the
discretion of the President of the Company.
4. CONFIDENTIALITY. McLaughlin acknowledges that during the course of his
ownership of the stock of Net and his duties as an employee and officer,
he has had and may in the future continue to be given access to or may
become acquainted with Confidential Information and Trade Secrets of
PHS, Preferred Employers Holdings, Inc., Preferred Employers Group, Inc.
and its affiliates (hereinafter collectively referred to as
"Preferred"). As used in this Section 4, Confidential Information and
Trade Secrets means all trade practices, customer lists, member or
beneficiary list for any employee staffing company, professional
employer organization (PEO), self-insurance fund or employee
organization serviced or proposed to be serviced by Preferred, all
marketing plans, financial information, Travel Nurse information, and
all other compilations of information that relate to the business of
Preferred, or its affiliates, travel nurses, customers or suppliers, and
which have not been disclosed by Preferred to the public. McLaughlin
acknowledges that the Confidential Information and Trade Secrets of
Preferred, as such may exist from time to time are valuable,
confidential, special and unique assets of Preferred, expensive to
produce and maintain and essential for the profitable operation of its
businesses. At all times from and after the date of this Agreement,
except with Preferred's express prior written consent, McLaughlin shall
not, directly or indirectly, communicate, disclose or divulge to any
person, or use for his benefit or the benefit of any person, in any
manner any Confidential Information and Trade Secrets acquired before or
during McLaughlin's employment with PHS or NET, including, without
limitation, the terms of this Agreement, except as may be required by
law.
5. TIME COMMITMENT. During the Term, McLaughlin shall devote 100% of his
full working time to the operations of PHS.
6. NONCOMPETITION. McLaughlin shall be bound by the provisions of Section
4.12 COVENANT NOT TO COMPETE, in the Stock Purchase Agreement.
7. STOCK OPTIONS. On the date hereof, Preferred Employers Holdings, Inc.
("PEH") will grant to McLaughlin stock options to purchase up to 20,000
shares of PEH common stock. Such stock options are subject to the
vesting schedule and other terms and conditions contained in the
Company's Stock Option Agreement by
2
<PAGE>
and between PEH and McLaughlin, a copy of which is attached hereto as
Exhibit A.
8. BENEFIT PLANS. McLaughlin shall be entitled to participate in PHS'
benefit plans in the same manner and subject to the same terms and
conditions as the other executives of PHS.
9. RELIANCE. McLaughlin acknowledges that his compliance with the terms
and conditions of this Agreement is an essential component of the
transactions contemplated by the Stock Purchase Agreement. McLaughlin
further acknowledges that his compliance with the provisions of Sections
4 and 6 of this Agreement (hereinafter referred to as the "Restrictive
Covenants") is a material element of the consideration bargained for by
PHS hereunder and under the Stock Purchase Agreement, especially in view
of the information disclosed to McLaughlin and in connection with the
Stock Purchase Agreement. McLaughlin agrees to be bound by the
provisions of Sections 4 and 6 of this Agreement to the maximum extent
permitted by law, it being the intent and spirit of the parties that the
provisions of Sections 4 and 6 of this Agreement shall be enforceable
even after the Term. However, the parties further agree that if any
portion of any of the Restrictive Covenants or their application is
construed to be invalid or unenforceable, then the other portions
thereof and the other Restrictive Covenants and their application shall
not be affected thereby and shall be enforceable. If any of the
Restrictive Covenants and their application shall for any reason be held
to be excessively broad as to duration, geographical scope, property,
subject or similar factor, then the court making such determination
shall have the power to reduce or limit such scope, duration, area or
other factor so as to be enforceable to the maximum extent compatible
with applicable law, and such Restrictive Covenant shall then be
enforceable in its reduced or limited form.
10. TERMINATION. (a) This Agreement may be terminated by PHS at any time
"For Cause". For purposes of this Agreement, "For Cause" shall mean the
following: (i) McLaughlin has failed to devote 100% of his full working
time to the operations of PHS, (ii) McLaughlin has been convicted of
(whether or not subject to appeal) or plead "nolo contendere" or has
made any similar plea to any criminal offense involving a violation of
federal or state securities laws or regulations, embezzlement, fraud,
wrongful taking or misappropriation of property, theft, or any other
crime involving dishonesty, (iii) McLaughlin has violated or breached
any provision of this Agreement, (iv) McLaughlin has taken any action
which directly or indirectly causes PHS to have any license, permit or
other authorization necessary for the operations of its business (a
"License") to be suspended or revoked, (v) PHS has received any notice
from any governmental or other agency which regulates the operations of
PHS which indicates that McLaughlin's employment with PHS could have an
adverse effect on the ability of PHS to retain or obtain any License or
to otherwise conduct its operations in the manner then conducted, and/or
(vi) McLaughlin has repeatedly failed to
3
<PAGE>
demonstrate the ability to achieve the objectives set forth in section 2
of this Agreement.
11. DISABILITY; DEATH.
(a) If, during the Term, McLaughlin becomes physically or mentally
disabled, whether by injury, illness or otherwise, so that he is
unable to perform his duties for a period of 90 days in any 180
day period, then PHS may, at its option, terminate this Agreement
upon ten days' written notice to McLaughlin without further
obligation.
(b) In the event of McLaughlin's death during the Term, this
Agreement shall terminate and be of no further force and effect,
provided that McLaughlin shall be entitled to all salary and
other benefits to which he is entitled through his date of death.
12. AUTHORITY; NO CONFLICT. McLaughlin represents and warrants to PHS that
(a) he has the full power and authority to enter into this Agreement and
to perform his obligations hereunder, and (b) the execution, delivery
and performance by McLaughlin of this Agreement will not (i) violate,
conflict with, or result in a breach of any contract or other agreement
by which McLaughlin is bound, (ii) require McLaughlin to obtain the
consent of, or give any notice to, or make any filing with, any Federal,
state, or local government, or any agency thereof (a "Governmental
Body"), or any other third person, or (iii) violate any law, statute or
other requirement of any Governmental Body.
13. EQUITABLE RELIEF AND OTHER REMEDIES. McLaughlin acknowledges that any
breach by McLaughlin of any of the Restrictive Covenants will result in
irreparable injury to PHS, for which money damages could not provide
adequate compensation. In the event of any such breach, PHS shall be
entitled, in addition to all other rights and remedies which PHS may
have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining McLaughlin and all other persons
involved therein from continuing such breach. PHS shall be entitled to
such injunction without the necessity of posting any bond, but if a bond
is nonetheless required by the court entertaining the motion for
injunction, the parties hereto agree that a bond in the amount of
$1,000.00 is appropriate. The existence of any claim or cause of action
which McLaughlin, or any other Person, may have against PHS or Preferred
shall not constitute a defense or bar to the enforcement of any of the
Restrictive Covenants. If PHS resorts to litigation to enforce any of
the Restrictive Covenants which has a fixed term, then such term shall
be extended for a period of time equal to the period of such breach,
beginning on the date of a final court order (without further right of
appeal) acknowledging the validity of such Restrictive Covenant or, if
later, the last day of the original fixed term of the Restrictive
Covenant.
4
<PAGE>
14. ACKNOWLEDGEMENTS BY MCLAUGHLIN. McLaughlin acknowledges and confirms
that the length of the term of the Restrictive Covenants and the
geographical restrictions contained therein are fair and reasonable and
are not the result of overreaching, duress or coercion of any kind.
McLaughlin further acknowledges and confirms that the full, uninhibited
and faithful observance of each of the Restrictive Covenants contained
in this Agreement shall not cause any undue hardship, financial or
otherwise. McLaughlin acknowledges and confirms that his special
knowledge of the Confidential Information and Trade Secrets of NET and
PHS is such as would cause PHS serious injury and loss if he was to use
such knowledge for the benefit of a competitor of PHS or were to compete
with PHS.
15. NONDISPARAGEMENT. McLaughlin agrees not to engage in any conduct that
is injurious to the reputation or interest of Preferred, including but
not limited to disparaging (or inducing or encouraging others to
disparage) Preferred or its officers, directors, employees or
shareholders. As used herein, the term "disparage" includes, without
limitation, comments or statements to the press, any of Preferred's
employees or any person with whom Preferred has a business relationship
which would adversely affect in any manner the reputation of Preferred
or any of its officers, directors, employees or shareholders.
16. INTELLECTUAL PROPERTY AS SOLE PROPERTY OF THE COMPANY. (a) McLaughlin
agrees promptly to disclose to PHS any and all intellectual property,
computer software, discoveries, improvements, trade secrets, formulas,
techniques, processes, and know-how, whether or not patentable and
whether or not reduced to practice, conceived or learned by him during
the period of his employment, either alone or jointly with others, which
relate to or result from the actual or anticipated business, work,
research or investigations of NET or PHS, or which result, to any
extent, from use of NET or PHS's premises or property (the work being
hereinafter collectively referred to as the "INTELLECTUAL PROPERTY").
(b) McLaughlin acknowledges and agrees that all the Intellectual
Property shall be the sole property of PHS, and he hereby assigns to PHS
his entire right of interest in and to all the Intellectual Property.
PHS shall be the sole owner of all domestic and foreign rights
pertaining to the Intellectual Property. McLaughlin further agrees as
to all the Intellectual Property to assist PHS in every way (at PHS's
expense) to obtain and from time to time enforce patents on the
Intellectual Property in any and all countries. To that end, by way of
illustration but not limitation, McLaughlin will testify in any suit or
other proceeding involving any of the Intellectual Property, execute all
documents which PHS reasonably determines to be necessary or convenient
for use in applying for and obtaining patents thereon and enforcing
same, and execute all necessary assignments thereof to PHS or persons
designated by it. McLaughlin's obligation to assist PHS in obtaining
and enforcing patents for the Intellectual Property shall continue
beyond the termination of his employment, but PHS agrees to compensate
McLaughlin at a reasonable rate after such termination for the time
actually spent by McLaughlin at PHS's request on such assistance.
5
<PAGE>
(c) All inventions, if any, which McLaughlin made prior to his
employment by NET or PHS, all of which are set forth as Exhibit B
attached hereto, are excluded from the scope of this Agreement.
McLaughlin represents and warrants that Exhibit B sets forth a complete
list of all Intellectual Property, discoveries, or improvements which
have been made by McLaughlin prior to his employment with PHS.
17. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior negotiations,
understandings, agreements, arrangements and understandings, both
oral and written, between the parties hereto with respect to such
subject matter.
(b) AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties
hereto.
(c) WAIVERS AND REMEDIES. The waiver by any of the parties hereto of
any other party's prompt and complete performance, or breach or
violation, of any provision of this Agreement shall not operate
nor be construed as a waiver of any subsequent breach or
violation, and the failure by any of the parties hereto to
exercise any right or remedy which it may possess hereunder shall
not operate nor be construed as a bar to the exercise of such
right or remedy by such party upon the occurrence of any
subsequent breach or violation.
(d) DESCRIPTIVE HEADINGS. Descriptive headings contained herein are
for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the separate parties hereto in separate
counterparts, each of which shall be deemed to be one and the
same instrument.
(f) NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all
legal process in regard hereto shall be in writing and shall be
deemed to have been duly given, when delivered by hand or Federal
Express or (2) days after deposited in the United States mail, by
registered or certified mail, return receipt requested, postage
prepaid, as follows:
6
<PAGE>
If to PHS, one copy to:
Preferred Healthcare Staffing, Inc.
10800 Biscayne Boulevard, 10th Floor
Miami, Florida 33161
Attn: Mr. Mel Harris
With a copy to:
Preferred Healthcare Staffing, Inc.
10800 Biscayne Boulevard, 10th Floor
Miami, Florida 33161
Attn: Jose M. Menendez, Esq.
If to McLaughlin, one copy to:
Mr. Stephen M. McLaughlin
4311 Greenbriar Lane
Weston, Florida 33331
Or to such other address as any party hereto may from time to time
designate in writing delivered in a like manner.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective personal representatives, heirs, successors and
assigns.
(h) APPLICABLE LAW. This Agreement shall be governed by, and shall
be construed, interpreted and enforced in accordance with, the
laws of the State of Florida without regard to its conflict of
law principles to the extent that such principles would require
the application of laws other than the State of Florida.
(i) CONSENT TO JURISDICTION. Each of the parties hereto irrevocably
consents to the exclusive jurisdiction of the federal and state
courts located in Dade County, Florida in any and all actions
between or among any of the parties hereto, whether arising
hereunder or otherwise.
(j) ATTORNEYS' Fees. If any legal action is brought for the
enforcement of any of the provisions of this Agreement, the
prevailing party shall be entitled to recover upon final
judgement on the merits reasonable attorneys' fees (including
attorneys' fees for any appeal) incurred in bringing such action.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have placed their hands as of the
day and year first above written.
PREFERRED HEALTHCARE STAFFING, INC.
By: /s/ William R. Dresback
--------------------------------
Name:
Title:
By: /s/ Stephen M. McLaughlin
--------------------------------
Stephen M. McLaughlin
8
<PAGE>
Exhibit 10.4
PREFERRED EMPLOYERS HOLDINGS, INC.
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "AGREEMENT"), dated as of August 10, 1998,
between PREFERRED EMPLOYERS HOLDINGS, INC., a Delaware corporation (the
"COMPANY"), having an address at 10800 Biscayne Boulevard, Penthouse, Miami,
Florida 33161 and STEPHEN M. McLAUGHLIN, having an address at 4311 Greenbriar
Lane, Weston, Florida 33331 (the "GRANTEE").
In accordance with the Preferred Employers Holdings, Inc. 1996 Stock Option
Plan (the "PLAN"), and, subject to the terms hereof, the Company hereby grants
to the Grantee an incentive stock option (the "OPTION") to purchase all or any
part of an aggregate of 20,000 shares of the Company's common stock, par value
$.01 per share (the "SHARES").
To evidence the Option and to set forth its terms, the Company and the
Grantee agree as follows:
1. CONFIRMATION OF GRANT. The Company hereby evidences and confirms its
grant of the Option to the Grantee on the date of this Agreement.
2. NUMBER OF SHARES. This Option shall be for an aggregate of 20,000
Shares.
3. EXERCISE PRICE. The exercise price shall be 8.625 per share.
4. MEDIUM AND TIME OF PAYMENT. The exercise price of the Option shall be
paid in cash or by check payable to the order of the Company at the time of
exercise. In addition, the Company shall accept full or partial payment in
Shares having a fair market value on the date of exercise equal to the portion
of the exercise price being so paid.
Payment in full shall be required before the issuance of any Shares
pursuant to this Option. In addition, before or concurrently with delivery to
the Grantee of a certificate representing such Shares, the Grantee shall pay any
amount necessary to satisfy applicable federal, state, or local tax
requirements.
5. TERM AND EXERCISE OF THE OPTION. The Option shall expire ten (10)
years from the date of this Agreement and may be exercised at the times and for
the number of Shares as follows:
<PAGE>
(a) on or after the date which is one year after the date hereof, up
to 20% (ignoring fractional shares) of the total number of Shares subject
to this Option;
(b) on or after the date which is two years after the date hereof, up
to an additional 20% (ignoring fractional Shares) of the total number of
Shares subject to this Option;
(c) on or after the date which is three years after the date hereof,
up to an additional 20% (ignoring fractional Shares) of the total number of
Shares subject to this Option;
(d) on or after the date which is four years after the date hereof,
up to an additional 20% (ignoring factional Shares) of the total number of
Shares subject to this Option; and
(e) on or after the date which is five years after the date of the
grant, all of the remaining Shares subject to this Option.
This Option may be exercised only by written notice to the Company
indicating the number of Shares which are being purchased. Such notice must be
signed by the Grantee and be accompanied by full payment of the exercise price.
6. NONTRANSFERABILITY. The Option may be transferred only by will or the
laws of descent and distribution, and the Option may be exercised during the
Grantee's lifetime only by the Grantee or by the Grantee's legal representative.
7. RIGHTS IN THE EVENT OF THE GRANTEE'S DISABILITY. If the Grantee's
employment with the Company or any parent or subsidiary corporation (within the
meaning of Section 424(e) and (f) of the Internal Revenue Code of 1986, as
amended (the "CODE"), ("AFFILIATES")) is terminated on account of permanent and
total disability (as defined in Code Section 22(e)(3)), the Grantee or the
Grantee's legal representative (or the Grantee's estate if the Grantee dies
after termination of employment) may exercise the Option, to the extent
exercisable on the date of the Grantee's termination of employment, at any time
within one year after termination of employment but in no event after the
expiration of the term of the Option. The Grantee's "ESTATE" means the
Grantee's legal representative or any person who acquires the right to exercise
the Option by reason of the Grantee's death.
8. RIGHTS IN THE EVENT OF THE GRANTEE'S DEATH. If the Grantee dies while
an employee of the Company or any Affiliate (or within three months after the
Grantee ceases to be such an employee) but while he still has the right to
exercise this Option, his estate may exercise the Option, to the extent
exercisable at the date of the Grantee's death, any time within one year after
the Grantee's death, but in no event after the expiration of the term of the
Option.
-2-
<PAGE>
9. RIGHTS IN THE EVENT OF TERMINATION OF EMPLOYMENT. If Grantee's
employment with the Company or any Affiliate is terminated involuntarily for
"CAUSE" the Grantee's Option shall expire as of the date of termination of
employment. "Cause" under this Agreement shall mean (i) material misconduct by
the Grantee, (ii) any act by the Grantee that is materially adverse to the
Company or any Affiliate, or (iii) breach by the Grantee of any employment or
confidentiality or nondisclosure agreement with the Company or any Affiliate.
"Cause" also shall have the meaning given to that term, or any similar term,
under any employment agreement with the Company or any Affiliate. If the
Grantee's employment is terminated for any reason other than death, disability,
or as described in the preceding sentences of this Section, the Grantee (or the
Grantee's estate, if the Grantee dies after the termination) may exercise the
Option, to the extent exercisable before the termination, within three months
after the termination, but in no event after the expiration of the term of the
Option.
10. ADJUSTMENT IN THE SHARES. If the Shares, as presently constituted,
shall be changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation (whether by reason of
merger, consolidation, recapitalization, reclassification, split, reverse split,
combination of shares, or otherwise) or if the number of Shares shall be
increased through the payment of a share dividend, the Grantee shall receive
upon exercise of the Option the number and kind of shares or other securities
into which each outstanding Share shall be so changed, or for which each such
Share shall be exchanged, or to which each such Share shall be entitled, as the
case may be. The exercise price and other terms of the Option shall be
appropriately amended to reflect the foregoing events. If there shall be any
other change in the number or kind of the outstanding Shares, or of any shares
or other securities into which the Shares shall have been changed, or for which
the Shares shall have been exchanged, then, if the Board of Directors shall, in
its sole discretion, determine that such change equitably requires an adjustment
in the Option, such adjustment shall be made in accordance with that
determination. Notice of any adjustment shall be given by the Company to the
Grantee.
11. EFFECT OF TERMINATION OR AMENDMENT OF PLAN. No suspension,
termination, modification, or amendment of the Plan may, without the express
written consent of the Grantee, adversely affect the rights of the Grantee under
this Option.
12. NO LIMITATION ON RIGHTS OF THE COMPANY. The grant of this Option
shall not in any way affect the right or power of the Company to make
adjustments, reclassifications, or changes in its capital or business structure
or to merge, consolidate, dissolve, liquidate, sell, or transfer all or any part
of its business or assets.
13. RIGHTS AS A SHAREHOLDER. The Grantee shall have the rights of a
shareholder with respect to the Shares covered by the Option only upon becoming
the holder of record of those Shares.
-3-
<PAGE>
14. COMPLIANCE WITH APPLICABLE LAW. Notwithstanding anything herein to
the contrary, the Company shall not be obligated to cause to be issued or
delivered any certificates for Shares pursuant to the exercise of the Option,
unless and until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authority, and the requirements of any exchange upon
which Shares are traded. The Company shall in no event be obligated to register
any securities pursuant to the Securities Act of 1933 (as now in effect or as
hereafter amended) or to take any other action in order to cause the issuance
and delivery of such certificates to comply with any such law, regulation or
requirement. The Board of Directors may require, as a condition of the issuance
and delivery of such certificates and in order to ensure compliance with such
laws, regulations, and requirements, that the Grantee make such covenants,
agreements, and representations as the Board of Directors, in its sole
discretion, considers necessary or desirable.
15. NO OBLIGATION TO EXERCISE OPTION. The granting of the Option shall
impose no obligation upon the Grantee to exercise the Option.
16. AGREEMENT NOT A CONTRACT OF EMPLOYMENT. This Agreement is not a
contract of employment, and the terms of employment of the Grantee or the
relationship of the Grantee with the Company or any Affiliate shall not be
affected in any way by this Agreement except as specifically provided herein.
The execution of this Agreement shall not be construed as conferring any legal
rights upon the Grantee for a continuation of employment or relationship with
the Company or any Affiliate, nor shall it interfere with the right of the
Company or any subsidiary thereof to discharge the Grantee and to treat him
without regard to the effect which that treatment might have upon him as a
Grantee.
17. NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified, registered, or express mail, postage prepaid. Any such notice shall
be deemed given when so delivered personally or, if mailed, four days after the
date of deposit in the United States mails, to each party at its address set
forth above or to such other address as may be designated in a notice given in
accordance with this Section.
18. GOVERNING LAW. Except to the extent preempted by Federal law, this
Agreement shall be construed and enforced in accordance with, and governed by,
Delaware law.
19. RECEIPT OF PLAN. Grantee acknowledges receipt of a copy of the Plan,
and represents that he is familiar with the terms and provisions thereof, and
hereby accepts this Option subject to all the terms and provisions of this
Option and of the Plan. Grantee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board of Directors of the
Company or the Committee, as defined in the Plan, upon any questions rising
under the Plan.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company and the Grantee have duly executed this
Agreement as of the date first written above.
PREFERRED EMPLOYERS HOLDINGS, INC.
/s/ Jonathan J. Russo
- ---------------------------- By: /s/ William R. Dresback
Witness -------------------------------
Name:
Title:
/s/ Carlos J. Deupi /s/ Stephen M. McLaughlin
- ---------------------------- ----------------------------------
Witness STEPHEN M. McLAUGHLIN
-5-
<PAGE>
Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
August 10, 1998 (this "Agreement"), among PREFERRED EMPLOYERS HOLDINGS, INC.,
a Delaware corporation (the "Company"), and DEBBIE BENDER-BALAZICH, STEVEN
BARTH, STEVEN JONES AND STEPHEN M. McLAUGHIN (each a "Holder" and
collectively, the "Holders").
W I T N E S S E T H:
WHEREAS, the Holders are parties to that certain Stock Purchase Agreement,
dated as of July 10, 1998 (the "Stock Purchase Agreement"), by and between the
Holders and Preferred Healthcare Staffing, Inc. (the "Staffing"), a Delaware
corporation and a wholly-owned subsidiary of the Company, pursuant to which
Holders have certain registration rights covering the Transaction Shares; and
WHEREAS, pursuant to the terms contained herein, the Company agrees to
undertake to register under the Securities Act (as defined in Section 1 below)
all of the Transaction Shares held by Holders.
NOW, THEREFORE, in consideration of the parties entering into the
agreements and carrying out the transactions herein described, and for other
good and valuable consideration, the parties agree as follows:
1. DEFINITIONS. (a) As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any other
United States agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, or any similar
United States statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.
<PAGE>
"Registrable Securities" means (i) any Transaction Shares held by each
Holder and (ii) any securities issued or issuable with respect to any such
Transaction Shares held by such Holder by way of stock dividend or stock split.
As to any particular Registrable Securities, such securities shall cease to be
Registrable Securities (A) when (i) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement, (ii) they shall have been distributed pursuant to Rule 144 (or any
successor provision) under the Securities Act, (iii) they shall have been
otherwise transferred and the subsequent disposition of such Registrable
Securities shall not require registration or qualification under the Securities
Act or any similar state law then in force or (iv) they shall have ceased to be
outstanding or (B) on the second anniversary of the date hereof.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Section 2, including (i) all registration,
filing and NASD fees, (ii) all fees and expenses of complying with securities or
"blue sky" laws, and (iii) the fees and disbursements of counsel for the Company
and of its independent public accountants.
"Securities Act" means the Securities Act of 1933, or any similar United
States statute, and the rules and regulations of the Commission promulgated
thereunder, all as the same shall be in effect at the time.
(b) All capitalized terms used herein which are not otherwise
defined shall have the meaning given to such terms in the Stock Purchase
Agreement.
2. REGISTRATION UNDER SECURITIES ACT.
(a) REGISTRATION STATEMENT FILING. The Company shall use reasonable
efforts to file a Registration Statement (such Registration Statement and any
and all amendments and supplements thereto, the "Registration Statement") under
the Securities Act covering the sale of the Registrable Securities or otherwise
cause the sale of the Registrable Securities to be included in a previously
filed Registration Statement by no later than seventy-five (75) days from the
date hereof, and will use reasonable efforts to have the Registration Statement
declared effective as soon as practicable thereafter.
(b) REGISTRATION STATEMENT FORM. Any registration under this Section
2(a) shall be on such appropriate registration form of the Commission as shall
be selected by the Company and as shall permit the disposition of the
Registrable Securities to be registered. The Company agrees to include in any
such Registration Statement all information which the Holders of Registrable
Securities being registered shall reasonably request.
-2-
<PAGE>
(c) EXPENSES. The Company shall pay all Registration Expenses in
connection with any registration pursuant to Section 2(a). Each Holder of
Registrable Securities included in the Registration Statement shall promptly pay
those expenses allocated to the registration of such Holder's Registrable
Securities, on a pro-rata basis, including, but not limited to, fees and
expenses of such Seller's legal counsel. The Company shall not be responsible
for any commissions resulting from the sale by any Holder of Registrable
Securities.
(d) REGISTRATION PROCEDURES. Whenever the Company is required to use
reasonable efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 2(a), the Company will as
expeditiously as possible:
(i) use reasonable efforts to cause such Registration Statement
to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and any prospectus used in
connection therewith as may be necessary to keep such Registration
Statement continuously effective for a period of either nine (9) months or
such shorter period as will terminate when all of the Registrable
Securities covered by such Registration Statement have been disposed of,
and to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such Registration
Statement until such time as all of such securities have been disposed of
by the Holder or Holders thereof set forth in such Registration Statement;
(iii) furnish to each Holder such number of conformed copies of
such Registration Statement and of each such amendment and supplement
thereto (in each case including all exhibits, but only one copy thereof to
each such Holder), such number of copies of any prospectus contained in
such Registration Statement (including each preliminary prospectus and any
summary prospectus) and any final prospectus filed under Rule 424 under the
Securities Act (the "Final Prospectus"), in conformity with the
requirements of the Securities Act, and such other documents in order to
facilitate the disposition of the Registrable Securities owned by such
Holders, as such Holder may reasonably request;
(iv) use reasonable efforts to register or qualify such
Registrable Securities under securities or "blue sky" laws of such
jurisdictions as each Holder thereof shall reasonably request, to keep such
registration or qualification in effect for so long as such Registration
Statement remains in effect, and to take any other action which may be
reasonably necessary or advisable to enable such Holder to consummate the
disposition in such jurisdictions of the securities owned by such Holder;
PROVIDED, that the Company shall not for any such purpose be required to
(A) qualify generally to do business as a foreign corporation in any
jurisdiction where it would not otherwise be required to qualify but for
the requirements of
-3-
<PAGE>
this clause (iv), (B) consent to general service of process in any such
jurisdiction or (C) subject itself to taxation in such jurisdiction;
(v) use reasonable efforts to cause all Registrable Securities
covered by such Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be reasonably
necessary by virtue of the business and operations of the Company to enable
the Holder or Holders thereof to consummate the disposition of such
Registrable Securities;
(vi) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the Commission;
(vii) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such Registration
Statement from and after a date not later than the effective date of such
Registration Statement;
(viii) promptly notify each Holder of Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the
happening of any event as a result of which the Final Prospectus included
in such Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary in order to make the statements therein
not misleading in the light of the circumstances under which they were
made; and
(ix) use reasonable efforts to secure the designation of all such
Registrable Securities covered by such Registration Statement as a Nasdaq
SmallCap Market security or a security on any other securities exchange on
which the Company's Common Stock is then currently listed.
The Company may require each Holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such Holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that upon receipt of any
notice from the Company of the happening of any event of the kind described in
clause (viii) of this Section 2(d), such Holder will forthwith discontinue such
Holder's disposition of Registrable Securities pursuant to the Registration
Statement relating to such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by clause
(viii) of this Section 2(d) and, if so directed by the Company, such Holder will
use its best efforts to deliver to the Company (at the Company's expense) all
copies, other than permanent file copies
-4-
<PAGE>
then in such Holder's possession, of the Prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
3. INDEMNIFICATION. (a) INDEMNIFICATION BY THE COMPANY. The Company
agrees to, indemnify and hold harmless each Holder of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such Holder may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon (A) any untrue statement or alleged untrue statement of any
material fact contained (x) the Registration Statement under which the
Registrable Securities were registered under the Securities Act, any preliminary
prospectus, Final Prospectus or summary prospectus contained therein or used in
connection with the offering of securities covered thereby, or any amendment or
supplement thereto or any document included by reference therein, or (y) in any
application or other document or communication (in this Section 3 collectively
called an "application") executed by or on behalf of the Company or based upon
written information furnished by or on behalf of the Company filed in any
jurisdiction in order to qualify any securities covered by such Registration
Statement under the "blue sky" or securities laws thereof, or (B) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; PROVIDED,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof)
or omission or alleged omission, arising out of such Registration Statement, any
such preliminary prospectus, Final Prospectus, summary prospectus, amendment or
supplement, or in any application, which was in connection with, in reliance
upon, or in conformity with information prepared or furnished to the Company by
such Holder for use in the preparation thereof which information contained any
untrue statement of any material fact or omitted to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such Holder. The Company shall not
be obligated to pay the fees and expenses of any counsel or firm of counsel for
any parties indemnified in respect of a claim unless in the reasonable judgment
of any such indemnified party a conflict of interest may exist between such
indemnified party and any other indemnified party in respect of such claim.
(b) INDEMNIFICATION BY THE HOLDERS. Each Holder of Registrable Securities
agrees to indemnify and hold harmless (in the same manner and to the same extent
as set forth in clause (a) of this Section 3) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission from
such Registration Statement, any preliminary prospectus, Final Prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any application, if such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with information prepared
and furnished to the Company by such Holder for use in the preparation of such
Registration Statement, preliminary prospectus, Final Prospectus, summary
prospectus, amendment or supplement, or such
-5-
<PAGE>
application, which information contained any untrue statement of any material
fact or omitted to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or controlling Persons
and shall survive the transfer of such securities by such Holder. The indemnity
provided by each Holder of securities under this Section 3(b) shall be provided
jointly and severally with any other Holder of Registrable Securities.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 3, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action;
PROVIDED, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 3, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, but the fees and expenses of such counsel shall be the
responsibility of the indemnified party. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. Notwithstanding anything
to the contrary, the indemnifying party shall not be liable for any settlement
of any such claim or action effected without its written consent, which consent
shall not be unreasonably withheld.
(d) CONTRIBUTION. In order to provide for just and equitable contribution
in circumstances under which the indemnity contemplated by this Section 3 is for
any reason not available, the parties required to indemnify by the terms hereof
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and any Holder of Registrable Securities, except to the extent that
contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amounts which the respective parties shall contribute, there
shall be considered the relative benefits received by each party from the
offering of the Registrable Securities (taking into account the portion of the
proceeds of the offering realized by each), the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted, the opportunity to correct and prevent any statement or omission and
any other equitable considerations appropriate under the circumstances. The
Company and each Holder of Registrable Securities agree that no Holder shall be
required to contribute any amount in excess of the amount such Holder would have
been required to pay to an indemnified party if the indemnities under clauses
(a) and (b) above of this Section 3 were available. For purposes
-6-
<PAGE>
of this clause (d), and each director and each officer of the Company who signed
the Registration Statement, and each Person, if any, who controls the Company or
a Holder of Registrable Securities within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as the Company or a
Holder of Registerable Securities, as the case may be.
4. RULE 144. The Company will file the reports required to be filed by
it under the Exchange Act and the rules and regulations promulgated by the
Commission thereunder and will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the Commission.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended or waived only
with the prior written agreement signed by the Company and Holders of at least a
majority of all Registrable Securities at the time outstanding, and no course of
conduct or failure or delay in enforcing the provisions of this Agreement shall
affect the validity, binding effect or enforceability of this Agreement.
6. NOTICES. All communications provided for hereunder shall be in
writing and shall be delivered personally or sent by first-class mail (return
receipt requested) and addressed as follows:
(a) If to the Company, one copy to:
Preferred Employers Holdings, Inc.
10800 Biscayne Boulevard
Miami, Florida 33161
Attention: Mr. Mel Harris
with a copy to:
Baer Mark & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Donald J. Bezahler, Esq.
-7-
<PAGE>
(b) If to a Holder, one copy to such Holder as follows:
(i) If to Debbie Bender-Balazich to:
7998 East Country Club Boulevard
Boca Raton, Florida 33434
Attention: Ms. Debbie Bender-Balazich
(ii) If to Steven Barth:
1004 Basil Road
McLean, Virginia 22101
Attention: Mr. Steven Barth
(iii) If to Steven Jones:
907 Hyacinth Drive
Delray Beach, Florida 33483
Attention: Mr. Steven Jones
(iv) If to Stephen M. McLaughlin:
4311 Greenbriar Lane
Weston, Florida 33331
Attention: Mr. Stephen M. McLaughlin
(v) with a copy in each case to:
Akerman, Senterfitt & Eidson, P.A.
SunTrust International Center
One Southeast Third Avenue, 28th Floor
Miami, Florida 33131-1714
Attention: Marshall R. Burack, Esq.
Any party by notice given in accordance with this Section 6 to the other
parties may designate another address or person for receipt of notices
hereunder. Notices by a party may be given by counsel to such party.
7. BINDING AGREEMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
-8-
<PAGE>
8. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
9. GOVERNING LAWS: SUBMISSION TO JURISDICTION. (i) THIS AGREEMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(ii) EACH OF THE PARTIES HERETO CONSENTS AND AGREES TO THE
JURISDICTION OF ANY COURTS OF THE STATE OF DELAWARE OR OF THE UNITED STATES
DISTRICT COURT FOR DELAWARE, AND WAIVES AND AGREES NOT TO PLEAD, OR CLAIM, IN
ANY SUCH COURT ANY OBJECTION BASED UPON VENUE OR FORUM NON CONVENIENS WITH
RESPECT TO ANY ACTION INSTITUTED THEREIN.
10. COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
11. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
of Registrable Securities shall be enforceable to the fullest extent permitted
by law.
12. ENTIRE AGREEMENT. This Agreement is intended by the parties hereto as
a final expression of their agreement and intended to be a complete and
exclusive statement of their agreement and understanding in respect to the
subject matter contained herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
[Remainder Of Page Intentionally Left Blank]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the date first above written.
PREFERRED EMPLOYERS HOLDINGS, INC.
By: /s/ William R. Dresback
--------------------------------------------
William R. Dresback, Senior Vice President,
Chief Financial Officer and Secretary
/s/ Debbie Bender-Balazich
-----------------------------------------------
DEBBIE BENDER-BALAZICH
/s/ Marshall Burack as attorney in fact
-----------------------------------------------
STEVEN BARTH
/s/ Marshall Burack as attorney in fact
-----------------------------------------------
STEVEN JONES
/s/ Steven M. McLaughlin
-----------------------------------------------
STEVEN M. McLAUGHLIN
-10-
<PAGE>
EXHIBIT 99.1
PREFERRED EMPLOYERS COMPLETES ACQUISITION OF NATIONAL EXPLORERS
MIAMI, August 12, 1998 -- Preferred Employers Holdings, Inc.
(Nasdaq/SmallCap:PEGI) announced today that the Company and its subsidiary
Preferred Healthcare Staffing Inc. have acquired, through a pooling of
interests, all of the outstanding capital stock of National Explorers and
Travelers Healthcare, Inc. ("NET Healthcare") in exchange for 517,085 shares of
common stock of Preferred Employers.
Organized in January 1996, NET Healthcare provides registered nurse and other
professional medical personnel, often referred to as "travel nurses," primarily
to client hospitals in the United States and the Caribbean on a contractual
basis, for periods generally ranging from 8 to 52 weeks. During 1997, NET
Healthcare placed in excess of 1,000 nurses and currently has orders for in
excess of 1,800 nurses. The Company intends to retain NET Healthcare's existing
management and staff. This is Preferred's second employee staffing acquisition
this year.
With the acquisition of NET Healthcare, Preferred Healthcare has more than 600
nurses, surgical technologists and therapists currently under contract and will
serve more than 1,000 client facilities in the continental United States and the
Caribbean.
Commenting on the closing of the transaction, Mel Harris, Chairman and CEO of
Preferred Employers stated, "NET Healthcare fits into our announced strategy of
moving into the employee leasing/employee staffing arena, where our demonstrated
competencies in workers' compensation and claims cost containment can be
leveraged, and fits with the business presently being conducted by Preferred
Healthcare. We are committed to prudent, accretive acquisitions that directly
build on our core business."
Preferred Employers is a multi-service oriented provider engaged in the
following businesses: (i) a provider of workers' compensation and business
insurance products and risk management and cost containment services primarily
for franchised companies throughout the United States; (ii) a re-insurer with
respect to certain workers' compensation and employers' liability insurance
policies; and (iii) a provider of temporary registered nurses and other
professional medical personnel, primarily to client hospitals. Its announced
strategy calls for it to grow its core business in new geographic regions and in
other franchise areas, as well as expanding its operations in complementary
businesses, where its workers' compensation knowledge and expertise is
particularly applicable.
---------------
Certain statements contained herein are forward-looking statements that have
been made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements involve known and
unknown risks and uncertainties which may cause the actual results in the future
periods or plans for future periods to differ materially from those described
herein as anticipated, believed or estimated.
