<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 2, 1998
NovaCare Employee Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-23343 23-2866146
(Commission File No.) (IRS Employer Identification No.)
2621 VAN BUREN AVENUE, NORRISTOWN, PA 19403
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 650-4700
N.A.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 15, 1998, NovaCare Employee Services, Inc. (the "Registrant"),
AmeriCare Employers Group, Inc. ("AmeriCare"), Paralign Staffing Technologies,
Inc. (a wholly owned subsidiary of AmeriCare), Ronald N. Shostack, Kerran L.
Shostack, Ian Ackerman, Theresa Conroy and Zanza Personnel, Inc. (collectively
the shareholders of AmeriCare) consummated an agreement for Registrant to
purchase all of the outstanding stock of AmeriCare (the "Purchase Agreement").
This agreement was dated as of December 1, 1997, and received regulatory
approval on January 12, 1998. The determination of the consideration for the
purchase of the common stock of AmeriCare was based on arms length negotiations
between the Registrant and AmeriCare's shareholders. Pursuant to the Purchase
Agreement, AmeriCare's shareholders delivered to the Registrant 101,011 shares
of its $.01 par value common stock in exchange for $9 million in cash and
722,892 shares of the Registrant's $.01 par value common stock ("Common
Stock"). The number of shares of Common Stock delivered to AmeriCare's
shareholders was determined by dividing (i) $6 million, which represents the
sale price specified in the Purchase Agreement, by (ii) $8.30, which was the
average closing sales price per share of Common Stock, as reported on the
NASDAQ Composite Tape, for the 30 business days ending December 23, 1997. The
cash portion of the purchase price was funded through borrowings under the
Registrant's revolving credit agreement with PNC Bank, National Association, as
agent, and through cash generated by Registrant operations prior to
acquisition. The 722,892 shares of Common Stock issued to the former owners of
AmeriCare and its subsidiary represent 2.7% of the Common Stock issued and
outstanding as of December 31, 1997.
The former owners of AmeriCare and its subsidiary are eligible to receive
additional Common Stock, contingent upon achieving certain financial and
operating criteria (earnout) established in the Purchase Agreement. The
earnouts are to be achieved over a three year period beginning January 1, 1998.
The earnout target for each year is $5,000,000. The earnout is designed so that
it can be exceeded or reduced proportionately to the target amount. The number
of shares to be issued will be determined by dividing the earnout amount by the
average closing price of Common Stock over a period of thirty business days
prior to the date the earnout is determined.
No material relationship exists between AmeriCare, its affiliates, officers,
directors or shareholders, and the Registrant, its affiliates, officers or
directors, or their associates. Prior to the acquisition, AmeriCare used its
assets (including plant, equipment or other physical property) to provide
Professional Employer Organization services. The Registrant intends that
AmeriCare, as a wholly owned subsidiary of the Registrant, will continue to use
such assets for the same purpose.
The acquisition description contained herein is qualified in its entirety by
reference to the Purchase Agreement, dated as of December 1, 1997, by and among
the Registrant, AmeriCare Employers Group, Inc. and Paralign Staffing
Technologies, Inc.; and the Press Release, dated January 5, 1998, which are
attached hereto as Exhibits I and II, respectively, and incorporated herein by
reference.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the financial statements required
by this Item 7(a). In accordance with Item 7(a)(4) of Form 8-K, such financial
statements shall be filed by amendment to this Form 8-K no later than 60 days
after February 2, 1998.
(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the pro forma financial information
required by this Item 7(b). In accordance with Item 7(b) of Form 8-K, such
financial statements shall be filed by amendment to this Form 8-K no later than
60 days after February 2, 1998.
(c) Exhibits.
The Exhibits to this Report are listed in the Exhibit Index set forth elsewhere
herein.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NOVACARE EMPLOYEE SERVICES, INC.
By: /s/ Thomas D. Schubert
-----------------------------
Thomas D. Schubert
Senior Vice President, Chief Financial Officer and Principal
Accounting Officer
Date: February 2, 1998
<PAGE> 1
=================================================================
AGREEMENT OF PURCHASE AND SALE
By and Among
AMERICARE EMPLOYERS GROUP, INC.,
PARALIGN STAFFING TECHNOLOGIES, INC.,
RONALD N. SHOSTACK,
KERRAN L. SHOSTACK,
IAN ACKERMAN,
THERESA CONROY
and
ZANZA PERSONNEL, INC.
and
NOVACARE EMPLOYEE SERVICES, INC.
=================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
I PURCHASE AND SALE OF THE SHARES . . . . . . . . . . . . . . . . . 2
II REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
COMPANIES AND THE SHAREHOLDERS . . . . . . . . . . . . . 5
III REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 19
IV REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE
PURCHASER . . . . . . . . . . . . . . . . . . . . . . . 21
V CONDUCT OF THE BUSINESS . . . . . . . . . . . . . . . . . . . . . 22
VI ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANIES, THE SHAREHOLDERS AND THE PURCHASER . . . . . 24
VII CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
VIII CONDITIONS TO THE SHAREHOLDERS' OBLIGATION TO CLOSE . . . . . . . 26
IX CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE . . . . . . . . 28
X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 29
XI NON-COMPETITION AGREEMENT . . . . . . . . . . . . . . . . . . . . 32
XII BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . . . 33
XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
SCHEDULES
I. CONSIDERATION
II. EARN-OUT PAYMENTS
III. ADDITIONAL PAYMENTS; EXAMPLES OF EARN-OUT COMPUTATIONS
<PAGE> 3
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT dated as of the 1st day of December, 1997 by
and among Americare Employers Group, Inc., an Arizona corporation
("Americare"), Paralign Staffing Technologies, Inc., an Arizona corporation
("Paralign") (Americare and Paralign are collectively referred to as the
"Companies"), Ronald N. Shostack ("Shostack"), Kerran L. Shostack ("K.
Shostack"), Ian Ackerman, Theresa Conroy and Zanza Personnel, Inc., an Arizona
corporation (each, a "Shareholder" and, collectively, the "Shareholders"), and
NovaCare Employee Services, Inc., a Delaware corporation (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Shareholders are the holders of an aggregate of
98,069 shares of common stock, $.01 par value (the "Americare Common Stock"),
of Americare, which shares constitute all of the issued and outstanding shares
of capital stock of Americare (all such shares of Americare Common Stock held
by the Shareholders being hereinafter referred to as the "Shares");
WHEREAS, Americare is the holder of an aggregate of 1,000
shares of common stock, $.01 par value (the "Paralign Common Stock"), of
Paralign, which shares constitute all of the issued and outstanding shares of
capital stock of Paralign;
WHEREAS, Americare is a professional employer organization and
is engaged in the business, among other things, of providing businesses with an
outsourcing solution to the costs related to employment and human resources and
related activities (such activities as conducted by Americare on the date of
the Closing (as hereinafter defined) being hereinafter referred to as the
"Americare Business");
WHEREAS, Paralign is engaged in the business, among other
things, of providing staffing to healthcare organizations and related
activities (such activities as conducted by Paralign on the date of the Closing
being hereinafter referred to as the "Paralign Business") (the Americare
Business and the Paralign Business are collectively referred to as the
"Business"); and
WHEREAS, effective on the date of the Closing, the Purchaser
desires to acquire from the Shareholders all of the Shares, and each of the
Shareholders desires to sell his respective Shares to the Purchaser, on the
terms and subject to the conditions hereinafter set forth.
<PAGE> 4
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, and intending to be
legally bound, the parties hereto hereby agree as follows:
SECTION I
PURCHASE AND SALE OF THE SHARES
A. Purchase and Sale of the Shares. Subject to the
terms and conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, at the Closing, each of
the Shareholders shall sell, assign and convey to the Purchaser and the
Purchaser shall purchase, acquire and accept from the Shareholders, the Shares.
B. Purchase Price. (i) The purchase price (the
"Purchase Price") for the Shares is: (a) $9,000,000 in cash, payable to the
Shareholders (in the amounts set forth on Schedule I hereto) at the Closing;
(b) shares (the "NCES Shares") of the common stock, $.01 par value (the "NCES
Common Stock"), of the Purchaser, in such number as is determined pursuant to
Section I(B)(ii) below, issuable to the Shareholders (as set forth in Schedule
I hereto) at the Closing; and (c) the contingent payments, if any, provided for
in Sections I(C) and I(D) hereof (such payments, the "Earn-Out Payments").
Each of the Shareholders hereby irrevocably assigns his, her or its right to
receive a portion of the Purchase Price (including the Earn-Out Payments, if
any) to Thetford Investments, Inc., an Arizona corporation (the "Broker");
provided that the Broker makes the representations and warranties set forth in
Section III(D) hereof and delivers a writing (the "Broker Writing") to the
Purchaser to such effect on or prior to the Closing. The Purchaser
acknowledges that Shostack may assign his right to receive a portion of the
Earn-Out Payments to Dennis L. Hall, Roberta M. Merker and Steven Klaproth;
provided that prior to issuing any shares of NCES Common Stock to such
individuals in connection with such Earn-Out Payments, the Purchaser receives
such evidence as it or its counsel shall reasonably request that no
registration of such shares of NCES Common Stock is required under the
Securities Act (as hereinafter defined) in connection with such issuance. Each
of the Shareholders hereby agrees that the fees and expenses of Squire, Sanders
& Dempsey L.L.P., Ernst & Young, Polese, Pietszch, Williams & Nolan and any
other accountants, attorneys or other professionals representing the Companies
and/or the Shareholders shall be paid by the Shareholders out of such
Shareholders' pro rata cash portion of the Purchase Price at Closing and that
such amounts shall be disbursed to such parties at Closing pursuant to the
instructions of Shostack on behalf of the Shareholders pursuant to the terms
and provisions of the Escrow Agreement (as hereinafter defined); provided,
however, that neither the Purchaser nor either of the Companies shall be
responsible for the payment of such fees and/or expenses.
<PAGE> 5
(ii) The number of NCES Shares to be issued at the
Closing shall be determined by dividing (a) $6,000,000 by (b) the average of
the Market Prices (as defined below) with respect to the NCES Common Stock for
the thirty (30) business day period ending on the fifth business day
immediately preceding the date of the Closing. For purposes of the foregoing,
"Market Price" with respect to any business day shall be the last sale price of
the NCES Common Stock as reported on the National Market System of The Nasdaq
Stock Market, Inc. on such date.
C. Earn-Out Payments. As additional payment for the
Shares, subject to the conditions set forth herein and in Schedule II hereto,
within (i) sixty (60) days after December 31, 1998, December 31, 1999 and
December 31, 2000, respectively, or (ii) sixty (60) days after such other date
that such Earn-Out Payments are due and payable, the Purchaser shall deliver to
the Shareholders and the Broker (in the percentage amounts set forth opposite
each such Shareholder's and the Broker's name in Schedule I hereto) the
Earn-Out Payments, if any, payable with respect to the twelve-month periods
(each an "Earn-Out Period") ending December 31, 1998, December 31, 1999 and
December 31, 2000, respectively. The amount of the Earn-Out Payments payable
to the Shareholders shall be (i) based upon the achievement by the Companies of
(a) targeted "worksite employee numbers" (as hereinafter defined) and (b)
targeted "pre-tax earnings" (as hereinafter defined) and (ii) determined in
accordance with the provisions hereof and Schedules I and II hereto. Each of
the Earn-Out Payments, if earned, shall be made by delivery to each of the
Shareholders and the Broker of a certificate representing shares of the NCES
Common Stock, registered in the name of such Shareholder or the Broker, in such
numbers of shares as are determined in accordance with Schedules I and II
hereto.
D. Additional Payments; Shortfall. (i) In addition to
the consideration set forth in Section I(C) hereof, subject to the conditions
set forth herein and in Schedule III hereto, with respect to each of the
Earn-Out Periods ending December 31, 1998, December 31, 1999 and December 31,
2000, respectively, if the Companies shall have achieved (x) the targeted
"worksite employee numbers" for such Earn-Out Period and (y) "pre-tax earnings"
greater than the 1998 Target Amount, 1999 Target Amount and 2000 Target Amount
(as each such term is defined in Schedule II hereto), respectively, the
Purchaser shall deliver to the Shareholders and the Broker (in the percentage
amounts set forth opposite each such Shareholder's and the Broker's name in
Schedule I hereto) at the same time the Earn-Out Payments set forth in Section
I(C) hereof are made (and only if such Earn-Out Payments are required to be
made), as additional payment for the Shares, the additional payments (the
"Additional Payments") provided for in Schedule III hereto. Each of the
Additional Payments, if earned, shall be made by delivery to each of the
Shareholders and the Broker of a certificate representing shares of NCES Common
Stock, registered in the name of such Shareholder or the Broker, in such number
of shares as are determined in accordance with Schedules I and III hereto.
<PAGE> 6
(ii) In the event that there shall be a "Shortfall" (as
hereinafter defined) with respect to the 1998 Target Amount or the 1999 Target
Amount, as the case may be, and the Companies shall achieve pre-tax earnings
during the Earn-Out Period ending December 31, 1999 or December 31, 2000,
respectively (each, an "Excess Period"), in excess of the applicable Target
Amount for the Excess Period (each, an "Excess Amount"), at the option of the
Shareholders (unanimously exercised), the Earn-Out Payments with respect to
such Excess Period shall be computed by adding (x) the amount of the Earn-Out
Payments which would have been payable pursuant to Section I(C) for the
Earn-Out Period ending December 31, 1998 or December 31, 1999, as the case may
be, in excess of that actually paid, if the Companies had pre-tax earnings
equal to the pre-tax earnings actually achieved in the prior period plus the
Excess Amount carried back, if any, which Excess Amount shall not exceed the
Shortfall, and (y) the Earn-Out Payments, if any, which would be payable
pursuant to Section I(C) with respect to the Excess Period if the pre-tax
earnings of the Companies with respect to the Excess Period were reduced by the
Excess Amount carried back. Such option shall be exercised by the Shareholders
by delivering written notice executed by all of the Shareholders to the
Purchaser no later than fifteen (15) days after the Shareholders are notified
by the Purchaser of the pre-tax earnings for such Excess Period. For purposes
hereof, "Shortfall" shall mean the amount by which the Companies fail to
achieve pre-tax earnings at least equal to the 1998 Target Amount or 1999
Target Amount, as the case may be.
E. Computation of Worksite Employee Numbers and Pre-Tax
Earnings; Certain Adjustments. The Purchaser shall, within sixty (60) days
after the end of each Earn-Out Period, compute the worksite employee numbers
and pre-tax earnings of the Companies for each such Earn-Out Date. The amount
so computed shall be the worksite employee numbers and pre-tax earnings for
purposes of determining whether or not Earn-Out Payments shall be due and
payable. For purposes of this Agreement, (i) "worksite employee numbers" shall
mean the number of persons paid as employees of all of the clients of the
Companies for which the Companies paid such employees' wages during the last
calendar quarter of such Earn-Out Period and (ii) "pre-tax earnings" shall mean
the earnings before income taxes of the Companies (and any other professional
employer organizations acquired by the Purchaser after the date hereof to which
Shostack and the Purchaser agree in writing) for the applicable period as
determined on an accrual basis in accordance with generally accepted accounting
principles, consistently applied throughout the Earn-Out Periods. For purposes
of calculating pre-tax earnings, operating expenses of the Companies shall not
include (x) any expenses incurred in connection with the amortization of the
Purchase Price or (y) any corporate overhead expenses (except for those
operational expenses applicable to the operations of the Companies).
Notwithstanding the determination of worksite employee numbers or pre-tax
earnings for any Earn-Out Period by the Purchaser, the Shareholders shall have
the right to receive the information upon which such determination was made,
and shall, in the event of a dispute as to the amount or method of calculation
of such worksite
<PAGE> 7
employee numbers or pre-tax earnings, have the right to review all work papers
relating to the determination of the worksite employee numbers or pre-tax
earnings. Any disputes as to the determination of the worksite employee
numbers or pre-tax earnings for any Earn-Out Period shall be resolved in
accordance with Section XIII(G) hereof.
Numbers of shares of NCES Common Stock and prices per share
set forth herein shall be appropriately adjusted for any stock split, stock
dividend, reverse stock split or other similar event affecting the NCES Common
Stock. Fractional shares shall be rounded up to the nearest whole share.
In the event of the consolidation or merger of the Purchaser
with or into another person or the acquisition of all or substantially all the
assets of the Purchaser by another person (other than a consolidation or merger
in which the Purchaser is the continuing corporation and which does not result
in any change in the NCES Common Stock), the Purchaser shall have the option to
pay the Shareholders (and the Broker) at such time as a payment is due pursuant
to Sections I(C) or I(D) hereof, in lieu of the NCES Common Stock provided for
in such Sections, the consideration per share in the form (in stock or cash or
other consideration) payable to the other holders of NCES Common Stock in
connection with such transaction, in each case, multiplied by the number of
shares of the NCES Common Stock deliverable to the Shareholders or the Broker
provided for in such Sections.
SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE COMPANIES AND THE SHAREHOLDERS
Each of the Companies and each of the Shareholders, jointly
and severally as to all matters relating to the Companies, and each of the
Shareholders, individually as to all matters relating to each Shareholder,
hereby represents and warrants to, and covenants and agrees with, the
Purchaser, as of the date of the Closing, that:
A. Organization and Qualification. Each of the
Companies is duly organized, validly existing and in good standing under the
laws of the State of Arizona and has full corporate power and authority to own
its properties and to conduct the businesses in which it is now engaged. Each
of the Companies is in good standing in each other jurisdiction wherein the
failure so to qualify would have a material adverse effect on the Companies'
businesses, financial condition, results of operations, prospects or properties
taken as a whole (a "Material Adverse Effect"). Other than as set forth on
Exhibit II(A) attached hereto, neither of the Companies has any subsidiaries,
owns any capital stock or other proprietary interest, directly or
<PAGE> 8
indirectly, in any other corporation, association, trust, partnership, joint
venture or other entity and has no agreement with any person, firm or
corporation to acquire any such capital stock or other proprietary interest.
Each of the Companies has full power, authority and legal right, and all
necessary approvals, permits, licenses and authorizations, to own its
properties and to conduct the Business and to enter into and consummate the
transactions contemplated under this Agreement. The copies of the certificate
of incorporation and by-laws of each of the Companies which have been delivered
to the Purchaser are complete and correct.
B. Authority. The execution and delivery of this
Agreement by each of the Companies, the performance by each of the Companies of
its covenants and agreements hereunder and the consummation by each of the
Companies of the transactions contemplated hereby have been duly authorized by
all necessary corporate action. This Agreement constitutes a valid and legally
binding obligation of each of the Companies, enforceable against each of the
Companies in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally or by
general principles of equity (regardless of whether enforcement is sought in a
court of law or equity).
C. No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, violates any provision of the certificate of incorporation
or by-laws of either of the Companies or any material statute, ordinance,
regulation, order, judgment or decree of any court or governmental agency or
board applicable to either of the Companies, or conflicts with or will result
in any breach of any of the terms of or constitute a default under or result in
the termination of or the creation of any lien pursuant to the terms of any
contract or agreement to which either of the Companies is a party or by which
either of the Companies or any of the assets of either of the Companies is
bound. Except for the filing of a Hart-Scott-Rodino Notification and Report
Form (an "H-S-R Form") and the expiration or termination of the related waiting
period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "H-S-R Act"), no consents, approvals or authorizations of, or
filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, except for required
consents, if any, to assignment of permits, certificates, contracts, leases and
other agreements as set forth in Exhibit II(C) attached hereto.
Notwithstanding the foregoing, the Purchaser acknowledges that certain
jurisdictions in which the Business is currently conducted require licensure
and qualification and that, following consummation of the transactions
contemplated hereby, certain amendments or additional filings may be required
in order for the Purchaser to continue operation of the Business as currently
conducted. The Shareholders do not know of any reason why such amendments or
filings could not be made as required.
<PAGE> 9
D. Capitalization. (i) The authorized capital stock of
Americare consists of 1,000,000 shares of Americare Common Stock, of which
98,069 shares are issued and outstanding. All of the issued and outstanding
shares of Americare Common Stock have been duly and validly authorized and
issued and are fully paid and non-assessable. Except as set forth on Exhibit
II(D) attached hereto, all of the issued and outstanding shares of Americare
Common Stock are owned beneficially and of record by the Shareholders, free and
clear of any lien, encumbrance, charge, security interest or claim whatsoever.
Except as set forth on Exhibit II(D) attached hereto, there are no outstanding
subscriptions, warrants, options, calls, commitments or other rights or
agreements to which Americare or any of the Shareholders is bound relating to
the issuance, sale or redemption of shares of Americare Common Stock or other
securities of Americare. Except as set forth on Exhibit II(D) attached hereto,
no person other than the Shareholders has any interest in the Shares. No
shares of capital stock or other securities of Americare are reserved for any
purpose.
(ii) The authorized capital stock of Paralign
consists of 10,000 shares of Paralign Common Stock, of which 1,000 shares are
issued and outstanding. All of the issued and outstanding shares of Paralign
Common Stock have been duly and validly authorized and issued and are fully
paid and non-assessable. All of the issued and outstanding shares of Paralign
Common Stock are owned beneficially and of record by Americare, free and clear
of any lien, encumbrance, charge, security interest or claim whatsoever. There
are no outstanding subscriptions, warrants, options, calls, commitments or
other rights or agreements to which Paralign or Americare is bound relating to
the issuance, sale or redemption of shares of Paralign Common Stock or other
securities of Paralign. No person other than Americare has any interest in the
shares of Paralign Common Stock. No shares of capital stock or other
securities of Paralign are reserved for any purpose.
E. Financial Statements; No Undisclosed Liabilities.
The Companies and the Shareholders have delivered to the Purchaser consolidated
balance sheets of the Companies as of December 31, 1994 (the "1994
Financials"), December 31, 1995, December 31, 1996 and November 30, 1997
(unaudited) (the "1997 Financials") and the related statements of income,
retained earnings and cash flows and the notes thereto, for the periods then
ended (hereinafter referred to as the "Financial Statements"). The 1994
Financials have been audited by Nevitt, Olesky & Associates, Ltd., the
Companies' former independent accountants. The Financial Statements (other
than the 1994 Financials and the 1997 Financials) have been audited by Ernst &
Young LLP, the Companies' independent accountants. The Financial Statements
are true and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied consistently
throughout the periods involved. The Financial Statements fairly present the
financial condition of the Companies as at the dates thereof and the results of
the operations of the Companies for the periods indicated. The balance sheets
contained in the Financial Statements fairly reflect all liabilities of the
Companies of the types
<PAGE> 10
normally reflected in balance sheets as at the dates thereof and the reserves
for workers' compensation and other benefits are adequately stated on the
Financial Statements and represent the ultimate realizable expected costs for
such items. Except to the extent set forth in or provided for in the
consolidated balance sheet of the Companies as of November 30, 1997 included in
the Financial Statements (the "1997 Balance Sheet") or as identified in Exhibit
II(E), and except for current liabilities incurred in the ordinary course of
business consistent with past practices (and not materially different in type
or amount), neither of the Companies has any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, whether due or to
become due, whether properly reflected under generally accepted accounting
principles as a liability or a charge or reserve against an asset or equity
account, and whether the amount thereof is readily ascertainable or not.
Neither of the Companies nor any of the Shareholders is aware of any material
omissions in the Financial Statements. A true and correct copy of the
Financial Statements is attached hereto as Exhibit II(E).
F. Absence of Certain Changes. Except as set forth in
Exhibit II(F), subsequent to the date of the 1997 Balance Sheet, there has not
been any (i) material adverse or prospective material adverse change in the
condition of either of the Companies, financial or otherwise, or in the results
of the operations of either of the Companies; (ii) material damage or
destruction (whether or not insured) affecting the properties or business
operations of either of the Companies; (iii) labor dispute or, to the best
knowledge of each of the Companies and each of the Shareholders, threatened
labor dispute involving the employees of either of the Companies; (iv) actual
or, to the best knowledge of each of the Companies and each of the
Shareholders, threatened disputes with any major accounts of either of the
Companies, or actual or, to the best knowledge of each of the Companies and
each of the Shareholders, threatened loss of business from any of the major
accounts of either of the Companies; (v) changes in the methods or procedures
for billing or collection of customer accounts or recording of customer
accounts receivable or reserves for doubtful accounts with respect to either of
the Companies; or (vi) other event or condition of any character, known to
either of the Companies or any of the Shareholders or which in the exercise of
reasonable diligence should be known to either of the Companies or any of the
Shareholders, not disclosed in this Agreement pertaining to and materially
adversely affecting either of the Companies, the Business or the assets of
either of the Companies.
G. Liabilities Incurred. Except as disclosed in Exhibit
II(G), subsequent to the date of the 1997 Balance Sheet, neither of the
Companies has (i) incurred any bank indebtedness, entered into any leases, loan
agreements or, except in the ordinary course of business consistent with past
practices, contracts, obligations or arrangements of any kind, including,
without limitation, for the payment of money or property to any person, or (ii)
permitted any liens or encumbrances to attach to any assets of either of the
Companies.
<PAGE> 11
H. Real Property Owned or Leased. A list and
description of all real property owned by or leased to or by either of the
Companies or in which either of the Companies has any interest is set forth in
Exhibit II(H). All such leased real property is held subject to written leases
or other agreements which are valid and effective in accordance with their
respective terms, and there are no existing defaults or events of default, or
events which with notice or lapse of time or both would constitute defaults,
thereunder on the part of either of the Companies, except for such defaults, if
any, as are not material in character, amount or extent and do not, severally
or in the aggregate, materially detract from the value or interfere with the
present use of the property subject to such lease or affect the validity,
enforceability or assignability of such lease or otherwise materially impair
either of the Companies or the operations of the Business. Neither of the
Companies nor any of the Shareholders has any knowledge of any default or
claimed or purported or alleged default or state of facts which with notice or
lapse of time or both would constitute a default on the part of any other party
in the performance of any obligation to be performed or paid by such other
party under any lease referred to in Exhibit II(H). Neither of the Companies
nor any of the Shareholders has received any written or oral notice to the
effect that any lease will not be renewed at the termination of the term
thereof or that any such lease will be renewed only at a substantially higher
rent.
I. Title to Assets; Condition of Property. The
Companies have good and valid title to all its properties and assets, real,
personal and mixed, tangible and intangible (in the case of owned real property
and the improvements thereon, good and marketable title in fee simple),
including, without limitation, the properties and assets reflected in the 1997
Balance Sheet (except for assets leased under leases set forth in Exhibit
II(H), assets sold or retired and accounts receivable collected upon, since the
date of the 1997 Balance Sheet in the ordinary course of business consistent
with past practices). Each of the Companies leases or owns all properties and
assets used in the operations of the Business as currently conducted. All such
properties and assets are in good condition and repair, consistent with their
respective ages, and have been maintained and serviced in accordance with the
normal practices of the Companies and as necessary in the normal course of
business. None of the properties or assets of the Companies are subject to any
liens, charges, encumbrances or security interests, except as set forth in
Exhibit II(I). None of the assets of either of the Companies (or uses to which
they are put) fail to conform with any applicable agreement, law, ordinance or
regulation in a manner which is likely to be material to the operations of the
Business. Except as set forth in Exhibit II(I), each of the Companies owns all
the properties and assets which have been located at or on any of the leased
premises of either of the Companies at any time since the date of the 1997
Balance Sheet.
J. Taxes. Each of the Companies has filed or caused to
be filed on a timely basis all federal, state, local, foreign and other tax
returns, reports and declarations (collectively, "Tax Returns") required to be
filed by it. All Tax Returns
<PAGE> 12
filed by or on behalf of each of the Companies are true, complete and correct
in all material respects. Each of the Companies has paid all income,
estimated, excise, franchise, gross receipts, capital stock, profits, stamp,
occupation, sales, use, transfer, value added, property (whether real, personal
or mixed), employment, unemployment, disability, withholding, social security,
workers' compensation and other taxes, and interest, penalties, fines, costs
and assessments (collectively, "Taxes"), due and payable with respect to the
periods covered by such Tax Returns (whether or not reflected thereon). There
are no Tax liens on any of the properties or assets, real, personal or mixed,
tangible or intangible, of either of the Companies. The accrual for Taxes
reflected in the Financial Statements accurately reflects the total amount of
all unpaid Taxes, whether or not disputed and whether or not presently due and
payable, of the Companies as of the close of the period covered by the
Financial Statements, and the amount of the Companies' unpaid Taxes does not
exceed the accrual for Taxes reflected in the Financial Statements as of
November 30, 1997. Since the date of the 1997 Balance Sheet, neither of the
Companies has incurred any Tax liability other than in the ordinary course of
business. Other than Americare's federal income Tax Return filed for the
calendar year ended December 31, 1991, no Tax Return of either of the Companies
has ever been audited. No deficiency in Taxes for any period has been asserted
by any Taxing authority which remains unpaid at the date hereof (the results of
any settlement being set forth in Exhibit II(J)), no written inquiries or
notices have been received by either of the Companies from any Taxing authority
with respect to possible claims for Taxes, neither of the Companies nor any of
the Shareholders has any reason to believe that such an inquiry or notice is
pending or threatened or has knowledge of any reasonable basis for any
additional claims or assessments for Taxes. Neither of the Companies has
agreed to the extension of the statute of limitations with respect to any Tax
Return or Tax period. Each of the Companies has delivered to the Purchaser
copies of the federal and state income Tax Returns filed by each of the
Companies for the past three years and for all other past periods as to which
the appropriate statute of limitations has not lapsed. The Shareholders shall
be responsible for the Tax, if any, due and payable by the Companies arising
out of or relating to the dividend of the Division (as hereinafter defined).
The Shareholders at their own expense shall be responsible for
preparing and filing any and all federal, state, municipal and other Tax
Returns of the Companies in respect of any and all periods up to and including
the date of the Closing (including, without limitation, the Companies' federal
income Tax Returns for the short taxable year ending with the date of the
Closing) to the extent not already filed, whether or not required to be filed
on or before the date of the Closing, and shall pay all Taxes (and interest,
penalties, fines or assessments thereon) due and payable by the Companies for
all periods up to and including November 30, 1997 to the extent not already
paid (including, without limitation, the federal income Taxes due and payable
with respect to the short taxable year referenced in the preceding sentence)
(collectively, "Pre-Closing Tax Periods"); provided, however, that the
<PAGE> 13
Companies shall be responsible for up to $5,000 of the expenses incurred by the
Shareholders in connection with the preparation and filing of such Tax Returns
upon presentment by the Shareholders of evidence of the incurrence of such
expenses. The Shareholders' individual obligations to pay any Taxes
attributable to the Pre-Closing Tax Periods shall be pro rata in proportion to
their respective ownership of Shares on the date of the Closing as set forth on
Schedule I hereto. The parties agree that any refunds of any federal, state,
municipal or other Taxes attributable to Pre-Closing Tax Periods, irrespective
of when paid, that may be received subsequent to the date of the Closing shall
be promptly distributed to the Shareholders pro rata in proportion to their
respective ownership of Shares on the date of the Closing as set forth on
Schedule I hereto. The Shareholders shall review all such Tax Returns with the
Purchaser prior to filing and shall submit such proof of payment of the Taxes
due as the Purchaser shall reasonably request.
K. Permits; Compliance with Applicable Law.
(i) General. Neither of the Companies is in
default under any, and has complied with all, statutes, ordinances, regulations
and laws, orders, judgments and decrees of any court or governmental entity or
agency, relating to either of the Companies, the Business or any assets of
either of the Companies as to which a default or failure to comply might result
in a Material Adverse Effect. Neither of the Companies nor any of the
Shareholders has any knowledge of any basis for assertion of any violation of
the foregoing or for any claim for compensation or damages or otherwise arising
out of any violation of the foregoing. Neither of the Companies nor any of the
Shareholders has received any notification of any asserted present or past
failure to comply with any of the foregoing which has not been satisfactorily
responded to in the time period required thereunder.
(ii) Permits; Intellectual Property. Set forth in
Exhibit II(K) is a complete and accurate list of all permits, licenses,
approvals, franchises, patents, registered and common law trademarks, service
marks, tradenames, copyrights (and applications for each of the foregoing),
notices and authorizations issued by governmental entities or other regulatory
authorities, federal, state or local (collectively the "Permits"), held by
either of the Companies. The Permits set forth in Exhibit II(K) are all the
Permits required for the conduct of the Business. All the Permits set forth in
Exhibit II(K) are in full force and effect, and neither of the Companies has
engaged in any activity which would cause or permit revocation or suspension of
any such Permit, and no action or proceeding looking to or contemplating the
revocation or suspension of any such Permit is pending or, to the best
knowledge of each of the Companies and each of the Shareholders, threatened.
There are no existing defaults or events of default or event or state of facts
which with notice or lapse of time or both would constitute a default by either
of the Companies under any such Permit except for such defaults as are not
reasonably likely to have, either singly or in the aggregate, a Material
Adverse Effect. Neither
<PAGE> 14
of the Companies nor any of the Shareholders has any knowledge of any default
or claimed or purported or alleged default or state of facts which with notice
or lapse of time or both would constitute a default on the part of any other
party in the performance of any obligation to be performed or paid by any other
party under any Permit set forth in Exhibit II(K). To the best knowledge of
each of the Companies and each of the Shareholders, the use by either of the
Companies of any proprietary rights relating to any Permit does not involve any
claimed infringement of such Permit or rights. The consummation of the
transactions contemplated hereby will in no way affect the continuation,
validity or effectiveness of the Permits set forth in Exhibit II(K) or, except
for the filing of an H-S-R Form, require the consent of any person. Except as
set forth in Section II(K)(iii) below, neither of the Companies is required to
be licensed by, nor is it subject to the regulation of, any governmental or
regulatory body.
(iii) Licensing. The operations of the Companies
are licensed in each state where the failure to be licensed would have a
Material Adverse Effect, and are currently in compliance in all material
respects with all statutes regulating professional employer organizations in
such states where the failure to comply would have a material adverse effect on
either of the Companies.
(iv) Environmental. (a) Each of the Companies
has duly complied in all material respects with and the real estate subject to
the leases listed in Exhibit II(H) and improvements thereon, and all other real
estate leased by either of the Companies, and the improvements thereon (all
such owned or leased real estate hereinafter referred to collectively as the
"Premises") are in compliance in all material respects with, the provisions of
all federal, state and local environmental, health and safety laws, codes and
ordinances and all rules and regulations promulgated thereunder.
(b) Neither of the Companies has
received any notice of, and neither of the Companies nor any of the
Shareholders knows of any facts which might constitute, violations of any
federal, state or local environmental, health or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder, which relate
to the use, ownership or occupancy of any of the Premises or of any premises
formerly owned, leased or occupied by either of the Companies.
L. Accounts Receivable; Accounts Payable.
(i) The accounts receivable of each of the
Companies are in their entirety valid accounts receivable, arising in the
ordinary course of business. At the Closing, the Companies shall have
available to the Purchaser unrestricted cash and cash equivalents of sufficient
amounts to pay any and all current obligations of the Companies as they become
due.
<PAGE> 15
(ii) The accounts and notes payable and other
accrued expenses reflected in the Financial Statements, and the accounts and
notes payable and accrued expenses incurred by either of the Companies
subsequent to the date of the 1997 Balance Sheet, are in all material respects
valid claims that arose in the ordinary course of business. Since the date of
the 1997 Balance Sheet, the accounts and notes payable and other accrued
expenses of either of the Companies have been paid in a manner consistent with
past practice.
M. Contractual and Other Obligations. Set forth in
Exhibit II(M) is a list and brief description of all (i) material contracts,
agreements, licenses, leases, arrangements (written or oral) and other
documents to which either of the Companies is a party or by which either of the
Companies, the Business or any of the assets of either of the Companies is
bound (including, in the case of loan agreements, a description of the amounts
of any outstanding borrowings thereunder and the collateral, if any, for such
borrowings); (ii) obligations and liabilities of either of the Companies
pursuant to uncompleted orders for the purchase of materials, supplies,
equipment and services for the requirements of the Business with respect to
which the remaining obligation of either of the Companies is in excess of
$2,500; and (iii) material contingent obligations and liabilities of either of
the Companies; all of the foregoing being hereinafter referred to as the
"Contracts". Neither of the Companies nor, to the best knowledge of each of
the Companies and each of the Shareholders, any other party is in default in
the performance of any covenant or condition under any Contract except for such
defaults as are not reasonably likely to have, either singly or in the
aggregate, a Material Adverse Effect and, to the best knowledge of each of the
Companies and each of the Shareholders, no claim of such a default has been
made and no event has occurred which with the giving of notice or the lapse of
time would constitute a default under any covenant or condition under any
Contract except for such defaults as are not reasonably likely to have, either
singly or in the aggregate, a Material Adverse Effect. Neither of the
Companies is a party to any Contract which would terminate or be materially
adversely affected by consummation of the transactions contemplated by this
Agreement. Neither of the Companies is a party to any Contract expected to be
performed at a loss. Originals or true, correct and complete copies of all
written Contracts have been provided to the Purchaser.
N. Compensation. Set forth in Exhibit II(N) attached
hereto is a list of all agreements between either of the Companies and each
person, other than worksite employees of the Company's employer clients
("Worksite Employees"), employed by or independently contracting with either of
the Companies with regard to compensation, whether individually or
collectively, and set forth in Exhibit II(N) is a list of all employees of the
Companies other than Worksite Employees ("Company-Based Employees") entitled to
receive annual compensation in excess of $20,000 and their respective salaries.
The transactions contemplated by this Agreement will not result in any
liability for severance pay to any employee or independent contractor of either
of the Companies. Neither of the Companies has informed any employee or
<PAGE> 16
independent contractor providing services to either of the Companies that such
person will receive any increase in compensation or benefits or any ownership
interest in either of the Companies or the Business.
O. Employee Benefit Plans. Except as set forth in
Exhibit II(O) attached hereto, neither of the Companies maintains or sponsors,
nor is either of them required to make contributions to, any pension,
profit-sharing, savings, bonus, incentive or deferred compensation, severance
pay, medical, life insurance, welfare or other employee benefit plan. All
pension, profit-sharing, savings, bonus, incentive or deferred compensation,
severance pay, medical, life insurance, welfare or other employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (hereinafter referred to as "ERISA"), in which
Company-Based Employees of either of the Companies participate (such plans and
related trusts, insurance and annuity contracts, funding media and related
agreements and arrangements, other than any "multiemployer plan" (within the
meaning of Section 3(37) of ERISA), being hereinafter referred to as the
"Benefit Plans" and any such multiemployer plans being hereinafter referred to
as the "Multiemployer Plans") comply in all material respects with all
requirements of the Department of Labor and the Internal Revenue Service, and
with all other applicable law, and neither of the Companies has taken or failed
to take any action with respect to the Benefit Plans or Multiemployer Plans
which might create any material liability on the part of either of the
Companies or the Purchaser. Each "fiduciary" (within the meaning of Section
3(21)(A) of ERISA) as to each Benefit Plan and as to each Multiemployer Plan
has complied in all material respects with the requirements of ERISA and all
other applicable laws in respect of each such Plan. The Companies have
furnished to the Purchaser copies of all Benefit Plans and Multiemployer Plans
and all financial statements, actuarial reports and annual reports and returns
filed with the Internal Revenue Service with respect to such Benefit Plans and
Multiemployer Plans for a period of three years prior to the date hereof. Such
financial statements and actuarial reports and annual reports and returns are
true and correct in all material respects, and none of the actuarial
assumptions underlying such documents have changed since the respective dates
thereof. In addition:
(i) Each Benefit Plan intended to be qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), has received a favorable determination letter from the Internal
Revenue Service as to its qualification thereunder;
(ii) No Benefit Plan which is a "defined benefit
plan" (within the meaning of Section 3(35) of ERISA) (hereinafter referred to
as the "Defined Benefit Plans") or Multiemployer Plan has incurred an
"accumulated funding deficiency" (within the meaning of Section 412(a) of the
Code), whether or not waived;
<PAGE> 17
(iii) No "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred with respect to any Defined Benefit Plan or
any Multiemployer Plan;
(iv) Neither of the Companies has withdrawn
(partially or totally within the meaning of ERISA) from any Benefit Plan or any
Multiemployer Plan and neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated herein will result in the
withdrawal (partially or totally within the meaning of ERISA) from any Benefit
Plan or any Multiemployer Plan, or in any withdrawal or other liability of any
nature to either of the Companies or the Purchaser under any Benefit Plan or
any Multiemployer Plan;
(v) No "prohibited transaction" (within the
meaning of Section 406 of ERISA or Section 4975(c) of the Code) has occurred
with respect to any Benefit Plan or any Multiemployer Plan;
(vi) The excess of the aggregate present value of
accrued benefits over the aggregate value of the assets of any Defined Benefit
Plan (computed both on a termination basis and on an ongoing basis) is not more
than $-0-, and the aggregate withdrawal liability of either of the Companies
with respect to any Multiemployer Plan assuming the withdrawal of either of the
Companies from said Multiemployer Plan, is not more than $-0-;
(vii) No provision of any Benefit Plan or of any
agreement, and no act or omission of either of the Companies, in any way
limits, impairs, modifies or otherwise affects the right of either of the
Companies or the Purchaser unilaterally to amend or terminate any Benefit Plan
after the Closing, subject to the requirements of applicable law;
(viii) There are no contributions which are or
hereafter will be required to have been made to trusts in connection with any
Benefit Plan that would constitute a "defined contribution plan" (within the
meaning of Section 3(34) of ERISA) (hereinafter referred to as a "Defined
Contribution Plan"), with respect to services rendered by Company-Based
Employees of either of the Companies prior to the date of the Closing;
(ix) Other than claims in the ordinary course for
benefits with respect to the Benefit Plans or Multiemployer Plans, there are no
actions, suits or claims (including claims for income Taxes, interest,
penalties, fines or excise Taxes with respect thereto) pending with respect to
any Benefit Plan or any Multiemployer Plans, or any circumstances which might
give rise to any such action, suit or claim (including claims for income Taxes,
interest, penalties, fines or excise Taxes with respect thereto);
<PAGE> 18
(x) All reports, returns and similar documents
with respect to the Benefit Plans required to be filed with any governmental
agency have so been filed;
(xi) Neither of the Companies has incurred any
liability to the Pension Benefit Guaranty Corporation (except for required
premium payments). No notice of termination has been filed by the plan
administrator (pursuant to Section 4041 of ERISA) or issued by the Pension
Benefit Guaranty Corporation (pursuant to Section 4042 of ERISA) with respect
to any Benefit Plan subject to ERISA. There has been no termination of any
Defined Benefit Plan or any related trust by either of the Companies; and
(xii) Neither of the Companies has any obligation
to provide health or other welfare benefits to former, retired or terminated
Company-Based Employees, except as specifically required under Section 4980B of
the Code. Each of the Companies has substantially complied with the notice and
continuation requirements of Section 4980B of the Code and the regulations
thereunder.
P. Labor Relations. There have been no violations of any
federal, state or local statutes, laws, ordinances, rules, regulations, orders
or directives with respect to the employment of individuals by, or the
employment practices or work conditions of, either of the Companies, or the
terms and conditions of employment, wages and hours except for such violations
as are not reasonably likely to have, either singly or in the aggregate, a
Material Adverse Effect. Neither of the Companies is engaged in any unfair
labor practice or other unlawful employment practice and there are no charges
of unfair labor practices or other employee-related complaints pending or, to
the best knowledge of each of the Companies and each of the Shareholders,
threatened against either of the Companies before the National Labor Relations
Board, the Equal Employment Opportunity Commission, the Occupational Safety and
Health Review Commission, the Department of Labor or any other federal, state,
local or other governmental authority. There is no strike, picketing, slowdown
or work stoppage or organizational attempt pending, threatened against (to the
best knowledge of each of the Companies and each of the Shareholders) or
involving either of the Companies. No issue with respect to union
representation is pending or, to the best knowledge of each of the Companies
and each of the Shareholders, threatened with respect to the employees of
either of the Companies. No union or collective bargaining unit or other labor
organization has ever been certified or recognized by either of the Companies
as the representative of any of the employees of either of the Companies.
Q. Increases in Compensation or Benefits. Except as set
forth in Exhibit II(Q), subsequent to the date of the 1997 Balance Sheet, there
have been no increases in the compensation payable or to become payable to any
of the Company-Based Employees of either of the Companies and there have been
no payments or
<PAGE> 19
provisions for any awards, bonuses, loans, profit sharing, pension, retirement
or welfare plans or similar or other disbursements or arrangements for or on
behalf of such employees (or related parties thereof), in each case, other than
pursuant to currently existing plans or arrangements, if any, set forth in
Exhibit II(O); provided, however, that in no event was any such increase in
compensation or any such payment or provision made with respect to any of the
Shareholders (or any members of the families of any of the Shareholders). All
bonuses heretofore granted to Company-Based Employees of either of the
Companies have been paid in full to such employees. The vacation policy of
each of the Companies is set forth in Exhibit II(Q). Except as set forth in
Exhibit II(Q), no Company-Based Employee of either of the Companies is entitled
to vacation time in excess of three weeks during the current calendar year and
no Company-Based Employee of either of the Companies has any accrued vacation
or sick time with respect to any prior period.
R. Insurance. A list and brief description of the
insurance policies maintained by each of the Companies is set forth in Exhibit
II(R). Such insurance policies are in full force and effect and all premiums
due thereon prior to or on the date of the Closing have been paid. Each of the
Companies has complied in all material respects with the provisions of such
policies. Such insurance is of comparable amounts and coverage as that which
companies engaged in similar businesses maintain in accordance with good
business practices. Neither of the Companies has received any notices of any
pending or threatened termination or premium increases with respect to any such
policies. Neither of the Companies has had any casualty loss or occurrence
which may give rise to any claim of any kind not covered by insurance and
neither of the Companies nor any of the Shareholders is aware of any occurrence
which may give rise to any claim of any kind not covered by insurance. No
third party has filed any claim against either of the Companies or the Business
for personal injury or property damage of a kind for which liability insurance
is generally available which is not fully insured, subject only to the standard
deductible. All claims against either of the Companies or the Business covered
by insurance have been reported to the appropriate insurance carrier on a
timely basis. Each of the Companies has adequate insurance and reserves to
cover any liability that may arise out of any claims, including but not limited
to workers compensation and health insurance claims, that may be asserted
against either of the Companies for occurrences prior to the date of the
Closing.
S. Conduct of Business. Neither of the Companies is
restricted from conducting the Business in any location by agreement or court
decree.
T. Allowances. Neither of the Companies has any
obligation outside of the ordinary course of business to make allowances to any
customers with respect to the Business.
<PAGE> 20
U. Use of Names. All names under which either of the
Companies currently conducts the Business are listed in Exhibit II(U). To the
best knowledge of each of the Companies and each of the Shareholders, there are
no other persons or businesses conducting businesses similar to those of the
Companies in the State of Arizona having the right to use or using the names
set forth in Exhibit II(U) or any variants of such names; and no other person
or business has ever attempted to restrain either of the Companies or any of
the Shareholders from using such names or any variant thereof except as set
forth on Exhibit II(U).
V. Power of Attorney. Neither of the Companies has
granted any power of attorney (revocable or irrevocable) to any person, firm or
corporation for any purpose whatsoever other than a power of attorney granted
to James F. Polese, Esq. by the Companies solely with respect to certain tax
matters.
W. Litigation; Disputes. Except as set forth in Exhibit
II(W), there are no material claims, disputes, actions, suits, investigations
or proceedings pending or, to the best knowledge of each of the Companies and
each of the Shareholders, threatened against or affecting either of the
Companies, the Business or any of the properties or assets of either of the
Companies, no such claim, dispute, action, suit, proceeding or investigation
has been pending or, to the best knowledge of each of the Companies and each of
the Shareholders, threatened during the five-year period preceding the date of
the Closing and, to the best of the knowledge of each of the Companies and each
of the Shareholders, there is no basis for any such claim, dispute, action,
suit, investigation or proceeding. Neither of the Companies nor any of the
Shareholders has any knowledge of any default under any such action, suit or
proceeding. Neither of the Companies is in default in respect of any judgment,
order, writ, injunction or decree of any court or of any federal, state,
municipal or other government department, commission, bureau, agency or
instrumentality or any arbitrator except for such defaults as are not
reasonably likely to have, either singly or in the aggregate, a Material
Adverse Effect.
X. Location of Business and Assets. Set forth in Exhibit
II(X) is each location (specifying state, county and city) where either of the
Companies (i) has a place of business, (ii) owns or leases real property and
(iii) owns or leases any other property, including equipment and furniture.
Y. Computer Software. Each of the Companies has the
right to use all computer software, including all property rights constituting
part of that computer software, used in connection with the Companies' business
operations (the "Computer Software"). A list of all written licenses
pertaining to the Computer Software is set forth in Exhibit II(Y) (the
"Licenses"). Neither of the Companies has knowledge that any of the Licenses
may not be valid or enforceable by either of the Companies or that the use of
the Computer Software or any of the Licenses may infringe upon or conflict with
the rights of any third party. Neither of the Companies has granted any
<PAGE> 21
licenses to use the Computer Software or any sub-licenses with respect to any
of the Licenses, except that Americare will grant Unalign Staffing
Technologies, Inc. a zero royalty license to use its current payroll software.
Z. Worksite Employee Numbers. The number of persons paid
as employees of all of the clients of the Companies for which the Companies
paid such employees' wages during the three-month period ending November 30,
1997 was estimated by the Companies to be 7,000. An accurate count will be
provided by the Companies within seven days after the date of the Closing with
accompanying documentation supporting their count. As of November 30, 1997,
each of the Companies had paid all salaries, wages, employer's portion of
social security, Medicare premiums, federal employment Taxes, health care and
workers' compensation costs and state unemployment Taxes with respect to such
worksite employees due and payable by such date and since November 30, 1997,
each of the Companies has continued to pay such amounts as they have become due
and payable.
AA. Bank Accounts. Set forth in Exhibit II(AA) attached
hereto is a list of all bank accounts maintained in the name of each of the
Companies and a brief description of persons having power to sign on behalf of
either of the Companies with respect to each such account.
BB. Disclosure. No representation or warranty made under
any Section hereof and none of the information furnished by either of the
Companies or any of the Shareholders set forth herein, in the exhibits hereto
or in any document delivered by either of the Companies or any of the
Shareholders to the Purchaser, or any authorized representative of the
Purchaser, pursuant to this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SHAREHOLDERS
Each of the Shareholders hereby represents and warrants to,
and covenants and agrees with, the Purchaser, as of the date of the Closing,
that:
A. Authority. Such Shareholder is fully able to execute
and deliver this Agreement and to perform such Shareholder's covenants and
agreements hereunder, and this Agreement constitutes a valid and legally
binding obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except to the extent that the enforceability thereof
may be limited by applicable
<PAGE> 22
bankruptcy, insolvency or similar laws affecting the enforcement of creditor's
rights generally or by general principles of equity (regardless of whether
enforcement is sought in a court of law or equity).
B. No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, violates any statute, ordinance, regulation, order,
judgment or decree of any court or governmental agency, or conflicts with or
will result in any breach of any of the terms of or constitute a default under
or result in the termination of or the creation of any lien pursuant to the
terms of any contract or agreement to which such Shareholder is a party or by
which such Shareholder or any of such Shareholder's assets is bound.
C. Ownership of Shares. Such Shareholder owns his Shares
free and clear of any lien, encumbrance, charge, security interest or claim
whatsoever. Such Shareholder has the right to transfer his Shares to the
Purchaser and, upon transfer of such Shareholder's Shares to the Purchaser
hereunder, the Purchaser will acquire good and marketable title to such
Shareholder's Shares, free and clear of any lien, encumbrance, charge, security
interest or claim whatsoever.
D. Investment. (i) Such Shareholder has received a copy
of the Purchaser's (x) Prospectus dated November 11, 1997 and (y) Quarterly
Report on Form 10-Q for the period ended September 30, 1997 and such other
information relating to the business and affairs of the Purchaser which such
Shareholder has requested, and all additional information which such
Shareholder has considered necessary to verify the accuracy of the information
so received. Such Shareholder has had the opportunity to ask questions of and
receive answers from the Purchaser concerning the terms and conditions of the
transactions contemplated by this Agreement. On the basis of the foregoing,
such Shareholder is familiar with the operations, business plans and financial
condition of the Purchaser.
(ii) Such Shareholder understands that the
Purchaser proposes to issue and deliver to such Shareholder, under certain
circumstances, shares of NCES Common Stock pursuant to this Agreement without
compliance with the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"); that for such purpose the Purchaser will rely
upon the representations, warranties, covenants and agreements contained
herein; and that such non-compliance with registration is not permissible
unless such representations and warranties are correct and such covenants and
agreements performed.
(iii) Such Shareholder understands that, under
existing rules of the Securities and Exchange Commission (the "SEC"), such
Shareholder may be unable to sell his shares of NCES Common Stock except to the
extent that such shares of NCES Common Stock may be sold (A) pursuant to an
effective registration statement covering such shares pursuant to the
Securities Act or (B) in a bona fide
<PAGE> 23
private placement to a purchaser who shall be subject to the same restrictions
on any resale or (C) subject to the restrictions contained in Rule 144 under
the Securities Act ("Rule 144"). Such Shareholder understands that the
Purchaser is under no obligation to effect a registration of the Shareholder's
shares of NCES Common Stock under the Securities Act.
(iv) Such Shareholder is familiar with the
provisions of Rule 144 and the limitations upon the availability and
applicability of such Rule.
(v) Such Shareholder, either alone or with his or
her financial advisor(s) or representative(s), has such knowledge and
experience in financial and business matters that he or she is capable of
evaluating the merits and risks inherent in the acquisition of restricted
securities such as the shares of NCES Common Stock and his financial position
is such that he can afford to retain his shares of NCES Common Stock for an
indefinite period of time without realizing any direct or indirect cash return
on his investment.
(vi) Such Shareholder is acquiring his shares of
NCES Common Stock for his account and not with a view to, or for sale in
connection with, the distribution thereof within the meaning of the Securities
Act.
E. Representation by Counsel.
(i) Each of Shostack, Ian Ackerman and
Zanza Personnel, Inc has been represented by Sacks Tierney in connection with
his or its execution and delivery of this Agreement, the Employment Agreement,
the Escrow Agreement, the other documents and agreements executed in connection
therewith and the consummation of the transactions contemplated by this
Agreement.
(ii) K. Shostack has been represented by
Gallagher & Kennedy in connection with her execution and delivery of this
Agreement, the Escrow Agreement, the other documents and agreements executed in
connection therewith and the consummation of the transactions contemplated by
this Agreement.
(iii) Theresa Conroy has been advised of
the importance of this Agreement, the Escrow Agreement, the other documents and
agreements executed in connection therewith and the consummation of the
transactions contemplated by this Agreement and has been given the opportunity
to avail herself of counsel of her choice and to review such documents with
such counsel. Insofar as Theresa Conroy has deemed necessary or appropriate,
she has reviewed such documents with, and sought the advice of, counsel of her
own choice.
<PAGE> 24
SECTION IV
REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS OF THE PURCHASER
The Purchaser hereby represents and warrants to, and
covenants, and agrees with, the Companies and the Shareholders, as of the date
of the Closing, that:
A. Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to purchase the Shares.
B. Authority. The execution and delivery of this
Agreement by the Purchaser, the performance by the Purchaser of its covenants
and agreements hereunder and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action, and this Agreement constitutes a valid and legally binding
obligation of the Purchaser, enforceable against the Purchaser in accordance
with its terms.
C. No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, violates any provision of the certificate of incorporation
or bylaws of the Purchaser or any statute, ordinance, regulation, order,
judgment or decree of any court or governmental agency, or conflicts with or
will result in any breach of any of the terms of or the creation of any lien
pursuant to the terms of any contract or agreement to which the Purchaser is a
party or by which the Purchaser or any of its assets is bound.
D. Investment. The Purchaser is acquiring the Shares
for its own account and not with a view toward resale or redistribution thereof
within the meaning of the Securities Act.
E. Reports Under the Securities Exchange Act of 1934.
The Purchaser covenants and agrees that it will continue to be subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended and
will file all periodic reports and other filings required to be filed
thereunder.
<PAGE> 25
SECTION V
CONDUCT OF THE BUSINESS
Each of the Companies and each of the Shareholders, jointly
and severally, hereby covenants and agrees with the Purchaser that, except as
hereafter consented to in writing by the Purchaser, from and after the date of
this Agreement and until the Closing, neither of the Companies shall:
A. Operation of the Business. Make a purchase, sale or
lease in respect of either of the Companies or introduce any method of
management, accounting or operation in respect of either of the Companies,
except in a manner consistent with prior practice.
B. Accounts Receivable. Fail to maintain sales or
accounts receivable on a normal basis or change the cash equivalent accounts or
the methods or procedures for billing, collecting, or recording customer
accounts receivable or reserves for doubtful accounts.
C. Properties, Plant and Equipment. Fail to maintain,
repair, service, preserve, and in any way further encumber, its properties,
other than accounts receivable collected upon and supplies used in the ordinary
course of business after the date hereof.
D. No Loans, Advances, etc. Make any loans or
advances, debt repayments or forgiveness, interest payments or forgiveness, or
grant pay raises, bonuses or awards, or unusual salary or other payments,
disbursements or other distributions, directly or indirectly, in any form to
any management personnel, Company-Based Employee, director, officer or
shareholder of either of the Companies, or any relative of any such person, or
entities or persons affiliated with or related to any such management
personnel, Company-Based Employee, director, officer or shareholder of either
of the Companies.
E. No Dividends; Distributions; Payment of Certain
Indebtedness. Except as set forth in Exhibit V(E), declare or pay any dividend
or make any other distribution in respect of its capital stock, or, except as
specifically contemplated by this Agreement, directly or indirectly, purchase,
redeem or otherwise acquire or dispose of any shares of its capital stock or,
except in the ordinary course of business, pay or discharge any outstanding
indebtedness and in any event pay or discharge any outstanding indebtedness of
any of the Shareholders, the relatives or affiliates of any of the Shareholders
or of any of the management personnel, Company-Based Employees, directors or
officers of either of the Companies.
<PAGE> 26
F. Preservation of Organization, Company-Based Employees
and Business Relationships. Fail to use its reasonable best efforts to: (i)
preserve the present business organization of each of the Companies intact;
(ii) keep available the services of the present Company-Based Employees of each
of the Companies; and (iii) preserve present relationships and goodwill with
entities or persons having business dealings with either of the Companies,
including, without limitation, existing customers of either of the Companies.
G. Books and Records. Fail to maintain the books and
records of each of the Companies in accordance with good business practices, on
a basis consistent with prior practice.
H. Compliance with Laws. Fail to use its best efforts
to comply in all material respects with all statutes, ordinances, regulations,
orders, judgments and decrees of every court or governmental entity or agency
applicable to each of the Companies and to the conduct of the Business and
perform all of its obligations with respect thereto without default.
I. Maintenance of Insurance. Fail to maintain and pay
all premiums with respect to such policies of insurance as are currently held
in the name of either of the Companies.
J. Contracts. Make any change adverse to either of the
Companies in the terms of any Contract or fail to perform any of its
obligations with respect thereto without default.
K. Claims. Waive, cancel, sell or otherwise dispose of
for less than the face value thereof any claim or right either of the Companies
has against others.
L. Bonuses, etc. Take any action described in the first
sentence of Section II(Q) hereof.
M. Billings; Accounts Payable. Fail to bill for
services rendered or permit any account payable or accrued expense of either of
the Companies to be outstanding for more than sixty (60) days, other than
accounts payable or accrued expenses being diligently contested in good faith
by either of the Companies and as to which the Purchaser shall have consented
in writing.
N. Contracts. Enter into any contract, contractual
obligation, bank debt, lease, loan or other commitment, written or oral, or
agreement for amounts to be due to third parties, other than in the ordinary
course of business.
<PAGE> 27
O. Encumbrances. Permit any encumbrance, lien or
attachment against any of its property.
P. Further Information. Fail to make available to the
Purchaser the books of account, records, Tax Returns, leases, contracts and
other documents or agreements of either of the Companies and the Business as
the Purchaser, its counsel, accountants and its authorized representatives may
from time to time reasonably request.
Q. Cooperation. Fail to cooperate fully with the
Purchaser, do all things reasonably necessary to assist the Purchaser and use
its reasonable best efforts at its own expense to obtain all consents and
approvals necessary for the transfer of the Shares, including the furnishing of
all financial and other information reasonably required by the party whose
consent or approval is being sought.
SECTION VI
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE COMPANIES,
THE SHAREHOLDERS AND THE PURCHASER
A. Publicity. Each of the Companies and each of the
Shareholders covenants and agrees, jointly and severally, that any and all
publicity (whether written or oral) and notices to third parties (other than
employees of the Companies) concerning the sale of the Shares and other
transactions contemplated by this Agreement shall be subject to the prior
written approval of the Purchaser, which approval may be withheld in the sole
discretion of the Purchaser.
B. Correspondence, etc. Each of the Companies and each
of the Shareholders covenants and agrees, jointly and severally, that each of
them will deliver to the Purchaser, promptly after the receipt thereof, all
inquiries, correspondence and other materials received by any of them from any
person or entity relating to either of the Companies or the Business.
C. Confidentiality. Each of the Companies, the
Purchaser and each of the Shareholders covenants and agrees that it or he shall
keep confidential any and all nonpublic information relating to the Purchaser
(with respect to either of the Companies and each of the Shareholders) or,
prior to the Closing, either of the Companies or the Business (with respect to
the Purchaser), and none of them shall disclose such information without the
prior written consent of the other party.
<PAGE> 28
D. Software.
(i) In the event Shostack "Successfully Develops"
"Internet-Based Computer Software for Professional Employer Organizations"
(each as hereinafter defined), Shostack shall provide the Purchaser with
written notice thereof (the "Initial Notice"), describing such software in
reasonable detail, and shall give the Purchaser a right of first refusal to
license such Internet-Based Computer Software for Professional Employer
Organizations on an exclusive basis. Such right of first refusal shall be
exercised by the Purchaser by providing Shostack with a written exercise notice
(the "Exercise Notice") within 30 days after the Purchaser's receipt of the
Initial Notice, which Exercise Notice shall set forth the license fee proposed
to be paid by the Purchaser. The license fee proposed will state (1) a license
fee consisting of (a) a fee per worksite employee per year and (b) a guaranty
of a minimum number of employees for each year of the proposed license; and/or
(2) flat company license fee for a stated maximum number of worksite employees
per year for a company wide license. Shostack may elect to take either
proposed fee, or neither. In the event that the Purchaser does not timely
deliver an Exercise Notice or if Shostack elects not to accept the Purchaser's
offer contained in an Exercise Notice, Shostack shall be entitled to license
the Internet-Based Computer Software for Professional Employer Organizations to
any party on terms no less favorable to Shostack than those set forth in the
Exercise Notice, if any. For purposes of interpreting the term "on terms no
less favorable", the proposed minimum guarantee and flat company license should
be reasonably adjusted by taking into account the relative size of the
professional employer organization taking the license, with size measured by
the number of worksite employees as otherwise defined in this Agreement. For
purposes of this Agreement, Internet-Based Computer Software for Professional
Employer Organizations shall mean Payroll Processing and Human Resource
Management for Professional Employer Organizations, and such software shall be
considered Successfully Developed if such software is marketed and sold to the
Purchaser or another professional employer organization customer which is not
related to or an affiliate of Shostack or S&F Employee Software, L.L.C., except
that S&F Employee Software, L.L.C. may license such software to Unalign
Staffing Technologies, Inc. on an exclusive or non-exclusive basis at fair
market value if Shostack elects not to accept the Exercise Notice and such
license shall satisfy the "Successfully Developed" provision above if such
license is on "terms no less favorable" as defined above. If Shostack elects
to accept the Exercise Notice, S&F Employee Software, L.L.C. may,
notwithstanding anything to the contrary above, license the software to Unalign
Staffing Technologies, Inc. on the same terms (adjusted for size) as proposed
by Purchaser.
(ii) In connection with the development of such software, the
Purchaser will consider, upon written notice from Shostack, allowing S&F
Employee Software, L.L.C. to test some or all of the Internet-Based Human
Resource and Payroll Management Software at Americare, which consideration not
be unreasonably
<PAGE> 29
withheld. Shostack will cause S&F Employee Software, L.L.C. to extend to
Americare a zero royalty license for such software for the lesser of the
duration of the Employment Agreement or the Purchaser exercises its right to
first refusal pursuant to or such right lapses pursuant to subsection (i)
above.
(iii) Subject to subsection (i) above, each of the
parties acknowledges and agrees that the Internet-Based Computer Software for
Professional Employer Organizations shall be the sole property of S&F Employee
Software, L.L.C. including all tangible and intangible and intellectual
property rights therein, and expressly including all trade secrets, know-how,
and rights in any patentable innovations, and the sole and exclusive worldwide
right to all common law and statutory copyrights, and all renewals and
extension thereof, including the right to reproduce any works based thereon, to
distribute copies of phonorecords to the public by sale or other transfer of
ownership or by rental, lease or lending; to perform and display the
Internet-Based Computer Software for Professional Employer Organizations
publicly and hereby assigns all claims, rights, title and interest in such
software to Shostack. Shostack agrees to indemnify and hold all members of the
Purchaser Group (as hereinafter defined) harmless from any claims from any
party relating to the development, ownership or any other rights with respect
to such software.
E. Guarantees. The Shareholders shall use their
reasonable best efforts (it being understood and agreed that nothing contained
herein shall require the Shareholders to obtain the guarantee by any third
party to replace either Americare or any subsidiary thereof (other than PRM (as
hereinafter defined)) to cause each of Americare or any subsidiary thereof
(other than PRM) to be released from obligations and guarantees (the
"Guarantees"), if any, made by any of them in connection with any contract,
lease or agreement in favor of a third party including, but not limited to,
loans issued by certain banks, individuals and companies to the either of the
Companies, and each of the Shareholders agrees to indemnify, defend and hold
harmless Americare and/or such subsidiary from and against all Damages (as
hereinafter defined) sustained or incurred by Americare and/or such subsidiary
by reason of the Guarantees or the failure to perform fully any obligations
pursuant to such contracts, leases or agreements.
SECTION VII
CLOSING
A. Time and Place of Closing. The closing of the
purchase and sale of the Shares as set forth herein (the "Closing") shall be
held at the offices of Haythe & Curley, 237 Park Avenue, New York, New York
10017 at 12:00 P.M., local time on December 31, 1997 or such date as shall be
mutually agreed upon by
<PAGE> 30
the parties; provided, however, that the parties agree that the Closing may
occur by telecopier and if the applicable waiting period under the H-S-R Act
has not expired or terminated, the transactions contemplated by this Agreement
will close in escrow on December 31, 1997 or such other date as shall be
mutually agreed upon by the parties pursuant to the terms of the Escrow
Agreement between the Shareholders and the Purchaser, which agreement shall be
substantially in the form attached hereto as Exhibit VII(A) (the "Escrow
Agreement").
B. Delivery of the Shares. Delivery of the Shares shall
be made by the Shareholders to the Purchaser at the Closing by delivering one
or more certificates in negotiable form representing the Shares, each such
certificate to be accompanied by any requisite documentary or stock transfer
Taxes, against payment of the Purchase Price payable at the Closing.
C. Tax Matters. All transfer, documentary, sales, use,
stamp, registration, value added and other such Taxes and fees (including any
penalties and interest) incurred in connection with this Agreement shall be
borne and paid by the Shareholders when due, and each of the Shareholders will,
at such Shareholder's own expense, file all necessary Tax Returns and other
documentation with respect to all such Taxes and fees, and, if required by
applicable law, the Purchaser will join in the execution of any such Tax
Returns and other documentation.
SECTION VIII
CONDITIONS TO THE SHAREHOLDERS' OBLIGATION TO CLOSE
The obligation of the Shareholders to sell the Shares and the
obligation of the Shareholders otherwise to consummate the transactions
contemplated by this Agreement at the Closing are subject to the following
conditions precedent, any or all of which may be waived by the Shareholders
(acting jointly) in writing in their sole discretion, and each of which the
Purchaser hereby agrees to use its best efforts to satisfy at or prior to the
Closing:
A. No Litigation. No action, suit or proceeding against
either of the Companies, any of the Shareholders or the Purchaser relating to
the consummation of any of the transactions contemplated by this Agreement or
any governmental action seeking to delay or enjoin any such transactions shall
be pending or threatened.
B. Representations and Warrants. The representations
and warranties made by the Purchaser herein shall be correct as of the date of
the Closing in all respects with the same force and effect as though such
representations and warranties had been made as of the date of the Closing,
and, on the date of the
<PAGE> 31
Closing, the Purchaser shall deliver to the Companies and the Shareholders a
certificate dated the date of the Closing to such effect. All the terms,
covenants and conditions of this Agreement to be complied with and performed by
the Purchaser on or before the date of the Closing shall have been duly
complied with and performed in all material respects, and, on the date of the
Closing, the Purchaser shall deliver to the Shareholders a certificate dated
the date of the Closing to such effect.
C. Other Certificates. The Shareholders shall have
received such additional certificates, instruments and other documents in form
and substance satisfactory to them and their counsel, as they shall have
reasonably requested in connection with the transactions contemplated hereby.
D. Deliveries. All deliveries by the Purchaser required
hereunder shall have been made.
E. Payment of the Purchase Price. Each of the
Shareholders shall have received from the Purchaser (i) a certified check made
payable to the order of, or a wire transfer to an account designated by, each
of the Shareholders in the amount set forth opposite such Shareholder's name on
Schedule I hereto and (ii) a certificate representing the number of shares of
NCES Common Stock determined on the basis set forth opposite such Shareholder's
name on Schedule I hereto.
F. Employment Agreement. The Purchaser and Shostack
shall have entered into an employment agreement substantially in the form of
Exhibit VIII(F) attached hereto (the "Employment Agreement").
G. Escrow Agreement. If the applicable waiting period
under the H-S-R Act has not expired or terminated, the Purchaser and the
Shareholders shall have entered into the Escrow Agreement.
H. Opinion. The Shareholders shall have received an
opinion of Haythe & Curley, counsel to the Purchaser, delivered to the
Shareholders pursuant to the instructions of the Purchaser, dated the date of
the Closing, substantially to the effect set forth in Exhibit VIII(H) attached
hereto.
SECTION IX
CONDITIONS TO THE PURCHASER'S OBLIGATION TO CLOSE
The obligation of the Purchaser to purchase the Shares and
otherwise to consummate the transactions contemplated by this Agreement at the
Closing is subject to the following conditions precedent, any or all of which
may be waived by the
<PAGE> 32
Purchaser in its sole discretion, and each of which each of the Companies and
each of the Shareholders hereby agrees to use his or its best efforts to
satisfy at or prior to the Closing:
A. Opinion of Counsel. The Purchaser shall have
received an opinion of Squire, Sanders & Dempsey L.L.P., counsel for the
Companies, with respect to the Companies and, solely with respect to certain
opinions, the Shareholders, delivered to the Purchaser pursuant to the
instructions of the Companies, dated the date of the Closing, substantially to
the effect set forth in Exhibit IX(A) attached hereto.
B. No Litigation. No action, suit or proceeding against
either of the Companies, any of the Shareholders or the Purchaser relating to
the consummation of any of the transactions contemplated by this Agreement nor
any governmental action seeking to delay or enjoin any such transactions shall
be pending or threatened.
C. Representations and Warranties. The representations
and warranties made by each of the Companies and each of the Shareholders
herein shall be correct as of the date of the Closing in all respects with the
same force and effect as though such representations and warranties had been
made as of the date of the Closing, and, on the date of the Closing, each of
the Companies and each of the Shareholders shall deliver to the Purchaser a
certificate dated the date of the Closing to such effect. All the terms,
covenants and conditions of this Agreement to be complied with and performed by
each of the Companies and each of the Shareholders on or before the date of the
Closing shall have been duly complied with and performed in all material
respects and, on the date of the Closing, each of the Companies and each of the
Shareholders shall deliver to the Purchaser a certificate dated the date of the
Closing to such effect.
D. Other Certificates. The Purchaser shall have
received such other certificates, instruments and other documents, in form and
substance satisfactory to the Purchaser and its counsel, as it shall have
reasonably requested in connection with the transactions contemplated hereby.
E. Third Party Consents. The Purchaser shall have
received all necessary consents of third parties under the contracts,
agreements, leases, insurance policies and other instruments of each of the
Companies, the Purchaser or any of the Shareholders to the consummation of the
transactions contemplated hereby which consents shall not provide for the
acceleration of any liabilities or any other detriment to the Purchaser or
either of the Companies.
F. Employment Agreement. The Purchaser and Shostack
shall have entered into the Employment Agreement.
<PAGE> 33
G. Deliveries. All deliveries by the Companies and the
Shareholders required hereunder shall have been made.
H. Shares. All of the Shares shall have been sold by
the Shareholders and delivered to the Purchaser.
I. Dividend of Stock. The Purchaser shall have received
evidence of the dividend by Americare to the Shareholders of all of the capital
stock of Paralign Revenue Management, Inc., an Arizona corporation ("PRM"),
representing Americare's Revenue Management and Technical Recruiting Divisions
(the "Division") on terms reasonably acceptable to the Purchaser.
J. Escrow Agreement. If the applicable waiting period
under the H-S-R Act has not expired or terminated, the Purchaser and the
Shareholders shall have entered into the Escrow Agreement.
K. Counsel Letter; Broker Writing. The Purchaser shall
have received (x) the Broker Letter and (y) letters, reasonably acceptable to
the Purchaser and its counsel, that (x) Sacks Tierney represents Shostack, Ian
Ackerman and Zanza Personnel, Inc. and (y) Gallagher & Kennedy represents K.
Shostack with respect to this Agreement and the consummation of the
transactions contemplated thereby.
L. BankOne. The Purchaser shall substitute funding for
the Companies' line of credit with BankOne currently in place.
SECTION X
INDEMNIFICATION
A. Indemnification by the Shareholders. Each of the
Shareholders, jointly and severally, shall indemnify and hold harmless the
Purchaser from and against any and all losses, claims, assessments, demands,
damages, liabilities, obligations, costs and/or expenses whatsoever
(hereinafter referred to collectively as the "Purchaser's Damages"), including,
without limitation, Purchaser's Counsel Expenses (as hereinafter defined),
sustained or incurred by any member of the Purchaser Group and/or either of the
Companies (i) as a result of or arising from the breach of any of the
obligations, covenants or provisions of, or the inaccuracy of any of the
representations or warranties made by, either of the Companies or any of the
Shareholders herein, (ii) arising out of or relating to PRM, the Division or
the dividend thereof (including any Tax due and payable by the Companies from
any gain on the sale thereof or otherwise), (iii) arising out of or related to
the development of the Internet-Based Computer Software for Professional
Employer Organizations, including any infringement claims arising therefrom,
(iv) arising out of or relating to
<PAGE> 34
the Share Repurchase Agreement or Voting Trust Agreement including but not
limited to any claim by K. Shostack arising therefrom, (v) arising out of or
relating to any claims or litigations set forth on Exhibit II(W), (vi) arising
out of or relating to the failure to pay or perform any Guarantees or (vii)
arising out of or relating to any claim that the Companies (or either of them)
are in violation of any statutes, rules and/or regulations relating to
professional employer organizations. For purposes hereof "Purchaser's Counsel
Expenses" shall mean reasonable fees and disbursements of counsel howsoever
sustained or incurred by any member of the Purchaser Group and/or either of the
Companies, including, without limitation, in any action or proceeding between
any member of the Purchaser Group and/or either of the Companies and any of the
Shareholders or in any action or proceeding between the Purchaser and/or either
of the Companies and any third party. In addition to the right of the
Purchaser to indemnification hereunder, the Purchaser shall have the right from
time to time to set off the amount of any of the Purchaser's Damages against
any Earn-Out Payments or Additional Payments due and payable to the
Shareholders as provided for in Section I(C) or I(D) hereof; provided, however,
that the Purchaser shall not have the right to set-off under this Section X(A)
the amount of the Purchaser's Damages which it may sustain or incur by reason
of a breach of any of the Shareholders' covenants contained in Section XI
hereof.
B. Indemnification by the Purchaser. The Purchaser
shall indemnify and hold harmless each of the Shareholders and, in the case of
Shareholders who are individuals, each of their respective heirs and legal
representatives (collectively, the "Shareholder Group") from and against any
and all losses, claims, assessments, demands, damages, liabilities,
obligations, costs and/or expenses whatsoever (hereinafter referred to as the
"Shareholders' Damages"; the Shareholders' Damages and the Purchaser's Damages
are sometimes referred to herein as the "Damages"), including, without
limitation, Shareholders' Counsel Expenses (as hereinafter defined), sustained
or incurred by any member of the Shareholder Group as a result of or arising
from the breach of any of the obligations or covenants or provisions of, or the
inaccuracy of any of the representations or warrants made by, the Purchaser
herein. For purposes hereof "Shareholders' Counsel Expenses" shall mean
reasonable fees and disbursements of counsel howsoever sustained or incurred by
any member of the Shareholder Group, including, without limitation, in any
action or proceeding between any member of the Shareholder Group and the
Purchaser and/or either of the Companies or in any action or proceeding between
any of the Shareholders and any third party.
C. Procedure for Indemnification. In the event that any
party hereto shall incur any Damages in respect of which indemnity may be
sought by such party pursuant to this Section X, the party from whom such
indemnity may be sought (the "Indemnifying Party") shall be given written
notice thereof by the party seeking such indemnity (the "Indemnified Party"),
which notice shall specify the amount and nature of such Damages and include
the request of the Indemnified Party for
<PAGE> 35
indemnification of such amount. The Indemnifying Party shall within 30 days
pay to the Indemnified Party the amount of the Damages so specified.
D. Subrogation. The Shareholders shall be subrogated to
all rights of the Purchaser or the Companies with respect to any claim for
which the Purchaser or either of the Companies has been indemnified by the
Shareholders hereunder; provided, that, the Purchaser shall not be required to
make any claim against either of the Companies or any other party in order to
pursue any claim against any of the Shareholders and provided further, that
none of the Shareholders shall be entitled to any indemnification or right of
contribution from either of the Companies or have any other rights against
either of the Companies in connection with any claim made hereunder.
E. Limits on Indemnification.
(i) Notwithstanding anything in this Section X to the
contrary, no party shall be entitled to indemnification pursuant to this
Section X with regard to any misrepresentation or breach of warranty or the
litigations referenced in clause (v) of Section X(A) hereof unless and until
the aggregate amount of Damages to which the indemnity relates sustained or
incurred by such party with respect to all such misrepresentations and breaches
exceeds $100,000 ($50,000 with respect to all such litigations, which shall
reduce such $100,000 on a dollar-for-dollar basis).
(ii) Notwithstanding anything in this Section X to the
contrary, the aggregate liability of the Shareholders arising out of the
breaches of the representations and warranties of the Companies and the
Shareholders contained in this Agreement shall be limited to an amount equal to
the sum of (x) $15,000,000 and (y) the amounts which would be payable to the
Shareholders (and the Broker) except for the offset provisions contained in
Section X(A) hereof, as Earn-Out Payments (collectively, the "Shareholders
Limit"). In the event that the Purchaser shall not be entitled to receive
Purchaser's Damages because such Purchaser's Damages exceed the Shareholders
Limit as in effect at the time, but there is an increase in the Shareholders
Limit because the Shareholders have become entitled to receive an Earn-Out
Payment, the Purchaser shall be entitled to recover such excess Purchaser's
Damages by offsetting the amount thereof against the amount of such Earn-Out
Payment; provided, further, however, that in no event shall the Shareholders
have the right to pay the indemnification for such Purchaser's Damages in
consideration other than cash. The aggregate liability of the Purchaser
arising out of the breaches of the representations and warranties of the
Purchaser contained in this Agreement shall be limited to an amount equal to
the Shareholders Limit in effect from time to time.
<PAGE> 36
SECTION XI
NON-COMPETITION AGREEMENT
Following the consummation of the transactions contemplated
hereby, and in consideration thereof, none of the Shareholders shall (a)
subsequent to the date of the Closing and until five years after the date of
the Closing, directly or indirectly, (i) engage, whether as principal, agent,
investor, distributor, representative, stockholder, employee, consultant,
volunteer or otherwise, with or without pay, in any activity or business
venture, anywhere within a one hundred (100) mile radius of any facility in
which the Companies conduct the Business as of the date of the Closing, which
is competitive with the Business or the Purchaser's business as a professional
employer organization or a provider of staffing to healthcare organizations,
(ii) solicit or entice or endeavor to solicit or entice away from any member of
the Purchaser Group (as hereinafter defined) any person who was or is at the
time of the solicitation or enticement a director, officer, employee, agent or
consultant of such member of the Purchaser Group, either on any of the
Shareholders' own account or for any person, firm, corporation or other
organization, whether or not such person would commit any breach of such
person's contract of employment by reason of leaving the service of such member
of the Purchaser Group, (iii) solicit or entice or endeavor to solicit or
entice away any person who was or is at the time of the solicitation or
enticement a client or customer of any member of the Purchaser Group, either on
any of the Shareholders' own account or for any other person, firm, corporation
or organization, or (iv) employ any person who was a director, officer or
employee of any member of the Purchaser Group or any person who is or may be
likely to be in possession of any confidential information or trade secrets
relating to the business of any member of the Purchaser Group, or (b) at any
time, take any action or make any statement the intended effect of which would
be, directly or indirectly, to impair in any material respect the goodwill of
any member of the Purchaser Group or the business reputation or good name of
any member of the Purchaser Group, or be otherwise detrimental in any material
respect to the Purchaser and/or either of the Companies, including any action
or statement intended, directly or indirectly, to benefit a competitor of any
member of the Purchaser Group. Because the remedy at law for any breach of the
foregoing provisions of this Section XI would be inadequate, each of the
Shareholders hereby consents, in case of any such breach, to the granting by
any court of competent jurisdiction of specific enforcement, including, but not
limited to pre-judgment injunctive relief, of such provisions, as provided for
in Section XIII(F) hereof. Notwithstanding the foregoing, the parties
acknowledge and agree that any and all business ventures and other activities
that are expressly permitted under other terms and provisions of this Agreement
or that are expressly permitted under the Employment Agreement and the
assistance of Dennis L. Hall in connection with such business ventures and
other activities (so long as such assistance does not (x) interfere in any
material respect with Mr. Hall's employment by the Companies or (y) materially
affect the Companies)
<PAGE> 37
shall be deemed to be permitted under, and shall not constitute a violation or
breach of, this Section XI.
The parties hereto agree that if, in any proceeding, the court
or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
For purposes hereof, "Purchaser Group" shall mean,
collectively, the Purchaser, the Companies and their subsidiaries, affiliates
and parent entities operating in the same lines of business.
Notwithstanding anything to the contrary, it shall not be
deemed a breach of clause (a)(i) above for Shostack to engage in any of the
following in accordance with the Employment Agreement (A) close down
Americare's Technical Recruiting lines of business and (B) manage or operate
(w) the Division, (x) Unalign, Inc. (a professional employer organization that
will market to businesses with employees who are represented by unions), (y) a
payroll financing and financial company that is as of the date hereof in the
development stage or (z) S&F Employer Software L.L.C. in connection with the
development and marketing of the Internet-Based Computer Software for
Professional Employer Organizations.
SECTION XII
BROKERS AND FINDERS
A. The Shareholders' Obligation. Neither the Purchaser
nor either of the Companies shall have any obligation to pay any fee or other
compensation to any person, firm or corporation dealt with by either of the
Companies or any of the Shareholders in connection with this Agreement and the
transactions contemplated hereby, other than a broker's fee equal to three
percent (3%) of the Purchase Price which shall be payable to the Broker, and
each of the Shareholders, jointly and severally, hereby agrees to indemnify and
save the Purchaser harmless from any liability, damage, cost or expense arising
from any claim for any such fee or other compensation. The parties acknowledge
and agree that all payments of the Purchase Price (whether in cash or in NCES
Shares) otherwise payable to the Shareholders shall be reduced by the amount of
such broker's fee and that such broker's fee shall be paid directly to the
Broker by the Purchaser,
B. The Purchaser's Obligation. Neither of the Companies
nor any of the Shareholders shall have any obligation to pay any fee or other
compensation to any person, firm or corporation dealt with by the Purchaser in
connection with this
<PAGE> 38
Agreement and the transactions contemplated hereby, and the Purchaser hereby
agrees to indemnify and save each of the Shareholders harmless from any
liability, damage, cost or expense arising from any claim for any such fee or
other compensation.
SECTION XIII
MISCELLANEOUS
A. Notices. All notices, requests or instructions
hereunder shall be in writing and delivered personally, sent by telecopy or
sent by registered or certified mail, postage prepaid, as follows:
(1) If to the Companies (prior to the Closing):
Americare Employers Group, Inc.
4350 East Camelback Road, Suite 100-E
Phoenix, Arizona 85018
Attention: President
Telecopy No.: (602) 263-4600
Telephone No.: (602) 230-2500
with copies to:
Americare Employers Group, Inc.
4350 East Camelback Road
Suite 100-E
Phoenix, Arizona 85018
Attention: Dennis L. Hall, Esq.
Telecopy No.: (602) 263-4600
Telephone No.: (602) 230-2500
and:
Squire, Sanders & Dempsey L.L.P.
40 North Central Avenue
Suite 2700
Phoenix, Arizona 85004
Attention: Jeffrey D. Warren, Esq.
Telecopy No.: (602) 253-8129
Telephone No.: (602) 528-4000
<PAGE> 39
(2) If to Ronald N. Shostack or Zanza Personnel,
Inc.:
4300 East Rose Lane
Paradise Valley, Arizona 85253
Telecopy No.: (602)
Telephone No.: (602)
with a copy to:
Sacks Tierney
2929 North Central Avenue
Phoenix, Arizona 85012-2742
Attention: Bob Lord, Esq.
Telecopy No.: (602)
Telephone No.: (602) 657-9408
(3) If to Ian Ackerman:
c/o Ackerman Limited
4747 North 7th Street
Phoenix, Arizona 85014
Telecopy No.: (602) 265-8093
Telephone No.: (602) 228-3501
with a copy to:
Sacks Tierney
2929 North Central Avenue
Phoenix, Arizona 85012-2742
Attention: Bob Lord, Esq.
Telecopy No.: (602)
Telephone No.: (602) 657-9408
(4) If to Kerran Shostack:
145 Sharon Lane
Grover Beach, California 93433
Telecopy No.: (805) 473-4834
Telephone No.: (805) 473-1176
<PAGE> 40
with a copy to:
Gallagher & Kennedy
2600 North Central
Phoenix, Arizona 85004-3020
Attention: Tom Lawless, Esq.
Telecopy No.: (602) 530-8282
Telephone No.: (602) 530-8542
(5) If to Theresa Conroy:
6139 North 31st Street
Phoenix, Arizona 85016
Telecopy No.: (602) 954-7450
Telephone No.: (602)
with a copy to:
Rayndon Law Office, P.C.
401 West Baseline Road, Suite 102
Tempe, Arizona 85283-5349
Attention: Darra Rayndon, Esq.
Telecopy No.: (602) 820-4421
Telephone No.: (602)
(6) If to the Purchaser or the Companies
(subsequent to the Closing):
NovaCare Employee Services, Inc.
2621 Van Buren Avenue
Norristown, Pennsylvania 19406
Attention: President
Telecopy No.: (610) 650-4706
Telephone No.: (610) 650-4700
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Andrew J. Beck, Esq.
Telecopy No.: (212) 682-0200
Telephone No.: (212) 880-6000
<PAGE> 41
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or telecopied, and two business days after the date of
mailing, if mailed.
B. Survival of Representations. Each representation,
warranty, covenant and agreement of the parties hereto herein contained shall
survive closing, notwithstanding any investigation at any time made by or on
behalf of any party hereto until March 31, 2001; provided, however, that if any
Earn-Out Payment would be payable to the Shareholders and the Broker for the
Earn-Out Period ending December 31, 2000, but for the failure of the Companies
to achieve the 2000 Employee Target (as hereinafter defined) during such
Earn-Out Period, then the representations, warranties, covenants and agreements
of the Companies and the Shareholders shall survive until the earlier of (x)
March 31, 2002 and (y) the date, if any, such Earn-Out Payment is paid to the
Shareholders and the Broker; except (i) for covenants and agreements to be
performed subsequent to the Closing and (ii) that nothing in the foregoing
shall be deemed to diminish any Indemnifying Party's indemnification
obligations to an Indemnified Party respecting (a) any matter for which written
notice to the Indemnifying Party has been given prior to the end of the
applicable indemnification period, and (b) claims for indemnification for Tax
matters and common law fraud, which shall survive for the duration of the
applicable statutes of limitations.
C. Entire Agreement. This Agreement and the documents
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby, and no modification hereof
shall be effective unless in writing and signed by the party against which it
is sought to be enforced.
D. Further Assurances. Each of the parties hereto shall
use such party's best efforts to take such actions as may be necessary or
reasonably requested by the other parties hereto to carry out and consummate
the transactions contemplated by this Agreement. Each of the Shareholders
agrees to execute and deliver any reasonable and customary management
representation letter requested by the Purchaser's independent certified public
accountants in connection with their audit of the Financial Statements.
E. Expenses. Each of the parties hereto shall bear such
party's own expenses in connection with this Agreement and the transactions
contemplated hereby; provided, however, that, except as set forth in Section
II(J), the Companies shall not bear any of such expenses.
F. Injunctive Relief. Notwithstanding the provisions of
Section XIII(G) hereof, in the event of a breach or threatened breach by any of
the
<PAGE> 42
Shareholders of the provisions of Section XI of this Agreement, each of the
Shareholders hereby consents and agrees that the Purchaser shall be entitled in
order to maintain the status quo ante pending the outcome of any arbitration
pursuant to Section XIII(G) hereof to an injunction or similar equitable relief
restraining any of the Shareholders, as the case may be, from committing or
continuing any such breach or threatened breach or granting specific
performance of any act required to be performed by any of the Shareholders, as
the case may be, under any such provision, without the necessity of showing any
actual damage or that money damages would not afford an adequate remedy and
without the necessity of posting any bond or other security. The parties
hereto hereby consent to the jurisdiction of the federal courts for the
District of Arizona and the Arizona state courts located in such District for
any proceedings under this Section XIII(F). The parties hereto agree that the
availability of arbitration in Section XIII(G) hereof shall not be used by any
party as grounds for the dismissal of any injunctive actions instituted by the
Purchaser pursuant to this Section XIII(F).
G. Dispute Resolution.
(i) Arbitration. The parties shall attempt
amicably to resolve disagreements by negotiating with each other. In the event
that the matter is not amicably resolved through negotiation, any controversy,
dispute or disagreement arising out of or relating to this Agreement (a
"Controversy") shall be submitted to J.A.M.S./Endispute for final binding
arbitration, which shall be conducted by a single arbitrator in the Phoenix,
Arizona area, pursuant to J.A.M.S./Endispute's Arbitration Rules (the "Rules").
The parties agree that, notwithstanding anything to the contrary contained in
the Rules, the arbitrator shall not award consequential, exemplary, incidental,
punitive or special damages.
(ii) Procedure. It is agreed that if any party
shall desire relief of any nature whatsoever from any other party as a result
of any Controversy, such party will initiate such arbitration proceedings
within a reasonable time, but in no event more than one (1) year after the
facts underlying said Controversy first arise or become known to the party
seeking relief (whichever is later). The failure of such party to institute
such proceedings within said period shall be deemed a full waiver of any claim
for such relief. The parties shall bear equally all costs of said arbitration
(other than their own attorney's fees and costs). The parties agree that the
decision and award of the Arbitrator shall be final and conclusive upon the
parties, in lieu of all other legal, equitable (except as provided in Section
XIII(F) hereof), or judicial proceedings between them, and that no appeal or
judicial review of the award or decision of the Arbitrator shall be taken, but
that such award or decision may be entered as a judgment and enforced in any
court having jurisdiction over the party against whom enforcement is sought.
Any equitable relief awarded under Section XIII(F) hereof shall be dissolved
upon issuance of the Arbitrator's decision and order.
<PAGE> 43
H. Invalidity. Should any provision of this Agreement
be held by a court or arbitration panel of competent jurisdiction to be
enforceable only if modified, such holding shall not affect the validity of the
remainder of this Agreement, the balance of which shall continue to be binding
upon the parties hereto with any such modification to become a part hereof and
treated as though originally set forth in this Agreement. The parties further
agree that any such court or arbitration panel is expressly authorized to
modify any such unenforceable provision of this Agreement in lieu of severing
such unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making such
other modifications as it deems warranted to carry out the intent and agreement
of the parties as embodied herein to the maximum extent permitted by law. The
parties expressly agree that this Agreement as modified by the court or the
arbitration panel shall be binding upon and enforceable against each of them.
In any event, should one or more of the provisions of this Agreement be held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions hereof,
and if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
I. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Purchaser and each of the Companies, respectively, and the legal
representatives and heirs of each of the Shareholders.
J. Governing Law. The validity of this Agreement and of
any of its terms or provisions, as well as the rights and duties of the parties
under this Agreement, shall be construed pursuant to and in accordance with the
laws of the Commonwealth of Pennsylvania, without regard to conflict of laws
principles.
K. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
L. Appointment of Shareholder Representative.
(a) Each Shareholder hereby makes, constitutes and
appoints Shostack to be such Shareholder's true and lawful attorney in fact and
agent (the "Shareholder Representative"), for such Shareholder and in such
Shareholder's name, as effectively as such Shareholder could act for such
Shareholder with full power of substitution in the premises, to take all
actions which under this Agreement and the Escrow Agreement are to be or may be
taken by such Shareholder, including, without limitation, to give and receive
all consents, waivers, amendments, notices and other communications to be given
or which may be given or received under this
<PAGE> 44
Agreement. The incapacity of any Shareholder shall not terminate the agency
and power of attorney granted hereby to the Shareholder Representative. Upon
the death of any Shareholder, such Shareholder's executors, administrators,
legal representatives and heirs may only exercise rights under this Agreement
or the Escrow Agreement through the Shareholder Representative as their sole
and exclusive agent. Such agency and power of attorney is irrevocable and
coupled with an interest, and the provisions of this Section XIII(L) are
independent and severable and shall be enforceable notwithstanding any rights
or remedies that any Shareholder may have in connection with, or in any way
arising out of, the transactions contemplated by this Agreement and the Escrow
Agreement. In the event that the Shareholder Representative should for any
reason become unable to perform his responsibilities hereunder, or resign such
position, the Shareholders holding a majority of the Shares shall select
another representative by written notice executed by such Shareholders and
delivered to the Purchaser to fill such vacancy and such substituted
representative shall be deemed the Shareholder Representative for all purposes
of this Agreement.
(b) The Purchaser shall be entitled to rely conclusively
on the actions, communications, instructions, decisions and agreements of the
Shareholder Representative as being the actions, communications, instructions,
decisions and agreements of each of the Shareholders (without the need to
communicate or otherwise confirm such with any Shareholder), and no Shareholder
shall have any claim or cause of action against the Purchaser for any action
taken or not taken by the Purchaser in reliance upon the actions,
communications, instructions, decisions or agreements of the Shareholder
Representative.
(c) All actions, communications, instructions, decisions
and agreements of the Shareholder Representative shall be conclusive and
binding upon all of the Shareholders and no Shareholder shall have any claim or
cause of action against the Shareholder Representative for any action taken or
not taken by the Shareholder Representative in his role as such, except for any
action or omission taken or made fraudulently or in bad faith with respect to
such Shareholder.
* * *
<PAGE> 45
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
AMERICARE EMPLOYERS GROUP, INC.
By: /s/ RONALD N. SHOSTACK
---------------------------------------
Name: Ronald N. Shostack
Title: President
PARALIGN STAFFING TECHNOLOGIES, INC.
By: /s/ RONALD N. SHOSTACK
---------------------------------------
Name: Ronald N. Shostack
Title: President
/s/ RONALD N. SHOSTACK
------------------------------------------
Ronald N. Shostack
ZANZA PERSONNEL, INC.
By: /s/ RONALD N. SHOSTACK
---------------------------------------
Name:
Title:
/s/ IAN ACKERMAN
------------------------------------------
Ian Ackerman
/s/ THERESA CONROY
------------------------------------------
Theresa Conroy
NOVACARE EMPLOYEE SERVICES, INC.
By: /s/ LOREN J. HULBER
---------------------------------------
Name: Loren J. Hulber
Title: President & CEO
[Purchase Agreement]
<PAGE> 46
/s/ KERRAN L. SHOSTACK
------------------------------------------
Kerran L. Shostack
[Purchase Agreement]
<PAGE> 1
NEWS RELEASE
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE Analyst Contact: Susan J. Campbell
(As of January 5, 1998) 610-992-7425
Media Contact: David Fridling
610-992-7426
NOVACARE EMPLOYEE SERVICES, INC. TO ACQUIRE
AMERICARE EMPLOYERS GROUP, INC.
NORRISTOWN, Pa., -- NovaCare Employee Services, Inc. (NASDAQ:NCES), a
leading national employee services company, or professional employer
organization (PEO), has entered into a definitive agreement to acquire
AmeriCare Employers Group, Inc. (AmeriCare), a PEO based in Phoenix, Arizona,
with a presence in eight states.
Completion of the sale is pending regulatory approval.
AmeriCare, founded in 1982, had revenues of $128 million for the nine
months ended September 30, 1997. It has approximately 7,500 worksite employees
and 625 clients under contract.
"We are especially pleased to join with AmeriCare, a high quality firm
of long-standing," said Loren J. Hulber, president and chief executive officer
of NovaCare Employee Services. "Dedicated to service and performance
leadership, the combined resources and expertise of these two high quality
organizations offer tremendous opportunities for the future."
NovaCare Employee Services was established in September 1996 and
completed its initial public offering in November 1997. NovaCare Employee
Services reported revenues for the three months ended September 30, 1997 of
$267 million.
A key element of the NovaCare Employee Services growth strategy is the
penetration of attractive geographic target markets. In September 1997,
NovaCare Employee Services entered the Atlanta marketplace and plans to enter
the Philadelphia marketplace during the first calendar quarter of 1998. The
acquisition of AmeriCare accelerates NovaCare Employee Services' planned
entrance into the Phoenix marketplace and provides it with a strong presence in
the western United States.
"There has been significant consolidation within the PEO industry over
the past year," said Ronald N. Shostack, president, chief executive officer and
majority shareholder of AmeriCare. "As one of the leading PEO's in the western
United States, AmeriCare has received numerous solicitations. We chose
NovaCare Employee Services because of their commitment to excellence, high
level of integrity and dedication to creating a national PEO infrastructure.
We anticipate NovaCare Employee Services will become the premier national PEO
in a relatively short period of time."
Shostack will remain with the company as NovaCare Employee Services
senior vice president of the western region.
-more-
<PAGE> 2
NOVACARE EMPLOYEE SERVICES/AMERICARE AGREEMENT
ADD ONE
NovaCare Employee Services, Inc. is one of the largest professional
employer organizations in the United States. The Company is an employee
services company that provides small to medium-sized businesses with
comprehensive, fully integrated outsourcing solutions to human resource issues,
including payroll management, risk management, benefits administration,
unemployment services and human resource consulting services. NovaCare
Employee Services is a unit of NovaCare, Inc. (NYSE:NOV), a leading national
provider of physical rehabilitation services that treats 37,000 patients per
day in 43 states.
###
