<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACSYS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 7363 58-2299173
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
TIMOTHY MANN, JR.
CHIEF EXECUTIVE OFFICER
ACSYS, INC.
2000 PENNSYLVANIA AVENUE, N.W.
SUITE 7650
WASHINGTON, D.C. 20006
(202) 872-0303
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND AGENT FOR SERVICE)
---------------
COPIES TO:
GLENN W. STURM, ESQ. ERIC A. STERN, ESQ.
CHARLES D. VAUGHN, ESQ. MICHAEL A. BELL, ESQ.
C. RUSSELL PICKERING, ESQ. LATHAM & WATKINS
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. 1001 PENNSYLVANIA AVENUE, N.W.
FIRST UNION PLAZA, SUITE 1400 SUITE 1300
999 PEACHTREE STREET, N.E. WASHINGTON, D.C. 20004
ATLANTA, GEORGIA 30309 (202) 637-2200
(404) 817-6000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
---------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) PRICE REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, no par
value................. 3,162,500 $11.00 $34,787,500 $10,542
</TABLE>
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(1) Includes 412,500 common shares which the Underwriters have an option to
purchase from the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED OCTOBER 22, 1997
PROSPECTUS
2,750,000 SHARES
[LOGO OF ACSYS, INC. APPEARS HERE]
COMMON STOCK
Of the 2,750,000 shares of common stock, no par value (the "Common Stock")
offered hereby (the "Offering"), 2,250,000 shares are being offered by ACSYS,
Inc. (the "Company") and 500,000 shares are being offered by certain
shareholders of the Company (the "Selling Shareholders"). See "Principal and
Selling Shareholders." The Company will not receive any of the proceeds from
the sale of the shares by the Selling Shareholders. See "Use of Proceeds."
Prior to the Offering there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price for the
Common Stock will be between $9.00 and $11.00 per share. See "Underwriting" for
information relating to the determination of the initial public offering price.
Application will be made for quotation of the Common Stock on the Nasdaq
Stock Market's National Market under the symbol "ACSY."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
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Total (3)........................ $ $ $ $
</TABLE>
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(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated Offering expenses of $1,600,000 payable by the
Company.
(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 412,500 additional shares of Common Stock on the same terms
and conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discount will be $ and the total Proceeds to Company will
be $ . See "Underwriting."
-----------
The shares of Common Stock are offered subject to receipt and acceptance by
the Underwriters, to prior sale and to the Underwriters' right to reject orders
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that certificates for the shares of Common Stock will be
available for delivery on or about , 1997.
-----------
J.C.Bradford&Co. Janney Montgomery Scott Inc.
, 1997.
<PAGE>
[COLOR MAP OF THE EASTERN UNITED STATES REFLECTING THE OUTLINES OF THE STATES
AND DETAILS OF THE COMPANY'S LOCATIONS]
----------------
THE COMPANY INTENDS TO FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Consolidated Financial
Statements and the related Notes thereto appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information contained in this
Prospectus assumes (i) no exercise of the Underwriters' over-allotment option,
and (ii) a public offering price of $10.00 per share. The term "Company" as
used in this Prospectus means ACSYS, Inc. and its subsidiaries on a
consolidated basis.
THE COMPANY
ACSYS, Inc. is one of the leading accounting and finance temporary staffing
and permanent placement firms in the United States. The Company operates 15
offices serving the Atlanta, Charlotte, Central New Jersey, Philadelphia, Tampa
and Washington, D.C. metropolitan markets. The Company was formed in March 1997
and since its formation has acquired seven accounting and finance specialty
professional staffing companies which had an average operating history of 15
years. The Company's goal is to build a national specialty professional
staffing business with offices in major United States metropolitan markets. The
Company's clients include Fortune 1000 companies, middle market companies,
governmental agencies and nonprofit organizations.
The Company's operating strategy is based on a focus on client relationships
and its philosophy that the central function of corporate management is to
support the staffing consultants who directly interact with clients. The
Company carries out its strategy through its decentralized "Hub-Center"
management model, which the Company believes fosters an entrepreneurial
environment. Hub-Centers, located in major metropolitan markets, are managed by
Division Presidents who are responsible for achieving the Company's operational
and financial goals and have significant latitude over such matters as hiring,
recruiting, compensation, pricing and sales management. Division Presidents are
supported by the Company's corporate services which include advertising,
marketing, public relations, management information systems support, training,
human resources, accounting and other back office functions. The Company
believes that its decentralized management structure enables it to be more
responsive to its clients' needs. Further, the Company believes that its
specialty professional focus makes it more attractive to staffing consultants
and temporary and permanent placement candidates.
The Company's goal is to build a national specialty professional staffing
business with offices in major United States metropolitan markets by pursuing
strategic acquisitions, enhancing and expanding existing offices, introducing
new services and opening new offices. The Company seeks to acquire specialty
professional staffing businesses with strong management and a significant
presence in what the Company believes to be desirable, growing markets. The
Company believes it will have a strategic advantage in competing for
acquisitions based on (i) its focus on the specialty professional staffing
segment of the staffing industry; (ii) the personal relationships of its senior
executives with managers and owners of other specialty professional staffing
firms; (iii) the Company's entrepreneurial operating environment and Hub-Center
management model; (iv) the Company's merger and acquisition execution
capabilities; and (v) the Company's greater visibility and resources as a
public company. The Company plans to enhance and expand its existing offices by
adding quality personnel, pursuing new clients, expanding relationships with
its current clients and replicating its most successful sales, marketing and
business techniques in offices that are not currently using those techniques.
The Company also intends to introduce new specialty professional staffing
services in addition to its core accounting and finance staffing services. For
example, the Company recently introduced information technology ("IT") staffing
in several locations. The Company may develop or expand new services internally
by leveraging its existing staffing expertise and specialty professional
staffing reputation or it may acquire existing businesses that offer such new
specialty professional staffing services. Furthermore, the Company intends to
grow by opening new offices in both its current markets and new geographic
markets.
3
<PAGE>
The Company derived 74.3% and 77.1% of its pro forma service revenues from
its temporary staffing operations in the six months ended June 30, 1997 and the
year ended December 31, 1996, respectively. Within the temporary staffing
sector, the Company competes primarily in the specialty professional segment
which, based on the Staffing Industry Report, had 1996 revenues of $5.0 billion
and is projected to grow 22% in 1997. The specialty professional segment
includes services such as accounting and finance, legal, laboratory and other
professional staffing services but excludes IT staffing. The IT segment of the
temporary staffing sector had 1996 revenues of $11.7 billion and is projected
to grow 27% in 1997. The IT segment includes services such as consulting,
systems and network integration and support, and supplemental staffing.
Specialty professional and IT staffing assignments generally have profit
margins greater than those of traditional clerical and light industrial
temporary staffing assignments. The Company believes that organizations are
increasingly accepting the idea of using specialty professional temporary
employees in traditional permanent professional roles and are planning to use
such employees as a continuing corporate strategy. Furthermore, traditional
accounting and finance services that were historically performed internally are
being outsourced.
The Company also operates in the placement and search sector of the staffing
industry, which had 1996 revenues of $9.1 billion and is projected to grow 14%
in 1997. The Company derived 25.7% and 22.9% of its pro forma service revenues
from its permanent placement operations in the six months ended June 30, 1997
and the year ended December 31, 1996, respectively. Permanent placement firms
fulfill their clients' needs by identifying, evaluating and recommending
qualified candidates for positions. The Company believes that companies have
become increasingly reliant on permanent placement firms for several reasons,
including the increased difficulty of finding talented candidates, the reduced
costs and increased efficiency of outsourcing the recruiting process, and the
ability of placement firms to provide objective feedback on candidates and
advice regarding the appropriate qualifications and compensation for a
particular position.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Compa-
ny................................. 2,250,000 shares
Common Stock offered by the Selling
Shareholders....................... 500,000 shares(1)
Common Stock to be outstanding after
the Offering....................... 10,743,220 shares(2)
Use of proceeds by the Company...... Repay certain indebtedness, enhance
management information systems and for
working capital
and general corporate purposes, including
acquisitions and the opening of new
offices.
See "Use of Proceeds."
Proposed Nasdaq National Market sym-
bol................................ ACSY
</TABLE>
- --------------------
(1) See "Principal and Selling Shareholders" and "Description of Capital
Stock."
(2) Excludes 2,000,000 shares of Common Stock reserved for issuance under the
Company's 1997 Stock Option Plan, as amended (the "Option Plan"), of which
options to purchase 246,885 shares of Common Stock have been granted and
were exercisable at September 30, 1997 with a weighted average exercise
price of $5.58 per share. The Company intends to grant options to purchase
approximately 950,000 shares of Common Stock upon consummation of this
Offering at an exercise price equal to the initial public offering price
per share. See "Management -- 1997 Stock Option Plan."
----------------
Prior to the closing of this Offering, the Company expects to distribute to
its shareholders an amount which approximates such shareholders' unpaid federal
and state income taxes on the Company's taxable income for the period the
Company was treated as an S corporation (the "Distribution"). The Company
estimates that the amount of the Distribution would have been approximately
$800,000 if the closing of the Offering had occurred on June 30, 1997; that
amount is reflected in the Consolidated Financial Statements. The actual amount
of the Distribution will reflect the Company's taxable income through the
termination of its S corporation status. See "Prior S Corporation Status" and
"Use of Proceeds."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------- --------------------------------
PRO FORMA PRO FORMA
1994 1995 1996 1996(2) 1996 1997 1997(2)
------- ------- ------- --------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DA-
TA(1):
Total service reve-
nues................. $27,395 $34,485 $45,908 $52,411 $22,212 $26,355 $30,079
Gross profit.......... 13,370 16,753 23,035 25,486 10,728 13,612 15,054
Operating income...... 2,043 3,117 3,031 5,152 2,263 119 3,406
Income (loss) before
income taxes......... 1,190 2,252 2,228 4,172 1,813 (261) 2,932
Net income (loss), as
adjusted for income
taxes(3)............. $ 1,247 $ 2,336 $ (920) $ 1,642
Net income (loss) per
share, as adjusted
for income
taxes(3)(4).......... $ 0.14 $ 0.27 $ (0.20) $ 0.19
Weighted average
common shares
outstanding(4)....... 7,261 8,602 7,152 8,602
<CAPTION>
JUNE 30, 1997
--------------------------------
PRO FORMA,
PRO AS
ACTUAL FORMA(5) ADJUSTED(5)(6)
------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital......................................... $ 2,338 $ 774 $11,983
Total assets............................................ 16,496 26,429 34,567
Long-term debt, including current maturities ........... 9,061 11,119 732
Redeemable Common Stock................................. 766 -- --
Shareholders' equity.................................... 1,083 7,415 26,740
</TABLE>
- --------------------
(1) All of the financial data set forth above have been restated to give effect
to the Company's acquisitions of the Acquired Companies other than C.P.A.
Staffing. The Company's acquisitions, other than C.P.A. Staffing, have been
accounted for under the pooling of interests method of accounting. Includes
results of operations of Don Richard Associates of Washington and Don
Richard Associates of Tampa from March 1, 1994 and January 1, 1996,
respectively, the dates of their formation. See Note 1 of Notes to
Consolidated Financial Statements. See "The Company."
(2) Prior to the Company's acquisition of AcSys Resources, Inc. ("AcSys
Resources") in September 1997, AcSys Resources acquired C.P.A. Staffing in
a transaction accounted for under the purchase method of accounting. The
pro forma operations data reflect the Company's operations as if AcSys
Resources' purchase of C.P.A. Staffing had occurred on January 1, 1996. In
addition, the pro forma operations data reflect (i) the elimination of
expenses incurred in connection with the Company's acquisitions (the
"Combination Expenses"), (ii) an adjustment to compensation expense for the
difference between actual compensation paid to certain owners of the
Acquired Companies (including C.P.A. Staffing) and the compensation
negotiated in conjunction with such acquisitions and (iii) income tax
expense computed as if the Company had terminated its status as an S
corporation as of January 1, 1996. See Pro Forma Consolidated Financial
Statements.
(3) The Company has operated as an S corporation for income tax purposes since
inception and will terminate such status in connection with this Offering.
See Note 2 of Notes to Consolidated Financial Statements for information
concerning the computation of the income taxes. See "Prior S Corporation
Status" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(4) See Note 2 of Notes to Consolidated Financial Statements and Note 5 of
Notes to Pro Forma Consolidated Financial Statements for a discussion of
the computations of net income (loss) per share, as adjusted for income
taxes.
(5) The pro forma balance sheet data reflect (i) the acquisition of C.P.A.
Staffing as if it had occurred on June 30, 1997, (ii) the Deferred Tax
Liability described in "Prior S Corporation Status" attributable to the
Company's results of operations through June 30, 1997 and (iii) the
elimination of certain redemption rights related to 122,012 shares of
Common Stock (the "Redeemable Common Stock") held by a former owner of
AcSys Resources. See "Certain Transactions" and Pro Forma Consolidated
Financial Statements.
(6) Adjusted to reflect the sale of 2,250,000 shares of Common Stock offered by
the Company hereby and the application of the estimated net proceeds
therefrom. See "Prior S Corporation Status," "Use of Proceeds" and
"Capitalization."
5
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the Common Stock offered hereby. This Prospectus contains "forward-looking
statements" relating to, without limitation, future economic performance,
plans and objectives of management for future operations and projections of
revenues and other financial items that are based on the beliefs of the
Company's management, as well as assumptions made by, and information
currently available to, the Company's management. The words "expect,"
"estimate," "anticipate," "believe" and similar expressions and variations
thereof are intended to identify forward-looking statements. The cautionary
statements set forth in this "Risk Factors" section and elsewhere in this
Prospectus identify important factors with respect to such forward-looking
statements, including certain risks and uncertainties, that could cause actual
results to differ materially from those in such forward-looking statements.
BRIEF COMBINED OPERATING HISTORY
The Company was incorporated in March 1997 and acquired the Acquired
Companies in transactions that occurred from May 1997 to September 1997. The
members of the Company's senior management have worked together and managed
the Company as a combined business for only a short time. There can be no
assurance that management will be able to oversee the Company and effectively
implement the Company's operating or growth strategies or that the Company
will be able to achieve any cost savings or effectively manage the combined
enterprise. The Company's historical financial results cover periods when the
Company was not under common control or management and, therefore, may not be
indicative of the Company's future financial or operating results. The
Company's inability to integrate the Acquired Companies could have a material
adverse effect on the Company's business, operating results and financial
condition and could make it unlikely that the Company's operations and
strategies will be successful. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Management" and "Certain
Transactions."
ABILITY TO ACHIEVE AND MANAGE GROWTH
The Company intends to grow through acquisitions and internal growth,
including opening new offices. There can be no assurance that the Company will
be able to expand its market presence in its current locations or successfully
enter other markets through acquisitions or the opening of new offices. The
Company's ability to grow will depend on a number of factors, including the
availability of capital to fund acquisitions, existing and emerging
competition, the ability to maintain sufficient profit margins despite pricing
pressures and the strength of demand for temporary and permanent employees in
the Company's markets. The Company must also manage costs in a changing
regulatory environment, adapt its infrastructure and systems to accommodate
growth and recruit and train additional qualified personnel. The Company's
failure or inability to implement and manage its growth strategy successfully
may have a material adverse effect on the Company's business, operating
results and financial condition.
ACQUISITION RISKS
There can be no assurance that the Company will be able to successfully
identify suitable acquisition candidates, complete acquisitions or integrate
acquired businesses into its operations. Once integrated, acquired companies
may not achieve levels of revenues, profitability or productivity comparable
to those of the Company's existing locations or otherwise perform as expected.
Acquisitions also involve special risks, including risks associated with
unanticipated problems, liabilities and contingencies, diversion of management
attention and possible adverse effects on earnings resulting from increased
goodwill amortization, increased interest costs, the issuance of additional
securities and difficulties related to the integration of the acquired
business, some or all of which could have a material adverse effect on the
Company's business, operating results and financial condition. The Company is
unable to predict whether or when any prospective acquisition candidate will
become available or the likelihood that any acquisition will be completed. In
addition, the value of Common Stock held by shareholders at the time of any
acquisition may be diluted if the Company issues Common Stock to complete such
acquisition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Business --
Growth Strategy" and "Description of Capital Stock."
6
<PAGE>
RISKS ASSOCIATED WITH OPENING NEW OFFICES
The Company also intends to grow by opening new offices. The Company
anticipates that new offices initially will produce significant operating
losses and will place demands on the Company's operational, administrative and
financial resources. In addition, the Company's future performance and
profitability will depend, in part, on its ability to successfully attract and
retain qualified personnel to manage the growth and operations of the new
offices. The Company has limited experience in opening new offices to date,
and there can be no assurance that the Company's new offices will be
successful. The opening of additional offices, individually or in the
aggregate, may have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Growth Strategy."
RISKS ASSOCIATED WITH NEW SERVICES
The Company also intends to grow by offering services other than those
presently provided by the Company. The Company's ability to successfully
develop new services depends on a number of factors, including its ability to
identify and effectively integrate new services into the Company's existing
operating structure. The identification and offering of new services in which
the Company has little or no experience or expertise could result in diversion
of management's attention and place significant demands on the Company's
operational, administrative and financial resources. There can be no assurance
that the Company will be successful in offering new services or that such
services will not have a material adverse effect upon the Company's business,
operating results and financial condition. See "Business -- Growth Strategy"
and "Business -- Services."
DEPENDENCE ON AVAILABILITY OF QUALIFIED PERSONNEL
The Company depends on its ability to attract and retain candidates and
staffing consultants who possess the skills and experience necessary to meet
the requirements of its clients. Competition for individuals with proven
skills in finance and accounting is intense. There can be no assurance that
qualified personnel will continue to be available to the Company in sufficient
numbers and on economic terms acceptable to the Company. The inability to
attract and retain such qualified personnel could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Business -- Operating Strategy."
DEPENDENCE ON KEY CLIENTS
Substantially all of the Company's contracts to perform services may be
cancelled or modified by the Company's clients at will without penalty. No one
client accounted for more than 4.8% of the Company's pro forma service
revenues for the year ended December 31, 1996 or the six months ended June 30,
1997. For the year ended December 31, 1996 and the six months ended June 30,
1997, the Company's six largest clients accounted for approximately 13.2% and
14.7%, respectively, of the Company's pro forma revenues. The loss of or a
material reduction in revenues from one or more large clients could have a
material adverse effect on the Company's business, operating results and
financial condition.
EFFECT OF ECONOMIC FLUCTUATIONS
Demand for staffing services is significantly affected by the general level
of economic activity and unemployment in the United States. During periods of
slowed economic activity, the use of permanent placement firms tends to
decline significantly and many companies also reduce their use of temporary
employees. In addition, the Company may experience more competitive pricing
pressure during such periods of economic downturn. Therefore, any significant
economic downturn could have a material adverse effect on the Company's
business, operating results and financial condition.
COMPETITIVE MARKET
The staffing industry is highly competitive, with limited barriers to entry.
The Company competes for employees, candidates, clients and acquisitions in
national, regional and local markets with full service and
7
<PAGE>
specialized staffing companies. A significant number of competitors have
greater marketing, financial and other resources than the Company and could
provide new or increased competition to the Company. Price competition in the
staffing industry is intense and pricing pressures from competitors and
customers are increasing. The Company expects that the level of competition
will remain high in the future, which could limit the Company's ability to
maintain or increase its market share or maintain adequate gross profits,
either of which could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance
that the Company will compete effectively with existing or potential
competitors, or that competition, particularly from companies with greater
financial resources than the Company, will not have a material adverse effect
on the Company's business, operating results and financial condition. See
"Business -- The Staffing Industry" and "Business -- Competition."
DEPENDENCE ON MANAGEMENT
The continued growth and success of the Company's business is highly
dependent upon the continued services of its management, including David C.
Cooper, Chairman of the Board; Timothy Mann, Jr., Chief Executive Officer;
Edward S. Baumstein, President and Chief Operating Officer; and Beth Monroe-
Chase, Chief Development Officer. Currently, the loss of the services of one
or more of these key individuals could have a material adverse effect upon the
Company's business, operating results and financial condition. The loss of the
services of one or more of Messrs. Cooper, Mann or Ms. Monroe-Chase would
trigger an event of default under the Company's $15 million revolving credit
facility (the "Credit Facility"). The Company expects that the Credit Facility
will be amended to eliminate this provision upon the closing of the Offering.
The Company does not maintain key person insurance policies on the lives of
any of these individuals. The Company's continued growth also will depend upon
its ability to attract and retain additional skilled management personnel. See
"Management."
INCREASED COSTS FROM GOVERNMENT REGULATION
The Company is required to pay a number of federal, state and local payroll
and related costs, including unemployment taxes, workers' compensation and
insurance, FICA, and Medicare, for its employees and personnel. Significant
increases in the effective rates of any payroll related costs likely would
have a material adverse effect upon the Company. The Company's costs could
also increase as a result of health care reforms or the possible imposition of
additional requirements and restrictions related to the placement of
personnel. Federal and state legislative proposals have included provisions
extending health insurance benefits to personnel who currently do not receive
such benefits. There can be no assurance that the Company will be able to
increase the fees charged to its clients in a timely manner and in a
sufficient amount to cover increased costs, if any such proposals are adopted.
There is also no assurance that the Company will be able to adapt to future
regulatory changes made by the Internal Revenue Service, the Department of
Labor, or other state and federal regulatory agencies. The Company's inability
to increase its fees or adapt to future regulatory changes could have a
material adverse effect upon the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
INDUSTRY RISKS
Temporary staffing services providers employ and place people generally in
the workplace of other businesses. Attendant risks of such activity include
possible claims of discrimination and harassment, employment of illegal
aliens, violations of wage and hour requirements, errors and omissions of its
temporary employees, and, particularly for the actions of professionals (e.g.,
accountants), misuse of client proprietary information, misappropriation of
funds, other criminal activity or torts and other similar claims. In some
instances the Company, pursuant to a written contract, has agreed to indemnify
clients against some or all of the foregoing matters. Moreover, in certain
circumstances, the Company may be held responsible for the actions at a
workplace of persons not under the Company's direct control. Although the
Company historically has not had any significant problems in this area, there
can be no assurance that the Company will not experience such problems in the
future or that the Company's insurance, if any, will be sufficient in amount
or scope to cover
8
<PAGE>
any such liability. The failure of any Company employee or personnel to
observe the Company's policies and guidelines, relevant client policies and
guidelines, or applicable federal, state or local laws, rules and regulations,
or other circumstances that cannot be predicted, could have a material adverse
effect upon the Company's business, operating results and financial condition.
Temporary staffing services providers are also affected by fluctuations and
interruptions in the business of their clients. For example, inclement weather
or work stoppages, which may require clients to close or reduce their hours of
operation, could have a material adverse effect on the Company's business,
operating results and financial condition.
NO PRIOR PUBLIC MARKET
Before this Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or
continue following the Offering or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price for the Common Stock will be determined by negotiation between
the Company and the Representatives (as defined herein) based on several
factors and may not be indicative of the market price for the Common Stock
after this Offering. See "Underwriting."
VOLATILITY OF STOCK PRICE; POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company believes that various factors such as general economic
conditions and changes or volatility in the financial markets, changing market
conditions in the accounting and finance industry and quarterly or annual
variations in the Company's financial results, some of which are unrelated to
the Company's performance, could cause the market price of the Common Stock to
fluctuate substantially. In particular, quarterly revenues are difficult to
forecast, and the Company's expense levels are based, in part, on its
expectations as to future revenues. If revenue levels are below expectations,
the Company may be unable or unwilling to reduce expenses proportionately and
operating results would likely be adversely affected. As a result, the Company
believes that period-to-period comparisons of its results of operations are
not necessarily meaningful and should not be relied upon as indications of
future performance. Due to all of the foregoing factors, it is likely that in
some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the
market price of the Common Stock would likely be materially adversely
affected.
EXPECTED LOSSES AS A RESULT OF NONRECURRING INCOME TAX CHARGE
As a result of the termination of its S corporation status in connection
with this Offering, the Company will record a nonrecurring income tax expense
and a corresponding net deferred income tax liability. This amount would have
been approximately $2.1 million if the termination of S corporation status had
occurred on June 30, 1997, but the actual amount will be adjusted based on the
tax effect of differences in the bases in assets and liabilities for financial
reporting and income tax purposes as of the date of the termination of S
corporation status. The Company will pay the tax liability over a four-year
period. As a result of this tax liability, the Company expects to incur a net
loss for the quarter, and possibly the year, in which the Company's S
corporation status is terminated. See "Prior S Corporation Status" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock offered hereby will experience immediate dilution
in the pro forma net tangible book value per share of Common Stock of $8.99
per share. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON MARKET PRICE
A substantial number of outstanding shares of Common Stock, as well as
shares of Common Stock issuable on exercise of stock options granted or to be
granted under the Option Plan, are or will be eligible for future sale in the
public market at prescribed times pursuant to Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"). Sales of such shares in the
public market, or the perception that such sales may occur, could adversely
affect the market price of the Common Stock or impair the Company's ability to
raise additional capital in the future through the sale of equity securities.
Upon completion of the Offering, there will be 10,743,220
9
<PAGE>
outstanding shares of Common Stock (11,155,720 outstanding shares if the
Underwriters' over-allotment option is exercised). In addition, the Company
currently has outstanding options to purchase 246,885 shares of Common Stock
and anticipates that it will grant options to purchase approximately 950,000
shares of Common Stock prior to completion of the Offering. Of the total
shares to be outstanding after the Offering, the 2,750,000 shares of Common
Stock sold in the Offering (3,162,500 shares if the Underwriters' over-
allotment option is exercised in full) will be freely tradable by persons
other than "affiliates" of the Company without restriction under the
Securities Act. The remaining 7,993,220 shares of Common Stock will be
"restricted" securities within the meaning of Rule 144 under the Securities
Act and may not be sold in the absence of registration under the Securities
Act unless an exemption from registration is available, including the
exemptions contained in Rule 144. All current shareholders of the Company have
agreed not to sell, contract to sell, or otherwise dispose of any shares of
the Common Stock currently owned by them for a period of 180 days after the
date of this Prospectus without the prior written consent of J.C. Bradford &
Co. The Company plans to register the shares issuable upon exercise of options
granted under the Option Plan and, upon such registration, such shares will be
eligible for resale in the public market unless such resale is contractually
restricted. In addition, the Company plans to register up to an additional
2,000,000 shares of its Common Stock with the Securities and Exchange
Commission under the Securities Act as soon as practicable after completion of
this Offering for use by the Company as all or a portion of the consideration
to be paid in future acquisitions. These shares may be freely tradable after
their issuance, unless the sale of such shares is contractually restricted.
See "Management -- 1997 Stock Option Plan," "Shares Eligible for Future Sale"
and "Underwriting."
VOTING CONTROL BY MANAGEMENT
After the Offering, the executive officers and directors of the Company will
own approximately 49.6% of the outstanding Common Stock (approximately 47.8%
if the Underwriters' over-allotment option is exercised in full; these
percentages do not reflect currently exercisable options held by such
persons). As a result, the executive officers and directors of the Company,
voting together, will as a practical matter be able to control the outcome of
matters requiring a shareholder vote, including the election of directors,
adopting or amending provisions of the Company's Articles of Incorporation and
Bylaws, and approving certain mergers or other similar transactions, such as
sales of substantially all the Company's assets. Purchasers in this Offering
will become minority shareholders of the Company and will be unable to control
the management or business policies of the Company. See "Management" and
"Principal and Selling Shareholders."
SUBSTANTIAL DISCRETION OF MANAGEMENT CONCERNING USE OF PROCEEDS
The Company expects to use approximately $12.9 million of the net proceeds
of the Offering for specific, identified purposes, with the remaining net
proceeds, expected to be approximately $6.4 million, to be used for working
capital and general corporate purposes, including acquisitions and the opening
of new offices. Accordingly, management will have substantial discretion in
spending a large part of the net proceeds to be received by the Company. There
can be no assurance that management will use these proceeds in a manner that
enhances shareholder value. See "Use of Proceeds."
INTANGIBLE ASSETS
As of June 30, 1997, approximately $15.9 million, or 60.0%, of the Company's
pro forma total assets were intangible assets. This amount is likely to
increase as the Company acquires other staffing companies in the future. Any
impairment or write-off of such assets could have a material adverse effect on
the Company's earnings, business, operating results and financial condition.
POTENTIAL ANTI-TAKEOVER EFFECTS OF ARTICLES OF INCORPORATION, BYLAWS, THE
GEORGIA BUSINESS CORPORATION CODE AND EMPLOYMENT AGREEMENTS
The Company's Articles of Incorporation and Bylaws, the Georgia Business
Corporation Code (the "GBCC") and employment agreements between the Company
and its executive officers contain certain
10
<PAGE>
provisions that could have the effect of delaying, deferring or preventing an
unsolicited change in the control of the Company, which may adversely affect
the market price of the Common Stock or the ability of shareholders to
participate in a transaction in which they might otherwise receive a premium
for their shares over the then-current market price. The Company's Articles of
Incorporation authorize the Board of Directors to issue preferred stock
("Preferred Stock") without shareholder approval and on such terms as the
Board of Directors may determine. Although no shares of Preferred Stock are
currently outstanding and the Company has no present plans to issue any shares
of Preferred Stock, the rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of holders of any Preferred
Stock that may be issued in the future. See "Description of Capital Stock --
Preferred Stock." The Company's Bylaws provide that special meetings of
shareholders may be called by shareholders only upon a written request made by
the holders of a majority of the votes entitled to be cast on an issue and
require compliance with certain advance notice procedures to bring business
before an annual meeting of shareholders and to nominate directors. The "fair
price" and "business combinations" statutes under the GBCC may restrict
certain business combinations by interested shareholders. See "Description of
Capital Stock-- Anti-Takeover Provisions and Georgia Law." The Company's
executive officers have entered into employment agreements with the Company
that contain change in control provisions. The change in control provisions
may hinder, delay, deter or prevent a tender offer, proxy contest or other
attempted takeover because the covered employees can terminate their
employment if such provisions are triggered and thereby receive severance pay
of a lump sum equal to three times the sum of (i) such officer's annual salary
then in effect plus (ii) the amount of such officer's bonus as calculated
based on the results of operations for the twelve months prior to such
termination. See "Management -- Executive Compensation; Employment Agreements;
Covenants Not to Compete."
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT
The Company currently anticipates that after completion of this Offering all
of its earnings will be retained for development and expansion of its
business. The Company does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Credit Facility prohibits the payment of
cash dividends without the lender's consent. See "Prior S Corporation Status"
and "Dividend Policy."
11
<PAGE>
THE COMPANY
ACSYS, Inc., a Georgia corporation, was formed in March 1997 and has become
a leading provider of accounting and finance temporary staffing and permanent
placement services. Since its formation, the Company has acquired seven
temporary staffing businesses (the "Acquired Companies") as summarized in the
table below. For a description of the transactions pursuant to which certain
of these businesses were acquired, see "Certain Transactions -- Acquisitions."
The Company maintains its principal executive offices at 2000 Pennsylvania
Avenue, N.W., Suite 7650, Washington, D.C. 20006, and its telephone number is
(202) 872-0303. The Company maintains various sites on the Internet's world
wide web. Information contained in the Company's world wide web sites shall
not be deemed to be part of this Prospectus. Industry information presented is
based on sources which the Company believes to be reliable but has not
independently verified.
Certain information regarding these acquisitions is summarized in the
following table:
<TABLE>
<CAPTION>
DATE YEAR 1996
ACQUIRED COMPANY ACQUIRED FOUNDED (1) REVENUES LOCATIONS (2)
- ---------------- ---------- ----------- ------------- ------------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Infinity Enterprises, Inc. May 1997 1974 $17.0 Bethesda, MD
d/b/a Don Richard Associates of Washington Tyson's Corner, VA
("Don Richard Associates of Washington")(3) Washington, DC
David C. Cooper & Associates, Inc. and May 1997 1980 7.8 Atlanta, GA
DCCA Professional Temporaries, Inc.
(together, "David C. Cooper & Associates")
EKT, Inc. May 1997 1974 2.8 Charlotte, NC
d/b/a Don Richard Associates of Charlotte
("Don Richard Associates of Charlotte")(3)
Cama of Tampa, Inc. May 1997 1987 2.5 Tampa, FL
d/b/a Don Richard Associates of Tampa
("Don Richard Associates of Tampa")(3)
Rylan Forbes Consulting Group, Inc. July 1997 1992 1.4 Edison, NJ
("Rylan Forbes") Philadelphia, PA
C.P.A. Staffing, Inc., Aug. 1997 1990 6.5 Atlanta, GA
C.P.A. Search Inc. and
Career Placement Associates, Inc.
("C.P.A. Staffing")(4)
AcSys Resources, Inc. Sept. 1997 1977 14.4(5) Cherry Hill, NJ
("AcSys Resources") Edison, NJ
Lancaster, PA
Philadelphia, PA
Princeton, NJ
Wayne, PA
Wilmington, DE
</TABLE>
- ---------------------
(1) Reflects year of founding of each of the Acquired Companies or its
predecessor.
(2) Locations at time of acquisition by the Company.
(3) "Don Richard Associates" is a federally registered trademark of Don
Richard Associates International, Inc., an unaffiliated company. The
Company owns the rights to the names "Don Richard Associates of
Washington" and "Don Richard Associates of Charlotte" in the areas where
the Company currently operates under such names. The Company's rights to
use the name "Don Richard Associates of Tampa" expire in May 1999.
(4) Acquired by AcSys Resources in August 1997 and merged into C.P.A.
Staffing, Inc. prior to the Company's acquisition of AcSys Resources.
(5) Does not include revenues of C.P.A. Staffing.
12
<PAGE>
PRIOR S CORPORATION STATUS
Because the Company has been an S corporation for federal and certain state
income tax purposes, the Company's income has been allocated and taxable to
the Company's individual shareholders rather than to the Company. The Company
will terminate its S corporation status prior to the closing of this Offering
and will thereafter be taxed as a C corporation for federal and state income
tax purposes. Prior to the termination of the Company's S corporation status,
the Company expects to make the Distribution to its shareholders. The
Distribution will approximate the amount that such shareholders will need to
fund the payment of federal and state income taxes payable on the Company's
taxable income during the period the Company was an S corporation. The Company
estimates that the amount of the Distribution would have been approximately
$800,000 if the termination of the Company's S corporation status had occurred
on June 30, 1997. The actual amount of the Distribution will reflect the
Company's taxable income through the termination of its S corporation status.
A portion of the proceeds of the Offering will be used to repay indebtedness
incurred under the Credit Facility to make the Distribution. See "Use of
Proceeds" and Note 2 of Notes to Consolidated Financial Statements. The
Company's shareholders have agreed to indemnify the Company for any federal,
state and other income taxes (including interest) incurred by the Company for
the period for which it reported its taxable income as an S corporation.
In addition, as a result of the termination of its S corporation status in
connection with this Offering, the Company will record a nonrecurring income
tax expense and a corresponding net deferred income tax liability (the
"Deferred Tax Liability"). The amount of the Deferred Tax Liability would have
been approximately $2.1 million if the termination of the Company's S
corporation status had occurred on June 30, 1997, but the actual amount will
be adjusted based on the tax effect of differences in the bases in assets and
liabilities for financial reporting and income tax purposes as of the date of
the termination of S corporation status. The Company will pay the Deferred Tax
Liability over a four-year period. As a result of the Deferred Tax Liability,
the Company expects to incur a net loss for the quarter, and possibly the
year, in which the Company's S corporation status is terminated.
DIVIDEND POLICY
Prior to the closing of the Offering, the Company expects to make the
Distribution to existing shareholders. See "Prior S Corporation Status." The
Company does not anticipate paying any cash dividends on its Common Stock in
the foreseeable future because it intends to retain its earnings, if any, to
finance the expansion of its business and for general corporate purposes,
including future acquisitions. Any payment of future dividends will be at the
discretion of the Board of Directors and will depend upon, among other things,
the Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of
dividends and other factors that the Company's Board of Directors deems
relevant. The Credit Facility currently prohibits the payment of dividends
without the lender's consent.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,250,000 shares of
Common Stock offered by the Company in this Offering are estimated to be
approximately $19.3 million, after deducting underwriting discounts and other
offering expenses, all of which are payable by the Company. The Company will
not receive any proceeds from the sale of the shares offered by the Selling
Shareholders. See "Principal and Selling Shareholders."
The Company intends to use the net proceeds of this Offering as follows: (i)
approximately $11.9 million to repay the outstanding indebtedness under the
Credit Facility (including indebtedness incurred to fund the Distribution);
(ii) approximately $1.0 million for capital expenditures, primarily to enhance
management information systems; and (iii) the balance of the net proceeds,
expected to be approximately $6.4 million, for working capital and general
corporate purposes, including acquisitions and the opening of new offices. The
Company estimates that the amount borrowed under the Credit Facility to fund
the Distribution would have been approximately $800,000 if the termination of
the Company's S corporation status had occurred on June 30, 1997. The actual
amount of the Distribution will reflect the Company's taxable income through
the date of termination of its S corporation status. See "Prior S Corporation
Status."
The outstanding indebtedness under the Credit Facility was used to pay
certain obligations of the Acquired Companies. Interest on the Credit Facility
is due quarterly and outstanding principal is due on May 31, 2000. Interest is
payable at a rate equal to, at the election of the Company, either: (A) the
greater of (i) the prime rate or (ii) the federal funds rate plus 0.5%, plus a
variable amount between 0% and 0.75%; or (B) LIBOR plus a variable amount
between 1.25% and 2.5%. The Credit Facility is secured by substantially all
assets of the Company and a pledge of 100% of the stock of all subsidiaries.
As of October 7, 1997, the amount outstanding under the Credit Facility was
approximately $11.1 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company continues to evaluate potential acquisitions and carry on
discussions with several potential acquisition candidates. The Company is not
currently a party to any binding agreements or commitments with respect to any
such acquisitions. There can be no assurance that any acquisitions will be
consummated on terms favorable to the Company, if at all. Pending application
of the net proceeds as described above, the Company intends to invest the net
proceeds in short-term, interest-bearing, investment grade securities. See
"Risk Factors -- Substantial Discretion of Management Concerning Use of
Proceeds" and "Business -- Growth Strategy."
14
<PAGE>
DILUTION
The pro forma deficit in net tangible book value of the Company at June 30,
1997 was $8.4 million, or $0.99 per share. See Pro Forma Consolidated
Financial Statements. The pro forma deficit in net tangible book value per
share represents the amount by which the Company's total liabilities exceed
the Company's net tangible assets divided by the pro forma number of shares of
Common Stock outstanding. After giving effect to the sale of the 2,250,000
shares of Common Stock offered by the Company in this Offering and the
application of the net proceeds as set forth under "Use of Proceeds," the
Company's pro forma net tangible book value as of June 30, 1997 would have
been $10.9 million, or $1.01 per share, representing an immediate increase of
$2.00 in net tangible book value per share to existing shareholders and an
immediate dilution of $8.99 in net tangible book value per share to persons
purchasing shares in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Pro forma deficit in net tangible book value per share
before this Offering..................................... $(0.99)
Increase per share attributable to the sale of shares of-
fered hereby............................................. 2.00
------
Pro forma net tangible book value per share after this Of-
fering..................................................... 1.01
------
Dilution in net tangible book value per share to new invest-
ors(1)..................................................... $ 8.99
======
</TABLE>
- ---------------------
(1) Dilution is determined by subtracting pro forma net tangible book value
per share after this Offering from the assumed initial public offering
price of $10.00 per share.
The following table sets forth the number of shares of the Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by the Company's existing shareholders and to be paid by new
investors in this Offering, and before deducting estimated Offering expenses
and underwriting discounts.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......... 8,493,220 79.1% $ 774,096 3.3% $ 0.09
New investors.................. 2,250,000 20.9 22,500,000 96.7 10.00
---------- ----- ----------- -----
Total........................ 10,743,220 100.0% $23,274,096 100.0%
========== ===== =========== =====
</TABLE>
Sales by Selling Shareholders in this Offering will reduce the number of
shares held by existing shareholders to 7,993,220, or 74.4%, and will increase
the number of shares to be held by new investors to 2,750,000, or 25.6%, of
the total number of shares of the Common Stock to be outstanding after this
Offering (3,162,500 shares, or 28.3%, if the Underwriters over-allotment
option is exercised in full). See "Principal and Selling Shareholders."
The foregoing tables assume no exercise of outstanding stock options. At
September 30, 1997, there were outstanding options to purchase 246,885 shares
of Common Stock at a weighted average exercise price of $5.58 per share. See
Note 8 of Notes to Consolidated Financial Statements. The Company also plans
to grant options to purchase approximately 950,000 shares of Common Stock to
substantially all of its operating personnel upon consummation of the
Offering.
15
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization at June 30,
1997: (i) on a historical basis; (ii) on a pro forma basis giving effect to
AcSys Resources' acquisition of C.P.A. Staffing, the termination of the
Company's S corporation status and the elimination of certain Common Stock
redemption rights in connection with the Offering; and (iii) as adjusted to
give effect to the sale by the Company of 2,250,000 shares of Common Stock
offered hereby and the application of the net proceeds therefrom. See
"Selected Consolidated Financial Data" and "Use of Proceeds." This table
should be read in conjunction with the Consolidated Financial Statements and
the related Notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the other financial information
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------
PRO FORMA,
ACTUAL PRO FORMA (1) AS ADJUSTED
------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current maturi-
ties....................................... $ 9,061 $11,119 $ 732
------- ------- -------
Redeemable Common Stock, 122,012 shares is-
sued and outstanding ...................... 766 -- --
------- ------- -------
Shareholders' equity:
Preferred Stock, no par value, 5,000,000
shares authorized, no shares issued and
outstanding.............................. -- -- --
Common Stock, no par value, 45,000,000
shares authorized, 7,151,932 shares
issued and outstanding (actual),
8,493,220 shares (pro forma) and
10,743,220 shares (pro forma, as
adjusted) (2)............................ 210 7,415 26,740
Retained earnings......................... 1,462 -- --
Treasury stock, at cost................... (589) -- --
------- ------- -------
Total shareholders' equity.............. 1,083 7,415 26,740
------- ------- -------
Total capitalization.................. $10,910 $18,534 $27,472
======= ======= =======
</TABLE>
- ---------------------
(1) The pro forma financial data have been prepared to reflect (i) the
Company's operations as if AcSys Resources' purchase of C.P.A. Staffing
had occurred on January 1, 1996, (ii) the effects of the termination of
the Company's S corporation status, including the Deferred Tax Liability
and (iii) the elimination of certain redemption rights related to the
Redeemable Common Stock in connection with the Offering. See "Prior S
Corporation Status," "Use of Proceeds" and Pro Forma Consolidated
Financial Statements.
(2) Excludes 2,000,000 shares of Common Stock reserved for issuance under the
Option Plan, of which options to purchase 246,885 shares of Common Stock
have been granted and were exercisable at September 30, 1997 with a
weighted average exercise price of $5.58 per share. The Company intends to
grant options to purchase an aggregate of approximately 950,000 shares of
Common Stock upon consummation of this Offering at an exercise price equal
to the initial public offering price per share. See "Management -- 1997
Stock Option Plan."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
All of the financial data set forth below has been restated to give effect
to the Company's acquisitions of the Acquired Companies (other than C.P.A.
Staffing), each of which has been accounted for under the pooling of interests
method of accounting. See "The Company." Prior to the Offering the Company was
an S corporation; accordingly, certain financial data may not be comparable to
or indicative of post-Offering results. The following table contains certain
financial and operating data and is qualified by the more detailed
Consolidated Financial Statements and Notes thereto included elsewhere in this
Prospectus. The Balance Sheet Data as of December 31, 1995 and 1996 and the
Statements of Operations Data for the years ended December 31, 1994, 1995 and
1996 were derived from the Consolidated Financial Statements and Notes thereto
that have been audited by Arthur Andersen LLP, independent public accountants,
and are included elsewhere in this Prospectus. The Balance Sheet Data as of
December 31, 1992, 1993 and 1994 and June 30, 1997 and the Statements of
Operations Data for the years ended December 31, 1992 and 1993 and the six
months ended June 30, 1996 and 1997 have been derived from the unaudited
financial statements of the Company which, in the opinion of management, have
been prepared on the same basis as the audited financial statements and
include all adjustments, consisting of normal recurring adjustments, which
management considers necessary for a fair presentation of the selected
financial data shown. The financial data shown for the six months ended June
30, 1997 is not necessarily indicative of the results to be expected for the
entire year ending December 31, 1997. The financial data shown below should be
read in conjunction with the Consolidated Financial Statements and the related
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------- --------------------------------
PRO FORMA PRO FORMA
1992 1993 1994 1995 1996 1996(2) 1996 1997 1997(2)
------- ------- ------- ------- ------- --------- ------- -------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA(1):
Service revenues:
Temporary staffing..... $ 8,387 $10,664 $21,151 $26,566 $34,757 $40,410 $16,831 $19,079 $22,334
Permanent placement.... 3,641 4,338 6,244 7,919 11,151 12,001 5,381 7,276 7,745
------- ------- ------- ------- ------- ------- ------- ------- -------
Total service
revenues............ 12,028 15,002 27,395 34,485 45,908 52,411 22,212 26,355 30,079
Direct cost of
services.............. 5,832 7,679 14,025 17,732 22,873 26,925 11,484 12,743 15,025
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit......... 6,196 7,323 13,370 16,753 23,035 25,486 10,728 13,612 15,054
Selling, general and
administrative
expenses.............. 5,252 6,991 10,218 12,796 18,776 18,868 8,015 11,384 11,136
Combination Expenses... -- -- -- -- -- -- -- 1,722 --
Amortization and
depreciation.......... 33 33 547 674 661 899 342 217 342
Severance and franchise
termination costs..... -- -- 562 166 567 567 108 170 170
------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income..... 911 299 2,043 3,117 3,031 5,152 2,263 119 3,406
Other expense.......... 31 70 853 865 804 980 450 380 474
------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes.......... $ 880 $ 229 $ 1,190 $ 2,252 2,227 4,172 $ 1,813 (261) 2,932
======= ======= ======= ======= =======
Pro forma income taxes
(3)................... 980 1,836 659 1,290
------- ------- ------- -------
Pro forma net income
(loss) (3)............ $ 1,247 $ 2,336 $ (920) $ 1,642
======= ======= ======= =======
Pro forma net income
(loss) per share (3).. $ 0.14 $ 0.27 $ (0.20) $ 0.19
======= ======= ======= =======
Weighted average common
shares outstanding
(4)................... 7,261 8,602 7,152 8,602
<CAPTION>
DECEMBER 31, JUNE 30, 1997
--------------------------------------- --------------------------------
PRO FORMA,
PRO AS
1992 1993 1994 1995 1996 ACTUAL FORMA(2) ADJUSTED(2)(5)
------- ------- ------- ------- ------- ------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital........ $ 398 $ 692 $ 1,483 $ 2,077 $ 3,555 $ 2,338 $ 774 $11,983
Total assets........... 2,493 2,499 12,757 13,873 15,855 16,496 26,429 34,567
Long-term debt,
including current
maturities............ 1,096 843 9,925 8,905 8,847 9,061 11,119 732
Redeemable Common
Stock................. -- -- -- -- 288 766 -- --
Shareholders' equity... 351 266 914 2,448 3,313 1,083 7,415 26,740
</TABLE>
17
<PAGE>
- ---------------------
(1) All of the financial data set forth above have been restated to give
effect to the Company's acquisitions of the Acquired Companies other than
C.P.A. Staffing. The Company's acquisitions, other than C.P.A. Staffing,
have been accounted for under the pooling of interests method of
accounting. See "The Company." Includes results of operations of Don
Richard Associates of Washington and Don Richard Associates of Tampa from
March 1, 1994 and January 1, 1996, respectively, the dates of their
formation. See Note 1 of Notes to Consolidated Financial Statements.
(2) Prior to the Company's acquisition of AcSys Resources in September 1997,
AcSys Resources acquired C.P.A. Staffing in a transaction accounted for
under the purchase method of accounting. The pro forma operations data
reflect the Company's operations as if AcSys Resources' purchase of C.P.A.
Staffing had occurred on January 1, 1996. In addition, the pro forma
operations data reflect (i) the elimination of the Combination Expenses,
(ii) an adjustment to compensation expense for the difference between
actual compensation paid to certain owners of the Acquired Companies
(including C.P.A. Staffing) and the compensation negotiated in conjunction
with such acquisitions and (iii) income tax expense computed as if the
Company had terminated its status as an S corporation as of January 1,
1996. See Pro Forma Consolidated Financial Statements.
(3) The Company has operated as an S corporation for income tax purposes since
inception and will terminate such status in connection with this Offering.
See Note 2 of Notes to Consolidated Financial Statements for information
concerning the computation of the income taxes, as adjusted for income
taxes. See "Prior S Corporation Status" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(4) See Note 2 of Notes to Consolidated Financial Statements and Note 5 of
Notes to Pro Forma Consolidated Financial Statements for a discussion of
the computations of net income (loss) per share, as adjusted for income
taxes.
(5) The pro forma balance sheet data reflect (i) the acquisition of C.P.A.
Staffing as if it had occurred on June 30, 1997, (ii) the Deferred Tax
Liability described in "Prior S Corporation Status" attributable to the
six month period ended June 30, 1997 and (iii) the elimination of certain
redemption rights related to the Redeemable Common Stock. See Pro Forma
Consolidated Financial Statements.
(6) Adjusted to reflect the sale of 2,250,000 shares of Common Stock offered
by the Company hereby and the application of the estimated net proceeds
therefrom. See "Prior S Corporation Status," "Use of Proceeds" and
"Capitalization."
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains certain forward-looking statements relating to,
without limitation, future economic performance, plans and objectives of
management for future operations and projections of revenues and other
financial items that are based on the beliefs of the Company's management, as
well as assumptions made by, and information currently available to, the
Company's management. The cautionary statements set forth in the "Risk
Factors" section and elsewhere in this Prospectus identify important factors
with respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially from those
in such forward-looking statements. See "Risk Factors" for a discussion of
factors that could cause or contribute to such material differences. The
following discussion should be read in connection with the Consolidated
Financial Statements and the related Notes thereto included elsewhere in this
Prospectus.
INTRODUCTION
ACSYS, Inc. is one of the leading accounting and finance temporary staffing
and permanent placement firms in the United States. The Company operates 15
offices serving the Atlanta, Charlotte, Central New Jersey, Philadelphia,
Tampa and Washington, D.C. metropolitan markets. The Company was formed in
March 1997 and since its formation has acquired the Acquired Companies, which
had an average operating history of 15 years.
Each of the Company's acquisitions, other than C.P.A. Staffing, was
accounted for as a pooling of interests. Prior to its combination with the
Company in September 1997, AcSys Resources acquired C.P.A. Staffing in August
1997 in a transaction that was accounted for as a purchase. The Company's
historical financial statements have been restated to reflect the results of
operations and financial positions of the Acquired Companies (other than
C.P.A. Staffing). The results of operations for the year ended December 31,
1994 include the results of operations of Don Richard Associates of Washington
for only the 10 months ended December 31, 1994. The results of operations of
Don Richard Associates of Tampa are included for the periods beginning on
January 1, 1996. As a result, historical combined results may not be
comparable to or indicative of future performance. The Company's revenues and
expenses may be significantly affected by the number and timing of the
acquisition of additional businesses or the opening of additional offices. The
timing of such expansion activities may also affect period-to-period
comparisons.
Temporary staffing service revenues are recognized based on hours worked by
assigned personnel. Generally, the Company bills its clients a fixed sum per
hour for the hours its temporary employees work. Temporary personnel placed by
the Company are generally Company employees; accordingly, the Company is
responsible for workers' compensation, unemployment compensation insurance,
Medicare and Social Security taxes and general payroll expenses. These
expenses are included within direct cost of services. Because the Company pays
its temporary employees only for the hours they actually work, wages for the
Company's temporary personnel are a variable cost that increases or decreases
in proportion to service revenues. The Company's gross profit is determined by
deducting the direct cost of services from the Company's service revenues.
Some of the temporary employees placed by the Company may decide to accept an
offer of permanent employment from the client and thereby "convert" the
temporary position to a permanent position, and a fee is generally paid to the
Company. Such fees are included in temporary staffing revenues herein.
Permanent placement service revenues are recognized when the employment
offer and acceptance has occurred and the candidate's employment start date
has been established. The Company's fee is usually structured as a percentage
of the placed candidate's first-year annual compensation. Generally, if a
candidate placed by the Company is terminated or resigns during a specified
guaranty period (typically 90-180 days), the Company either fills the position
without further charge or provides a prorated refund. The primary costs
associated with permanent placement are sales commissions to staffing
consultants. Commissions vary proportionately with permanent placement service
revenues. Consistent with industry practices, the Company classifies all costs
associated with permanent placement services as selling, general and
administrative expenses. Other selling, general and administrative expenses
include payroll for management and administrative employees, office occupancy
costs, sales and marketing expenses and other general and administrative
costs.
19
<PAGE>
Prior to their acquisition by the Company, the Acquired Companies were
managed as private companies with significant equity ownership by management.
The results of operations of the Company reflect the S corporation tax
structures of the Acquired Companies (except for Don Richard Associates of
Charlotte, a C corporation) which influenced, among other things, the
historical levels of their owners' compensation. The income taxes related to
Don Richard Associates of Charlotte are immaterial to the Consolidated
Financial Statements and are included in other expenses therein. The former
owners of the Acquired Companies agreed to adjustments in their compensation
and benefits, effective as of the dates of the respective acquisitions. The
following results of operations do not include those contractual compensation
adjustments.
The Company will terminate its S corporation status and become a C
corporation in connection with this Offering. Prior to the closing of this
Offering, the Company expects to make the Distribution to its shareholders.
The Distribution will approximate the amount that such shareholders will need
to fund the payment of federal and state income taxes payable on the Company's
taxable income during the period the Company was an S corporation. The Company
estimates that the amount of the Distribution would have been approximately
$800,000 if the termination of the Company's S corporation status had occurred
on June 30, 1997; this amount is reflected in the Consolidated Financial
Statements. The actual amount of the Distribution will reflect the Company's
taxable income through the termination of the Company's S corporation status.
As a result of the termination of its S corporation status in connection
with this Offering, the Company will record the Deferred Tax Liability. The
amount of the Deferred Tax Liability would have been approximately $2.1
million if the termination of the Company's S corporation status had occurred
on June 30, 1997. The actual amount will be adjusted based on the tax effect
of differences in the bases in assets and liabilities for financial reporting
and income tax purposes as of the date of the termination of S corporation
status. The Company will pay the Deferred Tax Liability over a four-year
period. As a result of the Deferred Tax Liability, the Company expects to
incur a net loss for the quarter in which the Company's S corporation status
is terminated. See "Prior S Corporation Status" and "Use of Proceeds."
RESULTS OF OPERATIONS
The following table sets forth the percentage of service revenues
represented by certain items in the Company's consolidated statements of
income for the indicated periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Service revenues:
Temporary staffing ......... 77.2% 77.0% 75.7% 75.8% 72.4%
Permanent placement ........ 22.8 23.0 24.3 24.2 27.6
------- ------- ------- -------- --------
Total service revenues.... 100.0 100.0 100.0 100.0 100.0
Direct cost of services....... 51.2 51.4 49.8 51.7 48.4
------- ------- ------- -------- --------
Gross profit................ 48.8 48.6 50.2 48.3 51.6
Selling, general and
administrative expenses...... 37.3 37.1 40.9 36.1 43.2
Combination Expenses.......... -- -- -- -- 6.5
Amortization and
depreciation................. 2.0 2.0 1.4 1.5 0.8
Severance and franchise
termination costs............ 2.1 0.5 1.2 0.5 0.6
------- ------- ------- -------- --------
Operating income(1)......... 7.4 9.0 6.7 10.2 0.5
Other expense................. 3.1 2.5 1.8 2.0 1.5
------- ------- ------- -------- --------
Income (loss) before income
taxes(1)..................... 4.3% 6.5% 4.9% 8.2% (1.0)%
======= ======= ======= ======== ========
</TABLE>
- ---------------------
(1) The table below sets forth the percentage of service revenues represented
by certain items excluding the Combination Expenses and severance and
franchise termination costs:
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
---------------- ----------
1994 1995 1996 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating income............................... 9.5% 9.5% 7.8% 10.7% 7.6%
Income before income taxes..................... 6.4 7.0 6.1 8.6 6.2
</TABLE>
20
<PAGE>
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO RESULTS FOR THE SIX
MONTHS ENDED JUNE 30, 1996
Service Revenues. Service revenues increased $4.1 million, or 18.7%, to
$26.4 million in the first six months of 1997 from $22.2 million in the first
six months of 1996. Temporary staffing service revenues increased $2.2
million, or 13.4%, to $19.1 million in the first six months of 1997 from $16.8
million in the first six months of 1996. Temporary staffing service revenues
increased primarily as a result of increased billings to existing clients, the
addition of new clients, increased revenues from offices opened in 1996 and
1995 and increased billing rates. This increase was offset by the Company's
elimination of certain high-volume, low-margin temporary staffing service
assignments in its Tampa and Charlotte Hub-Centers. Permanent placement
service revenues increased $1.9 million, or 35.2%, to $7.3 million in the
first six months of 1997 from $5.4 million in the first six months of 1996.
Permanent placement service revenues increased primarily due to increases in
permanent placements, the number of consultants, the productivity of
consultants and billings to existing clients.
Gross Profit. Gross profit increased $2.9 million, or 26.9%, to $13.6
million in the first six months of 1997 from $10.7 million in the first six
months of 1996. Gross profit as a percentage of service revenues increased to
51.6% in the first six months of 1997 from 48.3% in the first six months of
1996, primarily due to an increase in the percentage of service revenues
derived from permanent placement services which increased to 27.6% of total
service revenues in the first six months of 1997 from 24.2% in the first six
months of 1996. Permanent placement service revenues generate higher gross
profits than temporary staffing service revenues because sales commissions and
other costs associated with permanent placement services are included in
selling, general and administrative expenses. In addition, the Company's
direct cost of services as a percentage of temporary staffing service revenues
decreased to 66.8% in the first six months of 1997 from 68.2% in the first six
months of 1996. This decrease resulted primarily from the Company's focus on
higher gross margin temporary staffing assignments, increased billing rates
and lower unemployment and workers' compensation insurance rates.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.4 million, or 42.0%, to $11.4 million in
the first six months of 1997 from $8.0 million in the first six months of
1996. Approximately $956,000 of the increase was the result of an increase in
owners' compensation and $916,000 of the increase was attributable to sales
commissions associated with the increase in permanent placement service
revenues. Owners' compensation was adjusted upon the Company's acquisition of
each of the Acquired Companies. In addition, the Company incurred expenses in
the first six months of 1997 in connection with the addition of personnel to
support the Company's increased sales and marketing efforts and the
introduction of IT temporary staffing services. As a result of the above
factors, selling, general and administrative expenses as a percentage of
revenues increased to 43.2% in the first six months of 1997 from 36.1% in the
first six months of 1996.
Combination Expenses. In the first six months of 1997, the Company
recognized an expense of $1.7 million, or 6.5% of service revenues, for legal,
accounting and other related expenses in connection with the acquisitions of
the Acquired Companies.
Amortization and Depreciation. Amortization and depreciation decreased
$125,000, or 36.6%, to $217,000 in the first six months of 1997 from $342,000
in the first six months of 1996 because the amortization of a non-compete
agreement was completed in 1996.
Severance and Franchise Termination Costs. In the first six months of 1997,
Don Richard Associates of Tampa terminated its franchise agreement and made a
one-time payment to the franchisor of $170,000. Prior to May 31, 1994, AcSys
Resources operated under a franchise agreement, which provided for various
marketing and royalty payments to the franchisor based on revenues. Effective
May 31, 1994, AcSys Resources and the franchisor entered into an agreement
(the "AcSys Franchise Termination Agreement") which terminated the franchise
agreement and provided for payments to the franchisor of $360,000, which were
made and recorded as an expense in 1994. In addition, AcSys Resources was
required to pay to the franchisor 1% of revenues for the period June 1, 1994
through May 31, 1995, and 2% of revenues for the period June 1, 1995 through
May 31, 1996. In the first six months of 1996, the Company incurred $108,000
of franchise termination costs under the
21
<PAGE>
AcSys Franchise Termination Agreement. Because the obligations under the AcSys
Franchise Termination Agreement were satisfied in 1996, the Company did not
incur such costs in the first six months of 1997. The Company is not currently
a party to any franchise agreements. The Company incurred no severance costs
in the first six months of 1997 or the first six months of 1996.
Operating Income. As a result of the above factors, operating income
decreased $2.1 million, or 94.8%, to $119,000 in the first six months of 1997
from $2.3 million in the first six months of 1996. Operating income as a
percentage of service revenues decreased to 0.5% in the first six months of
1997 from 10.2% in the first six months of 1996. Excluding Combination
Expenses and severance and franchise termination costs, operating income would
have decreased $360,000, or 15.2%, to $2.0 million in the first six months of
1997 from $2.4 million in the first six months of 1996. In addition, operating
income, as a percentage of revenues, would have decreased to 7.6% in the first
six months of 1997 from 10.7% in the first six months of 1996 due to an
increase in owners' compensation expense and the addition of personnel to
support the Company's increased sales and marketing efforts.
Other Expense. Other expense, which is primarily comprised of net interest
expense, decreased to $380,000 in the first six months of 1997 from $451,000
in the first six months of 1996.
Income (Loss) Before Income Taxes. As a result of the above factors, income
before income taxes decreased $2.1 million, or 114.4%, to a loss of $261,000
in the first six months of 1997 from $1.8 million in the first six months of
1996. Income before income taxes as a percentage of service revenues decreased
to (1.0%) in the first six months of 1997 from 8.2% in the first six months of
1996. Excluding Combination Expenses and severance and franchise termination
costs, income before income taxes would have decreased $289,000, or 15.1%, to
$1.6 million in the first six months of 1997 from $1.9 million in the first
six months of 1996 and as a percentage of service revenues, would have
decreased to 6.2% in the first six months of 1997 from 8.6% in the first six
months of 1996.
RESULTS FOR 1996 COMPARED TO RESULTS FOR 1995
Service Revenues. Service revenues increased $11.4 million, or 33.1%, to
$45.9 million in 1996 from $34.5 million in 1995. Temporary staffing service
revenues increased $8.2 million, or 30.8%, to $34.8 million in 1996 from $26.6
million in 1995. The increase in temporary staffing service revenues is
primarily a result of increased billings to existing clients, the addition of
new clients, increased billing rates and increased revenues from offices
opened in 1996 and 1995. Permanent placement service revenues increased $3.2
million, or 40.8%, to $11.2 million in 1996 from $7.9 million in 1995.
Permanent placement service revenues increased primarily due to an increase in
the number of permanent placements made in 1996, additional permanent
placement consultants and increased productivity. In addition, 1996 service
revenues reflect $2.5 million in total service revenues from Don Richard
Associates of Tampa. Due to a change in ownership of Don Richard Associates of
Tampa as of January 1, 1996, the Company's operating results for 1995 do not
include the operating results of that entity.
Gross Profit. Gross profit increased $6.3 million, or 37.5%, to $23.0
million in 1996 from $16.8 million in 1995. Gross profit as a percentage of
service revenues increased to 50.2% in 1996 from 48.6% in 1995, primarily
because permanent placement service revenues comprised a larger portion of
total service revenues, increasing to 24.3% of total service revenues in 1996
from 23.0% in 1995. The Company's direct cost of services as a percentage of
temporary staffing service revenues decreased to 65.8% in 1996 from 66.7% in
1995, primarily as a result of the Company's focus on higher gross margin
temporary staffing assignments and increased billing rates.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $6.0 million, or 46.7%, to $18.8 million in
1996 from $12.8 million in 1995. Approximately $2.1 million of the increase
was attributable to sales commissions associated with the increase in
permanent placement revenues, and $1.4 million was the result of an increase
in owners' compensation of the Acquired Companies. In addition,
22
<PAGE>
1996 selling, general and administrative expenses reflect the expenses of Don
Richard Associates of Tampa whereas 1995 selling, general and administrative
expenses do not. Selling, general and administrative expenses also increased
as a result of corporate expenses incurred in 1996 to support the Company's
growth. Selling, general and administrative expenses as a percentage of
service revenues increased to 40.9% in 1996 from 37.1% in 1995, due to the
increase in owners' compensation and an increase in sales commission rates.
Amortization and Depreciation. Amortization and depreciation decreased
$13,000, or 1.9%, to $661,000 in 1996 from $674,000 in 1995.
Severance and Franchise Termination Costs. In 1996, the Company incurred
$459,000 in severance payments to a former employee of AcSys Resources in
connection with his departure from the Company and $108,000 of costs
associated with the AcSys Franchise Termination Agreement, compared with
$166,000 of franchise termination costs in 1995.
Operating Income. As a result of the above factors, operating income
decreased $86,000, or 2.8%, to $3.0 million in 1996 from $3.1 million in 1995.
Operating income as a percentage of service revenues decreased to 6.6% in 1996
from 9.0% in 1995. Excluding severance and franchise termination costs,
operating income would have increased $314,000, or 9.6%, to $3.6 million for
1996 from $3.3 million for 1995 and, as a percentage of revenues, would have
decreased to 7.8% for 1996 from 9.5% for 1995 primarily due to an increase in
owners' compensation.
Other Expense. Other expense, which is primarily comprised of net interest
expense, decreased to $803,000 in 1996 from $865,000 in 1995 principally due
to lower average debt levels.
Income Before Income Taxes. As a result of the above factors, income before
income taxes decreased $24,000, or 1.1%, to $2.2 million in 1996 from $2.3
million in 1995. Income before income taxes as a percentage of service
revenues decreased to 4.9% in 1996 from 6.5% in 1995. Excluding severance and
franchise termination costs, income before income taxes would have increased
by $376,000, or 15.5%, to $2.8 million in 1996 from $2.4 million in 1995 and,
as a percentage of revenues, would have decreased to 6.1% in 1996 from 7.0% in
1995.
RESULTS FOR 1995 COMPARED TO RESULTS FOR 1994
Service Revenues. Service revenues increased $7.1 million, or 25.9%, to
$34.5 million in 1995 from $27.4 million in 1994. Temporary staffing service
revenues increased $5.4 million, or 25.6%, to $26.6 million in 1995 from $21.2
million in 1994. The increase in temporary staffing service revenues was
primarily due to the opening of new offices, improved marketing strategies and
changes in operating procedures including the implementation of consultant
training to improve productivity. Permanent placement service revenues
increased $1.7 million, or 26.8%, to $7.9 million in 1995 from $6.2 million in
1994. The increase in permanent placement service revenues is primarily due to
an increase in the number of permanent placements made in 1995, additional
permanent placement consultants and increased productivity. In addition, 1995
service revenues reflect 12 months of service revenues from Don Richard
Associates of Washington as compared to only 10 months of service revenues in
1994.
Gross Profit. Gross profit increased $3.4 million, or 25.3%, to $16.8
million in 1995 from $13.4 million in 1994. Gross profit as a percentage of
service revenues remained relatively constant at 48.6% for 1995 compared to
48.8% in 1994.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2.6 million, or 25.2%, to $12.8 million in
1995 from $10.2 million in 1994. Approximately $894,000 of the increase was
attributable to sales commissions associated with the increase in permanent
placement revenues. In addition, the Company incurred 12 months of selling,
general and administrative expenses at Don Richard Associates of Washington in
1995 as compared to only 10 months of selling, general and administrative
expenses in 1994. To a lesser extent, the increase was due to the addition of
consultants. Selling, general and administrative expenses as a percentage of
service revenues decreased slightly to 37.1% in 1995 from 37.3% in 1994.
23
<PAGE>
Amortization and Depreciation. Amortization and depreciation increased
$128,000, or 23.3%, to $674,000 in 1995 from $547,000 in 1994. The increase
resulted from depreciation related to capital expenditures for information
technology systems made at the beginning of 1995 and the end of 1994 and a
full year of amortization of intangible assets acquired in connection with the
acquisition of the Don Richard Associates of Washington operations in 1994.
Severance and Franchise Termination Costs. In 1995, the Company incurred
$166,000 of costs associated with the AcSys Franchise Termination Agreement
compared with $561,000 of franchise termination costs in 1994. No severance
payments were made in either 1995 or 1994.
Operating Income. As a result of the above factors, operating income
increased $1.1 million, or 52.6%, to $3.1 million in 1995 from $2.0 million in
1994. Operating income as a percentage of service revenues increased to 9.0%
in 1995 from 7.4% in 1994. Excluding franchise termination costs, operating
income would have increased $679,000, or 26.1%, to $3.3 million for 1995 from
$2.6 million for 1994 and, as a percentage of service revenues, would have
remained stable at 9.5% for 1995 and for 1994.
Other Expense. Other expense, which is primarily comprised of net interest
expense, increased to $865,000 in 1995 from $853,000 in 1994.
Income Before Income Taxes. As a result of the above factors, income before
income taxes increased $1.1 million, or 89.2%, to $2.3 million in 1995 from
$1.2 million in 1994. Income before income taxes as a percentage of service
revenues increased to 6.5% in 1995 from 4.3% in 1994. Excluding franchise
termination costs, income before income taxes would have increased by
$667,000, or 38.1%, to $2.4 million in 1995 from $1.8 million in 1994 and, as
a percentage of revenues, would have increased to 7.0% in 1995 from 6.4% in
1994.
UNAUDITED QUARTERLY RESULTS
The following table sets forth certain unaudited consolidated quarterly
operating information of the Company for the six quarters in the period
beginning January 1, 1996. This information has been prepared on the same
basis as the Consolidated Financial Statements contained elsewhere in this
Prospectus and, in the opinion of management, includes all adjustments,
consisting solely of normal and recurring adjustments, necessary for the fair
presentation of the information for the periods presented. The financial data
shown below should be read in conjunction with the Consolidated Financial
Statements and the related Notes thereto. Results for any previous quarter are
not necessarily indicative of results for the full year or for any future
quarter.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1996 1996 1996 1996 1997 1997
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Service revenues: $ $ $ $ $ $
Temporary staffing.....
Permanent placement....
---- ---- ---- ---- ---- ----
Total service reve-
nues.................
Operating income .......
Income (loss) before in-
come taxes............. $ $ $ $ $ $
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $1.4 million, $2.8 million and
$1.9 million in 1994, 1995 and 1996 and $1.1 million and $1.5 million for the
six months ended June 30, 1996 and 1997, respectively. The increase in cash
provided by operating activities for the six months ended June 30, 1997 as
compared to the six months ended June 30, 1996 was due to a significant
increase in accrued liabilities, partially offset by the reduction in net
income. The reduction in net cash provided by operating activities in 1996 as
compared to 1995 was primarily due to a significant increase in accounts
receivable in 1996. The increase in net cash provided by operating activities
in 1995 as compared to 1994 was due to higher net income before amortization
and depreciation in 1995.
24
<PAGE>
Net cash used in investing activities was $126,000, $274,000, $487,000 and
$194,000 in 1994, 1995, 1996 and the first six months of 1997, respectively.
Cash used in investing activities for the periods presented was attributable
to capital expenditures, including computer and telecommunications equipment,
furniture and office equipment. The Company expects to make capital
expenditures of $1.0 million, primarily to enhance management information
systems.
Net cash used in financing activities was $669,000, $1.8 million, $1.8
million and $1.4 million in 1994, 1995, 1996 and the first six months of 1997,
respectively. Cash used in financing activities for the periods presented was
primarily attributable to net repayments of long-term debt and capital lease
obligations and distributions to shareholders.
The Company's principal uses of cash are to fund temporary employee payroll
expense and employer related payroll taxes; investment in capital equipment
such as IT systems; start-up expenses of new offices; expansion of services
offered; and costs relating to unusual transactions such as acquisitions,
severance and franchise termination costs and the Deferred Tax Liability,
which will be paid over a four-year period. Temporary employees are paid
weekly, and customer remittances are generally received by the Company within
45 days from the time work was performed by temporary employees. Expansion of
the Company's services requires expenditures for marketing and personnel costs
at varied levels up to six months in advance of generating any service
revenues. In addition, for the first six months of 1997, $559,000 of cash was
used to pay Combination Expenses and costs related to obtaining the Credit
Facility.
The Company entered into the Credit Facility on May 16, 1997. Borrowings
under the Credit Facility are available for working capital and other
corporate purposes, including acquisitions; have been used to repay certain
debt of the Acquired Companies and to pay for expenses incurred in connection
with acquisitions; and will be available to make the Distribution. Interest on
the Credit Facility is due quarterly, and outstanding principal is due on May
31, 2000. Interest is payable at a rate equal to, at the election of the
Company, either: (A) the greater of (i) the prime rate or (ii) the federal
funds rate plus 0.5%, plus a variable amount between 0% and 0.75%; or (B)
LIBOR plus a variable amount between 1.25% and 2.5%. At October 7, 1997 the
Company owed $11.1 million in principal on the Credit Facility. The Credit
Facility contains covenants requiring the maintenance of certain financial
ratios and specified net worth and limiting the incurrence of additional
indebtedness, the sale of substantial assets, consolidations or mergers by the
Company and the payment of dividends. The Credit Facility is secured by all
assets of the Company and a pledge of 100% of the stock of all subsidiaries,
which have guaranteed the repayment of indebtedness under the Credit Facility.
The net proceeds from the Offering, after deducting underwriting discounts
and offering expenses, are expected to total approximately $19.3 million. The
Company intends to use the net proceeds of this Offering as follows: (i)
approximately $11.9 million (including indebtedness incurred to fund the
Distribution) to repay the outstanding indebtedness under the Credit Facility;
(ii) approximately $1.0 million for capital expenditures, primarily to enhance
management information systems; and (iii) the balance of the net proceeds,
expected to be approximately $6.4 million, for working capital and general
corporate purposes, including acquisitions and the opening of new offices. The
Company also intends to register up to an additional 2,000,000 shares of its
Common Stock as soon as practicable after completion of this Offering for use
by the Company as consideration in connection with future acquisitions. While
there can be no assurance, the Company believes that the proceeds of this
Offering, funds currently available on hand, funds to be provided by
operations and funds available under the Credit Facility will be sufficient to
meet the Company's anticipated needs for working capital for the next twelve
months. The Company's estimate of the time that the proceeds of this Offering,
funds currently on hand, funds provided by operations and funds available
under the Credit Facility will be sufficient to meet the Company's working
capital needs is a forward-looking statement that is subject to risks and
uncertainties. Actual results and working capital needs could differ
materially from those estimated due to a number of factors, including the use
of such proceeds to fund acquisitions. In addition, acquisitions may require
additional debt and equity financing.
25
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128) and
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" (SFAS 129).
SFAS 128 requires a dual presentation of basic and diluted earnings per
share (EPS) in the statement of operations. Basic EPS is computed by dividing
net income by the weighted average number of shares of Common Stock
outstanding for the period. Diluted EPS includes the effect, if any, from the
potential exercise or conversion of securities, such as stock options, which
would result in the issuance of shares of Common Stock. SFAS 128 is effective
for financial statements for the periods ending after December 15, 1997. The
Company will adopt SFAS 128 for the year ending December 31, 1997 and, based
upon current facts and circumstances, does not expect the basic and diluted
EPS computed under SFAS 128 to be materially different than the EPS computed
under the provisions of APB Opinion No. 15, "Earnings Per Share."
SFAS 129 establishes standards for disclosing information about an entity's
capital structure. SFAS 129 is effective for financial statements for the
periods ending after December 15, 1997. The Company will adopt SFAS 129 for
the year ending December 31, 1997 and does not expect the adoption of this
pronouncement to impact the results of operations.
26
<PAGE>
BUSINESS
GENERAL
ACSYS, Inc. is one of the leading accounting and finance temporary staffing
and permanent placement firms in the United States. The Company operates 15
offices serving the Atlanta, Charlotte, Central New Jersey, Philadelphia,
Tampa and Washington, D.C. metropolitan markets. The Company was formed in
March 1997 and since its formation has acquired seven accounting and finance
specialty professional staffing companies which had an average operating
history of 15 years. The Company's goal is to build a national specialty
professional staffing business with offices in major United States
metropolitan markets. The Company's clients include Fortune 1000 companies,
middle market companies, governmental agencies and nonprofit organizations.
The Company's operating strategy is based on a focus on client relationships
and its philosophy that the central function of corporate management is to
support the staffing consultants who directly interact with clients. The
Company carries out its strategy through its decentralized "Hub-Center"
management model, which the Company believes fosters an entrepreneurial
environment. Hub-Centers, located in major metropolitan markets, are managed
by Division Presidents who are responsible for achieving the Company's
operational and financial goals and have significant latitude over such
matters as hiring, recruiting, compensation, pricing and sales management.
Division Presidents are supported by the Company's corporate services which
include advertising, marketing, public relations, management information
systems support, training, human resources, accounting and other back office
functions. The Company believes that its decentralized management structure
enables it to be more responsive to its clients' needs. Further, the Company
believes that its specialty professional focus makes it more attractive to
staffing consultants and temporary and permanent placement candidates.
The Company's goal is to build a national specialty professional staffing
business with offices in major United States metropolitan markets by pursuing
strategic acquisitions, enhancing and expanding existing offices, introducing
new services and opening new offices. The Company seeks to acquire specialty
professional staffing businesses with strong management and a significant
presence in what the Company believes to be desirable, growing markets. The
Company believes it will have a strategic advantage in competing for
acquisitions based on (i) its focus on the specialty professional staffing
segment of the staffing industry; (ii) the personal relationships of its
senior executives with managers and owners of other specialty professional
staffing firms; (iii) the Company's entrepreneurial operating environment and
Hub-Center management model; (iv) the Company's merger and acquisition
execution capabilities; and (v) the Company's greater visibility and resources
as a public company. The Company plans to enhance and expand its existing
offices by adding quality personnel, pursuing new clients, expanding
relationships with its current clients and replicating its most successful
sales, marketing and business techniques in offices that are not currently
using those techniques. The Company also intends to introduce new specialty
professional staffing services in addition to its core accounting and finance
staffing services. For example, the Company recently introduced IT staffing in
several locations. The Company may develop or expand new services internally
by leveraging its existing staffing expertise and specialty professional
staffing reputation or it may acquire existing businesses that offer such new
specialty professional staffing services. Furthermore, the Company intends to
grow by opening new offices in both its current markets and new geographic
markets.
THE STAFFING INDUSTRY
The staffing industry generally consists of companies which provide four
basic services to clients: temporary staffing, placement and search,
professional employer organization services and outplacement. Based on
information from the Staffing Industry Report, staffing industry revenues
increased from approximately $31.4 billion in 1991 to approximately $74.4
billion in 1996, representing a compound annual growth rate of 19%. According
to industry sources, in 1996 the staffing industry employed approximately 5.2
million people per day, or approximately 4% of the entire United States
workforce. While the industry has undergone consolidation in the last few
years, it remains fragmented with over 9,300 temporary staffing firms and over
3,400 placement and
27
<PAGE>
search firms. Within the overall staffing industry, the Company primarily
provides services in the temporary staffing sector, which had 1996 revenues of
$47.1 billion and grew from 1991 revenues of $21.5 billion representing a
compound annual growth rate of 17%. The Company also provides services in the
placement and search sector, which had 1996 revenues of $9.1 billion and grew
from 1991 revenues of $4.2 billion also representing a compound annual growth
rate of 17%.
The Company's temporary staffing services are currently focused on the
accounting and finance portion of the specialty professional segment, which
had 1996 revenues of $5.0 billion, representing 11% of the $47.1 billion
temporary staffing sector. The Staffing Industry Report recently estimated
that the specialty professional segment will grow 22% in 1997. In addition to
accounting and finance, the specialty professional segment, as defined by the
Staffing Industry Report, includes legal, laboratory and other professional
staffing services (excluding IT and technical services). The specialty
professional segment is one of the fastest growing segments of the temporary
staffing sector, with profit margins greater than those of the traditional
clerical and light industrial temporary staffing business. The Company has
also recently begun to offer IT staffing services. The IT/technical segment of
the temporary staffing sector had 1996 revenues of $11.7 billion, representing
25% of the temporary staffing sector, and is expected to grow 27% in 1997.
This segment includes IT services such as consulting, systems and network
integration and support, and IT supplemental staffing.
Temporary staffing has become widely accepted as a valuable tool for
managing personnel costs and for meeting specialized or fluctuating employment
requirements. Temporary staffing companies offer a means of dealing with
uneven or peak work loads caused by such predictable events as vacations, tax
work, month-end activities, special projects, and seasonal increases in work
volume, and such unpredictable events as illnesses, resignations and
emergencies. In addition, employees increasingly look to temporary assignments
as a way to build experience, make contacts, and receive training and valuable
exposure to a variety of work settings, as well as a means to gain full-time
employment. The Company believes that more companies are not only accepting
the idea of using professional temporary employees in traditional permanent
professional roles, but are planning to use such employees as a continuing
corporate strategy. Furthermore, traditional accounting services that were
historically performed internally are being outsourced.
The placement and search sector of the staffing industry had 1996 revenues
of $9.1 billion, representing 12% of the staffing industry. This sector is
expected to grow 14% in 1997, according to the Staffing Industry Report.
Personnel placed by companies in this sector cover a wide range of industries
and a variety of position levels. Placement and search firms fulfill their
clients' needs by identifying, evaluating and recommending qualified
candidates for positions. Placement and search firms are generally
characterized as either retained search or contingency placement, depending
upon how their fees are determined. Retained search firms receive a retainer
at the outset of an assignment, whereas contingency firms, such as the
Company, receive compensation upon successful completion of a search and
placement of a recommended candidate. Contingency firms typically fill mid-
level positions for a fee equal to a percentage of the candidate's first year
annual salary.
The Company believes that companies have become increasingly reliant on
placement and search firms for a number of reasons. The continued strength and
growth of the economy has reduced the pool of available specialty
professionals and increased the difficulty of finding talented candidates.
Professional employee turnover has increased as more employees spend their
careers with a number of different organizations in various locations. Many
companies are outsourcing non-core activities, such as recruiting, to reduce
costs and increase efficiencies. A permanent placement firm may also serve in
a consultative role to the client by providing objective feedback on
candidates and advice regarding profile and compensation for a particular
position.
The Company believes that a number of factors may increase demand for
specialty professional temporary staffing and permanent placement services.
These factors include:
. Use of temporary employees to fill higher-skilled positions.
. Employers' difficulty locating qualified employees.
. Desire of employers to utilize candidates with the latest training and
current skill sets demanded in the increasingly technology-reliant
business environment.
. Trend to outsource non-core functions to reduce costs and increase
efficiencies.
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<PAGE>
. Employment candidates' attraction to industry-focused specialty service
providers.
. Employment candidates seeking more flexibility and opportunities to gain
experience in a variety of work settings.
OPERATING STRATEGY
The key elements of the Company's operating strategy are as follows:
Focus on Specialty Professional Markets. The Company focuses on staffing
positions that require specialized skills such as accounting, finance and
banking. The Company believes that its years of experience, recognized local
brand names, reputation for client service and the industry expertise of its
staffing consultants give it a competitive advantage. For example, many of the
Company's staffing consultants are certified public accountants. The Company
believes that these specialized characteristics also provide an opportunity
for the Company to generate higher margins than those of traditional clerical
and light industrial staffing companies.
Emphasize Client Relationships. The Company believes that client
relationships and the staffing consultants who are responsible for developing
and maintaining those relationships are the Company's most important assets.
These consultants are encouraged to respond directly and innovatively to
satisfy clients' staffing needs, and the Company has built its corporate level
services to support its consultants in that effort. Moreover, the Company
believes that the central function of management, including the Company's
senior executive team, is to support the consultants who directly interact
with the client.
Foster Entrepreneurial Environment with Hub-Center Management Model. The
Company employs a decentralized operating strategy which it has termed its
Hub-Center management model. The Company's operations in each market,
including any satellite offices in that market, are managed by local managers
called Division Presidents. The Company believes it has a strong market share
in each of its major markets largely due to the commitment, ability and
creativity of the Division Presidents who drive each local business. The
Company fosters this entrepreneurial environment by giving its Division
Presidents the authority to respond quickly and creatively to client needs.
Division Presidents are responsible for achieving operational and financial
objectives, including revenues and earnings growth, and have authority over
hiring, recruiting, compensation, pricing and sales management. The Company
believes that this coupling of accountability and authority, combined with the
support of the Company's corporate level support services, enables its
Division Presidents to compete successfully in the local marketplace. The
Company also believes this entrepreneurial environment allows the Company to
attract talented managers and successfully serve its clients' needs.
Provide Corporate Level Support. The Company's philosophy is that the
central function of corporate management is to support the staffing
consultants who directly interact with clients. The Company offers its
Division Presidents corporate level support to lessen their administrative
burden and allow them to focus on servicing clients and growing the business.
These support functions include advertising, marketing, public relations,
management information systems support, training, human resources, accounting
and other back office functions. The Company's corporate management has
identified and continues to identify "best practices" for its Division
Presidents to use in their day-to-day operations.
29
<PAGE>
The Company's focus on client relationships and its philosophy of servicing
those relationships with its Hub-Center management model and corporate level
support is graphically depicted as follows:
[GRAPHIC APPEARS HERE]
[Chart depicting Hub-Center management model and corporate level support with
"Clients" in an oval at the top. Underneath are two ovals, one on each side,
with "Satellite office" inside them and arrows pointing up to the Client's
oval. In between the Satellite office ovals is a larger oval with "Hub-Center"
in bold and "Division President" underneath it inside the oval, which also has
an arrow pointing upwards to the Client's oval. Underneath the Satellite
office ovals and the Hub-Center oval is a larger oval with the words
"Corporate Level Support" inside it, and with an arrow pointing from that oval
upwards towards the Hub-Center oval.]
Attract, Motivate and Retain Staffing Consultants with Specialty
Professional Skills. The Company places great emphasis on attracting,
motivating and retaining highly-skilled staffing consultants. The staffing
industry has generally been characterized by a high degree of employee
turnover. The Company believes its decentralized, entrepreneurial environment
and focus on the specialty professional market enhance the attractiveness of
the Company to staffing consultants. In addition, the Company believes that
its compensation policies effectively motivate its personnel. The Company also
plans to grant stock options to substantially all of its operating personnel
upon consummation of the Offering, which the Company believes will further
motivate its operating personnel.
GROWTH STRATEGY
The Company's goal is to build a national specialty professional staffing
business with offices in major United States metropolitan markets. The key
elements of its growth strategy are as follows:
Pursue Strategic Acquisitions. The Company intends to acquire accounting and
finance temporary staffing and permanent placement businesses and other
specialty professional staffing businesses, such as IT and legal staffing
companies. The Company seeks acquisition candidates with characteristics such
as attractive geographic market locations, strong market shares, recognized
local brand names and new or expanded specialties that can be added to the
Company's existing services. The Company also focuses on acquisition targets
that have strong management teams and complementary cultures. The Company
believes it will have a strategic advantage in competing for acquisitions
based on (i) its focus on the specialty professional staffing segment of the
staffing
30
<PAGE>
industry; (ii) the personal relationships of its key executives with managers
and owners of other specialty professional staffing firms; (iii) the Company's
entrepreneurial operating environment and Hub-Center management model; (iv)
the Company's merger and acquisition execution capabilities; and (v) the
Company's greater visibility and resources as a public company. To accomplish
acquisitions, the Company plans to use equity, debt, available cash and
combinations of all three as consideration. In addition, the Company intends
to register up to 2,000,000 additional shares of its Common Stock as soon as
practicable after the completion of the Offering for use in future
acquisitions. See "Acquisitions."
Enhance and Expand Existing Offices. The Company plans to develop and expand
its current offices by adding temporary staffing and permanent placement
consultants, pursuing new clients, expanding current client relationships,
cross-marketing temporary and permanent services, and replicating successful
sales, marketing and business techniques in offices that are not currently
using those techniques. The Company relies on its Division Presidents to drive
this internal growth and to determine which sales, marketing and business
techniques are most appropriate for their respective local markets.
Introduce New Services. The Company plans to develop new specialty
professional staffing services internally by leveraging its existing expertise
and reputation in specialty professional staffing services, particularly in
markets where the Company's clients have solicited the Company for those new
services. Examples of the Company's internal development of new service
offerings are its recent commencement of IT staffing services in several
offices, with plans to offer IT services in other offices, and ACSYS Advantage
Accountant, a program in which the Company seeks to staff higher-end positions
such as chief financial officers and controllers on an interim basis. The
Company currently has several new service development projects in process,
including: professional sales permanent placement; litigation support;
outsourced internal audit function; and vendor-on-premise, contract services
or project management. All of these potential new services are currently
offered only on a limited basis, and there can be no assurance that they will
be offered throughout the Company. The Company may also acquire specialty
staffing services firms with new or expanded services and market those
services through its existing offices.
Open New Offices. The Company has opened two offices since its formation and
plans to continue to grow its business by opening new offices. The Company
will open two types of new offices, spin-offs from existing offices and "de
novo" offices. A spin-off office is opened in an existing geographic market by
breaking a branch office in two. The purpose of such an office opening is to
provide the Company greater geographic coverage and increased market
penetration at a low marginal cost. The Company has recently opened two spin-
off offices, one in Alexandria, Virginia (a spin-off from the Company's
existing Tyson's Corner, Virginia office), and one in Landover, Maryland (a
spin-off from the Company's Washington, D.C. office). The Company will also
open de novo offices that will represent the Company's initial presence in new
geographic markets. The Company plans to open such an office in Orlando,
Florida. The Company has established a team of experienced management
personnel led by Beth Monroe-Chase, the Company's Chief Development Officer,
who will lead the Company's future de novo office opening efforts and oversee
the management of these new offices until they reach a level of performance
the Company believes is sufficient to allow them to operate as stand-alone
Hub-Centers led by a Division President.
SERVICES
The Company currently offers the following services:
Accounting and Finance Temporary Staffing. The Company's accounting and
finance temporary staffing operations are the core of the Company's business
and accounted for approximately 68.5% and 67.4% of its pro forma service
revenues in 1996 and the first six months of 1997, respectively. The Company
provides temporary staffing services to clients in a variety of industries,
such as telecommunications, banking, manufacturing and government. Its
temporary staffing clients are principally Fortune 1000 companies, middle
market companies, governmental agencies and nonprofit organizations. Some of
the temporary employees placed by the Company may decide to accept an offer of
permanent employment from the client and thereby "convert" the temporary
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<PAGE>
position to a permanent position. During a typical week, the Company has more
than 1,000 accounting and finance temporary personnel on assignment at an
average bill rate for temporary staffing employees of approximately $21 per
hour.
Accounting and Finance Permanent Placement. The Company's accounting and
finance permanent placement business accounted for 22.9% and 25.7% of its pro
forma service revenues in 1996 and the first six months of 1997, respectively.
The Company's permanent placement business specializes in placing mid-level
accounting, financial, tax and banking personnel in permanent positions with a
diverse mix of companies ranging from small businesses and nonprofit
organizations to Fortune 1000 companies. Substantially all of the Company's
permanent placement business is on a contingency basis; thus, the Company is
not compensated for a permanent placement assignment unless a candidate
recommended by the Company is hired by a client. Fees for successful permanent
placements are paid only by the employer and are generally equal to a
percentage of the new employee's first-year annual compensation. Generally, if
a candidate placed by the Company is terminated or resigns during a specified
guaranty period (typically 90-180 days), the Company either fills the position
without further charge or provides a prorated refund. The Company placed a
total of 1,509 permanent placement candidates during 1996 and 960 candidates
during the first six months of 1997, respectively. The Company's average
placement fee was approximately $7,900 and $8,200 in 1996 and the first six
months of 1997, respectively, on a pro forma basis.
Types of positions in which the Company places temporary staffing employees
and permanent candidates include:
<TABLE>
<S> <C>
. Accounting Managers . Budget Analysts
. Chief Financial Officers . Controllers and Assistant Controllers
. Cost Accountants . Credit and Collections Personnel
. Financial Analysts . Financial Reporting Specialists
. Internal Audit Personnel . Staff and Senior Accountants
. Tax Accountants . Treasurers
</TABLE>
Information Technology. The Company began offering IT staffing services in
the third quarter of 1997 in its Philadelphia, Central New Jersey, Charlotte
and Tampa Hub-Centers. The Company generally offers both IT temporary staffing
and IT permanent placement services. The Company is leveraging its existing
client contacts in the accounting and finance area by seeking to fill their IT
staffing needs as well. The Company may expand its IT business into other
offices and also may acquire other IT staffing firms as it seeks to diversify
its staffing services.
Other Staffing Services. The Company's corporate staffing services place
temporary office and administrative personnel, ranging from executive
assistants to office managers. The Company began offering these services in
its Washington, D.C. Hub-Center in response to clients' desire to staff
candidates with a stronger base of skills than those typically available from
other staffing providers. These services accounted for 8.6% and 6.9% of the
Company's pro forma service revenues in 1996 and the first six months of 1997,
respectively, and are included under temporary staffing service revenues in
the Consolidated Financial Statements.
ACQUISITIONS
A key element of the Company's growth strategy is to acquire accounting and
finance and other specialty professional staffing businesses. While the
industry has undergone significant consolidation in the last few years, it
remains a fragmented market with over 9,300 temporary staffing firms and over
3,400 placement and search firms. To accomplish acquisitions, the Company
plans to use equity, debt, available cash and combinations of all three as
consideration. In addition, the Company intends to register up to 2,000,000
additional shares of its Common Stock as soon as practicable after the
completion of the Offering for use in future acquisitions. The Company
believes that it will have a strategic advantage in competing for acquisitions
as a result of: (i) its focus on the specialty professional staffing segment
of the staffing industry; (ii) the personal relationships of its key
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<PAGE>
executives with managers and owners of other professional staffing firms;
(iii) the Company's decentralized, entrepreneurial operating environment and
Hub-Center management model; (iv) the Company's merger and acquisition
execution capabilities; and (v) the Company's greater visibility and resources
as a public company.
The Company believes that its focus on the specialty professional segment of
the staffing industry gives it a strategic advantage in attracting acquisition
candidates that prefer to affiliate with a professionally-focused company
rather than a traditional clerical and light industrial-based staffing
company. A number of the members of the Company's management have been active
or currently hold leadership positions in national and regional specialty
professional staffing trade associations, including the American Association
of Finance and Accounting, a national association of privately held accounting
and finance staffing firms. In addition, members of the Company's management
have previous work experience with national staffing companies or "Big Six"
accounting firms. As a result, these persons have developed personal
relationships with the owners of many independent specialty professional
staffing firms. The Company also believes that its commitment to maintaining a
strong professional permanent placement business will give it a strategic
advantage in attracting acquisition candidates whose businesses have a
permanent placement focus. Furthermore, the Company believes it can use its
temporary staffing expertise to build significant temporary staffing
businesses from these established professional permanent placement bases.
The Company has established an internal integration team led by its Chief
Executive Officer that is charged with quickly and cost effectively
integrating acquired companies into the Company's operating environment. An
immediate integration goal will be to consolidate back office administrative
functions to allow local management to devote more time and attention to
increased sales and profitability.
The Company will generally make two kinds of acquisitions --"platform"
acquisitions and "tuck-under" acquisitions. A platform acquisition represents
the Company's entry into a new geographic market through the acquisition of a
company that has a material share of its sector of the specialty professional
staffing business in that market and which will serve as a Hub-Center for that
market. Most of these companies' clients are likely to be middle market
businesses but may also include Fortune 1000 companies. In addition, a
platform acquisition may increase the Company's services and provide the base
from which to introduce such services into the Company's other locations.
Tuck-under acquisitions are acquisitions of smaller companies that fit well
with the Company's existing locations and present growth opportunities via
synergies with the Company's existing business. Such acquisitions may present
an alternative to opening a spin-off office.
Since its formation in March 1997 the Company has acquired seven accounting
and finance staffing companies. The Acquired Companies are described briefly
below.
Don Richard Associates of Washington. Effective May 1997, the Company
acquired Don Richard Associates of Washington, which operated three offices in
metropolitan Washington providing accounting and finance temporary staffing
and permanent placement services and corporate staffing services primarily to
Fortune 1000 businesses, middle market companies, governmental agencies and
nonprofit organizations. For the year ended December 31, 1996, Don Richard
Associates of Washington had service revenues of $17.0 million.
David C. Cooper & Associates. Effective May 1997, the Company acquired David
C. Cooper & Associates, which operated an Atlanta, Georgia office providing
accounting and finance temporary staffing and permanent placement services
primarily to Fortune 1000 and middle market companies. For the year ended
December 31, 1996, David C. Cooper & Associates had service revenues of $7.8
million.
Don Richard Associates of Charlotte. Effective May 1997, the Company
acquired Don Richard Associates of Charlotte, which operated a Charlotte,
North Carolina office providing accounting and finance temporary staffing and
permanent placement services and IT staffing services primarily to Fortune
1000 and middle market companies. For the year ended December 31, 1996, Don
Richard Associates of Charlotte had service revenues of $2.8 million.
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<PAGE>
Don Richard Associates of Tampa. Effective May 1997, the Company acquired
Don Richard Associates of Tampa, which operated a Tampa, Florida office
providing accounting and finance temporary staffing and permanent placement
services and IT staffing services primarily to Fortune 1000 and middle market
companies. For the year ended December 31, 1996, Don Richard Associates of
Tampa had service revenues of $2.5 million.
Rylan Forbes. Effective July 1997, the Company acquired Rylan Forbes, which
operated two offices in Philadelphia and Central New Jersey providing
accounting and finance temporary staffing and permanent placement services
primarily to Fortune 1000 and middle market companies. For the year ended
December 31, 1996, Rylan Forbes had service revenues of $1.4 million.
C.P.A. Staffing. Effective August 1997, AcSys Resources acquired C.P.A.
Staffing, which operated an Atlanta, Georgia office providing accounting and
finance temporary staffing and permanent placement services primarily to
Fortune 1000 and middle market companies. For the year ended December 31,
1996, C.P.A. Staffing had service revenues of $6.5 million.
AcSys Resources. Effective September 1997, the Company acquired AcSys
Resources, which operated seven offices in Pennsylvania, New Jersey and
Delaware providing accounting and finance temporary staffing and permanent
placement services and IT staffing services primarily to Fortune 1000 and
middle market companies. For the year ended December 31, 1996, AcSys Resources
had service revenues of $14.4 million.
HUB-CENTER MANAGEMENT MODEL
The Company's decentralized operating strategy uses a Hub-Center management
model in which the Company's operations in each market are managed by Division
Presidents. See "-- Operating Strategy -- Foster Entrepreneurial Environment
with Hub-Center Management Model." The Company's current Hub-Centers, offices
and 1996 pro forma service revenues for each Hub-Center are listed below:
<TABLE>
<CAPTION>
1996 PRO FORMA
HUB-CENTER OFFICES REVENUES
------------------ ------------------ --------------
(IN MILLIONS)
<S> <C> <C>
Washington, DC Washington, DC $17.0
Tyson's Corner, VA
Bethesda, MD
Alexandria, VA(1)
Landover, MD(1)
Atlanta, GA Atlanta, GA 14.3
Philadelphia, PA Philadelphia, PA 13.2
Wayne, PA
Lancaster, PA
Cherry Hill, NJ
Wilmington, DE
Charlotte, NC Charlotte, NC 2.8
Central New Jersey Edison, NJ 2.6
Princeton, NJ
Tampa, FL Tampa, FL 2.5
</TABLE>
- ---------------------
(1) Spin-off offices opened in 1997.
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CORPORATE SUPPORT SERVICES
The Company offers or is planning to offer the following corporate level
support functions to its Hub-Centers:
Training. The Company offers its staffing consultants and other employees a
two week orientation and training period as well as ongoing courses offering
instruction and training in client service and development, team building,
management techniques and employment law. The primary objective is to teach
employees how to build client relationships and manage others utilizing proven
business techniques. With respect to its Division Presidents in particular,
the Company seeks talented and motivated managers to serve as Division
Presidents and believes that its entrepreneurial Hub-Center operating
philosophy requires its Division Presidents to be exceptionally strong
managers and leaders. The Company seeks to cultivate these qualities in its
Division Presidents by using both training materials developed in-house and
outside consultants to conduct training sessions. In addition, the Company is
creating a company-wide database of "best practices" for its Division
Presidents to use in their day-to-day operations.
Information Systems. The Company has a management information systems
department that is actively reviewing its IT assets and needs and currently
plans to maintain and enhance each of the systems now in place. The Company is
in the process of implementing technology systems in each of the Acquired
Companies to provide several back office support functions. The Company is
building a corporate "Intranet" to facilitate the sharing of corporate
resources. The Company is also migrating to a common desktop computing office
suite platform.
Advertising, Marketing and Public Relations. The Company has developed and
continues to develop a full range of advertising, marketing and public
relations services, including development of classified advertising, regional
print advertising campaigns, radio advertising, premiums, public relations,
direct mail and promotions. These programs focus on both clients and
employment candidates.
Risk Management. The Company is centralizing the risk management function
and is reviewing its insurance coverage in an effort to maintain adequate
coverage at a reasonable cost. In addition, as part of its training effort,
the Company conducts seminars on pertinent topics (particularly employment
law-related matters) for its employees to help educate its work force and
reduce the Company's exposure to losses.
Human Resources. The Company has a human resources team designed and
committed to establishing and maintaining systems that assist and enhance
employee work-life, while helping to ensure the growth and health of the
organization as a whole. The Human Resources department is full-service with
responsibility for employee relations, compensation, training and development
and employee benefits. Because of the unique nature of the staffing industry,
Human Resources is also responsible for compliance issues in the recruitment
process. The Human Resources department structure is decentralized with a core
staff working at the corporate office combined with regional Human Resources
consultants strategically placed in key markets to provide local, in-person
assistance and support.
Legal Services. The Company is centralizing its legal services function and
is developing detailed policies regarding the retention of legal counsel and
certain guidelines within which Division Presidents are limited in making
decisions relating to legal issues.
Treasury Management. The Company has centralized its treasury management
function by establishing a lock box cash management system. In this system,
all customer payments are received at a central location maintained by the
Company's bank. The Company believes this system results in better internal
control by centralizing the cash collection portion of the revenue cycle.
Accounting. All accounting functions, including management financial
information, are being centralized. The processing of customer invoices and
temporary employee payroll, which are critical to customer service,
35
<PAGE>
will remain in the Hub-Centers. Division Presidents will be unencumbered by
routine accounting matters and will be supplied with timely and accurate
financial information allowing them to focus on operations and results.
RECRUITING
The Company uses a variety of methods to recruit qualified temporary
staffing and permanent placement candidates. The Company's primary recruiting
methods are networking and direct solicitation by staffing consultants. The
Company also has recruiting managers in several offices whose primary
responsibility is to market the Company's services to potential candidates.
Other recruiting methods include: advertising in newspaper classified ads and
in various other print media, including Yellow Pages and local and national
trade journals; advertising on radio; maintaining an Internet website;
recruiting on college campuses; participating in job fairs; offering referral
bonuses for new temporary employees; conducting direct mail campaigns; and
maintaining a good reputation and high visibility within the community through
community service. The Company receives a significant number of referrals from
past candidates due to its professional reputation, quality service and the
draw of the Company's permanent placement practice. Furthermore, the Company
believes that candidates are attracted to the Company by the number and
quality of the positions the Company has available, and that the availability
of good candidates increases its client base.
LOCAL SALES AND MARKETING
The Company emphasizes local sales and marketing efforts, which are
generally conducted by each Hub-Center. In addition to the Company's Division
Presidents and staffing consultants, the Company has 25 salespersons in its
Hub-Centers whose primary responsibility is to market the Company's services
to potential new clients. The Company's client-oriented advertising primarily
consists of print advertisements in national newspapers, Yellow Pages,
magazines and trade journals; and radio advertisements. Direct marketing
through mail and telephone solicitation also constitutes a significant portion
of the Company's total advertising. The Company also seeks endorsements and
affiliations with local and regional accounting and finance professional
organizations and conducts public relations activities designed to enhance
recognition of the Company and its services. Local employees are encouraged to
be active in civic organizations and industry trade groups.
EMPLOYEES
The Company had 210 full-time internal staff employees as of September 30,
1997. Temporary employees placed by the Company are the Company's employees
while they are working on assignments. Neither the Company's internal staff
nor its temporary employees are represented by a collective bargaining
agreement. Hourly wages for the Company's temporary employees are determined
according to market conditions. The Company pays mandated costs of employment,
including the employer's share of social security taxes (FICA), federal and
state unemployment taxes, unemployment compensation insurance, general payroll
expenses and workers' compensation insurance. The Company offers access to
various insurance programs and benefits to its temporary employees. The
Company believes its employee relations are satisfactory.
COMPETITION
The staffing industry is highly competitive, with limited barriers to entry.
The Company believes that availability and quality of employment candidates,
reliability of service and price of services are the most significant
competitive factors in the specialty professional staffing sector. The Company
believes it derives a competitive advantage from its long experience with and
commitment to the specialty professional staffing market, its strong local
market presence and reputation, and its various marketing activities. A number
of firms offer services similar to the Company's on a national, regional or
local basis. The Company competes for clients, candidates and acquisitions
with many local and regional companies and also faces competition from a
number of international and national specialty professional staffing companies
that include Robert Half International Inc., Romac International, Inc.,
Accountants, Inc., Source Services, Inc. and Accountants On Call, as well as
36
<PAGE>
professional staffing divisions of larger general staffing firms, such as
Interim Services Inc., Norrell, Inc. and Olsten Corporation. These firms have
materially greater financial and operating resources than the Company.
SERVICE MARKS AND TRADENAMES
The Company operates under the following tradenames and service marks: AcSys
Resources, Inc.(R), the AcSys Resources, Inc. logo, AcSys Resources, Inc.
Providing the Perfect Fit(R), C.P.A. Staffing, David C. Cooper &
Associates(R), DCCA Professional Temporaries, DCCA(R), the DCC&A logo, Rylan
Forbes Consulting Group, Signature Staffing, Don Richard Associates of
Charlotte, Don Richard Associates of Tampa, and Don Richard Associates of
Washington, D.C. "Don Richard Associates" is a federally registered trademark
of Don Richard Associates International, Inc., an unaffiliated company which
formerly owned Don Richard Associates of Washington and Don Richard Associates
of Charlotte and was the former franchisor for Don Richard Associates of
Tampa. By agreement with Don Richard Associates International, Inc., the
Company owns the rights to the name "Don Richard Associates of Washington" and
"Don Richard Associates of Charlotte" in the areas where the Company operates
under such names. The Company's rights to use the name "Don Richard Associates
of Tampa" expire in May 1999. Such territories are excluded from the federal
trademark registration held by Don Richard Associates International, Inc.
FACILITIES
The Company owns no real property. It leases its corporate office and all of
its local offices. The Company believes its facilities are adequate for its
needs and does not anticipate any material difficulty in replacing such
facilities or securing facilities for new offices.
LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings.
37
<PAGE>
MANAGEMENT
The directors and executive officers of the Company and their ages and
positions as of October 21, 1997 are as follows:
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David C. Cooper......... 41 Chairman of the Board
Timothy Mann, Jr........ 32 Chief Executive Officer and Director
Edward S. Baumstein..... 42 President, Chief Operating Officer and Director
Chief Development Officer, Executive Vice President and
Beth Monroe-Chase....... 45 Director
Mark E. Strassman....... 36 Director
John R. Ficquette....... 43 Director
Harry J. Sauer.......... 46 Director
Lester E. Gallagher,
III.................... 41 Chief Financial Officer
</TABLE>
BIOGRAPHICAL INFORMATION FOR EXECUTIVE OFFICERS AND DIRECTORS
David C. Cooper has served as the Chairman of the Board of Directors of the
Company since its formation and Division President--Atlanta since September
1997. Mr. Cooper founded David C. Cooper & Associates in 1980 and served as
its president until May 1997. Mr. Cooper received his Bachelors of Business
Administration degree in Accounting from the University of Georgia. Mr. Cooper
is a past president of the American Association of Accounting and Finance, a
national network of independently owned accounting and finance permanent
placement and temporary staffing businesses.
Timothy Mann, Jr., a Director of the Company, was promoted to Chief
Executive Officer of the Company in October 1997 after having served the
Company in various roles since its formation. From 1992 until 1997, Mr. Mann
was an attorney engaged in the private practice of law, most recently with
Alston & Bird, LLP in Atlanta, Georgia. Mr. Mann has extensive staffing
industry experience, having served as issuer's counsel in a number of staffing
industry public equity offerings and as buyer's counsel in a number of
staffing industry mergers and acquisitions. Mr. Mann's experience also
includes service in the audit division of Arthur Andersen LLP. Mr. Mann
received his J.D. cum laude from the University of Georgia and his Bachelors
of Science Degree in Accounting from the University of Florida.
Edward S. Baumstein has served as President of the Company since October
1997 and as the Chief Operating Officer and a Director of the Company since
September 1997. Mr. Baumstein served as the president and chief executive
officer of AcSys Resources from 1994 until September 1997 and had served in
various positions since he joined AcSys Resources in 1983. Prior to joining
AcSys Resources, Mr. Baumstein was with Price Waterhouse. He received his
B.B.A. in Accounting from Temple University and is a certified public
accountant.
Beth Monroe-Chase has served as a Director of the Company since its
formation. She served as Chief Operating Officer from the Company's formation
until September 1997, when she became the Company's Chief Development Officer
and Executive Vice President. Ms. Monroe-Chase was one of the founders of Don
Richard Associates of Washington and from 1994 until the formation of the
Company served as its president. Ms. Monroe-Chase served as the director of
sales from 1992 to 1994 and as managing director from 1993 to 1994 for the
predecessor of Don Richard Associates of Washington (which also operated under
that name). Her previous staffing industry experience includes service as an
area manager for Staff Builders and as a regional manager with TeleSec
Staffing.
38
<PAGE>
Mark E. Strassman has served as a Director of the Company since its
formation. Mr. Strassman served as the President of the Company from its
formation until October 1997. Mr. Strassman was one of the founders of Don
Richard Associates of Washington and served as its chief executive officer
from 1994 until May 1997. From 1987 until 1994, Mr. Strassman served in a
variety of capacities with the predecessor to Don Richard Associates of
Washington (which also operated under that name), most recently as managing
director. Prior to 1987, Mr. Strassman was a tax consultant at the national
accounting firm of Grant Thornton. He received his Bachelors of Science degree
from Drexel University and is a certified public accountant.
John R. Ficquette has served as a Director of the Company since September
1997. Mr. Ficquette was a shareholder and officer of C.P.A. Staffing from 1990
until its acquisition by AcSys Resources. His responsibilities at C.P.A.
Staffing included client development, training, system development and
administration. Mr. Ficquette received his Bachelors of Science Degree in
Business Administration from the University of Alabama.
Harry J. Sauer has served as a Director of the Company and as the Division
President--Philadelphia since September 1997. Mr. Sauer has worked in the
staffing industry since 1977, when he co-founded AcSys Resources. He served in
various positions with AcSys Resources, most recently as chief operating
officer. Mr. Sauer received his Bachelor of Arts in Political Science from
American University and his M.B.A. from Boston College. Mr. Sauer has served
as the president of Hillel of Greater Philadelphia and as a board member of
several nonprofit organizations.
Lester E. Gallagher, III has served as the Company's Chief Financial Officer
since September 1997. From 1994 through the AcSys Resources acquisition, Mr.
Gallagher served as the chief financial officer of AcSys Resources. From 1990
to 1994, he was a manager with Coopers & Lybrand LLP. Mr. Gallagher received
his Bachelor of Science in Accounting from Villanova University and is a
certified public accountant.
BOARD OF DIRECTORS
The number of directors on the Board of Directors is currently fixed at
seven. Directors of the Company are elected at the annual meeting of
shareholders. Executive officers are appointed by the Board of Directors.
Directors and executive officers of the Company are elected or appointed to
serve until they resign or are removed or are otherwise disqualified to serve,
or until their successors are elected and qualified at the next annual meeting
of shareholders. The Company intends to add two directors who are not
executive officers of the Company (the "Outside Directors") within 90 days
after listing on the Nasdaq National Market. It will be necessary for the
Company to appoint these Outside Directors within the 90-day period to
maintain its Nasdaq National Market listing. Failure to appoint such Outside
Directors could result in delisting of the Common Stock from the Nasdaq
National Market.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors intends to establish an Audit Committee, a
Compensation Committee and an Executive Committee. The members of each
committee are expected to be determined at the first meeting of the Board of
Directors following the closing of the Offering. The members of the Audit and
Compensation Committees will consist solely of Outside Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors intends to establish a Compensation Committee at the
first meeting of the Board of Directors following the closing of the Offering.
The Board of Directors has not previously had a Compensation Committee, and
the functions of the Compensation Committee historically have been performed
by the Board of Directors. See "-- Committees of the Board of Directors."
39
<PAGE>
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company will receive $500 for each meeting of the Board of Directors
attended and for each meeting of a committee of the Board of Directors (unless
the committee meeting is held on the same day as a meeting of the Board of
Directors). All directors of the Company are reimbursed for out-of-pocket
expenses incurred in attending meetings of the Board of Directors or its
committees and for other expenses incurred in their capacity as Directors.
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS; COVENANTS NOT TO COMPETE
The Company was incorporated in March 1997 and conducted no operations in
1996. The Company anticipates that during 1997 its most highly compensated
executive officers will be Ms. Monroe-Chase and Messrs. Cooper, Mann,
Baumstein and Gallagher (the "Named Executive Officers").
Each of Messrs. Cooper, Mann, Baumstein and Ms. Monroe-Chase have entered
into employment agreements with the Company that provide for an annual base
salary of $200,000. Each executive officer (except Messrs. Mann and Gallagher)
will also receive a bonus to be agreed upon and based upon certain performance
criteria as set forth in his or her agreement. Mr. Mann's agreement provides
for an annual bonus equal to 2.0% of the year-to-year increase in the
Company's earnings before interest, taxes, depreciation and amortization, and
the grant of stock options as described under "-- Option Grants." Mr.
Gallagher's agreement provides for an annual base salary of $125,000, such
bonus as the Board of Directors may determine up to an amount equal to 15% of
his then-current base salary, and the grant of stock options as described
under "-- Option Grants." None of the Company's executive officers is expected
to receive perquisites the value of which exceeds the lesser of $50,000 or 10%
of the salary and bonus of such executive.
Each employment agreement for the Named Executive Officers is for a term of
three years and continues thereafter for additional one year terms until
either the Company or the executive officer elects not to renew the agreement.
Each of these agreements provides that, in the event of a termination of
employment either (i) by the Company without cause (as defined in the
agreement) or (ii) by the employee following a change in control (as defined
in the agreement) or a breach by the Company of such executive's employment
agreement or the registration rights agreement described in "Description of
Capital Stock -- Registration Rights," such executive officer will be entitled
to receive from the Company a lump sum severance payment equal to three times
the sum of his or her then-current annual salary plus the amount of his or her
bonus calculated using the results of the operations of the Company for the
twelve months prior to such termination. In such event, the non-compete
provisions discussed below would not apply to such executive officer. If an
executive officer resigns for any other reason, such executive officer will be
entitled to receive from the Company a lump sum severance payment equal to his
or her then current annual salary. If an executive is terminated upon a
determination by the Board of Directors that such executive officer failed to
meet performance expectations, then such executive officer will be entitled to
receive a lump sum severance payment equal to his or her base salary for the
greater of the remainder of the term of his or her employment agreement or one
year. In May 1997 The Company entered into an employment agreement with its
former President, Mark E. Strassman on terms substantially similar to those
for the Named Executive Officers. Pursuant to that agreement, if Mr. Strassman
resigns from his employment with the Company he will be entitled to receive
from the Company a lump sum payment of $600,000 plus the amount of his bonus
calculated as described above, unless he elects to waive such right.
Each Named Executive Officer employment agreement contains a covenant not to
compete with the Company for a period of two years immediately following
termination of employment and an obligation not to solicit any employees or
customers of the Company for a period of one year following termination of
employment.
OPTION GRANTS
The Company has granted and agreed to grant stock options to two of the
Named Executive Officers, Timothy Mann, Jr. and Lester E. Gallagher, III, as
described below.
Timothy Mann, Jr. Pursuant to Mr. Mann's employment agreement, the Company
has granted him options to purchase 135,198 shares of Common Stock at an
exercise price of $8.00 per share, the fair market value of
40
<PAGE>
the Common Stock on the date of the grant as determined by the Board based
upon the report of an independent appraiser. These options are fully vested
and have a 10-year term. In addition, also pursuant to Mr. Mann's employment
agreement, the Company has agreed to grant to Mr. Mann, upon the effective
date of the Offering, options to purchase a number of additional shares of
Common Stock equal to 1% of the shares of Common Stock outstanding on the date
of the Offering, assuming the Underwriters' over-allotment option is exercised
in full, at an exercise price equal to the public offering price of the shares
sold in the Offering. Therefore, upon the effective date of the Offering the
Company will grant to Mr. Mann options to purchase 111,557 shares of Common
Stock at an exercise price equal to the offering price of shares in the
Offering. One-half of these options vest on each of the first two
anniversaries of the effective date of the Offering, and the options have a
10-year term. All of Mr. Mann's unvested options vest immediately if he is
terminated without cause or resigns for good reason or upon a change in
control (as such terms are defined in his employment agreement).
Lester E. Gallagher, III. In January 1997 AcSys Resources granted options to
Mr. Gallagher that were converted into options to purchase 18,771 shares of
Common Stock at a price of $2.66 per share in connection with the Company's
acquisition of AcSys Resources. These options are fully vested and expire in
2006. In addition, pursuant to Mr. Gallagher's employment agreement, the
Company has agreed to grant to him, upon the effective date of the Offering,
options to purchase 66,229 shares of Common Stock at an exercise price equal
to the offering price of shares in the Offering. One third of these options
vest on each of first, second and third anniversaries of the effective date of
the Offering. All of Mr. Gallagher's unvested options vest immediately if he
is terminated without cause or resigns for good reason or upon a change in
control (as such terms are defined in his employment agreement).
1997 STOCK OPTION PLAN
In May 1997, the Board of Directors and the Company's shareholders approved
the Option Plan. The purpose of the Option Plan is to advance the interests of
the Company and its shareholders by affording certain employees and directors
of the Company, as well as key consultants and advisors to the Company, an
opportunity to acquire or increase their proprietary interests in the Company.
The objective of the issuance of stock options under the Option Plan is to
promote the growth and profitability of the Company because the optionees will
be provided with an additional incentive to achieve the Company's objectives
through participation in its success and growth and by encouraging their
continued association with or service to the Company.
Awards under the Option Plan are granted by the Board of Directors but will
be granted by the Compensation Committee of the Board of Directors when it is
established. Awards under the Option Plan may include incentive stock options
("ISOs") and/or non-qualified stock options ("NQSOs"). The Compensation
Committee of the Board of Directors will administer the Option Plan and
generally has discretion to determine the terms of an option grant, including
the number of option shares, option price, term, vesting schedule, the post-
termination exercise period and whether the grant will be an ISO or NQSO.
Notwithstanding this discretion: (i) the number of shares subject to options
granted to any individual in any calendar year may not exceed 500,000 shares;
(ii) if an option is intended to be an ISO and is granted to a shareholder
holding more than 10% of the combined voting power of all classes of the
Company's stock or of its parent or subsidiary on the date of the grant of the
option, the option price per share of Common Stock may not be less than 100%
of the fair market value of such share at the time of grant or 110% of the
fair market value of such shares; and (iii) the term of any option may not
exceed 10 years, or 5 years if the option is intended to be an ISO and is
granted to a shareholder owning more than 10% of total combined voting power
of all classes of stock on the date of the grant of the option.
The maximum number of shares of Common Stock that may be subject to
outstanding options, determined immediately after the grant of any option, is
2,000,000 shares. Shares of Common Stock which are attributable to awards
which have expired, terminated or been canceled or forfeited during any
calendar year are available for issuance or use in connection with future
awards during such calendar year.
41
<PAGE>
The Option Plan will remain in effect until terminated by the Board of
Directors. No ISO may be granted after May 2007. The Option Plan may be
amended by the Board of Directors without the consent of the shareholders of
the Company, except that any amendment, although effective when made, will be
subject to shareholder approval within one year after approval by the Board of
Directors if the amendment increases the total number of shares issuable
pursuant to ISOs or changes the class of employees eligible to receive ISOs
that may participate in the Option Plan.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenues Code of 1986, as amended. Section 162(m) generally disallows
a public company's tax deduction for compensation to the chief executive
officer and four other most highly compensated executive officers in excess of
$1,000,000 in any tax year beginning on or after January 1, 1994. Compensation
that qualifies as "performance-based compensation" is excluded from the
$1,000,000 deductibility cap, and therefore remains fully deductible by the
company that pays it. The Company intends that options granted with an
exercise price at least equal to 100% of fair market value of the underlying
stock at the date of grant will qualify as such "performance-based
compensation," although other awards under the Option Plan may not so qualify.
42
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of October 21, 1997 and as adjusted
to reflect the sale of the Common Stock offered hereby with respect to: (i)
each of the Company's directors and Named Executive Officers; (ii) all
executive officers and directors of the Company as a group; and (iii) each
person known by the Company to own beneficially more than 5% of the Common
Stock. Each of the holders listed below has sole voting power and investment
power over the shares beneficially owned. Each of the persons known by the
Company to beneficially own more than 5% of the Common Stock has an address in
care of the Company's principal offices.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED AFTER
OWNED PRIOR TO OFFERING(1) NUMBER OF THE OFFERING(1)
------------------------------- SHARES --------------------
NAME NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
- ---- --------------- ------------------------ --------- ----------
<S> <C> <C> <C> <C> <C>
DIRECTORS, EXECUTIVE OF-
FICERS AND 5% SHARE-
HOLDERS
David C. Cooper......... 1,573,714 18.5% -- 1,573,714 14.6%
Timothy Mann, Jr.(2).... 135,198 1.6 -- 135,198 1.3
Edward S. Baumstein..... 993,521 11.7 -- 993,521 9.2
Beth Monroe-Chase....... 671,143 7.9 90,000 581,143 5.4
Lester E. Gallagher,
III(3)................. 18,771 * -- 18,771 *
John R. Ficquette....... 609,637 7.2 -- 609,637 5.7
Harry J. Sauer.......... 993,521 11.7 -- 993,521 9.2
Mark E. Strassman....... 671,143 7.9 90,000 581,143 5.4
Louis Boohaker.......... 609,637 7.2 -- 609,637 5.7
Kevin W. Cole........... 447,428 5.3 100,000 347,428 3.2
Rosemarie Mahoney....... 447,428 5.3 100,000 347,428 3.2
All directors and execu-
tive officers as a
group (8 persons)(4)... 5,666,648 66.7 5,486,648 51.1
OTHER SELLING SHAREHOLD-
ERS
Robert T. Criscuolo,
Jr. ................... 231,146 2.7% 15,000 216,146 2.0%
Joseph Stauffer......... 231,146 2.7 20,000 211,146 2.0
D. Perry Brown.......... 149,142 1.8 25,000 124,142 1.2
Teresa Gordon........... 149,142 1.8 15,000 134,142 1.2
Edward K. Turner........ 131,143 1.5 30,000 101,143 *
Stephen Tutwiler........ 131,143 1.5 15,000 116,143 1.1
</TABLE>
- ---------------------
* Less than 1%.
(1) Shares Beneficially Owned is calculated assuming 8,493,220 shares of
Common Stock were outstanding on October 14, 1997 and 10,743,220 shares of
Common Stock will be outstanding immediately after the Offering. This
percentage also includes Common Stock of which such individual has the
right to acquire beneficial ownership within sixty days of October 14,
1997, including but not limited to the exercise of an option; however,
such Common Stock shall not be deemed outstanding for the purpose of
computing the percentage owned by any other individual. See
"Underwriting."
(2) Comprised of currently exercisable options held by Mr. Mann to purchase a
total of 135,198 shares of Common Stock. See "Management -- Option
Grants."
(3) Comprised of currently exercisable options held by Mr. Gallagher to
purchase a total of 18,771 shares of Common Stock. See "Management --
Option Grants."
(4) Includes currently exercisable options to purchase a total of 153,969
shares of Common Stock.
43
<PAGE>
CERTAIN TRANSACTIONS
ACQUISITIONS
Since the Company's formation in March 1997, it has acquired seven
accounting and finance professional staffing companies. All of the Acquired
Companies now operate as wholly-owned subsidiaries of the Company. In certain
of these acquisitions persons who were previously shareholders of Acquired
Companies who are now executive officers, directors or holders of at least 5%
of the Company's outstanding Common Stock received consideration from the
Company in connection with the applicable acquisition. The following table
summarizes the total number of shares of Common Stock issued by the Company to
such persons in those acquisitions:
<TABLE>
<CAPTION>
SHARES OF
COMPANY COMMON STOCK
- ------- ------------
<S> <C>
David C. Cooper & Associates....................................... 1,573,714
Don Richard Associates of Washington............................... 2,535,426
AcSys Resources.................................................... 3,659,502
---------
Total............................................................ 7,768,642
=========
</TABLE>
These acquisitions are described in more detail below:
David C. Cooper & Associates. David C. Cooper received 1,573,714 shares of
Common Stock in connection with the mergers of wholly-owned subsidiaries of
the Company with and into David C. Cooper & Associates in May 1997.
Don Richard Associates of Washington. The following directors, executive
officers and/or 5% shareholders received shares of Common Stock in connection
with the merger of a wholly-owned subsidiary of the Company with and into Don
Richard Associates of Washington in May 1997: Mark E. Strassman -- 671,143
shares; Beth Monroe-Chase -- 671,143 shares; Kevin W. Cole -- 447,428 shares;
and Rosemarie Mahoney -- 447,428 shares. Other Don Richard Associates of
Washington shareholders who are not directors, executive officers and/or 5%
shareholders received the balance of 298,284 shares issued by the Company.
AcSys Resources. The following directors, executive officers and/or 5%
shareholders received shares of Common Stock in connection with the AcSys
Resources merger in September 1997: Edward S. Baumstein -- 993,521 shares;
Harry J. Sauer -- 993,521 shares; John R. Ficquette -- 609,637 shares; and
Louis Boohaker -- 609,637 shares. Certain of those shares are currently in
escrow to secure certain representations and warranties in the merger
agreement and are anticipated to be released on approximately March 1, 1998,
as follows: Mr. Baumstein -- 35,023 shares; Mr. Sauer -- 35,023 shares; Mr.
Ficquette -- 21,491 shares; and Mr. Boohaker -- 21,491 shares. Other AcSys
Resources shareholders who are not directors, executive officers and/or 5%
shareholders received the balance of 453,186 shares issued by the Company. In
addition, the Company owes Messrs. Baumstein and Sauer approximately $85,000
and $75,000, respectively, for compensation earned prior to the Company's
acquisition of AcSys Resources but not yet paid. These obligations are payable
on demand.
Albert Detorre, a former shareholder of AcSys Resources, has the contractual
right (the "Put Right") to require the Company to purchase 122,012 shares of
the Company's Common Stock that he received in connection with the AcSys
Resources acquisition (which includes 4,302 shares currently in escrow to
secure certain representations and warranties in the merger agreement and
which are anticipated to be released on approximately March 1, 1998) at a
price equal to the "fair market value" of such shares at the time Mr. Detorre
exercises such right. In connection with this Offering, Mr. Detorre has agreed
to waive the Put Right. In addition, the Company is obligated to pay Mr.
Detorre $500,000 if the closing of this Offering occurs before December 14,
1997. Management expects that the Offering will close after this date. See
Note 8 of Notes to Consolidated Financial Statements.
Prior to their acquisition by the Company, certain of the Acquired Companies
incurred indebtedness that was personally guaranteed by their shareholders. As
of October 7, 1997, the Company had borrowed an aggregate of approximately
$10.3 million under the Credit Facility to repay such indebtedness upon the
acquisition of such Acquired Companies. Obligations which are guaranteed by
certain of the Company's current shareholders having a principal balance of
approximately $1.2 million remain outstanding. See Note 3 of Notes to
Consolidated Financial Statements.
44
<PAGE>
COMPANY POLICY
Following the closing of this Offering, all transactions with the Company's
shareholders, officers and directors or their affiliates, if any, will be
subject to the approval of a majority of the independent and disinterested
Outside Directors and will be conducted on terms no less favorable than could
be obtained from unaffiliated third parties on an arm's-length basis.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 45,000,000 shares of
Common Stock without par value and 5,000,000 shares of Preferred Stock without
par value. The following description of the terms and provisions of the shares
of stock of the Company and certain other matters does not purport to be
complete and is subject to and qualified in its entirety by reference to the
applicable provisions of the GBCC and the Company's Articles of Incorporation
and Bylaws.
COMMON STOCK
Each holder of shares of Common Stock is entitled to one vote at
shareholders' meetings for each share held. The Company's Articles of
Incorporation provide for cumulative voting for the election of directors.
Subject to the prior rights of any series of Preferred Stock that may be
issued, holders of shares of Common Stock are entitled to receive, pro rata,
such dividends as may be declared by the Board of Directors out of funds
legally available therefor, and are also entitled to share, pro rata, in any
other distributions to the shareholders. The Company anticipates that for the
foreseeable future its earnings will be retained for the operation and
expansion of its business and that it will not pay cash dividends. See
"Dividend Policy." There are no redemption or sinking fund provisions
applicable to the Common Stock. The Credit Facility prohibits the payment of
dividends without the lender's prior consent. Holders of shares of Common
Stock do not have any preemptive rights or other rights to subscribe for
additional shares. The outstanding shares of Common Stock are, and the shares
sold by the Company pursuant to this Offering will be, when issued and paid
for, fully paid and non-assessable.
PREFERRED STOCK
Under the Articles of Incorporation, the Board of Directors may issue,
without any further action by the shareholders, up to 5,000,000 shares of
Preferred Stock of one or more series, including any preferences, conversion
and other rights, voting powers, restrictions, limitations, qualifications and
terms and conditions of redemption as shall be set forth in resolutions
adopted by the Board of Directors. The designation of any Preferred Stock with
greater rights, privileges and preferences than those applicable to the Common
Stock may adversely affect the voting power, market price and other rights and
privileges of the Common Stock, and may hinder or delay the removal of
directors, attempted tender offers, proxy contests or takeovers, or other
attempts to change control of the Company, some or all of which may be desired
by holders of the Common Stock. Articles of amendment must be filed with the
Georgia Secretary of State prior to the issuance of any shares of Preferred
Stock of the applicable series.
REMOVAL OF THE BOARD OF DIRECTORS; NO CLASSIFICATION OF THE BOARD
The entire Board of Directors or any individual director may be removed with
cause by the shareholders. Directors may not be removed without cause. The
Board of Directors is not divided into classes, and the terms of office of all
of the Directors expire at the next annual meeting of shareholders.
SPECIAL MEETINGS
Under the Bylaws, special meetings of the shareholders may be called by
shareholders only if such shareholders hold outstanding shares representing a
majority of all votes entitled to be cast on any issue proposed to be
considered at any such special meeting.
45
<PAGE>
ADVANCE NOTICE OF NEW BUSINESS AND DIRECTOR NOMINATIONS
The Company's Bylaws provide that, with respect to an annual meeting of
shareholders, the proposal of business to be considered by shareholders and
nominations of persons for election to the Board of Directors may be made only
(i) by or at the direction of the Board of Directors, the Chairman of the
Board or the President, or (ii) by a shareholder who has complied with the
advance notice procedures set forth in the Company's Bylaws.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Articles of Incorporation eliminate, subject to certain exceptions, the
personal liability of a director to the Company or its shareholders for
monetary damage for breaches of such director's duty of care or other duties
as a director. The Articles do not provide for the elimination of or any
limitation on the personal liability of a director for (i) any appropriation,
in violation of the director's duties, of any business opportunity of the
Company, (ii) acts or omissions that involve intentional misconduct or a
knowing violation of law, (iii) unlawful corporate distributions, or (iv) any
transactions from which the director derived an improper personal benefit. The
Articles of Incorporation of the Company further provide that if the GBCC is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent permitted by the
GBCC, as amended, without further action by the shareholders. These provisions
of the Articles of Incorporation will limit the remedies available to a
shareholder in the event of breaches of any director's duties to such
shareholder or the Company.
The Company's Bylaws require the Company to indemnify and hold harmless any
director who was or is a party or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (including any action or suit by or
in the right of the Company) because he or she is or was a director of the
Company, against expenses (including, but not limited to, attorney's fees and
disbursements, court costs and expert witness fees), and against judgments,
fines, penalties, and amounts paid in settlement incurred by him or her in
connection with the action, suit or proceeding. Indemnification would be
disallowed under any circumstances where indemnification may not be authorized
by action of the Board of Directors, the shareholders or otherwise.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers, whereby the Company agreed, among
other things, to provide for indemnification and advancement of expenses in a
manner and subject to terms and conditions similar to those set forth in the
Bylaws. These agreements also provide that the Company shall purchase and
maintain liability insurance for the benefit of its directors and executive
officers. These agreements may not be abrogated by action of the shareholders.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent. The Company has also agreed to hold the shareholders harmless
from, against and in respect of federal income tax liabilities, including
interest and penalties imposed thereon (and any state and local income tax
liabilities as provided by applicable law), if any, incurred by the
shareholders as a result of a final determination of an adjustment (by reason
of an amended return, claim for refund, audit, judicial decision or otherwise)
to the taxable income of the Company for any period during the time the
Company was treated as an S Corporation for federal and state income tax
purposes which results in a decrease for any such period in the Company's
taxable income and a corresponding increase for any such period in the taxable
income of the shareholders. See "Prior S Corporation Status."
REGISTRATION RIGHTS
The Company's current shareholders have the right in the event the Company
proposes to register under the Securities Act any Common Stock for its own
account or for the account of others, subject to certain exceptions, to
require the Company to include their shares in the registration, subject to
the right of any managing underwriter of any such offering to exclude some or
all of the shares for marketing reasons. In addition, through September 3,
1999, and upon the affirmative vote of the holders of at least 2,123,305
shares of Common Stock
46
<PAGE>
issued by the Company prior to the date of the Offering, these shareholders
have certain limited demand registration rights to require the Company to
register shares held by them, provided that the aggregate estimated public
offering price of all shares to be sold in the offering is at least $5,000,000
and that any such demand must be accompanied by either (i) the written consent
of (a) David C. Cooper, (b) either Mark E. Strassman or Beth Monroe-Chase and
(c) either Edward S. Baumstein or Harry J. Sauer to a registration pursuant to
such request, or (ii) a written valuation from a reputable investment banking
firm that is a member of the New York Stock Exchange which opines that the
value of the Company in an offering made pursuant to such request would be at
least $100 million.
The Company generally is required to bear the expense relating to the sale
of the shareholders' securities under these registration rights, except for
underwriting discounts and commissions, and in certain cases the fees and
expenses of the shareholders' counsel and filing fees related to the
registration statement. The Company also is obligated to indemnify the
shareholders whose shares are included in any of the Company's registrations
against certain losses and liabilities, including liabilities under the
Securities Act and state securities laws. Each of the shareholders will be
required to waive his or her right to include in this Offering shares which
are not being sold in this Offering.
ANTI-TAKEOVER PROVISIONS AND GEORGIA LAW
The Articles of Incorporation contain provisions that could have the effect
delaying, deferring or preventing an unsolicited change in control of the
Company.
Issuance of Preferred Stock. The Board of Directors has the power to issue
5,000,000 shares of Preferred Stock, in one or more classes or series and with
such rights and preferences as determined by the Board of Directors, all
without shareholder approval. Because the Board of Directors has the power to
establish the preferences and rights of each class or series of Preferred
Stock, it may afford the holders in any series of Preferred Stock preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
Common Stock. The Board of Directors has no present plans to issue any shares
of Preferred Stock.
Georgia Anti-Takeover Statutes. The GBCC generally restricts a company from
entering into certain business combinations with an interested shareholder
(which is defined as any person or entity that is the beneficial owner of at
least 10% of the company's voting stock) or its affiliates for a period of
five years after the date on which such shareholder became an interested
shareholder, unless (i) the transaction is approved by the board of directors
of the company prior to the date such person became an interested shareholder,
(ii) the interested shareholder acquires 90% of the company's voting stock in
the same transaction in which it exceeds 10%, or (iii) subsequent to becoming
an interested shareholder, such shareholder acquires 90% of the company's
voting stock and the business combination is approved by the holders of a
majority of the voting stock entitled to vote thereon (the "Business
Combination Statute"). The GBCC provides that the Business Combination Statute
will not apply unless the bylaws of the corporation specifically provide that
the Business Combination Statute is applicable to the corporation. The Company
has not elected to be covered by such statute, but it could do so by action of
the Board of Directors at any time.
The GBCC also contains provisions that impose certain fair price and other
procedural requirements applicable to certain business combinations (the "Fair
Price Statute") with any person who owns 10% or more of the common stock (an
"interested shareholder"). These statutory requirements restrict business
combinations with, and accumulations of shares of voting stock of, certain
Georgia corporations. The Fair Price Statute will apply to a company only if
the company elects to be covered by the restrictions imposed by these
statutes. The Company has elected to be covered by the Fair Price Statute.
TRANSFER AGENT AND REGISTER
The transfer agent and registrar for the Common Stock is SunTrust Bank,
Atlanta, Georgia.
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have 10,743,220 shares of
Common Stock outstanding. The 2,750,000 shares sold in this Offering
(3,162,500 shares if the Underwriters over-allotment option is exercised in
full) will be freely tradable by persons other than affiliates of the Company,
without restriction. The remaining 7,993,220 shares of Common Stock will be
"restricted" securities within the meaning of Rule 144 under the Securities
Act and may not be sold in the absence of registration under the Securities
Act unless an exemption from registration is available, including exemptions
contained in Rule 144. Of this amount, 5,335,838 shares will be beneficially
owned by persons who are affiliates of the Company and, commencing 90 days
after the date of this Prospectus, would be eligible for public sale pursuant
to Rule 144, subject to the volume restrictions discussed below. The Company
and all current shareholders of the Company, however, have agreed not to sell
or otherwise dispose of any shares of Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of the
J.C. Bradford & Co., except that the Company may issue shares of Common Stock
in connection with acquisitions or upon the exercise of options granted under
the Option Plan. See "Underwriting." These shareholders, however, have the
right in the event the Company proposes to register under the Securities Act
any Common Stock for its own account or for the account of others, subject to
certain exceptions, to require the Company to include their shares in the
registration, subject to the right of any managing underwriter of any such
offering to exclude some or all of the shares for marketing reasons. In
addition, through September 3, 1999, and upon the affirmative vote of the
holders of at least 2,123,305 shares of Common Stock issued by the Company
prior to the date of the Offering, these shareholders have certain limited
demand registration rights to require the Company to register shares held by
them, provided that the aggregate estimated public offering price of all
shares to be sold in the offering is at least $5,000,000 and that any such
demand must be accompanied by either (i) the written consent of (a) David C.
Cooper, (b) either Mark E. Strassman or Beth Monroe-Chase and (c) either
Edward S. Baumstein or Harry J. Sauer to a registration pursuant to such
request, or (ii) a written valuation from a reputable investment banking firm
that is a member of the New York Stock Exchange which opines that the value of
the Company in an offering made pursuant to such request would be at least
$100 million.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares of
Common Stock for at least one year (including the prior holding period of any
prior owner other than an affiliate) is entitled to sell within any three-
month period that number of shares which does not exceed the greater of 1% of
the outstanding shares of Common Stock and the average weekly trading volume
during the four calendar weeks preceding each such sale. Sales under Rule 144
are also subject to certain manner of sale provisions, notice requirements and
the availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company for at least three months and who has beneficially owned shares for at
least two years (including the holding period of any prior owner other than an
affiliate) would be entitled to sell such shares under Rule 144 without regard
to the limitations described above. Rule 144 defines "affiliate" of a company
as a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such company.
Affiliates of a company generally include its directors, officers and
principal shareholders.
The Company intends to grant under the Option Plan options to purchase up to
an aggregate of 2,000,000 shares of Common Stock. The Company intends to
register the shares issuable upon exercise of options granted under the Option
Plan. Upon such registration, such shares will be eligible for resale in the
public market without restrictions by persons who are not affiliates of the
Company, and to the extent they are held by affiliates, pursuant to Rule 144
without observance of the holding period requirements.
As soon as practical after the closing of this Offering, the Company intends
to register up to 2,000,000 shares of its Common Stock under the Securities
Act for use by the Company in connection with future
48
<PAGE>
acquisitions. These shares will generally be freely tradable after their
issuance, unless the sale thereof is contractually restricted. The
registration rights described above do not apply to the registration statement
related to these 2,000,000 shares.
Prior to this Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices and the ability of the Company to raise equity capital in the future.
49
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company and the Selling Shareholders have agreed to sell to each of the
Underwriters listed below, and the Underwriters, for whom J.C. Bradford & Co.
and Janney Montgomery Scott Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase, the respective number
of shares of the Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
NAME OF UNDERWRITER OF SHARES
------------------- ---------
<S> <C>
J.C. Bradford & Co...............................................
Janney Montgomery Scott Inc. ....................................
---------
Total.......................................................... 2,750,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
their counsel and to various other conditions. The Underwriters are obligated
to purchase all the shares of the Common Stock offered hereby, excluding
shares covered by the over-allotment option granted to the Underwriters, if
any such shares are purchased.
The Company and the Selling Shareholders have been advised by the
Representatives that the Underwriters propose to offer the Common Stock to the
public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price, less a concession of not
in excess of $ per share, and that the Underwriters and such dealers may
reallow a concession of not in excess of $ per share to other dealers. The
public offering price and concessions and reallowances to dealers may be
changed by the Representatives after the initial public offering.
The Company has granted to the Underwriters an option, exercisable within 30
days after the date of the initial public offering, to purchase up to an
additional 412,500 shares of Common Stock to cover over-allotments, at the
same price per share to be paid by the Underwriters for the other shares
offered hereby. If the Underwriters purchase any such additional shares
pursuant to this option, each of the Underwriters will be committed to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments, if any, in connection with the offering.
The Company, the Selling Shareholders and the Underwriters have agreed to
indemnify, or to contribute to payments made by, each other against certain
civil liabilities, including certain civil liabilities under the Securities
Act.
Before the offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock was determined by
negotiation among the Company, the Selling Shareholders and the
Representatives. The factors considered in determining the initial public
offering price include the history of and prospects for the business in which
the Company operates, past and present operations, revenues and earnings of
50
<PAGE>
the Company and the trend of such earnings, the prospects for such earnings,
the general condition of the securities markets at the time of the offering
and the demand for similar securities of reasonably comparable companies.
In August 1997, AcSys Resources borrowed $650,000 from Janney Montgomery
Scott Inc. ("Janney") pursuant to a promissory note issued in conjunction with
AcSys Resources' acquisition of C.P.A. Staffing. The note carried an interest
rate of 8.5% and was paid in full in September 1997 upon the Company's
acquisition of AcSys Resources. In October 1996, Janney was engaged to serve
as a financial advisor to AcSys Resources. In consideration of its financial
advisory services, Janney earned $384,000 (including reimbursement of out-of-
pocket expenses) from the Company in connection with the acquisition by the
Company of AcSys Resources.
The Representatives have informed the Company and the Selling Shareholders
that the Underwriters do not intend to make sales to any accounts over which
they exercise discretionary authority.
The Company and all of its existing shareholders have agreed not to sell,
contract to sell or otherwise dispose of any shares of the Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of J.C. Bradford & Co. See "Shares Eligible for Future Sale."
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market, which transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriters in connection with the Offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of
preventing or retarding a decline in the market price of the Common Stock, and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Common Stock than they are required to purchase from the
Company in the Offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-
dealers in respect of the securities sold in the Offering for their account
may be reclaimed by the syndicate if such securities are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the Nasdaq National Market, in over-the-
counter market or otherwise.
The Underwriters have reserved up to 137,500 shares for sale at the initial
public offering price to certain consultants, employees, clients and other
persons associated with the Company. The number of shares of Common Stock
available for sale to the general public will be reduced to the extent any of
such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the Underwriters to the general public on the
same basis as the other shares of Common Stock offered hereby.
LEGAL MATTERS
The validity of shares of Common Stock offered hereby is being passed upon
for the Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta,
Georgia. Certain legal matters related to this Offering will be passed upon
for the Underwriters by Latham & Watkins, Washington, D.C.
51
<PAGE>
EXPERTS
The audited financial statements included elsewhere in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving such reports.
AVAILABLE INFORMATION
The Company has filed with the Commission through the Electronic Data
Gathering and Retrieval ("EDGAR") system a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in such Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. For further information, reference is made to such registration
statement, including the exhibits thereto, which may be inspected without
charge at the Commission's principal office at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549; and at the following Regional Offices of the
Commission, except that copies of the exhibits may not be available at certain
of the Regional Offices: Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and New York Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of all or any part
of such material may be obtained from the Commission at 450 Fifth Street, N.W.
Room 1024, Washington, D.C. 20549, upon payment of certain fees prescribed by
the Commission. The Commission maintains a World Wide Web site on the Internet
at http://www.sec.gov that contains reports, proxy, information statements,
and registration statements and other information filed with the Commission
through the EDGAR system.
The Company is not presently a reporting company and does not file reports
or other information with the Commission. On the effective date of the
Registration Statement, however, the Company will become a reporting company.
Further, the Company will register its securities under the Exchange Act.
Accordingly, the Company will become subject to the additional reporting
requirements of the Exchange Act and in accordance therewith will file
reports, proxy statements and other information with the Commission. In
addition, after the completion of this offering, the Company intends to
furnish its shareholders with annual reports containing audited financial
statements and with quarterly reports containing unaudited summary financial
information for each of the first three quarters of each fiscal year.
52
<PAGE>
ACSYS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Basis of Presentation................................................... F-2
Pro Forma Consolidated Balance Sheet.................................... F-3
Pro Forma Consolidated Statements of Operations......................... F-4
Notes to Pro Forma Consolidated Financial Statements.................... F-6
ACSYS, INC. AND SUBSIDIARIES:
Report of Independent Public Accountants................................ F-8
Consolidated Balance Sheets............................................. F-9
Consolidated Statements of Operations................................... F-10
Consolidated Statements of Redeemable Common Stock and Shareholders' Eq-
uity................................................................... F-11
Consolidated Statements of Cash Flows................................... F-12
Notes to Consolidated Financial Statements.............................. F-13
C.P.A. STAFFING, INC. AND AFFILIATES:
Report of Independent Public Accountants................................ F-22
Combined Balance Sheets................................................. F-23
Combined Statements of Operations....................................... F-24
Combined Statements of Shareholders' Equity............................. F-25
Combined Statements of Cash Flows....................................... F-26
Notes to Combined Financial Statements.................................. F-27
</TABLE>
F-1
<PAGE>
ACSYS, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
(UNAUDITED)
ACSYS, Inc. (the "Company") was formed on March 10, 1997. On May 16, 1997,
the Company acquired all of the issued and outstanding common stock of
Infinity Enterprises, Inc.; David C. Cooper & Associates, Inc.; DCCA
Professional Temporaries, Inc.; and EKT, Inc. in exchange for shares of the
Company's Common Stock. The Company also acquired all of the issued and
outstanding common stock of Cama of Tampa, Inc., Rylan Forbes Consulting
Group, Inc. ("Rylan Forbes") and AcSys Resources, Inc. ("AcSys Resources"), on
May 19, 1997, July 25, 1997 and September 3, 1997, respectively, in the same
manner. The above acquisitions have been accounted for under the pooling of
interests method of accounting. The historical financial statements of the
Company have been restated to include the accounts and operating results of
the acquired companies for all dates and periods prior to the combinations,
except for Infinity Enterprises, Inc. and Cama of Tampa, Inc., which are
reflected only from their respective dates of formation of March 1, 1994 and
January 1, 1996, respectively. The financial statements were restated to
include the acquisitions of AcSys Resources and Rylan Forbes, which occurred
subsequent to June 30, 1997, as the Company expects to distribute a Prospectus
for its initial public offering (the "Offering") which will include the
financial statements of the Company as of September 30, 1997 and for the nine
months then ended.
Prior to the acquisition of AcSys Resources by the Company, AcSys Resources
acquired C.P.A. Staffing, Inc., C.P.A. Search, Inc. and Career Placement
Associates, Inc. (together, "C.P.A. Staffing") on August 12, 1997. The
acquisition was accounted for under the purchase method of accounting. The
accompanying pro forma financial statements give effect to the acquisition of
C.P.A. Staffing, the Offering and certain other pro forma adjustments. See
Notes to Pro Forma Consolidated Financial Statements.
The pro forma balance sheet gives effect to the acquisition of C.P.A.
Staffing and the Offering as if they had occurred on June 30, 1997. The pro
forma statements of operations give effect to the acquisition of C.P.A.
Staffing and the Offering as if they had occurred on January 1, 1996. See
Notes to Pro Forma Consolidated Financial Statements.
The pro forma adjustments are based on estimates, available information and
certain assumptions that management deems appropriate. The pro forma financial
data do not purport to represent what the Company's financial position or
results of operations would actually have been if such transactions had
occurred on those dates and are not necessarily representative of the
Company's financial position or results of operations for any future period.
The pro forma financial statements should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
Prospectus. See "Risk Factors" included elsewhere herein.
F-2
<PAGE>
ACSYS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
C.P.A. PRO FORMA PRO FORMA OFFERING PRO FORMA
ACSYS, INC. STAFFING ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- --------------- ------------ ----------- ----------- -----------
(NOTE 1) (NOTES 1 AND 2) (NOTE 3) (NOTE 3)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equiva-
lents................. $ 958,685 $ 175,301 $ -- $ 1,133,986 $ 8,138,138 $ 9,272,124
Accounts receivable,
net................... 6,853,261 1,012,388 -- 7,865,649 -- 7,865,649
Prepaid expenses and
other................. 352,352 -- -- 352,352 -- 352,352
----------- ---------- ---------- ----------- ----------- -----------
Total current as-
sets................ 8,164,298 1,187,689 -- 9,351,987 8,138,138 17,490,125
PROPERTY AND EQUIPMENT,
net.................... 920,789 144,755 -- 1,065,544 -- 1,065,544
GOODWILL AND OTHER
INTANGIBLE ASSETS,
net.................... 7,267,455 -- 8,594,539 15,861,994 -- 15,861,994
OTHER ASSETS............ 143,392 5,991 -- 149,383 -- 149,383
----------- ---------- ---------- ----------- ----------- -----------
$16,495,934 $1,338,435 $8,594,539 $26,428,908 $ 8,138,138 $34,567,046
=========== ========== ========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdrafts........ $ 161,454 $ -- $ -- $ 161,454 $ -- $ 161,454
Current portion of
long-term debt........ 269,037 -- 2,058,049 2,327,086 (2,271,253) 55,833
Accounts payable....... 249,370 129,702 -- 379,072 -- 379,072
Accrued liabilities.... 5,103,992 101,847 -- 5,205,839 (800,000) 4,405,839
Deferred income tax-
es.................... -- -- 462,285 462,285 -- 462,285
Other current liabili-
ties.................. 42,582 -- -- 42,582 -- 42,582
----------- ---------- ---------- ----------- ----------- -----------
Total current liabil-
ities............... 5,826,435 231,549 2,520,334 8,578,318 (3,071,253) 5,507,065
----------- ---------- ---------- ----------- ----------- -----------
LONG-TERM DEBT.......... 8,792,118 -- -- 8,792,118 (8,115,609) 676,509
----------- ---------- ---------- ----------- ----------- -----------
DEFERRED INCOME TAXES... -- -- 1,616,027 1,616,027 -- 1,616,027
----------- ---------- ---------- ----------- ----------- -----------
OTHER LONG-TERM
LIABILITIES............ 27,773 -- -- 27,773 -- 27,773
----------- ---------- ---------- ----------- ----------- -----------
REDEEMABLE COMMON STOCK,
no par value, 122,012
shares issued and
outstanding............ 766,145 -- (766,145) -- -- --
----------- ---------- ---------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock, no
par value, 5,000,000
shares authorized, no
shares issued or out-
standing.............. -- -- -- -- -- --
Common stock, no par
value, 45,000,000
shares authorized,
7,151,934 shares
issued and
outstanding (actual),
8,493,220 (pro forma)
and 10,743,220 (pro
forma as adjusted).... 210,604 1,900 7,202,168 7,414,672 19,325,000 26,739,672
Retained earnings...... 1,462,266 1,119,706 (2,581,972) -- -- --
Treasury stock, at
cost.................. (589,407) (14,720) 604,127 -- -- --
----------- ---------- ---------- ----------- ----------- -----------
Total shareholders'
equity.............. 1,083,463 1,106,886 5,224,323 7,414,672 19,325,000 26,739,672
----------- ---------- ---------- ----------- ----------- -----------
$16,495,934 $1,338,435 $8,594,539 $26,428,908 $ 8,138,138 $34,567,046
=========== ========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
ACSYS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
C.P.A. PRO FORMA PRO FORMA OFFERING PRO FORMA
ACSYS, INC. STAFFING ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- --------------- ----------- ----------- ----------- -----------
(NOTE 1) (NOTES 1 AND 2) (NOTE 4) (NOTE 4)
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES:
Temporary staffing..... $34,756,945 $5,653,164 $ -- $40,410,109 $ -- $40,410,109
Permanent placement.... 11,151,319 849,404 -- 12,000,723 -- 12,000,723
----------- ---------- ---------- ----------- -------- -----------
Total service reve-
nues................ 45,908,264 6,502,568 -- 52,410,832 -- 52,410,832
DIRECT COST OF SERVICES,
consisting of payroll,
payroll taxes and
insurance costs for
temporary employees.... 22,873,091 4,051,962 -- 26,925,053 -- 26,925,053
----------- ---------- ---------- ----------- -------- -----------
Gross profit......... 23,035,173 2,450,606 -- 25,485,779 -- 25,485,779
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 18,776,444 1,378,626 (1,287,175)(g) 18,867,895 -- 18,867,895
AMORTIZATION AND
DEPRECIATION........... 661,377 22,663 215,184 (j) 899,224 -- 899,224
SEVERANCE AND FRANCHISE
TERMINATION COSTS...... 566,512 -- -- 566,512 -- 566,512
----------- ---------- ---------- ----------- -------- -----------
Operating income..... 3,030,840 1,049,317 1,071,991 5,152,148 -- 5,152,148
OTHER INCOME (EXPENSE):
Interest income........ 73,729 -- -- 73,729 -- 73,729
Interest expense....... (872,958) -- (177,000)(k) (1,049,958) 950,314 (l) (99,644)
Other expense.......... (4,099) -- -- (4,099) -- (4,099)
----------- ---------- ---------- ----------- -------- -----------
Income before income
taxes............... 2,227,512 1,049,317 894,991 4,171,820 950,314 5,122,134
PRO FORMA INCOME TAXES.. -- -- 1,835,601 (i) 1,835,601 418,138 (i) 2,253,739
----------- ---------- ---------- ----------- -------- -----------
NET INCOME.............. $ 2,227,512 $1,049,317 $(940,610) $ 2,336,219 $532,176 $ 2,868,395
=========== ========== ========== =========== ======== ===========
PRO FORMA NET INCOME PER
SHARE.................. $ 0.27 $ 0.29
=========== ===========
WEIGHTED AVERAGE SHARES
USED IN COMPUTING PRO
FORMA NET INCOME PER
SHARE (Note 5)......... 8,602,238 9,758,043
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
ACSYS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
C.P.A. PRO FORMA PRO FORMA OFFERING PRO FORMA
ACSYS, INC. STAFFING ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
----------- --------------- ----------- ----------- ----------- -----------
(NOTE 1) (NOTES 1 AND 2) (NOTE 4) (NOTE 4)
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES:
Temporary staffing..... $19,078,421 $3,255,480 $ -- $22,333,901 $ -- $22,333,901
Permanent placement.... 7,276,303 468,705 -- 7,745,008 -- 7,745,008
----------- ---------- ---------- ----------- -------- -----------
Total service reve-
nues................ 26,354,724 3,724,185 -- 30,078,909 -- 30,078,909
DIRECT COST OF SERVICES,
consisting of payroll,
payroll taxes and
insurance costs for
temporary employees.... 12,742,527 2,282,267 -- 15,024,794 -- 15,024,794
----------- ---------- ---------- ----------- -------- -----------
Gross profit......... 13,612,197 1,441,918 -- 15,054,115 -- 15,054,115
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 11,384,488 723,339 (971,280)(g) 11,136,547 -- 11,136,547
COMBINATION EXPENSES.... 1,722,334 -- (1,722,334)(h) -- -- --
AMORTIZATION AND
DEPRECIATION........... 216,569 17,495 107,592 (j) 341,656 -- 341,656
SEVERANCE AND FRANCHISE
TERMINATION COSTS...... 170,000 -- -- 170,000 -- 170,000
----------- ---------- ---------- ----------- -------- -----------
Operating income..... 118,806 701,084 2,586,022 3,405,912 -- 3,405,912
OTHER INCOME (EXPENSE):
Interest income........ 25,441 -- -- 25,441 -- 25,441
Interest expense....... (425,539) (4,636) (90,120)(k) (520,295) 450,139(l) (70,156)
Other.................. 20,472 -- -- 20,472 -- 20,472
----------- ---------- ---------- ----------- -------- -----------
Income (loss) before
income taxes........ (260,820) 696,448 2,495,902 2,931,530 450,139 3,381,669
PRO FORMA INCOME TAXES.. -- -- 1,289,873 (i) 1,289,873 198,061(i) 1,487,934
----------- ---------- ---------- ----------- -------- -----------
NET INCOME (LOSS)....... $ (260,820) $ 696,448 $1,206,029 $ 1,641,657 $252,078 $ 1,893,735
=========== ========== ========== =========== ======== ===========
PRO FORMA NET INCOME PER
SHARE.................. $ 0.19 $ 0.19
=========== ===========
WEIGHTED AVERAGE SHARES
USED IN COMPUTING PRO
FORMA NET INCOME PER
SHARE (Note 5)......... 8,602,238 9,758,043
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
ACSYS, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL:
The accompanying pro forma information presents the pro forma financial
position of the Company as of June 30, 1997 and the pro forma results of
operations for the year ended December 31, 1996 and the six months ended June
30, 1997.
The historical financial statements of the Company and C.P.A. Staffing were
derived from their respective historical statements of operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 and their
respective historical balance sheets as of June 30, 1997. See the financial
statements and notes thereto for the Company and C.P.A. Staffing included
elsewhere in this Prospectus.
2. ACQUISITION OF C.P.A. STAFFING:
Prior to the acquisition of AcSys Resources by the Company, AcSys Resources
acquired C.P.A. Staffing on August 12, 1997. The acquisition was accounted for
under the purchase method of accounting. The total purchase price was
approximately $9,700,000 and consisted of cash of $1,900,000, 1,219,274 shares
of Common Stock with a fair market value of $7,700,000 and transaction costs
of $144,000. The purchase price was allocated to the assets acquired and
liabilities assumed. The $8,600,000 excess of the purchase price over
estimated fair value of the net assets acquired was recorded as goodwill.
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET:
The following table summarizes the pro forma adjustments to the balance
sheet as of June 30, 1997:
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS OFFERING ADJUSTMENTS
---------------------------------------------------------- ----------------------------------------
(A) (B) (C) (D) TOTAL (E) (F) TOTAL
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents........... $ -- $ -- $ -- $ -- $ -- $19,325,000 $(11,186,862) $ 8,138,138
Intangible assets,
net................... 8,594,539 -- -- -- 8,594,539 -- -- --
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Total assets.......... $8,594,539 $ -- $ -- $ -- $8,594,539 $19,325,000 $(11,186,862) $ 8,138,138
========== ======== ========== ======== ========== =========== ============ ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current portion of
long-term debt........ $2,058,049 $ -- $ -- $ -- $2,058,049 $ -- $ (2,271,253) $(2,271,253)
Accrued expenses....... -- -- -- -- -- -- (800,000) (800,000)
Deferred income taxes.. -- -- 462,285 -- 462,285 -- -- --
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Total current
liabilities.......... 2,058,049 -- 462,285 -- 2,520,334 -- (3,071,253) (3,071,253)
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Long-term debt......... -- -- -- -- -- -- (8,115,609) (8,115,609)
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Deferred income taxes.. -- -- 1,616,027 -- 1,616,027 -- -- --
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Redeemable Common
Stock................. -- (766,145) -- -- (766,145) -- -- --
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Shareholders' equity:
Common stock........... 7,052,069 766,145 -- (616,046) 7,202,168 19,325,000 -- 19,325,000
Retained earnings...... (1,119,706) -- (2,078,312) 616,046 (2,581,972) -- -- --
Treasury stock......... 604,127 -- -- -- 604,127 -- -- --
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Total shareholders'
equity............... 6,536,490 766,145 (2,078,312) -- 5,224,323 19,325,000 -- 19,325,000
---------- -------- ---------- -------- ---------- ----------- ------------ -----------
Total liabilities and
shareholders'
equity............... $8,594,539 $ -- $ -- $ -- $8,594,539 $19,325,000 $(11,186,862) $ 8,138,138
========== ======== ========== ======== ========== =========== ============ ===========
</TABLE>
- ---------------------
(a) Reflects the acquisition of C.P.A. Staffing using the purchase method of
accounting.
(b) Reflects the elimination of certain Common Stock redemption rights in
connection with the Offering.
F-6
<PAGE>
ACSYS, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(c) The Company operates as an S corporation and will terminate such status in
connection with the Offering. Upon the termination of status as an S
corporation, the Company will record a deferred income tax provision of
approximately $2,078,000 for the tax effect of the differences in the
bases of assets and liabilities for financial reporting and income tax
purposes. This deferred tax provision will be recorded in the quarter in
which the Offering is completed.
(d) Reflects the resetting of retained earnings in connection with the
termination of the Company's S corporation status.
(e) Reflects the net proceeds from the sale by the Company of 2,250,000 shares
of Common stock in the Offering at $10 per share, estimated to be
approximately $19,325,000 (after deducting underwriting discounts and
commissions and estimated offering expenses).
(f) Reflects the use of a portion of the net proceeds of the Offering to
reduce long-term debt of $10,386,862 and to pay accrued distributions of
$800,000 for income taxes on S corporation net income through June 30,
1997.
4. ADJUSTMENTS TO THE PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS:
(g) Reflects officer and employee compensation based on employment agreements
entered into upon the closing of the acquisitions. This adjustment does
not reflect discretionary bonuses which may be paid to these individuals.
(h) Reflects the elimination of the combination expenses.
(i) Reflects the provision for income taxes as if the Company was a C
corporation during the periods presented.
(j) Reflects the amortization expense for the goodwill recorded in connection
with the acquisition of C.P.A. Staffing. The goodwill is being amortized
on a straight-line basis over an estimated life of 40 years.
(k) Reflects additional interest expense on the borrowings incurred to finance
the cash portion of the C.P.A. Staffing purchase price.
(l) Reflects the elimination of interest expense resulting from the reduction
of debt from the net proceeds of the Offering.
5. PRO FORMA NET INCOME PER SHARE:
The shares used in computing pro forma net income per share are as follows:
<TABLE>
<S> <C>
Outstanding shares of Common Stock................................ 7,273,946
Common Stock equivalents for stock options granted................ 109,018
Shares issued to owners of C.P.A. Staffing........................ 1,219,274
---------
Pro forma shares................................................ 8,602,238
Shares issued in the Offering necessary to repay indebtedness and
expenses of the Offering and distributions to the shareholders to
pay taxes on S corporation earnings.............................. 1,155,805
---------
Pro forma, as adjusted shares................................... 9,758,043
=========
</TABLE>
The remaining shares to be sold in the Offering have been excluded.
Outstanding options that are exercisable at the Offering price are also
excluded.
F-7
<PAGE>
The accompanying consolidated financial statements have been restated to
reflect two business combinations accounted for under the pooling of interests
method of accounting which were consummated after June 30, 1997, but prior to
September 30, 1997. Upon issuance of the consolidated financial statements as
of September 30, 1997 and for the nine months then ended, we expect to be in a
position to render the following report.
Arthur Andersen LLP
Philadelphia, PA,
October 3, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ACSYS, Inc.:
We have audited the accompanying consolidated balance sheets of ACSYS, Inc.
(a Georgia corporation) and subsidiaries as of December 31, 1995 and 1996, and
the related consolidated statements of operations, redeemable common stock and
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ACSYS, Inc.
and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
Philadelphia, PA
F-8
<PAGE>
ACSYS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------ JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............. $ 1,431,531 $ 1,061,662 $ 958,685
Restricted cash....................... -- 116,434 --
Accounts receivable, net of allowances
of $166,251, $280,825 and $324,069... 4,547,323 6,219,127 6,853,261
Prepaid expenses and other............ 72,252 245,876 352,352
----------- ----------- -----------
Total current assets................ 6,051,106 7,643,099 8,164,298
PROPERTY AND EQUIPMENT, net............. 488,437 852,784 920,789
GOODWILL AND OTHER INTANGIBLE ASSETS,
net.................................... 7,092,980 7,126,478 7,267,455
OTHER ASSETS............................ 240,309 232,781 143,392
----------- ----------- -----------
$13,872,832 $15,855,142 $16,495,934
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank overdrafts....................... $ 7,393 $ 264,699 $ 161,454
Lines of credit....................... 550,000 925,000 --
Current portion of long-term debt..... 1,470,151 721,746 269,037
Accounts payable...................... 289,559 347,664 249,370
Accrued liabilities................... 1,574,156 1,792,754 5,103,992
Other current liabilities............. 83,235 36,474 42,582
----------- ----------- -----------
Total current liabilities........... 3,974,494 4,088,337 5,826,435
----------- ----------- -----------
LONG-TERM DEBT.......................... 7,435,177 8,125,008 8,792,118
----------- ----------- -----------
OTHER LONG-TERM LIABILITIES............. 15,067 40,842 27,773
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
REDEEMABLE COMMON STOCK, no par value,
122,012 shares issued and outstanding.. -- 287,946 766,145
----------- ----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value,
5,000,000 shares authorized, no
shares issued or outstanding......... -- -- --
Common stock, no par value, 45,000,000
shares authorized, 7,273,946,
7,151,934 and 7,151,934 shares issued
and outstanding, respectively........ 124,770 210,604 210,604
Retained earnings..................... 2,454,231 3,691,812 1,462,266
Treasury stock, at cost............... (130,907) (589,407) (589,407)
----------- ----------- -----------
Total shareholders' equity.......... 2,448,094 3,313,009 1,083,463
----------- ----------- -----------
$13,872,832 $15,855,142 $16,495,934
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE>
ACSYS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31 JUNE 30
------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SERVICE REVENUES:
Temporary staffing.... $21,150,942 $26,565,734 $34,756,945 $16,831,284 $19,078,421
Permanent placement... 6,243,700 7,919,043 11,151,319 5,380,372 7,276,303
----------- ----------- ----------- ------------ ------------
Total service reve-
nues............... 27,394,642 34,484,777 45,908,264 22,211,656 26,354,724
DIRECT COST OF SERVICES,
consisting of payroll,
payroll taxes and
insurance costs for
temporary employees.... 14,025,196 17,731,610 22,873,091 11,483,564 12,742,527
----------- ----------- ----------- ------------ ------------
Gross profit........ 13,369,446 16,753,167 23,035,173 10,728,092 13,612,197
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 10,218,230 12,795,347 18,776,444 8,015,232 11,384,488
COMBINATION EXPENSES.... -- -- -- -- 1,722,334
AMORTIZATION AND
DEPRECIATION........... 546,723 674,312 661,377 341,642 216,569
SEVERANCE AND FRANCHISE
TERMINATION COSTS...... 561,429 166,394 566,512 108,012 170,000
----------- ----------- ----------- ------------ ------------
Operating income.... 2,043,064 3,117,114 3,030,840 2,263,206 118,806
OTHER INCOME (EXPENSE):
Interest income....... 20,627 64,039 73,729 6,299 25,441
Interest expense...... (851,966) (890,133) (872,958) (376,652) (425,539)
Other ................ (21,589) (39,132) (4,099) (80,294) 20,472
----------- ----------- ----------- ------------ ------------
NET INCOME (LOSS)....... $ 1,190,136 $ 2,251,888 $ 2,227,512 $ 1,812,559 $ (260,820)
=========== =========== =========== ============ ============
PRO FORMA DATA
(UNAUDITED) (Note 2):
Historical net income
(loss), as reported.. $ 2,227,512 $ (260,820)
Pro forma income
taxes................ 980,105 659,619
----------- ------------
Pro forma net income
(loss)............... $ 1,247,407 $ (920,439)
=========== ============
Pro forma net income
(loss) per share..... $ 0.14 $ (0.20)
=========== ============
Weighted average
shares used in
computing pro forma
net income (loss) per
share................ 7,260,952 7,151,934
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-10
<PAGE>
ACSYS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE COMMON STOCK
AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
------------------------------------------------------
REDEEMABLE
COMMON STOCK COMMON STOCK
---------------- -------------------
RETAINED TREASURY
SHARES AMOUNT SHARES AMOUNT EARNINGS STOCK TOTAL
------- -------- --------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1994................... -- $ -- 7,273,946 $124,770 $ 273,175 $(130,907) $ 267,038
Distributions to
shareholders.......... -- -- -- -- (543,307) -- (543,307)
Net income............. -- -- -- -- 1,190,136 -- 1,190,136
------- -------- --------- -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1994................... -- -- 7,237,946 124,770 920,004 (130,907) 913,867
Distributions to
shareholders.......... -- -- -- -- (717,661) -- (717,661)
Net income............. -- -- -- -- 2,251,888 -- 2,251,888
------- -------- --------- -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1995................... -- -- 7,273,946 124,770 2,454,231 (130,907) 2,448,094
Contributions from
shareholders.......... -- -- -- 150,000 -- -- 150,000
Distributions to
shareholders.......... -- -- -- -- (766,151) -- (766,151)
Purchase of Common
Stock in connection
with redemption
agreement (Note 8).... 122,012 64,166 (122,012) (64,166) -- (458,500) (522,666)
Accretion of redeemable
Common Stock to
redemption value...... -- 223,780 -- -- (223,780) -- (223,780)
Net income............. -- -- -- -- 2,227,512 -- 2,227,512
------- -------- --------- -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1996................... 122,012 287,946 7,151,934 210,604 3,691,812 (589,407) 3,313,009
Distributions to
shareholders
(unaudited)........... -- -- -- -- (1,490,527) -- (1,490,527)
Accretion of redeemable
Common Stock to
redemption value
(unaudited)........... -- 478,199 -- -- (478,199) -- (478,199)
Net loss (unaudited)... -- -- -- -- (260,820) -- (260,820)
------- -------- --------- -------- ---------- --------- ----------
BALANCE, JUNE 30, 1997
(UNAUDITED)............ 122,012 $766,145 7,151,934 $210,604 $1,462,266 $(589,407) $1,083,463
======= ======== ========= ======== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE>
ACSYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE SIX MONTHS ENDED
DECEMBER 31 JUNE 30
------------------------------------ -------------------------
1994 1995 1996 1996 1997
---------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $1,190,136 $ 2,251,888 $ 2,227,512 $ 1,812,559 $ (260,820)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities--
Amortization and
depreciation......... 546,723 674,312 661,377 341,642 216,569
Change in deferred
rent liability....... (30,879) (30,463) (45,530) (15,232) 6,108
Imputed interest...... 57,000 73,000 71,000 34,500 27,850
Non-cash severance
charge............... -- -- 458,500 -- --
Changes in operating
assets and
liabilities:
Accounts receivable,
net.................. (667,202) (839,201) (1,483,465) (976,626) (634,134)
Prepaid expenses and
other................ (26,278) 13,878 (162,876) (186,276) (248,916)
Accounts payable...... 39,593 99,023 38,269 51,410 (98,294)
Accrued liabilities
and other............ 299,892 523,786 143,100 34,003 2,498,169
---------- ----------- ----------- ----------- ------------
Net cash provided by
operating activi-
ties................ 1,408,985 2,766,223 1,907,887 1,095,980 1,506,532
---------- ----------- ----------- ----------- ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (125,956) (273,509) (487,494) (416,661) (193,722)
---------- ----------- ----------- ----------- ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Changes in bank
overdrafts............ 68,731 (128,864) 224,688 126,232 (103,245)
Net borrowings
(repayments) on lines
of credit............. 110,282 177,000 325,500 169,903 (925,000)
Proceeds from long-term
debt.................. 250,000 79,973 326,325 300,000 7,585,532
Repayments of long-term
debt ................. (604,645) (1,235,674) (1,811,370) (768,160) (7,248,981)
Changes in restricted
cash.................. -- -- (89,254) (68) 116,434
Net borrowings
(repayments) of notes
payable to
shareholders.......... 50,000 -- (150,000) -- (150,000)
Shareholder
contributions......... -- -- 150,000 -- --
Distributions to
shareholders.......... (543,307) (717,661) (766,151) (264,313) (690,527)
---------- ----------- ----------- ----------- ------------
Net cash used in fi-
nancing activities.. (668,939) (1,825,226) (1,790,262) (436,406) (1,415,787)
---------- ----------- ----------- ----------- ------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ 614,090 667,488 (369,869) 242,913 (102,977)
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD.............. 149,953 764,043 1,431,531 1,431,531 1,061,662
---------- ----------- ----------- ----------- ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................. $ 764,043 $ 1,431,531 $ 1,061,662 $ 1,674,444 $ 958,685
========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Interest paid.......... $ 764,768 $ 919,280 $ 865,417 $ 438,897 $ 473,441
========== =========== =========== =========== ============
SUPPLEMENTAL NONCASH
FINANCING ACTIVITIES:
Purchase of Common
Stock for debt........ $ -- $ -- $ 442,785 $ -- $ --
========== =========== =========== =========== ============
Capital lease
obligations incurred.. $ -- $ 61,219 $ 100,000 $ -- $ --
========== =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-12
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1997 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED)
1. DESCRIPTION OF BUSINESS:
ACSYS, Inc. (the "Company") is an accounting and finance staffing firm that
operates offices primarily located in major metropolitan areas in the eastern
United States.
The Company was formed on March 10, 1997 and effected a business combination
on May 16, 1997 in which it acquired all of the issued and outstanding common
stock of Infinity Enterprises, Inc.; David C. Cooper & Associates, Inc.; DCCA
Professional Temporaries, Inc.; and EKT, Inc. in exchange for 4,240,283 shares
of the Company's Common Stock (the "May 16 Pooling"). Subsequent to the May 16
Pooling, the Company acquired all of the issued and outstanding common stock
of the following companies, in the same manner:
<TABLE>
<CAPTION>
NAME ACQUISITION DATE SHARES ISSUED
---- ----------------- -------------
<S> <C> <C>
Cama of Tampa, Inc....................... May 19, 1997 131,143
Rylan Forbes Consulting Group, Inc....... July 25, 1997 462,292
AcSys Resources, Inc..................... September 3, 1997 2,440,228
</TABLE>
The business combinations referred to above have been accounted for under
the pooling of interests method of accounting. Thus, the accompanying
financial statements have been restated to include the accounts and operating
results of the combined companies for all dates and periods prior to the
combinations, except for Infinity Enterprises, Inc. and Cama of Tampa, Inc.,
which are reflected only from their respective dates of formation (see Note 2)
of March 1, 1994 and January 1, 1996, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The financial statements as of June 30, 1997 and for the six months ended
June 30, 1996 and 1997 are unaudited and, in the opinion of management of the
Company, include all normal recurring adjustments necessary for a fair
presentation of the results for those interim periods. The results of
operations for the six months ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
RISKS AND UNCERTAINTIES
The Company's future results of operations involve a number of risks and
uncertainties. Factors that could affect the Company's future operating
results and cause actual results to vary materially from expectations include,
but are not limited to, the Company's brief operating history, the competitive
market for temporary staffing services, dependence on availability of
qualified personnel, dependence on key personnel and risks associated with
opening new offices and offering new services.
Credit risk with respect to accounts receivable is dispersed due to the
nature of the business, the large number of customers, and the diversity of
industries serviced. At December 31, 1995 and 1996 and June 30, 1997, no one
customer represented greater than 10% of accounts receivable or greater than
10% of revenues for the periods then ended.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. All significant
intercompany transactions and accounts have been eliminated.
F-13
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers cash on deposit with financial institutions and all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents. At the balance sheet dates, cash equivalents
were comprised primarily of investments in money market funds and certificates
of deposit.
RESTRICTED CASH
Restricted cash represents funds held by a financing institution as
collateral for a line of credit.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are depreciated using the straight-line method over the shorter
of the estimated useful life of the asset or the remaining term of the lease.
<TABLE>
<CAPTION>
DECEMBER 31
---------------------- JUNE 30,
USEFUL LIVES 1995 1996 1997
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Office equipment............. 3-7 years $ 662,860 $ 895,075 $1,015,024
Office furniture and fix-
tures....................... 3-7 years 362,400 597,137 640,582
Leasehold improvements....... 7 years 1,389 155,237 161,278
---------- ---------- ----------
1,026,649 1,647,449 1,816,884
Less-- Accumulated deprecia-
tion........................ (538,212) (794,665) (896,095)
---------- ---------- ----------
$ 488,437 $ 852,784 $ 920,789
========== ========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996,
and the six months ended June 30, 1996 and 1997 was $73,322, $116,231,
$252,090, $87,601 and $125,717, respectively.
INTANGIBLE ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------------- JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Goodwill.................................... $7,200,000 $7,642,785 $7,642,785
Non-compete agreements...................... 815,939 -- --
Deferred financing costs.................... -- -- 231,829
Other....................................... 108,523 8,523 8,523
---------- ---------- ----------
8,124,462 7,651,308 7,883,137
Less-- Accumulated amortization............. (1,031,482) (524,830) (615,682)
---------- ---------- ----------
$7,092,980 $7,126,478 $7,267,455
========== ========== ==========
</TABLE>
Goodwill was recorded in connection with the acquisition on February 28,
1994 of certain assets of a predecessor by Infinity Enterprises, Inc. and by
the acquisition on January 1, 1996 of common stock from the previous
shareholders of Cama of Tampa, Inc. Goodwill is being amortized on a straight-
line basis over 40 years.
The non-compete agreements were entered into on February 28, 1994 between
Infinity Enterprises, Inc. and its predecessor and were being amortized on a
straight-line basis over 30 months.
Deferred financing costs are being amortized over the three-year term of the
credit facility.
Amortization expense for the years ended December 31, 1994, 1995 and 1996
and for the six months ended June 30, 1996 and 1997 was $473,401, $558,081,
$409,287, $254,041 and $90,852, respectively.
F-14
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be
reviewed for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
changes in circumstances indicate that the carrying amount of an asset that an
entity expects to hold and use may not be recoverable, future cash flows
expected to result from the use of the asset and its disposition must be
estimated. If the undiscounted value of the future cash flows is less than the
carrying amount of the asset, an impairment will be recognized. Management
believes that there has been no impairment of long-lived assets as of June 30,
1997.
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
--------------------- JUNE 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Salaries and commissions................... $ 532,314 $ 515,701 $2,118,809
Combination costs.......................... -- -- 1,382,929
Payroll taxes.............................. 470,808 439,310 383,706
Shareholder distributions.................. -- -- 800,000
Other...................................... 571,034 837,743 418,548
---------- ---------- ----------
$1,574,156 $1,792,754 $5,103,992
========== ========== ==========
</TABLE>
REVENUE RECOGNITION
The Company recognizes permanent placement revenues when the employment
offer and acceptance has occurred and the candidate's employment start date
has been established. Revenue from permanent placements is reported in the
statements of operations net of estimated adjustments due to placed candidates
that terminate employment within the Company's guarantee period (generally 90-
180 days). The net adjustment in each of the periods presented is immaterial.
The Company recognizes temporary staffing revenue when the services are
performed.
GROSS PROFIT
Gross profit is determined by deducting the direct cost of services for
temporary staffing revenues (temporary and contract personnel payroll, payroll
taxes and insurance costs) from total service revenues. The primary costs
associated with permanent placement revenues are sales commissions, which
increase in proportion with service revenue from permanent placements.
Consistent with industry practice, these costs are included in selling,
general and administrative expenses.
INCOME TAXES
The Company is an S corporation for federal and state income tax reporting
purposes. As such, all taxable income and loss of the Company is included in
the shareholders' tax returns. If the S corporation status had been terminated
as of June 30, 1997, the Company would have recorded a net deferred tax
liability of approximately $2,078,000 representing the tax effect of
differences in the bases in assets and liabilities for financial reporting and
income tax purposes. The differences primarily relate to the use of the cash
basis of accounting for tax purposes and the accrual basis of accounting for
financial reporting purposes, as well as differences in depreciation and
amortization methods. Pro forma income taxes represent the income tax expense
that would have resulted if the Company was a C corporation for the periods
presented.
F-15
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PRO FORMA NET INCOME (LOSS) PER SHARE
Pro forma net income (loss) per Common share was calculated by dividing pro
forma net income (loss) available to Common shareholders by the weighted
average number of shares outstanding of 7,260,952, which includes Common Stock
equivalents of 109,018, unless otherwise anti-dilutive. The average number of
shares outstanding excludes the redeemable Common shares, as the accretion on
the redeemable Common Stock of $223,780 for the year ended December 31, 1996
and $478,199 for the six months ended June 30, 1997, is deducted in arriving
at pro forma net income (loss) available to Common shareholders. The average
number of shares outstanding has been retroactively restated to include the
shares issued for the business combinations accounted for as poolings of
interests.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes that the carrying amounts of certain financial
instruments, including cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximate their fair values as of each
balance sheet date given the relatively short maturity of these instruments.
The fair values of long-term debt instruments have been estimated by
discounting future cash flows based on the current interest rate environment
and remaining term to maturity.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128) and
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" (SFAS 129).
SFAS 128 requires a dual presentation of basic and diluted earnings per
share (EPS) in the statement of operations. Basic EPS is computed by dividing
net income by the weighted average number of shares of Common Stock
outstanding for the period. Diluted EPS includes the effect, if any, from the
potential exercise or conversion of securities, such as stock options, which
would result in the issuance of shares of Common Stock. SFAS 128 is effective
for financial statements for the periods ending after December 15, 1997. The
Company will adopt SFAS 128 for the year ending December 31, 1997 and, based
upon current facts and circumstances, does not expect the basic and diluted
EPS computed under SFAS 128 to be materially different than the EPS computed
under the provisions of APB Opinion No. 15, "Earnings Per Share".
SFAS 129 establishes standards for disclosing information about an entity's
capital structure. SFAS 129 is effective for financial statements for the
periods ending after December 15, 1997. The Company will adopt SFAS 129 for
the year ending December 31, 1997.
F-16
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. DEBT:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------- JUNE 30,
1995 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
Revolving line of credit.................. $ -- $ -- $7,050,000
Note payable to former shareholder of In-
finity Enterprises, Inc., repaid in May
1997..................................... 7,484,396 6,444,831 --
Non-compete agreements with former
shareholders of Infinity Enterprises,
Inc., maturing February 2009, with
monthly payments of $8,333............... 1,316,667 1,216,667 1,166,666
Non-compete agreements with former owners
of EKT, Inc., repaid in May 1997......... 227,367 111,371 --
Term notes payable to former shareholders
of Cama of Tampa, Inc., repaid in May
1997..................................... -- 300,000 --
Term loans payable to a bank, repaid in
September 1997........................... -- 256,659 226,000
Term loan payable to a bank, repaid in
February 1996............................ 162,493 -- --
Due to former shareholders of AcSys Re-
sources, Inc., repaid in September 1997.. 111,563 717,000 658,755
Capitalized lease obligations............. 52,218 130,664 100,036
Loans due to shareholders of AcSys Re-
sources, Inc............................. 79,973 92,770 97,221
Other .................................... 37,572 73,057 217,021
----------- ---------- ----------
9,472,249 9,343,019 9,515,699
Less--Unamortized discount................ (566,921) (496,265) (454,544)
----------- ---------- ----------
8,905,328 8,846,754 9,061,155
Less--Current portion..................... (1,470,151) (721,746) (269,037)
----------- ---------- ----------
$ 7,435,177 $8,125,008 $8,792,118
=========== ========== ==========
</TABLE>
On May 16, 1997, the Company entered into an agreement with a bank which
provides for a $15,000,000 Revolving Credit Facility (the "Credit Facility")
to be repaid on May 31, 2000. The Company can draw on the Credit Facility in
increments of $250,000 or more. The Company can elect at the time of its draws
to pay interest at either: (A) the greater of (i) the bank's prime rate or
(ii) the federal funds rate plus 0.5%, plus a margin which ranges up to 0.75%;
or (B) at LIBOR plus a margin, which ranges from 1.25% to 2.50%. Borrowings
under the Credit Facility are collateralized by all of the assets of the
Company and a pledge of all of the stock of its subsidiaries. The Credit
Facility also contains various financial and non-financial covenants. At June
30, 1997, the Company had outstanding borrowings under the Credit Facility of
$7,050,000 and for the six months ended June 30, 1997 incurred $69,800 of
interest expense. Subsequent to June 30, 1997, the Company borrowed additional
amounts under the Credit Facility to repay certain liabilities of the
companies acquired in July 1997 and September 1997 (see Note 1).
The Company has discounted the non-compete obligations and certain other
notes payable to reflect their fair market value based on average borrowing
rates available to the Company. The rate used to determine the discount was
approximately 9.25%. The discount is being amortized over the term of the
notes using the effective interest rate method. Amortization expense included
in interest expense in the accompanying statements of operations for the years
ended December 31, 1994, 1995 and 1996, and for the six months ended June 30,
1996 and 1997 was $57,000, $73,000, $71,000, $34,500 and $27,850,
respectively.
Certain of the notes payable and non-compete agreements with former
shareholders are secured by property and equipment and Common Stock of the
Company. In addition, the obligation due under the non-compete agreement of
$1,166,666 as of June 30, 1997 is personally guaranteed by certain
shareholders of the Company.
F-17
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Annual maturities of long-term debt as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................... $ 789,541
1998........................................................... 669,601
1999........................................................... 620,490
2000........................................................... 277,478
2001........................................................... 323,652
Thereafter..................................................... 6,662,257
----------
$9,343,019
==========
</TABLE>
In 1995 and 1996, the Company entered into capital leases for equipment with
terms ranging from two to three years. The implicit interest rates under these
leases range from 5% to 15%. The present value of the minimum lease payments
as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Total minimum lease payments................................... $ 149,728
Less-- Amounts representing interest........................... (19,064)
---------
Present value of minimum lease payments........................ $ 130,664
=========
</TABLE>
The Company had four separate line of credit agreements with different
banks, which provided for maximum borrowings of $1,200,000. These lines bore
interest at rates between 9.25% and 10.0% as of December 31, 1996. At December
31, 1995, 1996 and June 30, 1997, the Company had outstanding borrowings of
$550,000, $925,000 and $145,000, respectively, under these lines. Interest
expense under these lines was $66,700, $108,000 and $59,700 for the years
ended December 31, 1995 and 1996 and for the six months ended June 30, 1997,
respectively. Three of these lines were repaid in May 1997 and the fourth line
was repaid in September 1997 with borrowings under the Credit Facility.
4. COMMITMENTS AND CONTINGENCIES:
In connection with the business combinations, the Company entered into
employment agreements with certain shareholders who are also officers or
employees of the Company. The employment agreements provide for a guaranteed
base salary over a three-year period and a discretionary bonus to be
determined by the Board of Directors. For the years ending December 31, 1997,
1998, 1999 and 2000, the Company is obligated to pay $1,352,500, $2,575,000,
$2,575,000, and $1,222,500, respectively, in salaries under these agreements.
The agreements contain non-compete covenants and can be terminated based on
certain events, as defined. In addition, the agreements provide for lump sum
payments equal to three times current salary upon certain triggering events
such as a change in control, among other events.
The Company leases office space under noncancellable operating leases.
Certain leases require additional payments for taxes and operating expenses
and provide for renewal options. Future minimum payments required under
operating leases that have an initial or remaining noncancellable lease term
in excess of one year at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997........................................................... $ 912,764
1998........................................................... 699,971
1999........................................................... 661,520
2000........................................................... 555,221
2001........................................................... 409,652
Thereafter..................................................... 588,068
----------
$3,827,196
==========
</TABLE>
F-18
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rent expense for the years ended December 31, 1994, 1995 and 1996, and for
the six months ended June 30, 1996 and 1997 was $636,195, $720,815, $919,732,
$466,765 and $486,002, respectively.
The Company is subject to various claims and legal actions that arise in the
ordinary course of business. In the opinion of management, based in part on
consultation with legal counsel, the ultimate resolution of these matters will
be adequately covered by insurance or will not have a materially adverse
effect on the Company's financial position, liquidity or results of
operations.
5. TERMINATION OF FRANCHISE AGREEMENTS:
Prior to May 31, 1994, AcSys Resources operated as a franchisee under a
franchise agreement, which provided for various marketing and royalty payments
to the franchisor based on revenues. Effective May 31, 1994, AcSys Resources
and the franchisor terminated the agreement. The termination agreement
provided for payments to the franchisor of $360,000, which were made and
recorded as an expense in 1994. In addition, AcSys Resources was required to
pay to the franchisor 1% of revenues for the period June 1, 1994 through May
31, 1995, and 2% of revenues for the period June 1, 1995 through May 31, 1996,
resulting in an expense of $201,000 in 1994, $166,000 in 1995, and $108,000 in
1996. In May 1997, Cama of Tampa, Inc. terminated its franchise agreement and
made a one-time payment to the franchisor of $170,000, which was recorded as
an expense for the six months ended June 30, 1997. Costs under the franchise
termination agreements and severance expense (see note 8) have been recorded
as a separate line item in the accompanying consolidated statements of
operations.
6. RETIREMENT SAVINGS PLAN:
AcSys Resources has a defined contribution retirement plan for the benefit
of all eligible employees. The plan qualifies under Section 401(k) of the
Internal Revenue Code and allows for eligible employees to contribute to the
plan up to 15% of their pretax compensation, subject to the maximum
contributions allowed by the Internal Revenue Code. The plan provides for
discretionary matching contributions by AcSys Resources based on a percentage
of the participant's contributions to the plan and a discretionary profit
sharing contribution based on employee compensation. AcSys Resources made
$17,911, $23,083 and $30,449 in 1994, 1995 and 1996, respectively, in matching
contributions and no discretionary contributions were made to the plan.
7. RELATED PARTIES:
At December 31, 1995 and 1996, AcSys Resources had loans due from its
shareholders of $69,720 and $61,567, respectively, at an interest rate of 5%.
The loans are due on demand. These loans are included in other assets in the
accompanying consolidated balance sheets. In addition, AcSys Resources owes
three shareholders a total of $201,000 at June 30, 1997 for compensation
earned but not paid.
8. CAPITAL TRANSACTIONS:
REDEMPTION AND SEVERANCE AGREEMENTS
In September 1996, AcSys Resources entered into a Stock Redemption Agreement
with one of its shareholders. Under this agreement, AcSys Resources
repurchased a portion of the shares owned by this shareholder for $458,500. An
additional $500,000 will be paid to the shareholder if AcSys Resources closes
an initial public offering of its common stock prior to December 14, 1997.
Management expects that the offering will close after this date. The
shareholder can require AcSys Resources to repurchase his remaining 122,012
shares of Common Stock at a price based on an earnings formula defined in the
Stock Redemption Agreement. In connection with the Stock Redemption Agreement,
AcSys Resources and the shareholder entered into a severance agreement. Under
this agreement, the shareholder is to receive $458,500, which was charged to
expense in 1996. An initial payment of $200,000 was made to the shareholder
upon execution of the agreements, with the remaining $717,000 payable in equal
semi-monthly installments beginning in January 1997. The monthly payments may
be increased or decreased, based on a revenue formula, as defined in the
agreements.
F-19
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STOCK OPTION PLAN
In May 1997, the Company established the 1997 Stock Option Plan (the
"Plan"), which authorizes the Company to grant options to officers, employees,
directors and consultants. The maximum number of shares of Common Stock
issuable under the plan is 2,000,000, as amended. Awards and terms of stock
options issued under the Plan are at the discretion of the compensation
committee of the Board of Directors and may include incentive and non-
qualified stock options. Under the Plan, the term of any stock option issued
may not exceed ten years and certain limitations exist as to the issuance of
incentive stock options.
In January 1997, AcSys Resources issued stock options under the AcSys
Resources 1996 Equity Compensation Plan (the "AcSys Resources Plan") to its
officers and employees. In September 1997, the AcSys Resources Plan stock
options were exchanged for 111,687 stock options under the Company's Plan at
an exercise price of $2.66 per share. The exchange ratio was based on the
exchange ratio used to effect the AcSys Resources merger into the Company. In
connection with the merger between AcSys Resources and the Company on
September 3, 1997 (see Note 1), these options became fully vested in
accordance with the change of control provision included in the AcSys
Resources Plan. In May 1997, the Company issued 97,698 non-qualified stock
options and 37,500 qualified stock options to an officer of the Company at an
exercise price of $8.00 per share.
As of June 30, 1997, there were 246,885 stock options exercisable under the
Plan with a weighted average exercise price of $5.58 per share.
The Company accounts for its option plan under APB Opinion No. 25,
"Accounting for Stock Issued to Employees." In 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 established a
fair value based method of accounting for stock-based compensation plans. SFAS
123 requires that an employer's financial statements include certain
disclosures about stock-based employee compensation arrangements regardless of
the method used to account for the plan. Had the Company recognized
compensation cost for its stock option plans consistent with the provisions of
SFAS 123, the following pro forma net income per Common share for the six
months ended June 30, 1997 would have resulted:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
Pro forma net loss:
As reported............................................ $ (920,439)
===========
Per SFAS 123........................................... $(1,149,961)
===========
Pro forma net loss per Common Share:
As reported (unaudited)................................ $ (0.20)
===========
Per SFAS 123........................................... $ (0.23)
===========
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model, with a risk-free interest rate of
6.5%, no expected dividend yield and an expected life of five years. As of
June 30, 1997, the weighted average fair value of the options outstanding was
$1.55 per share.
F-20
<PAGE>
ACSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. ACQUISITION OF C.P.A. STAFFING:
AcSys Resources acquired C.P.A. Staffing, Inc., C.P.A. Search, Inc. and
Career Placement Associates, Inc. (together, "C.P.A. Staffing") on August 12,
1997. The acquisition was accounted for under the purchase method of
accounting. The total purchase price was approximately $9,700,000 and
consisted of cash of $1,900,000, 1,219,274 shares of Common Stock with a fair
market value of $7,700,000 and transaction costs of $144,000. The purchase
price was allocated to the assets acquired and liabilities assumed. The
$8,600,000 excess of the purchase price over the estimated fair market value
of the net assets acquired was recorded as goodwill and is being amortized on
a straight-line basis over 40 years.
The following table summarizes the unaudited pro forma results of operations
for the years ended December 31, 1995 and 1996 and the six months ended June
30, 1997, assuming that the acquisition of C.P.A. Staffing had occurred on
January 1, 1995:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
------------------- FOR THE SIX MONTHS
1995 1996 ENDED JUNE 30, 1997
------------- ------------- -------------------
<S> <C> <C> <C>
Revenues..................... $ 40,018,158 $ 52,410,832 $ 30,078,909
Operating income............. 3,851,457 3,864,973 712,298
Net income................... 2,852,474 2,884,645 237,916
</TABLE>
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To C.P.A. Staffing, Inc., C.P.A. Search, Inc. and Career Placement Associates,
Inc.:
We have audited the accompanying combined balance sheets of C.P.A. Staffing,
Inc., C.P.A. Search, Inc. and Career Placement Associates, Inc. (Georgia
corporations) as of December 31, 1996 and August 12, 1997, and the related
combined statements of operations, shareholders' equity and cash flows for the
year ended December 31, 1996, and for the period from January 1, 1997 to
August 12, 1997. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of C.P.A. Staffing,
Inc., C.P.A. Search, Inc. and Career Placement Associates, Inc. as of December
31, 1996 and August 12, 1997, and the results of their operations and their
cash flows for the year ended December 31, 1996 and for the period from
January 1, 1997 to August 12, 1997, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Philadelphia, PA,
October 3, 1997
F-22
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 12,
1996 1997
------------ ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................ $ 3,627 $ 40,246
Accounts receivable, net of allowances of $25,000.... 884,985 1,123,504
Prepaid expenses..................................... -- 1,143
---------- ----------
Total current assets............................... 888,612 1,164,893
PROPERTY AND EQUIPMENT, net............................ 138,387 166,852
---------- ----------
$1,026,999 $1,331,745
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 25,198 $ 68,659
Accrued salaries, commissions, and benefits.......... 161,363 180,615
---------- ----------
Total current liabilities.......................... 186,561 249,274
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 6)
SHAREHOLDERS' EQUITY (Note 8):
Common stock......................................... 1,900 1,900
Additional paid in capital........................... -- 702,465
Retained earnings.................................... 853,258 392,826
Treasury stock, at cost.............................. (14,720) (14,720)
---------- ----------
Total shareholders' equity......................... 840,438 1,082,471
---------- ----------
$1,026,999 $1,331,745
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-23
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
FOR THE JANUARY 1,
YEAR ENDED 1997 TO
DECEMBER 31, AUGUST 12,
1996 1997
------------ ----------
<S> <C> <C>
SERVICE REVENUES:
Temporary staffing................................... $5,653,164 $3,784,987
Permanent placement.................................. 849,404 771,523
---------- ----------
Total service revenues............................. 6,502,568 4,556,510
DIRECT COSTS OF SERVICES, consisting of payroll, pay-
roll taxes and insurance costs for temporary employ-
ees................................................... 4,051,962 2,832,357
---------- ----------
Gross profit....................................... 2,450,606 1,724,153
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........... 1,378,626 1,679,590
DEPRECIATION........................................... 22,663 20,995
---------- ----------
NET INCOME............................................. $1,049,317 $ 23,568
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID IN RETAINED TREASURY SHAREHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------ ---------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1,
1996................... $1,900 $ -- $ 518,941 $ (14,720) $ 506,121
Distributions to
shareholders......... -- -- (715,000) -- (715,000)
Net income............ -- -- 1,049,317 -- 1,049,317
------ -------- ---------- --------- ----------
BALANCE, DECEMBER 31,
1996................... 1,900 -- 853,258 (14,720) 840,438
Contribution from
shareholders......... -- 702,465 -- -- 702,465
Distributions to
shareholders......... -- -- (484,000) -- (484,000)
Net income............ -- -- 23,568 -- 23,568
------ -------- ---------- --------- ----------
BALANCE, AUGUST 12,
1997................... $1,900 $702,465 $ 392,826 $ (14,720) $1,082,471
====== ======== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FOR THE JANUARY 1,
YEAR ENDED 1997 TO
DECEMBER 31, AUGUST 12,
1996 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $1,049,317 $ 23,568
Adjustments to reconcile net income to net cash
provided by
operating activities--
Depreciation........................................ 22,663 20,995
Non-cash compensation charge (Note 7)............... -- 702,465
Changes in assets and liabilities--
Accounts receivable................................ (347,967) (238,519)
Prepaid expenses................................... -- (1,143)
Accounts payable................................... 5,922 43,461
Accrued salaries, commissions, and benefits........ 65,467 19,252
---------- ---------
Net cash provided by operating activities......... 795,402 570,079
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................. (86,139) (49,460)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders........................ (715,000) (484,000)
---------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...... (5,737) 36,619
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 9,364 3,627
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $ 3,627 $ 40,246
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid for interest............................... $ 4,424 $ 4,886
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
C.P.A. Staffing, Inc., C.P.A. Search, Inc. and Career Placement Associates,
Inc. (together, the "Company"), specialize in the placement of temporary and
permanent employees in the accounting, banking, finance and information
technology fields. The Company's primary market is Atlanta, Georgia.
On August 12, 1997, an agreement and plan of merger was entered into among
AcSys Resources, Inc. ("AcSys"), the Company and the shareholders of the
Company, whereby AcSys agreed to purchase all of the outstanding common stock
of the Company for approximately $9,600,000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF COMBINATION
The financial statements reflect the combined financial position, results of
operations and cash flows of C.P.A. Staffing, Inc., C.P.A. Search, Inc. and
Career Placement Associates, Inc. The companies are engaged in related
operations and are owned, in the same percentages, by the same shareholders.
The financial statements reflect the elimination of all significant
intercompany accounts and transactions.
REVENUE RECOGNITION
The Company recognizes permanent placement revenues when the employment
offer and acceptance has occurred and the candidate's employment start date
has been established. Revenue from permanent placements is reported in the
combined statements of operations net of estimated adjustments due to placed
candidates that terminate employment within the Company's guarantee period
(generally 90 days). The net adjustment in each of the periods presented is
immaterial. The Company recognizes temporary staffing revenues when the
services are performed.
GROSS PROFIT
Gross profit is determined by deducting the direct cost of services for
temporary staffing revenues (temporary and contract personnel payroll, payroll
taxes and insurance costs) from total service revenues. The primary costs
associated with permanent placement revenues are sales commissions, which
increase in proportion with service revenue from permanent placements.
Consistent with industry practice, these costs are included in selling,
general and administrative expenses.
CASH AND CASH EQUIVALENTS
The Company considers cash on deposit with financial institutions and all
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents. At December 31, 1996 and August 12, 1997, cash
equivalents consisted primarily of investments in money market funds.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets, which are
generally five to seven years for furniture, computer and office equipment.
INCOME TAXES
The Company is an S corporation and, as such, the Company is not subject to
federal and state income taxes and all taxable income and loss of the Company
is included in the shareholders' tax returns.
F-27
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
In the event of the termination of the S corporation status, the Company
would be required to record a deferred tax liability of approximately $415,000
as of August 12, 1997, in accordance with the provisions of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.
LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 121 "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles to be held and used by the Company be
reviewed for possible impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If
changes in circumstances indicate that the carrying amount of an asset that an
entity expects to hold and use may not be recoverable, future cash flows
expected to result from the use of the asset and its disposition must be
estimated. If the undiscounted value of the future cash flows is less than the
carrying amount of the asset, an impairment will be recognized.
3. PROPERTY AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 12,
1996 1997
------------ ----------
<S> <C> <C>
Computer equipment................................... $113,783 $155,044
Furniture and office equipment....................... 63,007 71,206
-------- --------
176,790 226,250
Less--Accumulated depreciation....................... (38,403) (59,398)
-------- --------
$138,387 $166,852
======== ========
</TABLE>
4. LINE OF CREDIT:
The Company has a revolving line of credit with a bank, which provides for
maximum borrowings of $250,000. Borrowings under the line are limited to 75%
of accounts receivable, as defined. The line is collateralized by
substantially all of the assets of the Company and is personally guaranteed by
the Company's shareholders. Interest on borrowings is payable monthly and
accrues at prime plus 1.50%. The line of credit expires in April 1998. At
December 31, 1996 and August 12, 1997, there were no borrowings on the line.
The maximum borrowed under the line in 1996 was $30,000 and the average amount
outstanding was approximately $4,000. The maximum borrowed under the line
during the period ended August 12, 1997 was $150,000 and the average amount
outstanding during this period was approximately $8,500. Interest expense for
the year ended December 31, 1996 and for the period ended August 12, 1997 was
not material.
F-28
<PAGE>
C.P.A. STAFFING, INC., C.P.A. SEARCH, INC.
AND CAREER PLACEMENT ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
5. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT:
For the year ended December 31, 1996, the Company had three customers which
accounted for 22%, 17% and 11% of total service revenues. For the period from
January 1, 1997 to August 12, 1997, the same three customers accounted for
17%, 17% and 11% of revenues. At December 31, 1996, the Company had two
customers which accounted for 31% and 12% of accounts receivable. At August
12, 1997, the Company had two customers which accounted for 24% and 13% of
accounts receivable.
6. COMMITMENTS AND CONTINGENCIES:
The Company leases office space and equipment under operating leases through
October 31, 2001. Rent expense, was approximately $32,000 and $34,000, for the
year ended December 31, 1996 and for the period from January 1, 1997 to August
12, 1997, respectively. Future minimum lease payments under the Company's
operating leases for the years ended December 31 are as follows:
<TABLE>
<S> <C>
1997.............................................................. $52,559
1998.............................................................. 77,562
1999.............................................................. 92,850
2000.............................................................. 94,503
2001.............................................................. 80,556
</TABLE>
The Company is party to various claims and other matters arising in the
normal course of business. In the opinion of management, the outcome of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
7. EMPLOYEE AGREEMENT:
In July 1996, the Company entered into an agreement with an employee which
provides for a cash payment in the event of the sale of the Company, as
defined. The cash payment is based on performance criteria and is limited to
10% of the staffing company's sale price, less any amount paid to the employee
under the termination clause of the agreement. As a result of the sale of the
Company's common stock on August 12, 1997 (see Note 1), the Company issued a
$280,000 demand note and a $422,465 note, payable over seven years with 8%
interest, as full consideration under this agreement. Both notes were assumed
by the shareholders of the Company. This assumption was recorded as a capital
contribution by the shareholders in the accompanying financial statements.
8. COMMON STOCK:
<TABLE>
<CAPTION>
PAR VALUE AUTHORIZED ISSUED OUTSTANDING
--------- ---------- ------ -----------
<S> <C> <C> <C> <C>
C.P.A. Staffing, Inc................ $ 1 10,000 200 200
C.P.A. Search, Inc.................. $ 1 10,000 200 200
Career Placement Associates, Inc.... $ -- 10,000 1,500 1,000
</TABLE>
In 1993, the Company repurchased 500 shares of Career Placement Associates,
Inc. common stock for $14,720.
F-29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPEC-
TUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SE-
CURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAW-
FUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEAL-
ERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
The Company.............................................................. 12
Prior S Corporation Status............................................... 13
Dividend Policy.......................................................... 13
Use of Proceeds.......................................................... 14
Dilution................................................................. 15
Capitalization........................................................... 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 27
Management............................................................... 38
Principal and Selling Shareholders....................................... 43
Certain Transactions..................................................... 44
Description of Capital Stock............................................. 45
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 50
Legal Matters............................................................ 51
Experts.................................................................. 52
Available Information.................................................... 52
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,750,000 SHARES
ACSYS, INC.
COMMON STOCK
---------------
PROSPECTUS
---------------
J.C.Bradford&Co.
Janney Montgomery Scott Inc.
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with the
Offering described in the Registration Statement:
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 10,542
NASD Fees....................................................... 3,979
Nasdaq Fees..................................................... 15,000
Blue Sky Fees and Expenses...................................... 10,000
Printing and Engraving.......................................... 100,000
Legal Fees and Expenses......................................... 500,000
Accounting Fees and Expenses.................................... 885,000
Transfer Agent Fees............................................. 7,500
Miscellaneous Expenses.......................................... 67,979
----------
Total:........................................................ $1,600,000*
==========
</TABLE>
- ---------------------
* All amounts other than the SEC Registration Fee and NASD Fees reflect
Company estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation eliminate, subject to certain
limited exceptions, the personal liability of a director to the Company or its
shareholders for monetary damage for any breach of duty as a director. There
is no elimination of liability for (i) a breach of duty involving
appropriation of a business opportunity of the Company; (ii) an act or
omission which involves intentional misconduct or a knowing violation of law;
(iii) any transaction from which the director derives an improper personal
benefit; or (iv) as to any payments of a dividend or any other type of
distribution that is illegal under Section 14-2-832 of the Georgia Business
Corporation Code (the "GBCC"). In addition, if at any time the GBCC is amended
to authorize further elimination or limitation of the personal liability of a
director, then the liability of each director of the Company shall be
eliminated or limited to the fullest extent permitted by such provisions, as
so amended, without further action by the shareholders, unless the provisions
of the GBCC require such action. The provision does not limit the right of the
Company or its shareholders to seek injunctive or other equitable relief not
involving payments in the nature of monetary damages.
The Company's bylaws contain certain provisions which provide
indemnification to directors of the Company that is broader than the
protection expressly mandated in Sections 14-2-852 and 14-2-857 of the GBCC.
To the extent that a director or officer of the Company has been successful,
on the merits or otherwise, in the defense of any action or proceeding brought
by reason of the fact that such person was a director or officer of the
Company, Sections 14-2-852 and 14-2-857 of the GBCC would require the Company
to indemnify such persons against expenses (including attorney's fees)
actually and reasonably incurred in connection therewith. The GBCC expressly
allows the Company to provide for greater indemnification rights to its
officers and directors, subject to shareholder approval.
The indemnification provisions in the Company's bylaws require the Company
to indemnify and hold harmless any director who was or is a party or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative
(including any action or suit by or in the right of the Company) because he or
she is or was a director of the Company, against expenses (including, but not
limited to, attorney's fees and disbursements, court costs and expert witness
fees), and against judgments, fines, penalties, and amounts paid in settlement
incurred by him or her in connection with the action, suit or proceeding.
Indemnification would be disallowed under any circumstances where
indemnification may not be authorized by action of the Board of Directors, the
shareholders or otherwise. The Board of Directors of
II-1
<PAGE>
the Company also has the authority to extend to officers, employees and agents
the same indemnification rights held by directors, subject to all the
accompanying conditions and obligations. Indemnified persons would also be
entitled to have the Company advance expenses prior to the final disposition
of the proceeding. If it is ultimately determined that they are not entitled
to indemnification, however, such amounts would be repaid. Insofar as
indemnification for liability arising under the Securities Act may be
permitted to officers and directors of the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
The Company has entered into separate indemnification agreements with each
of its directors and executive officers, whereby the Company agreed, among
other things, to provide for indemnification and advancement of expenses in a
manner and subject to terms and conditions similar to those set forth in the
Bylaws. These agreements also provide that the Company shall purchase and
maintain liability insurance for the benefit of its directors and exeuctive
officers. These agreements may not be abrogated by action of the shareholders.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened litigation that
may result in claims for indemnification by any director, officer, employee or
other agent. The Company has also agreed to hold the shareholders harmless
from, against and in respect of federal income tax liabilities, including
interest and penalties imposed thereon (and any state and local income tax
liabilities as provided by applicable law), if any, incurred by the
shareholders as a result of a final determination of an adjustment (by reason
of an amended return, claim for refund, audit, judicial decision or otherwise)
to the taxable income of the Company for any period which results in a
decrease for any period in the Company's taxable income and a corresponding
increase for any period in the taxable income of the shareholders.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities which were not registered under the Securities Act have been
sold by the Company within the past three years except for the following:
(i) The Company entered into that certain Agreement and Plan of
Reorganization dated as of April 16, 1997 by and among the Company, and
David C. Cooper & Associates, Inc. ("Cooper"), DCCA Professional
Temporaries, Inc. ("DCCA"), EKT, Inc. ("EKT"), Infinity Enterprises, Inc.
("Infinity"), certain subsidiaries of the Company, and the shareholders of
Cooper, DCCA, EKT, and Infinity. Pursuant to such agreement, four wholly-
owned subsidiaries of the Company were merged with and into each of Cooper,
DCCA, EKT and Infinity. Upon the effectiveness of each such merger on May
16, 1997, all of the issued and outstanding stock of each of Cooper, DCCA,
EKT, and Infinity was converted into stock of the Company, and the Company
issued an aggregate of 4,240,283 shares of Common Stock to the shareholders
of Cooper, DCCA, EKT, and Infinity.
(ii) The Company entered into that certain Agreement and Plan of
Reorganization dated as of April 24, 1997 by and among the Company, Cama of
Tampa, Inc., Cama Acquisition, Inc. and Stephen S. Tutwiler. Pursuant to
such agreement, Cama Acquisition, Inc., a wholly-owned subsidiary of the
Company, merged with and into Cama of Tampa, Inc. Upon the effectiveness of
such merger on May 19, 1997, all of the issued and outstanding stock of
Cama of Tampa was converted into stock of the Company, and the Company
issued 131,143 shares of Common Stock to the sole shareholder of Cama of
Tampa.
(iii) The Company entered into that certain Agreement and Plan of Merger
dated as of July 25, 1997 by and among the Company, Rylan Forbes Consulting
Group, Inc. and the shareholders of Rylan Forbes Consulting Group, Inc.
named therein. Pursuant to such agreement, the Company acquired all of the
equity interest of Rylan Forbes in exchange for 462,292 shares of Common
Stock.
(iv) The Company entered into that certain Agreement and Plan of Merger
dated as of September 3, 1997 by and among the Company, AcSys Resources and
the shareholders of AcSys Resources named therein. Pursuant to such
agreement, the Company acquired all of the equity interest of AcSys
Resources in
II-2
<PAGE>
exchange for 3,659,502 shares of Common Stock (including 129,005 shares
currently in escrow to secure certain representations and warranties of the
former AcSys Resources shareholders). Also pursuant to such agreement, the
Company issued options to acquire an aggregate of 111,687 shares of Common
Stock to holders of options to acquire AcSys Resources' common stock.
(v) The Company entered into an employment agreement dated March 10, 1997
with the Company's Chief Executive Officer pursuant to which the Company
has granted (or will grant, upon the effective date of this registration
statement) options to acquire an aggregate of 246,755 shares of Common
Stock. The Company also entered into an employment agreement dated
September 3, 1997 with the Company's Chief Financial Officer pursuant to
which the Company agreed to grant options to acquire 66,229 shares of
Common Stock upon the effective date of this registration statement.
The issuance of securities described above was made in reliance on one or
more of the exemptions from registration under the Securities Act, including
those provided for by Section 4(2), Regulation D and Rule 701 thereunder. The
recipients of the securities in the above transactions represented their
intention to acquire the securities for investment purposes only and not with
a view to or for the sale in connection with any distribution thereof, and
appropriate legends were affixed to the share certificates issued in such
transactions. The recipients of these securities had adequate access, through
their relationship with the Company, to information about the Company.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------------------
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Reorganization dated as of April 16, 1997 by and
among the Company and David C. Cooper & Associates, Inc., DCCA
Professional Temporaries, Inc., EKT, Inc., and Infinity Enterprises,
Inc., and Cooper Acquisition, Inc., DCCA Acquisition, Inc., EKT
Acquisition, Inc., and Infinity Acquisition, Inc., and the shareholders
named therein.
2.2 Agreement and Plan of Reorganization dated as of April 24, 1997 by and
among the Company, Cama of Tampa, Inc., Cama Acquisition, Inc. and
Stephen S. Tutwiler.
2.3 Agreement and Plan of Merger by and among the Company, RFCG Merger
Subsidiary, Inc., Rylan Forbes Consulting Group, Inc., and the
shareholders of Rylan Forbes Consulting Group, Inc. dated as of July 25,
1997.
2.4 Agreement and Plan of Merger by and among the Company, the shareholders
of the Company, AcSys Resources, Inc., ASRI Merger Subsidiary, Inc. and
the shareholders of AcSys Resources, Inc. dated as of September 3, 1997.
2.5 Agreement and Plan of Merger among ACSYS Resources, Inc., ACSYS Staffing
Acquisition Corp., ACSYS Search Acquisition Corp., ACSYS Career
Acquisition Corp., and C.P.A. Staffing, Inc., C.P.A. Search, Inc.,
Career Placement Associates, Inc. and John Ficquette and Louis Boohaker
dated as of August 12, 1997.
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
10.1 1997 Stock Option Plan of the Company.
10.2 First Amendment to 1997 Stock Option Plan dated as of October 14, 1997.*
10.3 Employment Agreement by and between the Company and Timothy Mann, Jr.
dated March 12, 1997.
10.4 Amendment No. 1 to Employment Agreement by and between the Company and
Timothy Mann, Jr. dated September 3, 1997.
10.5 Amendment No. 2 to Employment Agreement by and between the Company and
Timothy Mann, Jr. dated October 14, 1997.
10.6 Employment Agreement by and between the Company and Edward S. Baumstein
dated August 1997.
10.7 Amendment No. 1 to Employment Agreement by and between the Company and
Edward S. Baumstein dated as of October 14, 1997.
10.8 Stock Option Agreement by and between the Company and Timothy Mann, Jr.
dated May 19, 1997.
10.9 Stock Option Agreement by and between the Company and Timothy Mann, Jr.
dated May 19, 1997.
10.10 Employment Agreement by and between the Company and Lester E. Gallagher
dated September 3, 1997.
10.11 Form of Employment Agreement between the Company and key employees.
10.12 Amended and Restated Registration Rights Agreement dated as of September
3, 1997 by and among the Company and certain holders of the capital
stock of the Company.
10.13 Revolving Credit Agreement dated May 16, 1997 by and among the Company
and certain lenders.*
10.14 Form of Indemnification Agreement entered into between the Company and
its directors and officers.
10.15 Form of S Corporation Tax Allocation and Indemnification Agreement
entered into between the Company and certain of its shareholders.
10.16 Nonqualified Stock Option Grant dated as of January 30, 1997 by AcSys
Resources, Inc. to Les Gallagher.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
11.1 Computation of Earnings/(Loss) Per Share.*
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed as part
of Exhibit 5.1).*
27.1 Financial Data Schedule for periods ending December 31, 1996 and June
30, 1997 (for SEC use only).
</TABLE>
- ---------------------
*To be filed by amendment.
(B)FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide to the underwriter at the closing
specified in the underwriting agreement, certificates in such denominations
and registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4),
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF
GEORGIA, ON OCTOBER 22, 1997.
ACSYS, Inc.
By: /s/ Timothy Mann, Jr.
----------------------------------
TIMOTHY MANN, JR.
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and
directors of ACSYS, Inc. (the "Company"), a Georgia corporation, for himself
and not for one another, does hereby constitute and appoint David C. Cooper,
Edward S. Baumstein, and Timothy Mann, Jr., and each of them, a true and lawful
attorney in his name, place and stead, in any and all capacities, to sign his
name to any and all amendments, including post-effective amendments, to this
Registration Statement, and to sign a Registration Statement pursuant to
Section 462(b) of the Securities Act of 1933, and to cause the same (together
with all Exhibits thereto) to be filed with the Securities and Exchange
Commission, granting unto said attorneys and each of them full power and
authority to do and perform any act and thing necessary and proper to be done
in the premises, as fully to all intents and purposes as the undersigned could
do if personally present, and each of the undersigned for himself hereby
ratifies and confirms all that said attorneys or any one of them shall lawfully
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES LISTED AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ David C. Cooper Chairman of the October 22, 1997
- ------------------------------------ Board of Directors
DAVID C. COOPER
/s/ Timothy Mann, Jr. Chief Executive October 22, 1997
- ------------------------------------ Officer and
TIMOTHY MANN, JR. Director
(Principal
Executive Officer)
/s/ Edward S. Baumstein President, Chief October 22, 1997
- ------------------------------------ Operating Officer
EDWARD S. BAUMSTEIN and Director
II-6
<PAGE>
SIGNATURE TITLE DATE
/s/ Beth Monroe-Chase Chief Development October 22,
- ------------------------------------- Officer, Executive 1997
BETH MONROE-CHASE Vice President and
Director
/s/ Lester E. Gallagher Chief Financial October 22,
- ------------------------------------- Officer (Principal 1997
LESTER GALLAGHER Financial and
Accounting Officer)
/s/ John R. Ficquette Director October 22,
- ------------------------------------- 1997
JOHN FICQUETTE
/s/ Harry J. Sauer Director October 22,
- ------------------------------------- 1997
HARRY J. SAUER
/s/ Mark E. Strassman Director October 22,
- ------------------------------------- 1997
MARK E. STRASSMAN
II-7
<PAGE>
The accompanying consolidated financial statements have been restated to
reflect two business combinations accounted for under the pooling of interests
method of accounting which were consummated after June 30, 1997, but prior to
September 30, 1997. Upon issuance of the consolidated financial statements as
of September 30, 1997, and for the nine months then ended, we expect to be in
a position to render the following report.
ARTHUR ANDERSEN LLP
Philadelphia, PA,
October 3, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To AcSys, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of AcSys, Inc. and Subsidiaries included
in this Registration Statement and have issued our report thereon dated
October , 1997. Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule listed in Item
16(b) of the Registration Statement is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Philadelphia, PA,
S-1
<PAGE>
ACSYS, INC.
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND FOR THE SIX MONTHS ENDED JUNE
30, 1997
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COSTS AND ENDING
DESCRIPTION BALANCE EXPENSES DEDUCTIONS BALANCE
----------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
1994
Allowance for doubtful accounts...... $ 4,800 146,224 (64,024) $ 87,000
1995
Allowance for doubtful accounts...... $ 87,000 153,551 (74,300) $ 166,251
1996
Allowance for doubtful accounts...... $ 166,251 286,212 (171,638) $ 280,825
JUNE 30, 1997 (UNAUDITED)
Allowance for doubtful accounts...... $ 280,825 66,180 (22,936) $ 324,069
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Reorganization dated as of April 16, 1997 by and
among the Company and David C. Cooper & Associates, Inc., DCCA
Professional Temporaries, Inc., EKT, Inc., and Infinity Enterprises,
Inc., and Cooper Acquisition, Inc., DCCA Acquisition, Inc., EKT
Acquisition, Inc., and Infinity Acquisition, Inc., and the shareholders
named therein.
2.2 Agreement and Plan of Reorganization dated as of April 24, 1997 by and
among the Company, Cama of Tampa, Inc., Cama Acquisition, Inc. and
Stephen S. Tutwiler.
2.3 Agreement and Plan of Merger by and among the Company, RFCG Merger
Subsidiary, Inc., Rylan Forbes Consulting Group, Inc., and the
shareholders of Rylan Forbes Consulting Group, Inc. dated as of July 25,
1997.
2.4 Agreement and Plan of Merger by and among the Company, the shareholders
of the Company, AcSys Resources, Inc., ASRI Merger Subsidiary, Inc. and
the shareholders of AcSys Resources, Inc. dated as of September 3, 1997.
2.5 Agreement and Plan of Merger among ACSYS Resources, Inc., ACSYS Staffing
Acquisition Corp., ACSYS Search Acquisition Corp., ACSYS Career
Acquisition Corp., and C.P.A. Staffing, Inc., C.P.A. Search, Inc.,
Career Placement Associates, Inc. and John Ficquette and Louis Boohaker
dated as of August 12, 1997.
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Specimen Common Stock Certificate.*
5.1 Opinion of Nelson Mullins Riley & Scarborough, L.L.P.*
10.1 1997 Stock Option Plan of the Company.
10.2 First Amendment to 1997 Stock Option Plan dated as of October 14, 1997.*
10.3 Employment Agreement by and between the Company and Timothy Mann, Jr.
dated March 12, 1997.
10.4 Amendment No. 1 to Employment Agreement by and between the Company and
Timothy Mann, Jr. dated September 3, 1997.
10.5 Amendment No. 2 to Employment Agreement by and between the Company and
Timothy Mann, Jr. dated October 14, 1997.
10.6 Employment Agreement by and between the Company and Edward S. Baumstein
dated August 1997.
10.7 Amendment No. 1 to Employment Agreement by and between the Company and
Edward S. Baumstein dated as of October 14, 1997.
10.8 Stock Option Agreement by and between the Company and Timothy Mann, Jr.
dated May 19, 1997.
10.9 Stock Option Agreement by and between the Company and Timothy Mann, Jr.
dated May 19, 1997.
10.10 Employment Agreement by and between the Company and Lester E. Gallagher
dated September 3, 1997.
10.11 Form of Employment Agreement between the Company and key employees.
10.12 Amended and Restated Registration Rights Agreement dated as of September
3, 1997 by and among the Company and certain holders of the capital
stock of the Company.
10.13 Revolving Credit Agreement dated May 16, 1997 by and among the Company
and certain lenders.*
10.14 Form of Indemnification Agreement entered into between the Company and
its directors and officers.
10.15 Form of S Corporation Tax Allocation and Indemnification Agreement
entered into between the Company and certain of its shareholders.
10.16 Nonqualified Stock Option Grant dated as of January 30, 1997 by AcSys
Resources, Inc. to Les Gallagher.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
11.1 Computation of Earnings/(Loss) Per Share.*
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Nelson Mullins Riley & Scarborough, L.L.P. (filed as part of Exhibit 5.1).*
27.1 Financial Data Schedule for periods ending December 31, 1996 and June 30, 1997 (for SEC use only).
</TABLE>
- ---------------------
* To be filed by amendment.
________________________
AGREEMENT AND PLAN OF REORGANIZATION
dated as of April 16, 1997
by and among
ICCE, Inc.,
and
David C. Cooper & Associates, Inc., DCCA Professional Temporaries,
Inc., EKT, Inc., and Infinity Enterprises, Inc.,
and
Cooper Acquisition, Inc., DCCA Acquisition, Inc., EKT Acquisition,
Inc., and Infinity Acquisition, Inc.
and
the Shareholders named herein
<PAGE>
TABLE OF CONTENTS
Page
I. DEFINITIONS 1
II. THE MERGER 3
2.1 Merger 3
2.2 Effective Time of the Merger 4
2.3 Effect of the Merger 4
2.4 Certain Information With Respect to the Capital
Stock of the Companies, the Acquisition Companies,
and ICCE 5
III. CONVERSION OF STOCK 5
3.1 Conversion of Outstanding Shares 5
3.2 No Fractional Shares 6
3.3 Treasury Shares 6
3.4 Change in Number of Shares 6
3.5 Rights of ICCE Shareholders 6
IV. CLOSING 7
4.1 The Closing Date 7
4.2 The Closing 7
V. REPRESENTATIONS AND WARRANTIES OF EACH OF THE
COMPANIES AND THE SHAREHOLDERS 8
(A) Representations and Warranties of Each of the
Companies and its Shareholders 8
5.1 Due Organization 8
5.2 Authorization 8
5.3 Capital Stock of the Company 8
5.4 Transactions in Capital Stock 8
5.5 Subsidiaries 9
5.6 Predecessor Status, etc. 9
5.7 Spin-off by the Company 9
5.8 Financial Statements 9
5.9 Liabilities and Obligations 9
5.10 Accounts and Notes Receivable 10
5.12 Environmental Matters 11
5.13 Personal Property 11
5.14 Significant Customers; Material Contracts and
Commitments 11
5.15 Real Property 12
5.16 Insurance 12
5.17 Compensation; Employment Agreements; Organized
Labor Matters 12
5.18 Employee Plans 13
5.19 Compliance with ERISA 13
i
5.20 Conformity with Law, Litigation 15
5.21 Taxes 15
5.22 No Violations 18
5.23 Government Contracts 18
5.24 Absence of Changes 18
5.25 Deposit Accounts, Powers of Attorney 19
5.26 Disclosure 20
5.27 Pooling Information 20
(B) Representations and Warranties of Shareholders 20
5.28 Authority, Ownership 20
5.29 Preemptive Rights 20
VI. REPRESENTATIONS OF THE ACQUISITION COMPANIES
AND ICCE 21
6.1 Due Organization 21
6.2 Authorization 21
6.3 Capital Stock of ICCE and the Acquisition
Companies 21
6.4 Transactions in Capital Stock, Reorganization
Accounting 21
6.5 Subsidiaries 21
6.6 Financial Statements 22
6.7 Liabilities and Obligations 22
6.8 Conformity with Law, Litigation 22
6.9 No Violations 22
6.10 ICCE Stock 22
6.11 No Side Agreements 22
6.12 Business; Real Property, Material Agreements 23
6.13 Permits and Intangibles 23
6.14 Disclosure 23
VII. COVENANTS PRIOR TO CLOSING 23
7.1 Access and Cooperation; Due Diligence 23
7.2 Conduct of Business Pending Closing 24
7.3 Prohibited Activities 25
7.4 No Shop 26
7.5 Notification of Certain Matters 26
7.6 Further Assurances 26
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF
EACH OF THE COMPANIES AND ITS SHAREHOLDERS 27
8.1 Representations and Warranties; Performance of
Obligations 27
8.2 No Litigation 27
8.3 Opinion of Counsel 27
8.4 Consents and Approvals 27
8.5 Good Standing Certificates 27
8.6 No Material Adverse Change 28
8.7 Secretary's Certificate 28
ii
8.8 Employment Agreements 28
8.9 Opinion of Accountants 28
8.10 Tax Opinion 28
8.11 Registration Rights 28
8.12 Shareholders Agreement 28
8.13 Financing 28
8.14 Agreements 28
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF ICCE 29
9.1 Representations and Warranties; Performance of
Obligations 29
9.2 No Litigation 29
9.3 Secretary's Certificate 29
9.4 No Material Adverse Effect 29
9.5 Shareholders' Release 29
9.6 Termination of Related Party Agreements 29
9.7 Opinion of Counsel 30
9.8 Consents and Approvals 30
9.9 Good Standing Certificates 30
9.10 Employment Agreements 30
9.11 Registration Rights 30
9.12 Shareholders Agreement 30
9.13 Opinion of Accountants 30
9.14 Tax Opinion 30
9.15 Affiliates Agreements 30
X. COVENANTS OF ICCE AFTER CLOSING 31
10.1 Preservation of Tax and Accounting Treatment 31
10.2 Preparation and Filing of Tax Returns 31
10.3 Preservation of Employee Benefit Plans 32
XI. INDEMNIFICATION 32
11.1 Survival of Representations and Warranties 32
11.2 Indemnification by the Shareholders 32
11.3 Indemnification by ICCE 32
11.4 Claims 33
11.5 Exclusive Remedy 33
11.6 Limitations on Indemnification 33
XII. TERMINATION OF AGREEMENT 34
12.1 Termination 34
XIII. GENERAL 34
13.1 Cooperation 34
13.2 Successors and Assigns 34
13.3 Entire Agreement 34
13.4 Counterparts 35
iii
13.5 Brokers and Agents 35
13.6 Expenses 35
13.7 Notices 35
13.8 Governing Law 36
13.9 Exercise of Rights and Remedies 36
13.10 Time 36
13.11 Reformation and Severability 36
13.12 Captions 36
13.13 Amendments and Waivers 36
iv
<PAGE>
SCHEDULES and EXHIBITS
Schedule 1 - List of Shareholders' Names and Addresses
Schedule 5.1 - Qualifications to do Business; Fundamental Documents
Schedule 5.3 - Exceptions Regarding Capital Stock of Company
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.6 - Names of Predecessor Companies
Schedule 5.7 - Sales or Spin-Offs of Significant Assets
Schedule 5.8 - Initial Financial Statements
Schedule 5.9 - Significant Liabilities and Obligations
Schedule 5.10 - Accounts and Notes Receivable
Schedule 5.11 - Licenses, Franchises, Permits and Other Governmental
Authorizations
Schedule 5.12 - Environmental Matters
Schedule 5.13 - Personal Property
Schedule 5.14 - Significant Customers and Material Contracts
Schedule 5.15 - Real Property
Schedule 5.16 - Insurance Policies and Claims
Schedule 5.17 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.18 - Employee Benefit Plans
Schedule 5.19 - Violations of ERISA
Schedule 5.20 - Violations of Law, Regulations or Orders
Schedule 5.21 - Tax Returns and Examinations
Schedule 5.21(v) - Federal, State, Local and Foreign Income Tax Returns Filed
Schedule 5.21(xvii) - Aggregate Tax Losses
Schedule 5.22(a) - Violations of Charter and Documents and Material Defaults
Schedule 5.23 - Governmental Contracts Subject to Price Redetermination or
Renegotiation
Schedule 5.24 - Changes Since Balance Sheet Date
Schedule 5.25 - Deposit Accounts; Powers of Attorney
Schedule 5.29 - Ownership of Company Stock
Schedule 6.1 - Articles and Bylaws of ICCE
Schedule 6.3 - Ownership of ICCE Stock, etc.
Schedule 6.4 - Transactions in Capital Stock of ICCE
Schedule 6.7 - Liabilities and Obligations of ICCE
Schedule 6.8 - Conformity with Law; Litigation of ICCE
Schedule 6.9 - Violations of Charter Documents and Material Defaults of
ICCE
Schedule 6.12 - Real Property and Material Personal Property and Agreements
of ICCE
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary Course
Between Balance Sheet Date and Consummation Date
Schedule 7.3 - Prohibited Activities
Schedule 8.13 - Financing
v
Schedule 9.6 - Exceptions to Terminations of Related Party Agreements
Exhibit A - Form of Articles of Merger
Exhibit B - Form of Opinion of Nelson, Mullins, Riley & Scarborough, LLP
Exhibit C - Form of Employment Agreement
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Shareholders Agreement
Exhibit F - Form of Opinion of Counsel to Companies, etc.
Exhibit G - Form of Opinion of Counsel to ICCE
Exhibit H - Form of Affiliate Agreement
vi
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
April 16, 1997, by and among ICCE, Inc., a Georgia corporation ("ICCE"), David
C. Cooper & Associates, Inc., a Georgia corporation ("Cooper"), DCCA
Professional Temporaries, Inc., a Georgia corporation ("DCCA"), EKT, Inc., a
North Carolina corporation ("EKT"), Infinity Enterprises, Inc., a Maryland
close corporation ("Infinity"), Cooper Acquisition, Inc., a Georgia corporation
("Cooper Acquisition"), DCCA Acquisition, Inc., a Georgia corporation ("DCCA
Acquisition"), EKT Acquisition, Inc., a North Carolina corporation ("EKT
Acquisition"), and Infinity Acquisition, Inc., a Maryland corporation
("Infinity Acquisition"), and each of the individuals listed on Schedule 1
hereto (each a "Shareholder" and collectively the "Shareholders"). The
Shareholders are all of the shareholders of the Companies (as herein after
defined).
WHEREAS, ICCE is a corporation duly organized and existing under the laws
of the State of Georgia, having been incorporated on March 10, 1997, solely for
the purpose of completing the transactions set forth herein;
WHEREAS, the respective Boards of Directors of ICCE and each of the
Companies (as hereinafter defined) deem it advisable and in the best interests
of each of the Companies and their respective Shareholders that the Companies,
pursuant to this Agreement and the applicable laws of the states of
incorporation of each of the merging entities, merge with wholly owned
subsidiaries of ICCE pursuant to reverse triangular mergers as more
particularly set forth herein;
WHEREAS, the Shareholders will receive shares of ICCE stock pursuant to
such merger;
WHEREAS, the parties intend that the merger qualify as a tax-free
reorganization under Sections 351 and 368(a) of the Internal Revenue Code of
1986;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule or exhibit attached hereto and not otherwise
defined herein shall have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" shall have the meaning set forth in Section 5.21(i).
1
"Acquisition Company" shall mean each of Cooper Acquisition, DCCA
Acquisition, EKT Acquisition, and Infinity Acquisition, each of which is a
wholly owned subsidiary of ICCE. "Acquisition Companies" shall mean all of the
foregoing companies collectively.
"Articles of Merger" shall mean the Articles of Merger, Plan of Merger or
Certificates of Merger substantially in the forms attached hereto as Exhibit A,
with such changes as may be required by applicable state laws or agreement
among the parties.
"Balance Sheet Date" shall mean December 31, 1996.
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Date" shall have the meaning set forth in Section 4.1.
"COBRA" shall have the meaning set forth in Section 5.19.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean each of Cooper, DCCA, EKT, and Infinity, and
"Companies" shall mean all of the foregoing companies collectively.
"Company Financial Statements" shall have the meaning set forth in Section
5.8.
"Company Stock" shall have the meaning set forth in Section 3.1.
"Conversion Ratios" shall have the meaning set forth in Section 3.1.
"Effective Time of the Merger" shall mean the time as set forth in Section
2.2.
"Environmental Laws" shall have the meaning set forth in Section 5.12.
"ERISA" means Employee Retirement Income Security Act of 1974.
"ICCE Documents" shall have the meaning set forth in Section 6.9.
"ICCE Stock" shall mean the common stock, no par value, of ICCE.
"Indemnification Threshold" shall have the meaning set forth in Section
11.6.
"Indemnified Party" shall have the meaning set forth in Section 11.4.
"Indemnifying Party" shall have the meaning set forth in Section 11.4.
"IRS" shall mean the United States Internal Revenue Service.
2
"Material Adverse Effect" shall mean a material adverse impact on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise) of the party referred to.
"Material Documents" shall have the meaning set forth in Section 5.22.
"Merger" shall mean collectively the merger of each Acquisition Company
with and into its corresponding target Company as described in Section 2.1
below and pursuant to this Agreement and the applicable provisions of the State
Laws.
"PBGC" means Pension Benefit Guaranty Corporation.
"Permits" shall have the meaning set forth in Section 5.11(a).
"Plans" shall have the meaning set forth in Section 5.18.
"Qualified Plans" shall have the meaning set forth in Section 5.19(ii).
"Relevant Group" shall have the meaning set forth in Section 5.21(i).
"Returns" shall have the meaning set forth in Section 5.21.
"Rule" shall have the meaning set forth in Section 5.20.
"SEC" shall mean the United States Securities and Exchange Commission.
"State Laws" shall mean the corporation law of each of Georgia, Maryland
and North Carolina.
"Statutory Liens" shall have the meaning set forth at the end of Section
7.3(v).
"Shareholders" shall have the meaning set forth in the first paragraph of
this Agreement.
"Tax" shall have the meaning set forth at the end of Section 5.21.
"Tax Losses" shall have the meaning set forth in Section 5.21(xvi).
"Taxing Authority" shall have the meaning set forth in Section 5.21.
II. THE MERGER
2.1 Merger. Subject to the terms and conditions hereof and of the
applicable Articles of Merger, each Acquisition Company shall be merged with
and into a Company as described below and in accordance with the applicable
provisions of the State Laws:
3
(i) Cooper Acquisition shall be merged with and into Cooper; Cooper shall
be the surviving corporation and shall continue its existence under the name of
"David C. Cooper & Associates, Inc."; and Cooper shall succeed to and possess
all of the assets, rights, liabilities and debts of Cooper Acquisition;
(ii) DCCA Acquisition shall be merged with and into DCCA; DCCA shall be
the surviving corporation and shall continue its existence under the name of
"DCCA Professional Temporaries, Inc."; and DCCA shall succeed to and possess
all of the assets, rights, liabilities and debts of DCCA Acquisition;
(iii) EKT Acquisition shall be merged with and into EKT; EKT shall be
the surviving corporation and shall continue its existence under the name of
"EKT, Inc." d/b/a Don Richard Associates of Charlotte; and EKT shall succeed to
and possess all of the assets, rights, liabilities and debts of EKT
Acquisition; and
(iv) Infinity Acquisition shall be merged with and into Infinity; Infinity
shall be the surviving corporation and shall continue its existence under the
name of "Infinity Enterprises, Inc." d/b/a Don Richard Associates of Washington
D.C.; and Infinity shall succeed to and possess all of the assets, rights,
liabilities and debts of Infinity Acquisition.
2.2 Effective Time of the Merger. The Merger shall become effective at
such time as all of the Articles of Merger (i) have been executed by the
applicable Companies and Acquisition Companies in accordance with the
applicable provisions of the State Laws, (ii) have been duly filed with the
appropriate authorities in the states in which each of the Companies and
Acquisition Company are organized, as required by the State Laws, and (iii)
have become effective in accordance with their terms and the State Laws (the
"Effective Time of the Merger").
2.3 Effect of the Merger. Upon consummation of the Merger:
(i) the Articles of Incorporation of each of the Companies then in effect
shall remain the Articles of Incorporation of each such Company following the
Merger; provided, however, that Infinity may amend its Articles of
Incorporation pursuant to the Articles of Merger;
(ii) the Bylaws of each of the Companies then in effect shall remain the
Bylaws of each such Company following the Merger;
(iii) the officers of each of the Companies immediately prior to the
Effective Time of the Merger shall continue as the officers of each such
Company following the Merger in the same capacity or capacities;
(iv) the assets, liabilities, and debts of each of the Companies shall
remain the assets, liabilities, and debts of each such Company following the
Merger.
4
2.4 Certain Information With Respect to the Capital Stock of the
Companies, the Acquisition Companies, and ICCE. The respective designations
and numbers of outstanding shares and voting rights of each class of
outstanding capital stock of each of the Companies and of ICCE as of the date
of this Agreement are as follows:
(i) the authorized and outstanding capital stock of each of the Companies
is:
<PAGE>
Authorized Shares Outstanding
Company of Common Stock Shares
Cooper 100,000 1,000
DCCA 10,000 500
EKT 10,000 10
Infinity 100,000 850
(ii) The authorized capital stock of ICCE consists of 45 million shares of
ICCE Stock, of which no shares are issued and outstanding, and 5 million shares
of preferred stock, no par value, of which no shares are issued and
outstanding.
(iii) Each of the Acquisition Companies has 10,000 authorized shares of
no par value common stock, of which 1,000 shares are outstanding and owned by
ICCE.
III. CONVERSION OF STOCK
3.1 Conversion of Outstanding Shares. At the Effective Time of the
Merger, all of the stock of each of the Companies issued and outstanding
immediately prior to the Effective Time of the Merger (the "Company Stock")
shall be converted into a total of 4,240,286 shares of ICCE Stock according to
the following conversion ratios (the "Conversion Ratios"):
(i) Each outstanding share of common stock of Cooper shall be converted
into 1,101.600 shares of ICCE Stock;
(ii) Each outstanding share of common stock of DCCA shall be converted
into 944.228 shares of ICCE Stock;
(iii) Each outstanding share of common stock of EKT shall be converted
into 13,114.300 shares of ICCE Stock;
(iv) Each outstanding share of common stock of Infinity shall be converted
into 2,982.858 shares of ICCE Stock;
(v) Each outstanding share of common stock of Cooper Acquisition shall be
converted into one share of Cooper common stock;
5
(vi) Each outstanding share of common stock of DCCA Acquisition shall be
converted into one share of DCCA common stock;
(vii) Each outstanding share of common stock of EKT Acquisition shall
be converted into one share of EKT common stock; and
(viii) Each outstanding share of common stock of Infinity Acquisition
shall be converted into one share of Infinity common stock
3.2 No Fractional Shares. No fractional shares shall be issued pursuant
to the Merger. To the extent any Shareholder is entitled to receive a
fractional share of ICCE Stock pursuant to Section 3.1 above, the number of
shares of ICCE Stock that the Shareholder shall be entitled to receive shall be
rounded down to the next lower whole number.
3.3 Treasury Shares. All shares of stock that are held by each of the
Companies as treasury stock shall be retired and canceled and no shares of ICCE
Stock or other consideration shall be delivered or paid in exchange therefor.
3.4 Change in Number of Shares. (a) If, prior to the Closing Date, there
occurs an increase, decrease, or other change in the number of outstanding
shares of any of the Company Stock as a result of a stock split, stock
dividend, reverse stock split, or other similar event, the Conversion Ratio
under which shares of such Company Stock may be converted into the right to
receive shares of ICCE Stock pursuant to this Section 3.1 shall be
proportionally adjusted so that the aggregate number of shares of ICCE Stock to
be issued in the Merger and to be received by each Shareholder remains the same
as set forth in Section 3.1 above.
(b) If, prior to the Closing Date, there occurs an increase, decrease, or
other change in the number of outstanding shares of ICCE Stock as a result of a
stock split, stock dividend, reverse stock split, or other similar event, the
Conversion Ratio under which shares of Company Stock may be converted into the
right to receive shares of ICCE Stock shall be proportionally adjusted so that
the ownership interest of each of the Shareholders in ICCE shall remain the
same. Nothing in the foregoing shall be deemed to prohibit ICCE from taking
any and all such steps as are reasonably necessary to pursue and consummate
such other business reorganizations, mergers, acquisitions or securities
distributions as ICCE's management or its Board of Directors shall deem to be
in the best interests of ICCE and its shareholders.
3.5 Rights of ICCE Shareholders. All ICCE Stock received by the
Shareholders pursuant to this Agreement shall, except for restrictions on
resale or transfer described in any agreement among the parties hereof, have
the same rights as all outstanding shares of ICCE Stock prior to the Merger,
including all voting rights.
6
IV. CLOSING
4.1 The Closing Date. The closing of the Merger and the transactions
hereunder (the "Closing") shall occur on the date as determined by the parties,
which shall in any case be on or before April 30, 1997, unless otherwise agreed
in writing by the parties (the "Closing Date").
4.2 The Closing. The Closing shall occur on the Closing Date at such
time and place as agreed upon by the parties. At the Closing the following
shall occur:
(i) Each of the Articles of Merger shall be filed with the appropriate
state authorities, or if already filed shall become effective as provided
therein and the Merger shall thereby be effected;
(ii) The Shareholders shall deliver to ICCE the certificates representing
all of the applicable Company Stock, duly endorsed in blank by the
Shareholders, or accompanied by blank stock powers, with all necessary transfer
tax and other revenue stamps, acquired at the Shareholders' expense, affixed
and canceled. To the extent any certificate representing Company Stock is lost
or missing, the applicable Shareholder shall deliver an affidavit of lost
certificate and associated indemnifications in such form as may be approved by
ICCE and its legal counsel. The Shareholders agree to take all further actions
necessary to cure any deficiencies with respect to the endorsement of the stock
certificates or other documents of conveyance with respect to such Company
Stock or with respect to the stock powers accompanying any Company Stock;
(iii) ICCE shall deliver to the Shareholders newly issued shares of
ICCE Stock in accordance with Section 3.1 above;
(iv) Each of the Companies shall deliver to ICCE newly issued shares of
their common stock in accordance with Section 3.1 above;
(v) The certificates representing outstanding stock in each of the
Acquisition Companies shall be canceled; and
(vi) All other transactions contemplated herein shall be completed,
including the execution and delivery of the certificates pursuant to Sections
8.1 and 9.1 hereunder, the Shareholders' Agreement pursuant to Sections 8.12
and 9.12, the Affiliate Letter pursuant to Section 9.15, the Registration
Rights Agreement pursuant to Section 8.11 and 9.11, and any and all other
documents required to be delivered hereunder.
7
V. REPRESENTATIONS AND WARRANTIES OF EACH OF THE COMPANIES
AND THE SHAREHOLDERS
(A) Representations and Warranties of Each of the Companies and its
Shareholders.
Each of the Companies and each of such Company's Shareholders severally
and not jointly represent and warrant to ICCE and to each other Company and
their Shareholders that, with respect to such Company (but not with respect to
any other Company), all of the representations and warranties in this Article
V(A) are true at the date of this Agreement.
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted except
(i) as set forth on Schedule 5.1 or (ii) where the failure to be so authorized
or qualified would not have a Material Adverse Effect on the Company. Schedule
5.1 contains a list of all jurisdictions in which the Company is authorized or
qualified to do business. A certified copy of the Certificate or Articles of
Incorporation and a true, complete and correct copy of the Bylaws of the
Company are attached hereto as Schedule 5.1. The minute books and stock records
of the Company as provided to ICCE are correct and complete in all material
respects.
5.2 Authorization. The execution and delivery of this Agreement by the
Company and the completion of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors and the Shareholders of
the Company, the representatives of the Company executing this Agreement have
the authority to enter into and bind the Company to the terms of this
Agreement, the Company has the full legal right, power and authority to enter
into this Agreement and to effect the Merger, and this Agreement is a legal,
valid and binding obligation of the Company.
5.3 Capital Stock of the Company. The authorized stock of the Company is
as set forth in Section 2.4(i). All of the issued and outstanding shares of the
stock of the Company are owned by the Shareholders in the amounts set forth on
Schedule 5.3 and, except as set forth on Schedule 5.3, such shares are owned
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. There are no
other Shareholders of the Company except as set forth on Schedule 5.3. All of
the issued and outstanding shares of the stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the Shareholders, and were offered, issued, sold and
delivered by the Company in compliance with all applicable state and Federal
securities and other laws. No shares were issued in violation of the
preemptive rights of any past or present shareholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
the Company has not acquired any Company Stock since January 1, 1992. No
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any of its authorized but unissued capital
stock. The Company has no obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
8
therein or to pay any dividend or make any distribution in respect thereof.
Neither the voting stock structure of the Company nor the relative ownership of
shares among any of its respective shareholders has been altered or changed in
contemplation of the Merger.
5.5 Subsidiaries. The Company does not own, of record or beneficially,
any capital stock or other equity interest in any entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or
other non-corporate entity.
5.6 Predecessor Status, etc. Schedule 5.6 lists the names of all
predecessor companies of the Company, including the names of any entities
acquired by the Company (by stock purchase, merger, or otherwise) or from whom
the Company previously acquired material assets. Except as set forth on
Schedule 5.6, the Company has not been a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded and the
Company has never operated under any trade or fictitious name in any
jurisdiction.
5.7 Spin-off by the Company. Except as set forth on Schedule 5.7, there
has never been any sale, spin-off, split-off or split-up of material assets of
either the Company or any other person or entity that directly or indirectly
controls, is controlled by, or is under common control with the Company.
5.8 Financial Statements. Schedule 5.8 contains copies of the following
financial statements of the Company (the "Company Financial Statements"): the
Company's preliminary and tentative audited Consolidated Balance Sheets as of
December 31, 1996 and 1995, and Statements of Income, Cash Flows and Retained
Earnings for each year in the three-year period ended December 31, 1996.
Except as set forth on Schedule 5.8, the Company Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, and all such Consolidated
Balance Sheets, Statements of Income, Cash Flows and Retained Earnings present
fairly in all material respects the financial position and results of
operations of the Company as of the dates indicated thereon.
5.9 Liabilities and Obligations. Except as set forth on Schedule 5.9 or
reflected on or reserved against in the balance sheet of the Company as of the
Balance Sheet Date, the Company does not have any liabilities or obligations,
other than liabilities incurred in the ordinary course of business in
accordance with past practice which would not have a Material Adverse Effect on
the Company. Schedule 5.9 contains the following information with respect to
any liabilities for pending or threatened litigation or other liabilities for
which the amount thereof has not been fixed, accrued or reserved:
(i) a summary description of the liability, including amounts claimed and
any other action or relief sought;
(ii) copies of all relevant documentation relating thereto; and
9
(iii) in the case of litigation, the name of the claimants and all
other parties to the suit, the name of each court or agency before which such
suit is pending, and the date such suit was filed or instituted.
5.10 Accounts and Notes Receivable. Schedule 5.10 contains an accurate
list of each of the accounts and notes receivable of the Company as of a date
no later than 60 days prior to the date of this Agreement, and a list of all
receivables from and advances to employees and the Shareholders separately
indicated as such. All accounts and notes receivable are collectible in the
amount shown on Schedule 5.10, except as reserved against in the balance sheet
of the Company or as set forth on Schedule 5.10.
5.11 Permits, Intangibles, and Intellectual Property. (a) The Company
holds all licenses, franchises, permits, registrations, and other governmental
authorizations, licenses, franchises, and certificates, the absence of any of
which could have a Material Adverse Effect on its business (the "Permits").
Schedule 5.11 contains an accurate list and summary description of the Permits.
To the best of the Company's or the Shareholder's knowledge, the Permits are
valid and currently in effect, and the Company has not received any notice that
any governmental authority intends to cancel, terminate, or not renew any
Permit. The Company has conducted and is conducting its business in compliance
with the requirements, standards, criteria and conditions set forth in
applicable permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on the
Company.
(b) Schedule 5.11 contains a list of (i) all trademarks, service marks,
and trade names owned, used, or licensed by the Company or in which Company
otherwise claims any rights, (ii) all state or federal registrations and
applications for registration of any trademark or service mark of the Company,
and (iii) all copyright applications and registrations, patents, and patent
applications pertaining to the Company, its business or affairs. Except as set
forth on Schedule 5.11, no such registration or application has been
challenged, opposed, or invalidated, and there are no known claims or
encumbrances against any of them. Schedule 5.11 contains a complete and
accurate list of all computer software, programs, and other proprietary
computer or other technology owned, developed, or licensed by the Company or in
which the Company otherwise claims any right, other than retail shrink-wrap
license software. To the best of the Company's or the Shareholder's knowledge,
except as set forth on Schedule 5.11, no such computer software, program or
other technology infringes upon any copyright, patent, trade secret, or other
intellectual property right of any third party. Except as set forth on
Schedule 5.11, all such computer programs, and all intellectual property rights
therein including copyrights, developed by or for the Company are owned solely
by the Company and have either been produced by employees of the Company as
works for hire under Federal copyright law or have been assigned to the Company
in enforceable technology transfer agreements. Except as set forth on Schedule
5.11, all such computer software, programs and other technology (i) function
properly and (ii) are capable of functioning and of recognizing and processing
dates after January 1, 2000, to the same extent that they currently function.
(c) Except as specifically provided on Schedule 5.11, the transactions
contemplated by this Agreement will not result in a default under, a breach or
violation of, or have a Material Adverse Effect on the rights and benefits
afforded to the Company by any item listed on Schedule 5.11.
10
5.12 Environmental Matters. Except as set forth on Schedule 5.12, to the
best of the Company's or the Shareholder's knowledge, (i) the Company has
complied with and is in compliance with all Federal, state, local and foreign
statutes (civil and criminal), laws, ordinances, regulations, rules, notices,
permits, judgments, orders and decrees applicable to it or any of its
respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are defined in any applicable
Environmental Law); (ii) the Company has and is in compliance with all
necessary permits and other approvals necessary to treat, transport, store,
dispose of, and otherwise handle Hazardous Wastes and Hazardous Substances;
(iii) there have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in, or on any property owned or operated by the
Company in violation of any Environmental Law; (iv) the Company knows of no on-
site or off-site location to which the Company has transported or disposed of
Hazardous Wastes or Hazardous Substances or arranged for the transportation of
Hazardous Wastes or Hazardous Substances, which site is the subject of any
Federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Company or ICCE for any clean-up
cost, remedial work, damage to natural resources or personal injury, including,
but not limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended; and (v) the Company has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
5.13 Personal Property. Schedule 5.13 contains an accurate list of (i)
all personal property reflected on the balance sheet of the Company at the
Balance Sheet Date, (ii) each other item of personal property owned or used by
the Company which has a value in excess of $2,500 as of the Closing Date, and
(iii) all leases and agreements in respect of personal property. Schedule 5.13
contains (i) true, complete and correct copies of all such leases, (ii) a
listing of the capital costs of all assets subject to capital leases, and (iii)
an indication of which assets are currently owned, or were formerly owned, by
Shareholders or business or personal affiliates of the Company or Shareholders.
Except as set forth on Schedule 5.13, (i) all personal property used by the
Company in its business is either owned by the Company or leased by the Company
pursuant to a lease included on Schedule 5.13, (ii) all of the personal
property listed on Schedule 5.13 is in good working order and condition,
ordinary wear and tear excepted, and (iii) all leases and agreements included
on Schedule 5.13 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
5.14 Significant Customers; Material Contracts and Commitments. (a)
Schedule 5.14 contains an accurate list of all customers representing 5% or
more of the Company's annual revenues for the years ended December 31, 1995 and
1996. Except to the extent set forth on Schedule 5.14, no such customer has
canceled or substantially reduced or, to the best of the Company's or the
Shareholder's knowledge, is currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by the
Company.
11
(b) The Company has listed on Schedule 5.14 all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound, including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances, loan agreements, indemnity
or guaranty agreements, bonds, mortgages, options to purchase land, liens,
pledges or other security agreements, and licenses for software or other
intellectual property. The Company has delivered true, complete and correct
copies of such agreements to ICCE and to each of the other Companies. The
Company is not in default under any contracts or agreements and no notice of
default under any such contract or agreement has been received which default
would have a Material Adverse Effect on the Company. Schedule 5.14 contains a
summary description of all plans or projects involving the opening of new
operations, expansion of existing operations, the acquisition of any personal
property, business or assets requiring, in any event, the payment of more than
$20,000 by the Company.
5.15 Real Property. Schedule 5.15 includes a list of all real property
owned or leased by the Company and all other real property, if any, used by the
Company in the conduct of its business. The Company has good and insurable
title to the real property owned by it subject to no material mortgage, pledge,
lien, conditional sales agreement, encumbrance or charge, except as reflected
on Schedule 5.15. Schedule 5.15 shall, without limitation, contain true,
complete and correct copies of all title reports and title insurance policies
for real property owned by the Company. Schedule 5.15 contains a true,
complete, and correct copy of all leases and agreements in respect of real
property leased by the Company, and an indication as to which such properties,
if any, are currently owned, or were formerly owned, by Shareholders or
business or personal affiliates of the Company or Shareholders. Except as set
forth on Schedule 5.15, all of such leases are in full force and effect and
constitute valid and binding agreements of the parties and their successors in
accordance with their respective terms.
5.16 Insurance. Schedule 5.16 contains (i) an accurate list of all
insurance policies carried by the Company, (ii) an accurate list of all
insurance loss runs or workers compensation claims received since January 1,
1994, and (iii) true, complete and correct copies of all insurance policies
currently in effect. Such insurance policies are currently in full force and
effect and shall remain in full force and effect through the Closing Date.
Except as set forth on Schedule 5.16, no insurance carried by the Company has
ever been canceled by the insurer and the Company has never been denied
coverage.
5.17 Compensation; Employment Agreements; Organized Labor Matters.
Schedule 5.17 contains a list of all officers, directors, key employees and
staff of the Company, all employment agreements with any of them, and a
description of the compensation (and the portions thereof attributable to
salary, bonus and other compensation, respectively) of each such person. The
Company has provided to ICCE true, complete and correct copies of any
employment agreements for persons listed on Schedule 5.17. Except as set forth
on Schedule 5.17, since the Balance Sheet Date, there have been no increases in
the compensation payable or any special bonuses to any officer, director, key
employee or other employee, except salary increases in the ordinary course of
business implemented on a basis consistent with past practices. The Company is
not bound by or subject to any arrangement with any labor union. No employees
of the Company are represented by any labor union or covered by any collective
bargaining agreement. No campaign to establish such representation is in
progress. There is no pending or, to the best of the Company's and the
Shareholder's knowledge, threatened labor dispute involving the Company or any
group of its employees, nor has the Company experienced any labor interruptions
over the past three years. Neither the Company nor the Shareholder has any
knowledge of the intent of any employee (or employees) to leave the Company as
a result of the Merger or otherwise whose departure(s) would have a Material
Adverse Effect on the Company.
12
5.18 Employee Plans. Attached hereto as Schedule 5.18 are complete and
accurate copies, as of the date of this Agreement, of all employee benefit
plans, all employee welfare benefit plans, all employee pension benefit plans,
all multi-employer plans and all multi-employer welfare arrangements (as
defined in Sections 3(3), (1), (2), (37) and (40), respectively, of ERISA,
which are currently maintained and/or sponsored by the Company, or any benefit
plans or arrangements, formal or informal, that are not subject to ERISA,
including, without limitation, employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements,
or to which any Company currently contributes, or has an obligation to
contribute in the future (including, without limitation, benefit plans or
arrangements that are not subject to ERISA, such as employment agreements and
any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with copies of any trusts related thereto
and a classification of employees covered thereby (collectively, the "Plans").
Schedule 5.18 sets forth all of the Plans that have been terminated within the
past three years.
5.19 Compliance with ERISA. (a) Except for the Plans, the Company does
not maintain or sponsor, and is not a contributing employer to, a pension,
profit-sharing, deferred compensation, stock option, employee stock purchase or
other employee benefit plan, employee welfare benefit plan, or any other
compensation or benefit arrangement, formal or informal, with any of their
respective employees, whether or not subject to ERISA.
(b) Except as set forth on the Schedule 5.19 to best of the Company's or
the Shareholder's knowledge, (i) all Plans are in substantial compliance with
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable laws, and, in all material respects, have
been administered, operated and managed in substantial accordance with the
governing documents; (ii) all Plans that are intended to qualify (the
"Qualified Plans") under Section 401(a) of the Code are so qualified and have
been determined by the IRS to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, are included as part of Schedule 5.19; (iii) to the extent
that any Qualified Plans have not been amended to comply with applicable law,
the remedial amendment period permitting retroactive amendment of such
Qualified Plans has not expired and will not expire within 120 days after the
Closing Date; (iv) all reports and other documents required to be filed with
any governmental agency or distributed to plan participants or beneficiaries
13
(including, but not limited to, annual reports, summary annual reports,
actuarial reports, PBGC-1 Reports, audits or tax returns) have been timely
filed or distributed, or failure to timely file or deliver will not result in a
Material Adverse Effect to the Company; (v) none of the Shareholders, any Plan,
or the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA; (vi) no Plan has incurred
an accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; (vii) no circumstances exist pursuant to which the
Company could have any direct or indirect liability whatsoever (including being
subject to any statutory lien to secure payment of any such liability), to the
PBGC under Title IV of ERISA or to the IRS for any excise tax or penalty with
respect to any plan now or hereafter maintained or contributed to by the
Company; (viii) the Company currently has (or at the Closing Date will have) no
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14)), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under, or capable of assertion
under, Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan; (ix) there have been no
terminations, partial terminations or discontinuance of contributions to any
Qualified Plan without notice to and approval by the IRS; (x) no Plan which is
subject to the provisions of Title IV of ERISA has been terminated; (xi) there
have been no "reportable events" (as that phrase is defined in Section 4043 of
ERISA) with respect to any Plan which were not properly reported; (xii) the
valuation of assets of any Qualified Plan, as of the Closing Date, will exceed
the actuarial present value of all accrued pension benefits under any such
Qualified Plan in accordance with the assumptions contained in the Regulations
of the PBGC governing the funding of terminated defined benefit plans; (xiii)
with respect to Plans which qualify as "group health plans" under Section 4980B
of the and Section 607(l) of ERISA and related regulations (relating to the
benefit continuation rights imposed by "COBRA"), the Company and the
Shareholders have complied (and on the Closing Date will have complied) in all
material respects with all reporting, disclosure, notice, election and other
benefit continuation requirements imposed thereunder as and when applicable to
such plans, and the Company has not incurred (and will not incur) any material
direct or indirect liability and is not (and will not be) subject to any
material loss, assessment, excise tax penalty, loss of Federal income tax
deduction or other sanction, arising on account of or in respect of any direct
or indirect failure by the Company or the Shareholders, at any time prior to
the Closing Date, to comply with any such Federal or state benefit continuation
requirement, which is capable of being assessed or asserted before or after the
Closing Date directly or indirectly against the Company or the Shareholders
with respect to such group health plans; (xiv) the Company is not now, nor has
it been within the past five years, a member of a "controlled group" as defined
in ERISA Section 4001(a)(14); (xv) there is no pending litigation, arbitration,
or disputed claim, settlement or adjudication proceeding, and to the best of
the Company's or any of its Shareholders' knowledge, there is no threatened
litigation, arbitration or disputed claim, settlement or adjudication
proceeding, or any governmental or other proceeding, or investigation with
respect to any Plan, or with respect to any fiduciary, administrator, or
sponsor thereof (in their capacities as such), or any party in interest
thereof; (xvi) the Company Financial Statements as of the Balance Sheet Date
reflect the approximate total pension, medical and other benefit expense for
all Plans, and no material funding changes or irregularities are reflected
thereon which would cause such Financial Statements to be not
representative of most prior periods; and (xvii) the Company has not incurred
liability under Section 4062 of ERISA.
14
(c) The Company has not entered into any contract under which it has
assumed any liability related to any other person's qualified retirement plan.
The Company has not made any representation or warranty to any person that the
use of the Company's temporary employees would not have an adverse impact on
such person's qualified benefit plan.
(d) The Company does not engage in "Employee Leasing." For purposes
hereof, "Employee Leasing" shall mean an arrangement whereby a client of a
Company places some or all of its workforce onto the payroll of the Company in
a co-employment relationship in which the Company assumes responsibility for
administration of payroll, benefits, and other human resources activities for
the client. "Employee Leasing" does not include a temporary help arrangement,
whereby an organization hires its own employees and assigns them to a client to
support or supplement the client's workforce in special work situations such as
employee absences, temporary skill shortages, seasonal workloads, and special
assignments and projects.
5.20 Conformity with Law, Litigation. Except to the extent set forth on
Schedule 5.20, the Company has conducted its business in accordance with, has
not violated, and is not in violation of any law, rule, statute, ordinance,
regulation, or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
including but not limited to the rules and regulations of the U.S. Department
of Justice Immigration and Naturalization Services regarding Employment
Eligibility Verification (a "Rule") which would have a Material Adverse Effect
on the Company. Except to the extent set forth on Schedule 5.20, there are no
material claims, actions, suits or proceedings, pending or, to the best of the
Company's or its Shareholder's knowledge, threatened, against or affecting the
Company, at law or in equity, or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The delivery of this Agreement and
performance hereunder will not cause the Company to violate any Rule.
5.21 Taxes. Except as set forth on Schedule 5.21:
(i) All Returns required to have been filed with any Taxing Authority by
or with respect to the Company or any affiliated, combined, consolidated,
unitary or similar group of which the Company is or was a member (a "Relevant
Group") have been duly filed, and each such Return correctly and completely
reflects the income, franchise or other Tax liability and all other information
required to be reported thereon. All Taxes (whether or not shown on any
Return) owed by the Company, any subsidiary and any member of a Relevant Group
(individually, the "Acquired Party" and collectively, the "Acquired Parties")
have been paid.
(ii) The provisions for Taxes due by the Company and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in the Company Financial Statements
are sufficient for all unpaid Taxes.
15
(iii) No Acquired Party is a party to any agreement extending the time
within which to file any Return. No claim has ever been made by any Taxing
Authority in a jurisdiction in which an Acquired Party does not file Returns
that it is or may be subject to taxation by that jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There is no
dispute or claim concerning any Tax liability of any Acquired Party either (i)
claimed or raised by any Taxing Authority or (ii) otherwise known to any
Acquired Party. No issues have been raised in any examination by any Taxing
Authority with respect to any Acquired Party which, by application of similar
principles, reasonably could be expected to result in a proposed deficiency for
any other period not so examined. Schedule 5.21(v) attached hereto lists all
Federal, state, local and foreign income Tax Returns filed by or with respect
to any Acquired Party for all taxable periods ended on or after January 1,
1991, indicates those Returns, if any, that have been audited, and indicates
those Returns that currently are the subject of audit. Each Acquired Party has
delivered to ICCE complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired
Party since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(vii) No Acquired Party has made any payments, is obligated to make
any payments, or is a party to any agreement that under certain circumstances
could require it to make any payments, that are not deductible under Section
280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or sharing
agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt bond
financed property or tax-exempt use property, within the meaning of Section 168
of the Code. No Acquired Party is a party to any "safe harbor lease" that is
subject to the provisions of Section 168(f)(8) of the Code as in effect prior
to the Tax Reform Act of 1986, or to any "long-term contract" within the
meaning of Section 460 of the Code.
(x) No Acquired Party is a "consenting corporation" within the meaning of
Section 341(f)(1) of the Code, or comparable provisions of any state statutes,
and none of the assets of any Acquired Party is subject to an election under
Section 341(f) of the Code or comparable provisions of any state statutes.
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(xi) No Acquired Party is a party to any joint venture, partnership or
other arrangement that is treated as a partnership for Federal income Tax
purposes.
(xii) There are no proposed accounting method changes or, to the best
of the Company's or the Shareholder's knowledge, threatened accounting method
changes, of any Acquired Party that could give rise to an adjustment under
Section 481 of the Code for periods after the Closing Date.
(xiii) No Acquired Party has received any written ruling of a Taxing
Authority related to Taxes or entered into any written and legally binding
agreement with a Taxing Authority relating to Taxes.
(xiv) Each Acquired Party has disclosed (in accordance with Section
6662(d)(2)(B)(ii) of the Code) on its Federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of Federal
income Tax within the meaning of Section 6662(d) of the Code.
(xv) No Acquired Party has any liability for Taxes of any person other
than such Acquired Party (i) under Section 1.1502-6 of the regulations
promulgated pursuant to the Code (the "Treasury Regulations") (or any similar
provision of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract, or (iv) otherwise.
(xvi) There currently are no limitations on the utilization of the net
operating losses, built-in losses, capital losses, tax credits or other similar
items of any Acquired Party (collectively, the "Tax Losses") under (i) Section
382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code,
(iv) Section 269 of the Code, (v) Section 1.1502-15 and Section 1.1502-15A of
the Treasury Regulations, (vi) Section 1.1502-21 and Section 1.1502-21A of the
Treasury Regulations, or (vii) Sections 1.1502-91 through 1.1502-99 of the
Treasury Regulations, in each case as in effect both prior to and following the
Tax Reform Act of 1986.
(xvii) At the Closing Date, the Company will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person could acquire stock in the Company which, if exercised or
converted, would affect ICCE's acquisition or retention of ownership of more
than 100% of the total combined voting power of all classes of Company Stock
and more than 80% of the total number of shares of each class of Company non-
voting stock.
(xviii) The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xix) The fair market value of the assets of the Company exceeds the
sum of its liabilities, plus the amount of liabilities, if any, to which the
assets are subject.
(xx) The Company is not under the jurisdiction of a court in a Title II or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
17
For purposes of this Section 5.21, the following definitions shall apply:
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of any Tax or with any
Taxing Authority.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, sales, use,
property, deed, stamp, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States Federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
5.22 No Violations. The Company is not in violation of its Articles of
Incorporation or Bylaws. Neither the Company nor, to best of the Company's or
the Shareholder's knowledge, any other party thereto, is in default under any
lease, instrument, agreement, license, or permit set forth on any Schedule
hereto, or any other material agreement to which it is a party or by which its
properties are bound (the "Material Documents"); and, except as set forth on
Schedule 5.22, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach, or constitute a default
under, any of the terms or provisions of the Material Documents or the
Certificate or Articles of Incorporation or the Bylaws of the Company, which
violation, breach, or default would have a Material Adverse Effect on the
Company. Except as set forth on Schedule 5.22, none of the Material Documents
requires notice to, or the consent or approval of any third party with respect
to any of the transactions contemplated hereby, and consummation of the
transactions contemplated hereby will not give rise to any right to
termination, cancellation, acceleration, or loss of any right or benefit.
Except as set forth on Schedule 5.22, none of the Material Documents prohibits
the use or publication by the Company or ICCE of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the Company from freely providing services to any other customer,
potential customer, the Company, or ICCE.
5.23 Government Contracts. Except as set forth on Schedule 5.23, the
Company is not now a party to any governmental contracts subject to price
redetermination or renegotiation.
5.24 Absence of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.24, there has not been:
(i) any change in the financial condition, assets, liabilities
(contingent or otherwise), income or business of the Company which has had a
Material Adverse Effect on the Company;
18
(ii) any damage, destruction or loss (whether or not covered by insurance)
which had or may have a Materially Adverse Effect on the Company;
(iii) any change in the authorized capital of the Company or its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments with respect to
the Company's securities;
(iv) any declaration or payment of any dividend or distribution in respect
of the capital stock or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company other than S corporation
dividends consistent with past practice;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the Company to any of its officers,
directors, Shareholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with
past practice;
(vi) any work interruptions, labor grievances, or claims filed, or any
event or condition of any character which had or may have a Material Adverse
Effect on the Company;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of Company to any person, including,
without limitation, the Shareholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including, without limitation, any
indebtedness or obligation of any Shareholders or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, property, or rights
of the Company or requiring consent of any party to the transfer and assignment
of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of the Company's business;
(xi) any waiver of any material rights or claims of the Company;
(xii) any breach, amendment, or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(xiii) any transaction by the Company outside the ordinary course of
its business;
19
(xiv) any cancellation or termination of a material contract with a
customer or client; or
(xv) any other distribution of property or assets by the Company.
5.25 Deposit Accounts, Powers of Attorney. Schedule 5.25 sets forth as of
the date of this Agreement:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.25 also sets forth the name of each person, corporation, firm
or other entity holding a general or special power of attorney from the Company
and a description of the terms of such power.
5.26 Disclosure. This Agreement, including the schedules hereto, presents
fairly the business and operations of the Company as addressed in the
representations and warranties. The Company's rights under the documents
delivered pursuant hereto would not be materially adversely affected by, and no
statement made herein by the Company of the Shareholder would be rendered
untrue by, any other document to which the Company or such Shareholder is a
party, or by which its properties are subject, or by any other fact or
circumstance known to the Company or to such Shareholder that is not otherwise
disclosed herein.
5.27 Pooling Information. All of the information provided by the Company
or the Shareholder to Arthur Andersen L.L.P. in writing for purposes of its
pooling opinion is true and correct.
(B) Representations and Warranties of Shareholders
Each Shareholder severally and not jointly represents and warrants to ICCE
and to each of the Companies that, with respect to the Company in which such
Shareholder holds shares (but not with respect to any other Company), all of
the representations and warranties in this Article V(B) are true at the date of
this Agreement and shall be true on the Closing Date.
5.28 Authority, Ownership. Such Shareholder has the full legal right,
power and authority to enter into this Agreement. Such Shareholder owns
beneficially and of record all of the shares of the Company Stock identified on
Schedule 5.3 as being owned by such Shareholder, and, except as set forth on
Schedule 5.28, such Company Stock is owned free and clear of all liens,
encumbrances, and claims of every kind.
20
5.29 Preemptive Rights. Except as set forth in the ICCE Shareholders
Agreement, such Shareholder does not have, or hereby permanently waives, any
preemptive or other rights to acquire shares of Company Stock or ICCE Stock
that such Shareholder has or may have had other than the rights of any
Shareholder to acquire ICCE Stock pursuant to (i) this Agreement or (ii) any
option granted by ICCE.
VI. REPRESENTATIONS OF THE ACQUISITION COMPANIES AND ICCE
ICCE, and each of the Acquisition Companies, as applicable, represents and
warrants to each of the Companies and to the Shareholders that all of the
following representations and warranties in this Article VI are true at the
date of this Agreement.
6.1 Due Organization. Each of ICCE and the Acquisition Companies is a
corporation duly organized, validly existing and in good standing under the
laws of the state where it was organized, is duly authorized and qualified to
do business under all applicable laws, regulations, ordinances and orders of
public authorities to carry on its business in the places and in the manner as
now conducted except where the failure to be so authorized or qualified would
not have a Material Adverse Effect on the Company. True, complete and correct
copies of the Articles of Incorporation and Bylaws of ICCE are attached hereto
as Schedule 6.1.
6.2 Authorization. The execution and delivery of this Agreement by ICCE
and each of the Acquisition Companies and the completion of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors and the Shareholders of ICCE and each of the Acquisition Companies.
The representatives of ICCE and the Acquisition Companies executing this
Agreement have the authority to enter into and bind their respective
corporations to the terms of this Agreement, ICCE and each of the Acquisition
Companies has the full legal right, power and authority to enter into this
Agreement and the Merger, and this Agreement is a legal, valid and binding
obligation of ICCE and each of the Acquisition Companies.
6.3 Capital Stock of ICCE and the Acquisition Companies. The authorized
capital stock of ICCE and of each of the Acquisition Companies is as set forth
in Section 2.4(ii) and (iii). All of the issued and outstanding stock of each
of the Acquisition Companies is owned by ICCE. All of the issued and
outstanding shares of the capital stock of each of the Acquisition Companies
and of ICCE have been duly authorized and validly issued, are fully paid and
nonassessable, were offered, issued, sold and delivered by ICCE and the
Acquisition Companies in compliance with all applicable state and Federal laws
concerning the issuance of securities, and were not issued in violation of the
preemptive rights of any past or present shareholder.
6.4 Transactions in Capital Stock, Reorganization Accounting. Except as
set forth on Schedule 6.4, no option, warrant, call, conversion right or
commitment of any kind exists which obligates ICCE or any Acquisition Company
to issue any of its authorized but unissued capital stock. Neither ICCE nor
any Acquisition Company has any obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. Schedule 6.4 contains a list of all stock option or stock purchase
21
plans for ICCE, including a list, accurate as of the date of this Agreement
hereof, of all outstanding options, warrants, or other rights to acquire shares
of ICCE's stock.
6.5 Subsidiaries. ICCE has no subsidiaries other than the Acquisition
Companies. The Acquisition Companies have no subsidiaries. Neither ICCE nor
any of the Acquisition Companies presently owns, of record or beneficially, any
capital stock or other equity interest in any entity, nor is ICCE or any of the
Acquisition Companies, directly or indirectly, a participant in any joint
venture, partnership, or other non-corporate entity.
6.6 Financial Statements. There are no prepared financial statements for
ICCE or any of the Acquisition Companies.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
neither ICCE nor any of the Acquisition Companies has any material liabilities,
contingent or otherwise, except as set forth in or contemplated by this
Agreement and except for fees and expenses incurred in connection with the
transactions contemplated hereby and thereby.
6.8 Conformity with Law, Litigation. Except to the extent set forth on
Schedule 6.8, neither ICCE nor any of the Acquisition Companies is in violation
of any Rule which would have a Material Adverse Effect. Except to the extent
set forth on Schedule 6.8, there are no material claims, actions, suits or
proceedings, pending or, to the knowledge of ICCE or any of the Acquisition
Companies, threatened, against or affecting ICCE or any of the Acquisition
Companies, at law or in equity, or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over ICCE or any of the Acquisition
Companies, and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The delivery of this Agreement and
performance hereunder will not cause ICCE or any Acquisition Company to violate
any Rule.
6.9 No Violations. Neither ICCE nor any of the Acquisition Companies is
(i) in violation of any of its Articles of Incorporation or Bylaws or (ii) in
default under any lease, instrument, agreement, license, or permit to which it
is a party, or by which any of them is bound (collectively, the "ICCE
Documents"). The rights and benefits of ICCE and the Acquisition Companies
under the ICCE Documents will not be adversely affected by the transactions
contemplated hereby, and the execution of this Agreement, the performance of
the obligations hereunder, and the consummation of the transactions
contemplated hereby will not result in any material violation or breach or
constitute a default under any of the terms or provisions of the ICCE Documents
or the Articles of Incorporation or the Bylaws of ICCE or the Acquisition
Companies. Except as set forth on Schedule 6.9, none of the ICCE Documents
requires notice to, or the consent or approval of, any third party with respect
to any of the transactions contemplated hereby in order to remain in full force
and effect, and consummation of the transactions contemplated hereby will not
give rise to any right to termination, cancellation, or acceleration or loss of
any right or benefit.
22
6.10 ICCE Stock. Upon the issuance and delivery of the ICCE Stock to the
Shareholders pursuant to this Agreement, such shares will constitute valid and
legally issued shares of ICCE, fully paid and nonassessable.
6.11 No Side Agreements. Neither ICCE nor the Acquisition Companies have
entered nor will they, prior to the Closing, enter into any agreement with any
of the Companies or Shareholders other than this Agreement and the agreements
appearing as Exhibits hereto. ICCE and each of the Acquisition Companies has
made available to each of the Companies copies of all agreements entered into
between ICCE or the Acquisition Companies and the Companies or any of the
Shareholders.
6.12 Business; Real Property, Material Agreements. ICCE was formed on
March 10, 1997, Infinity Acquisition was formed on March 27, 1997, EKT
Acquisition was formed on March 26, 1997, DCCA Acquisition was formed on March
25, 1997 and Cooper Acquisition was formed on March 25, 1997. Each of them
conducted limited or no operations since that time. ICCE and the Acquisition
Companies have not conducted any material business since the date of their
inception, except in connection with this Agreement. Neither ICCE nor any of
the Acquisition Companies owns or has at any time owned any real property or
any material personal property or been a party to any other agreement, except
as listed on Schedule 6.12.
6.13 Permits and Intangibles. ICCE and each of the Acquisition Companies
hold all permits the absence of any of which could have a Material Adverse
Effect on their business. To the knowledge of ICCE and the Acquisition
Companies, the Permits are valid, and they have not received any notice that
any governmental authority intends to cancel, terminate or not renew any such
Permit. ICCE and the Acquisition Companies have conducted and are conducting
their business in compliance with the requirements, standards, criteria and
conditions set forth in applicable permits, licenses, orders, approvals,
variances, rules and regulations and are not in violation of any of the
foregoing except where such non-compliance or violation would not have a
Material Adverse Effect on ICCE or the Acquisition Companies. The transactions
contemplated by this Agreement will not result in a default under or a breach
or violation of, or adversely affect the rights and benefits afforded to, ICCE
or the Acquisition Companies by any such Permits.
6.14 Disclosure. This Agreement, including the schedules hereto, presents
fairly the business and operations of ICCE and the Acquisition Companies.
ICCE's and the Acquisition Companies' rights under the documents delivered
pursuant hereto would not be materially adversely affected by, and no statement
made herein would be rendered untrue by, any other document to which ICCE or
the Acquisition Companies is a party, or by which their properties are subject,
or by any other known fact or circumstance that is not disclosed pursuant
hereto.
VII. COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence. (a) Each of the Companies
agrees to afford the officers and authorized representatives of ICCE and each
of the other Companies access to all of such Company's sites, properties, books
23
and records and to furnish ICCE and each other Company with such additional
financial and operating data and other information as to the business and
properties of such Companies as ICCE may from time to time reasonably request.
Each of the Companies agrees to cooperate with ICCE and its representatives,
auditors and counsel in the preparation of any documents or other material
which may be required in connection with any documents or materials
contemplated by this Agreement. ICCE, the Acquisition Companies, the
Shareholders, and each of the Companies agrees to treat all information
obtained in connection with the negotiation and performance of this Agreement,
or the due diligence investigations conducted with respect to each other, as
confidential.
(b) ICCE and the Acquisition Companies agree to afford the officers and
authorized representatives of the Companies access to all of their sites,
properties, books and records and to furnish the Companies with such additional
financial and operating data and other information as to the business and
properties of ICCE and the Acquisition Companies as the Companies may from time
to time reasonably request. ICCE and the Acquisition Companies agree to
cooperate with the Companies and their representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials contemplated by this Agreement. The
Companies will cause all information obtained in connection with the
negotiation and performance of this Agreement to be treated as confidential.
7.2 Conduct of Business Pending Closing. During the period commencing on
the date of this Agreement and ending with the earlier to occur of the Closing
Date or the termination of this Agreement in accordance with its terms, each of
the Companies agrees that it will, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same manner
as it has heretofore and not introduce any material new method of management,
operation or accounting;
(ii) maintain its respective properties and facilities, including those
held under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements
relating to or affecting its respective assets, properties, or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) use its best efforts to maintain and preserve its business
organization intact, retain its respective present key employees, and maintain
its respective relationships with suppliers, customers, and others having
business relations with it;
24
(vi) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies,
and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments.; and
(viii) maintain present salaries and commission levels for all
officers, directors, employees and agents.
7.3 Prohibited Activities. During the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing Date or the
termination of this Agreement in accordance with its terms, each of the
Companies, ICCE, and the Acquisition Companies agrees that it will not, except
as set forth on Schedule 7.3:
(i) make any change in its Certificate or Articles of Incorporation or
Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock or declare any
dividends or make any distributions (other than S Corporation distributions),
nor pay out any extraordinary bonuses in excess of pro rata bonuses customarily
paid, or fees, or commissions to the Shareholders, directors, management or
other personnel;
(iv) enter into any contract or commitment or incur, or agree to incur,
any liability or make any capital expenditures, except in the normal course of
business consistent with past practice, involving amounts less than $5,000;
(v) create, assume, or permit to exist any mortgage, pledge, or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except (1) with respect to purchase money liens incurred in
connection with the acquisition of equipment with an aggregate cost not in
excess of $10,000 necessary or desirable for the conduct of the businesses of
the Company, (2) liens for taxes either not yet due or being contested in good
faith and by appropriate proceedings (and for which contested taxes adequate
reserves have been established and are being maintained) or materialmen's,
mechanics', workers', repairmen's, employees', or other like liens arising in
the ordinary course of business (the liens set forth in clause (2) being
referred to herein as "Statutory Liens"), or (3) liens set forth on Schedule
5.15 hereto;
(vi) sell, assign, lease, or otherwise transfer or dispose of any property
or equipment except in the normal course of business;
25
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims;
(x) commit a material breach of or amend or terminate any material
agreement or Permit;
(xi) enter into any other transaction outside the ordinary course of its
business consistent with past business practice or prohibited hereunder; or
(xii) change its accounts receivable collection practice or factor its
accounts receivable in any way.
7.4 No Shop. Except as required under applicable law, each of the
Companies, and each of such Company's Shareholders, agrees that it will not,
and agrees to cause each agent, officer, director, trustee or any
representative of such Company not to, during the period commencing on the date
of this Agreement and ending with the earlier to occur of the Closing Date or
the termination of this Agreement in accordance with its terms, directly or
indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than ICCE or its
authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of,
or any equity interest in, the Company or a merger, consolidation, or business
combination of the Company.
7.5 Notification of Certain Matters. Each party hereto shall notify ICCE
and each of the Companies of (i) the occurrence or non-occurrence of any event
would be likely to cause any representation or warranty of such party contained
herein to be untrue or inaccurate in any material respect at or prior to the
Closing and (ii) any material failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by such
person hereunder. The delivery of any notice pursuant to this Section 7.5
shall not be deemed to (i) modify the representations or warranties hereunder
of the party delivering such notice, which modification may only be made
pursuant to Section 13.13, (ii) modify the conditions set forth in Articles
VIII or IX, or (iii) limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
26
7.6 Further Assurances. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated hereby.
7.7 Sale of Stock. No Shareholder shall sell any stock in any Company or
any stock in ICCE between the date of this Agreement and the date upon which
financial statements are published which cover at least 30 days of post-Merger
operations of ICCE on a consolidated basis.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS
OF EACH OF THE COMPANIES AND ITS SHAREHOLDERS
The obligations of each Shareholder and of each Company are subject to the
satisfaction or waiver on or prior to the Closing Date of all of the following
conditions.
8.1 Representations and Warranties; Performance of Obligations. All
representations and warranties of ICCE and the Acquisition Companies contained
in Article VI shall be true and correct in all material respects as of the
Closing Date as though such representations and warranties had been made as of
that time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by ICCE or the Acquisition Companies on or before
the Closing Date shall have been duly complied with and performed in all
material respects, and a certificate to the foregoing effect dated the Closing
Date and signed by the President or the Chief Financial Officer of ICCE shall
have been delivered to the Shareholders.
8.2 No Litigation. Prior to the Closing Date, no action or proceeding
before a court or any other governmental agency or body shall have been
instituted to restrain or prohibit the Merger, and no governmental agency or
body shall have taken any other action or made any request of any Company as a
result of which the management of such Company deems it inadvisable to proceed
with the transactions hereunder.
8.3 Opinion of Counsel. The Company shall have received an opinion from
counsel for ICCE, dated the Closing Date, in substantially the form in Exhibit
B.
8.4 Consents and Approvals. All necessary consents of and filings
required to be obtained from or made with the SEC, the NASD, the Federal Trade
Commission, the United States Department of Justice, or any other federal,
state, county, local or other governmental or regulatory, authority (including
any self-regulated authority), commission, board or body, required by any Rule,
or required from any third party under any material contract or otherwise
relating to the consummation of the transactions contemplated herein shall have
been obtained or filed and each such consent or filing shall be in full force
and effect as of the Closing Date and all waiting periods required by any Rule
shall have expired. No such consent shall be conditioned or restricted in a
manner which would have a Material Adverse Effect on the Company or the
transactions contemplated herein.
27
8.5 Good Standing Certificates. ICCE and each of the Acquisition
Companies shall have delivered to the Companies a certificate or certificates,
dated no later than ten days prior to the Closing Date, duly issued by the
appropriate governmental authority in ICCE's and the Acquisition Companies'
respective states of incorporation, showing that ICCE and the Acquisition
Companies are in good standing and authorized to do business and that no state
franchise and/or income tax returns and taxes for ICCE and the Acquisition
Companies, respectively, required to be filed or paid prior to the Closing have
not been filed or paid, as the case may be.
8.6 No Material Adverse Change. No event or circumstance shall have
occurred with respect to ICCE or any of the other Companies or any of the
Acquisition Companies which would have a Material Adverse Effect on any of
them.
8.7 Secretary's Certificate. The Companies shall have received a
certificate or certificates, dated the Closing Date and signed by the Secretary
of ICCE, certifying the truth and correctness of attached copies of ICCE's and
the Acquisition Companies' respective Certificate or Articles of Incorporation
(including amendments thereto), Bylaws (including amendments thereto), and
resolutions of the boards of directors and, if required, the shareholders of
ICCE approving ICCE's and the Acquisition Companies' entering into this
Agreement and the consummation of the transactions contemplated hereby.
8.8 Employment Agreements. Each of the Shareholders (other than Perry
Brown and Teresa Gordon) shall have entered into an employment agreement with
ICCE or such Shareholder's Company substantially in the form of Exhibit C
hereto.
8.9 Opinion of Accountants. Each of the Companies shall have received a
letter as of the Closing Date from Arthur Andersen LLP, independent public
accountants, in such form and substance reasonably acceptable to them, to the
effect that the Merger should be treated as a pooling of interests in
conformity with GAAP if the Merger is closed and consummated in accordance with
this Agreement.
8.10 Tax Opinion. Each of the Companies shall have received a written
opinion as of the Closing Date from Nelson Mullins Riley & Scarborough, L.L.P.,
substantially in the form of Exhibit G. In rendering such opinion, such
counsel shall be entitled to rely upon representations of the Shareholders and
of officers of the Companies and ICCE reasonably satisfactory in form and
substance to such counsel.
8.11 Registration Rights. ICCE shall have executed and delivered a
Registration Rights Agreement in substantially the form attached hereto as
Exhibit D.
8.12 Shareholders Agreement. ICCE and each of the other Shareholders
shall have executed and delivered the ICCE Shareholders Agreement in
substantially the form attached hereto as Exhibit E.
8.13 Financing. ICCE shall have secured financing upon such terms and
conditions as are acceptable to the Companies and ICCE sufficient to repay the
liabilities set forth on Schedule 8.13, and either (i) each such liability
28
shall be retired at or prior to the Closing, or (ii) ICCE shall have received a
waiver from each person as required under any instrument governing any such
debt sufficient to allow the consummation of the transactions contemplated
herein.
8.14 Agreements. The Shareholders and each of the Companies shall have
terminated (i) any shareholders agreements, voting agreements, voting trusts,
and (ii) any existing agreement between the Company and any Shareholder (not
including group medical, pension, profit-sharing or other plan), at or prior to
the Closing Date, provided, however, that the employment agreements of Teresa
Gordon and D. Perry Brown shall not be terminated.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF ICCE
AND ACQUISITION COMPANIES
The obligations of ICCE and the Acquisition Companies at the Closing are
subject to the satisfaction or waiver on or prior to the Closing Date of all of
the following conditions.
9.1 Representations and Warranties; Performance of Obligations. All the
representations and warranties of each of the Shareholders and the Companies
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants
and conditions of this Agreement to be complied with or performed by the
Shareholders and the Companies on or before the Closing Date shall have been
duly performed or complied with in all material respects; and each of the
Companies and its respective Shareholders shall have delivered to ICCE a
certificate dated the Closing Date and signed by them to such effect.
9.2 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the merger of the Acquisition Companies with and into the
Companies.
9.3 Secretary's Certificate. ICCE shall have received a certificate from
each of the Companies, dated the Closing Date and signed by the secretary of
such Company, certifying the truth and correctness of attached copies of the
Company's Articles of Incorporation (including amendments thereto), Bylaws
(including amendments thereto), and resolutions of its board of directors and
Shareholders approving the Company's entering into this Agreement and the
consummation of the transactions contemplated hereby.
9.4 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to any Company which would constitute a Material Adverse
Effect.
9.5 Shareholders' Release. The Shareholders shall have delivered to ICCE
an instrument dated the Closing Date releasing each of the Companies from any
and all claims of the Shareholders against such Company and ICCE and the
obligations of such Company and ICCE to the Shareholders, except for director
and officer indemnification claims as permitted by the Articles of
Incorporation and Bylaws of such Company or applicable state corporate law,
29
items specifically identified on Schedules 5.10 and 5.11 as being claims of or
obligations to the Shareholders, continuing obligations to Shareholders
relating to their employment by the Company, and obligations arising under this
Agreement or the transactions contemplated hereby.
9.6 Termination of Related Party Agreements. All existing agreements
described in Section 8.14 shall have been canceled effective prior to or as of
the Closing Date as required by Section 8.14.
9.7 Opinion of Counsel. ICCE shall have received an opinion from counsel
to each of the Companies, dated the Closing Date, in substantially the form
attached hereto as Exhibit F.
9.8 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties listed on Schedule 5.22 shall have been
obtained; and no action or proceeding shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body shall
have taken any other action or made any request of ICCE which would have a
Material Adverse Effect on the transactions hereunder.
9.9 Good Standing Certificates. Each of the Companies shall have
delivered to ICCE a certificate, dated as of a date no earlier than ten days
prior to the Closing Date, duly issued by the appropriate governmental
authority in such Company's state of incorporation and, unless waived by ICCE,
in each state in which such Company is authorized to do business, showing such
Company is in good standing and authorized to do business and that all state
franchise and/or income tax returns and taxes for such Company for all periods
prior to the Closing have been filed and paid.
9.10 Employment Agreements. Each of the Shareholders (other than Perry
Brown and Teresa Gordon) shall have executed and delivered an employment
agreement substantially in the form of Exhibit C hereto.
9.11 Registration Rights. Each of the Shareholders shall have executed
and delivered a Registration Rights Agreement in substantially the form
attached hereto as Exhibit D.
9.12 Shareholders Agreement. Each of the Shareholders shall have executed
and delivered the ICCE Shareholders Agreement in substantially the form
attached hereto as Exhibit E.
9.13 Opinion of Accountants. ICCE shall have received a letter as of the
Closing Date from Arthur Andersen LLP, independent public accountants, in such
form and substance reasonably acceptable to it, to the effect that the Merger
should be treated as a pooling of interests in conformity with GAAP if the
Merger is closed and consummated in accordance with this Agreement.
30
9.14 Tax Opinion. ICCE shall have received a written opinion as of the
Closing Date from Nelson Mullins Riley & Scarborough, L.L.P., substantially in
the form attached hereto as Exhibit G. In rendering such opinion, such counsel
shall be entitled to rely upon representations of the Shareholders and of
officers of the Companies and ICCE reasonably satisfactory in substance to such
counsel.
9.15 Affiliates Agreements. ICCE shall have received from all persons
whom it reasonably believes to be an "affiliate" of each of the Companies as
such term is defined under Rule 145 of the 1933 Act an Affiliates Agreement
substantially in the form attached hereto as Exhibit H.
X. COVENANTS OF ICCE AFTER CLOSING
10.1 Preservation of Tax and Accounting Treatment. Except as contemplated
by this Agreement, after the Closing Date, ICCE shall not and shall not permit
any of its subsidiaries to undertake any act that would jeopardize the tax-free
status of the reorganization, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the ICCE Stock issued in connection with the transactions contemplated
hereby;
(b) the entering into of financial arrangements for the benefit of the
Shareholders; or
(c) the disposition of any material part of the assets of ICCE within the
two years following the Closing Date except in the ordinary course of business
or to eliminate duplicate services or excess capacity.
10.2 Preparation and Filing of Tax Returns. (a) Each of the Companies
shall, if possible, file, or cause to be filed, all separate Returns of any
Acquired Party for all taxable periods that end on or before the Closing Date.
If such Company is an S Corporation, each Shareholder shall pay or cause to be
paid all Tax liabilities shown by such Returns to be due.
(b) ICCE shall file or cause to be filed all separate Returns of, or that
include, any Acquired Party for all taxable periods ending after the Closing
Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Return, amended
Return, or claim for refund, determining a liability for Taxes or a right to
refund of Taxes, or conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities, and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
31
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(d) ICCE and each of the Companies and its Shareholders shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury Regulations
and treat the transaction as a tax-free reorganization under Section 351 and
368(a) of the Code.
10.3 Preservation of Employee Benefit Plans. Except as required under any
applicable Rule, following the Closing, ICCE shall not terminate any health
insurance, life insurance, profit sharing or 401(k) plan in effect at the
Companies until such time as ICCE is able to replace such plan with a plan that
is applicable to ICCE and all of its then existing subsidiaries. ICCE shall
have no obligation to provide replacement plans that have the same terms and
provisions as the existing plans, except that any new health insurance plan
shall provide for coverage for preexisting conditions.
XI. INDEMNIFICATION
The Shareholders and ICCE each make the following covenants that are
applicable to them, respectively:
11.1 Survival of Representations and Warranties. The representations and
warranties of each of the parties contained herein shall survive the Closing
until the earlier of (i) 15 days following the issuance of post-Merger audited
financial statements for ICCE and its subsidiaries on a consolidated basis
which cover at least 30 days of post-Merger operations, and (ii) the one year
anniversary of the Closing Date.
11.2 Indemnification by the Shareholders. Each Shareholder covenants and
agrees that he or she will severally and not jointly, indemnify, defend,
protect and hold harmless ICCE and each of the other Shareholders at all times,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
incurred by ICCE or any Company as a result of or arising from (i) any breach
of the representations and warranties of such Shareholder or his Company set
forth herein, (ii) any breach of any obligation on the part of such Shareholder
or his Company under this Agreement, (iii) any Tax imposed upon or relating to
an Acquired Party for any pre-Closing Date period, or (iv) any Tax to which an
Acquired Party is subject imposed upon or relating to any third party for a
pre-Closing Date period, including, in each case, any such Tax for which an
Acquired Party may be liable under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
11.3 Indemnification by ICCE. ICCE covenants and agrees that it will
indemnify, defend, protect and hold harmless the Shareholders at all times from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses, including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation,
incurred by the Shareholders as a result of or arising from (i) any breach by
32
ICCE or any Acquisition Company of its representations and warranties set forth
herein, (ii) any material breach of any obligation of ICCE or any Acquisition
Company hereunder, or (iii) any liabilities which the Shareholders may incur
due to ICCE's failure to be responsible for the liabilities and obligations of
a Company (except to the extent that ICCE has claims against the Shareholders
by reason of such liabilities).
11.4 Claims. Each person to be indemnified pursuant to this Section 11
(an "Indemnitee") shall, within five days after the discovery by the Indemnitee
of any matters giving arise to a claim for indemnification pursuant to Section
11.2 or 11.3, give written notice to the person or persons responsible for
indemnifying such Indemnitee (an "Indemnifying Party") setting forth any claim
with respect to which the Indemnitee seeks indemnification, provided that the
failure of any Indemnitee to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations under this Article XI except to the
extent that the Indemnifying Party is actually prejudiced by such failure to
give notice. In case any such action, proceeding or claim is brought against
any Indemnitee, the Indemnifying Party shall be entitled to participate in and,
unless in the reasonable good faith judgment of the Indemnitee a conflict of
interest between such Indemnitee and the Indemnifying Party may exist in
respect of such action, proceeding or claim, assume the defense thereof, with
counsel reasonably satisfactory to the Indemnitee. After notice from the
Indemnifying Party to the Indemnitee of their election so to assume such
defense, the Indemnifying Party shall not be liable to such Indemnitee for any
legal or other expenses subsequently incurred by the Indemnitee in connection
with such defense other than reasonable costs of investigation. In any event,
unless and until the Indemnifying Party elects in writing to assume and does so
assume the defense of any such claim, proceeding or action, the Indemnitee's
costs and expenses arising out of the defense, settlement or compromise of any
such action, claim or proceeding shall be considered losses subject to
indemnification hereunder. If the Indemnifying Party elects to defend any such
action or claim, then the Indemnitee shall be entitled to participate in such
defense with counsel of their choice at their sole cost and expense. The
Indemnifying Party shall not be liable for any settlement of any action, claim
or proceeding effected without its written consent, provided, however, that the
Indemnifying Party shall not unreasonably withhold, delay or condition its
consent. Anything in this Section 11.4 to the contrary notwithstanding, the
Indemnifying Party shall not, without the Indemnitee's prior written consent
(which consent shall not be unreasonably withheld), settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the Indemnitee or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnitee, a release from all liability in respect of such claim.
11.5 Exclusive Remedy. The indemnification provided in this Article XI
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.6 Limitations on Indemnification. ICCE and the other persons
indemnified pursuant to Section 11.2 shall not assert any claim (other than a
claim arising from a third party claim) for indemnification hereunder against
any Shareholder until such time as, and solely to the extent that, the
aggregate of all claims which such persons may have against such Shareholders
33
shall exceed $50,000 (the "Indemnification Threshold"). Shareholders shall not
assert any claim (other than a claim arising from a third person's claim) for
indemnification hereunder against ICCE until such time as, and solely to the
extent that, the aggregate of all claims which Shareholders may have against
ICCE shall exceed $50,000.
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), no Shareholder shall be liable under this Article XI for an
amount which exceeds the fair market value (at the time when the amount of
liability is determined) of the ICCE stock received by such Shareholder in
connection with the Merger, provided that a Shareholder's indemnification
obligations pursuant to Section 11.2(iv) shall not be so limited.
XII. TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date by the unanimous mutual consent of the boards of directors of
ICCE and all of the Companies. Any Company may withdraw from this Agreement
after May 15, 1997, if the Closing has not occurred provided that such Company
has paid its pro rata share (based on the number of shares of ICCE Stock to be
received in the Merger pursuant hereto) of all expenses incurred in connection
herewith, including its share of all professional fees.
XIII. GENERAL
13.1 Cooperation. Each of the Companies, its Shareholders, and ICCE shall
deliver or cause to be delivered to the others on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. Each of the Companies will cooperate and use its reasonable
efforts to have the present officers, directors and employees of such Company
cooperate with ICCE on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any tax return
filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Closing
Date.
13.2 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
ICCE and the Companies, and the heirs and legal representatives of the
Shareholders.
13.3 Entire Agreement. This Agreement (including the schedules and
exhibits attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the parties hereto and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement, except for paragraphs 4 (relating to confidential
information) and 5 (relating to announcements) of the Memo of Understanding,
which shall remain in effect. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance
with its terms and may be modified or amended only by a written instrument
34
executed by the parties hereto. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any
other Schedule required hereby.
13.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13.5 Brokers and Agents. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties hereto against all loss, cost, damages or expense
arising out of claims for fees or commission of brokers employed or alleged to
have been employed by such indemnifying party.
13.6 Expenses. Whether or not the transactions herein contemplated shall
be consummated, ICCE will pay all of the reasonable fees, expenses and
disbursements of ICCE and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto, including all costs and expenses incurred in the
performance and compliance with all conditions to be performed by ICCE under
this Agreement, including the fees and expenses of Arthur Andersen LLP, and
Nelson Mullins Riley & Scarborough, L.L.P. provided, however, that ICCE shall
obtain the prior approval of each of the Companies for any expenses to be
incurred from and after the date hereof and prior to the Closing in excess of
$100,000. In connection therewith, each Company shall be responsible for
paying into ICCE a sufficient amount to cover its pro rata share of such
expenses, based on the percentage of ICCE Stock to be received by such
Company's Shareholder(s) pursuant to the Merger. Each Shareholder shall pay
his or her own personal professional fees necessary to consummate this
transaction, and all sales, use, transfer, and other similar taxes and fees
imposed in connection with the Merger. Each Shareholder shall file all
necessary documentation and Returns with respect to such taxes. Each Company
shall pay all legal and accounting fees incurred by such Company in connection
with this transaction. If the transactions herein contemplated are not
consummated, the remaining balance of the assets of ICCE after payment of all
transaction expenses will be reimbursed to the Companies on a pro rata basis
based on the percentage of ICCE Stock to be received by such Company's
Shareholder(s) pursuant to the Merger.
13.7 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to ICCE, addressed to it at:
ICCE, Inc.
Five Concourse Parkway
Suite 2700
Atlanta, Georgia 30328
Attn: Timothy Mann, Jr.
35
<PAGE>
with copies to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza
999 Peachtree Street, N.E.
Suite 1400
Atlanta, Georgia 30309
Attn: Glenn W. Sturm
(b) If to any Company or Shareholder, addressed to such party at its
address set forth on Schedule 1, with copies to such counsel as is set forth
with respect to such party on such Schedule 1; or to such other address or
counsel as any party hereto shall specify pursuant to this Section 13.7 from
time to time. Notice shall be effective upon receipt.
13.8 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
13.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.10 Time. Time is of the essence with respect to this Agreement.
13.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby unless severing such provision(s) results in this Agreement not
providing reasonable assurance to a party that he or it will receive
substantially all of the benefits he or it bargained for.
13.12 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
13.13 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived only
with the written consent of ICCE and the unanimous written consent of all of
the Companies which remain a party hereto. Any amendment or waiver effected in
accordance with this Section 13.13 shall be binding upon each of the parties
hereto, and their successors and assigns.
36
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"The Companies"
David C. Cooper & Associates, Inc. DCCA Professional Temporaries, Inc.
By: /s/ David C. Cooper By: /s/ David C. Cooper
David C. Cooper, President David C. Cooper, President
EKT, Inc. Infinity Enterprises, Inc.,
By: /s/ Edward K. Turner By: /s/ Mary Beth Chase
Edward K. Turner, President Mary Beth Chase, President
"The Acquisition Companies"
Cooper Acquisition, Inc. DCCA Acquisition, Inc.
By: /s/ Timothy Mann, Jr. By: /s/ Timothy Mann, Jr.
Timothy Mann, Jr., President Timothy Mann, Jr., President
EKT Acquisition, Inc. Infinity Acquisition, Inc.
By: /s/ Timothy Mann, Jr. By: /s/ Timothy Mann, Jr.
Timothy Mann, Jr., President Timothy Mann, Jr., President
ICCE, Inc.
By: /s/ Timothy Mann, Jr.
Timothy Mann, Jr., President
[SIGNATURES CONTINUED ON THE NEXT PAGE]
37
"Shareholders"
/s/ Mark E. Strassman /s/ David C. Cooper
Mark E. Strassman David C. Cooper
/s/ Mary Beth Chase /s/ Edward K. Turner
Mary Beth Chase Edward K. Turner
/s/ D. Perry Brown /s/ Teresa Gordon
D. Perry Brown Teresa Gordon
/s/ Kevin W. Cole /s/ Rosemarie Mahoney
Kevin W. Cole Rosemarie Mahoney
38
<PAGE>
SCHEDULE 1
David C. Cooper
David C. Cooper & Associates, Inc.
DCCA Professional Temporaries, Inc.
Five Concourse Parkway
Suite 2700
Atlanta, Georgia 30328
Counsel:
Charles R. Roberts
Roberts, Isaf & Summers
Suite 1100
500 Northpark Town Center
1100 Abernathy Road, N.E.
Atlanta, GA 30328
Edward K. Turner
EKT, Inc.
2650 One First Union Center
Charlotte, North Carolina 28202-6000
Counsel:
Kenneth R. Benton
Baucomb Clayton & Benton
1351 E. Morehead Street, Suite 201
Charlotte, NC 28204
Mark E. Strassman
Infinity Enterprises, Inc.
1020 19th Street, N.W.
Suite 650
Washington, D.C. 20036
Beth Monroe-Chase
Infinity Enterprises, Inc.
1020 19th Street, N.W.
Suite 650
Washington, D.C. 20036
39
<PAGE>
D. Perry Brown
Infinity Enterprises, Inc.
1020 19th Street, N.W.
Suite 650
Washington, D.C. 20036
Kevin W. Cole
Infinity Enterprises, Inc.
1020 19th Street, N.W.
Suite 650
Washington, D.C. 20036
Teresa Gordon
Infinity Enterprises, Inc.
1020 19th Street, N.W.
Suite 650
Washington, D.C. 20036
Rosemarie Mahoney
Infinity Enterprises, Inc.
1020 19th Street, N.W.
Suite 650
Washington, D.C. 20036
Counsel:
Erik L. Kitchen
Steptoe & Johnson, L.L.P.
1330 Connecticut Avenue, N.W.
Washington, D.C. 20036-1798
40
AGREEMENT AND PLAN OF REORGANIZATION
dated as of April 24, 1997
by and among
ICCE, Inc.,
Cama of Tampa, Inc.,
Cama Acquisition, Inc.
and
Stephen S. Tutwiler
<PAGE>
TABLE OF CONTENTS
PAGE
I. DEFINITIONS 1
II. THE MERGER 3
2.1 Merger 3
2.2 Effective Time of the Merger 3
2.3 Effect of the Merger 3
2.4 Certain Information With Respect to
the Capital Stock of Cama, Cama
Acquisition, and ICCE 4
III. CONVERSION OF STOCK 4
3.1 Conversion of Outstanding Shares 4
3.2 No Fractional Shares 4
3.3 Treasury Shares 4
3.4 Change in Number of Shares 5
3.5 RIGHTS OF THE SHAREHOLDER 5
IV. CLOSING 5
4.1 The Closing Date 5
4.2 The Closing 5
V. REPRESENTATIONS AND WARRANTIES
OF CAMA AND THE SHAREHOLDER 6
(A) Representations and Warranties of Cama
and the Shareholder. 6
5.1 Due Organization 6
5.2 Authorization 6
5.3 Capital Stock of Cama 7
5.4 Transactions in Capital Stock 7
5.5 Subsidiaries 7
5.6 Predecessor Status, etc. 7
5.7 Spin-off by Cama 7
5.8 Financial Statements 7
5.9 Liabilities and Obligations 8
5.10 Accounts and Notes Receivable 8
5.11 Permits, Intangibles, and Intellectual
Property 8
5.12 Environmental Matters 9
5.13 Personal Property 9
5.14 Significant Customers; Material
Contracts and Commitments 10
5.15 Real Property 10
5.16 Insurance 10
5.17 Compensation; Employment
Agreements; Organized Labor Matters 11
5.18 Employee Plans 11
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5.19 Compliance with ERISA 11
5.20 Conformity with Law, Litigation 13
5.21 Taxes 13
5.22 No Violations 16
5.23 Government Contracts 16
5.24 Absence of Changes 16
5.25 Deposit Accounts, Powers of Attorney 18
5.26 Disclosure 18
5.27 18
(B) Representations and Warranties of
the Shareholder 18
5.28 Authority, Ownership 18
5.29 Preemptive Rights 18
VI. REPRESENTATIONS OF CAMA ACQUISITION
AND ICCE 19
6.1 Due Organization 19
6.2 Authorization 19
6.3 Capital Stock of ICCE
AND CAMA ACQUISITION 19
6.4 Transactions in Capital Stock,
Reorganization Accounting 19
6.5 Subsidiaries 19
6.6 Financial Statements 20
6.7 Liabilities and Obligations 20
6.8 Conformity with Law, Litigation 20
6.9 No Violations 20
6.10 ICCE Stock 20
6.11 No Side Agreements 20
6.12 Business; Real Property, Material
Agreements 21
6.13 Permits and Intangibles 21
6.14 Disclosure 21
VII. COVENANTS PRIOR TO CLOSING 21
7.1 Access and Cooperation; Due Diligence 21
7.2 Conduct of Business Pending Closing 22
7.3 Prohibited Activities 22
7.4 No Shop 23
7.5 Notification of Certain Matters 24
7.6 Further Assurances 24
7.7 Sale of Stock 24
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS
OF CAMA AND THE SHAREHOLDER 24
8.1 Representations and Warranties;
Performance of Obligations 24
8.2 No Litigation 25
8.3 Opinion of Counsel 25
8.4 Consents and Approvals 25
ii
8.5 Good Standing Certificates 25
8.6 No Material Adverse Change 25
8.7 Secretary's Certificate 25
8.8 Employment Agreements 25
8.9 Registration Rights 26
8.10 Shareholders Agreement 26
8.11 Financing 26
8.12 Agreements 26
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF ICCE 26
9.1 Representations and Warranties;
Performance of Obligations 26
9.2 No Litigation 26
9.3 Secretary's Certificate 26
9.4 No Material Adverse Effect 27
9.5 Shareholders' Release 27
9.6 Termination of Related Party Agreements 27
9.7 Opinion of Counsel 27
9.8 Consents and Approvals 27
9.9 Good Standing Certificates 27
9.10 Employment Agreements 27
9.11 Registration Rights 27
9.12 Shareholders Agreement 27
9.13 Affiliates Agreements 28
X. COVENANTS OF ICCE AFTER CLOSING 28
10.1 Preservation of Tax and Accounting
Treatment 28
10.2 Preparation and Filing of Tax Returns 28
10.3 Preservation of Employee Benefit Plans 29
XI. INDEMNIFICATION 29
11.1 Survival of Representations and
Warranties 29
11.2 Indemnification by the Shareholder 29
11.3 Indemnification by ICCE 29
11.4 Claims 29
11.5 Exclusive Remedy 30
11.6 Limitations on Indemnification 30
XII. TERMINATION OF AGREEMENT 31
12.1 Termination 31
XIII. GENERAL 31
13.1 Cooperation 31
13.2 Successors and Assigns 31
13.3 Entire Agreement 31
13.4 Counterparts 31
13.5 Brokers and Agents 31
iii
13.6 Expenses 32
13.7 Notices 32
13.8 Governing Law 32
13.9 Exercise of Rights and Remedies 33
13.10 Time 33
13.11 Reformation and Severability 33
13.12 Captions 33
13.13 Amendments and Waivers 33
iv
SCHEDULES and EXHIBITS
Schedule 5.1 - Qualifications to do Business; Fundamental Documents
Schedule 5.3 - Exceptions Regarding Capital Stock of Cama
Schedule 5.4 - Transactions in Capital Stock; Options & Warrants to
Acquire Capital Stock
Schedule 5.6 - Names of Predecessor Companies
Schedule 5.7 - Sales or Spin-Offs of Significant Assets
Schedule 5.8 - Initial Financial Statements
Schedule 5.9 - Significant Liabilities and Obligations
Schedule 5.10 - Accounts and Notes Receivable
Schedule 5.11 - Licenses, Franchises, Permits and Other Governmental
Authorizations
Schedule 5.12 - Environmental Matters
Schedule 5.13 - Personal Property
Schedule 5.14 - Significant Customers and Material Contracts
Schedule 5.15 - Real Property
Schedule 5.16 - Insurance Policies and Claims
Schedule 5.17 - Officers, Directors and Key Employees, Employment
Agreements; Compensation
Schedule 5.18 - Employee Benefit Plans
Schedule 5.19 - Violations of ERISA
Schedule 5.20 - Violations of Law, Regulations or Orders
Schedule 5.21 - Tax Returns and Examinations
Schedule 5.21(v) - Federal, State, Local and Foreign Income Tax Returns Filed
Schedule 5.21(xvii)- Aggregate Tax Losses
Schedule 5.22(a) - Violations of Charter and Documents and Material
Defaults
Schedule 5.23 - Governmental Contracts Subject to Price Redetermination or
Renegotiation
Schedule 5.24 - Changes Since Balance Sheet Date
Schedule 5.25 - Deposit Accounts; Powers of Attorney
Schedule 5.29 - Ownership of Cama Stock
Schedule 6.1 - Articles and Bylaws of ICCE
Schedule 6.3 - Ownership of ICCE Stock, etc.
Schedule 6.4 - Transactions in Capital Stock of ICCE
Schedule 6.7 - Liabilities and Obligations of ICCE
Schedule 6.8 - Conformity with Law; Litigation of ICCE
Schedule 6.9 - Violations of Charter Documents and Material Defaults of
ICCE
Schedule 6.12 - Real Property and Material Personal Property and Agreements
of ICCE
Schedule 7.2 - Exceptions to Conducting Business in the Ordinary Course
Between Balance Sheet Date and Consummation Date
Schedule 7.3 - Prohibited Activities
Schedule 8.13 - Financing
v
Schedule 9.6 - Exceptions to Terminations of Related Party Agreements
Exhibit A - Form of Articles of Merger
<PAGE> vi
Exhibit B - Form of Opinion of Nelson, Mullins, Riley & Scarborough,
LLP
Exhibit C - Form of Employment Agreement
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Form of Shareholders Agreement
Exhibit F - Form of Opinion of Counsel to Cama
Exhibit G - Form of Affiliate Agreement
vi<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made as of
April 24, 1997, by and among ICCE, Inc., a Georgia corporation ("ICCE"), Cama
of Tampa, Inc., a Florida corporation ("Cama"), Cama Acquisition, Inc., a
Florida corporation ("Cama Acquisition"), and Stephen S. Tutwiler (the
"Shareholder"). The Shareholder is the sole shareholder of Cama.
WHEREAS, ICCE is a corporation duly organized and existing under the laws
of the State of Georgia, having been incorporated on March 10, 1997;
WHEREAS, the respective Boards of Directors of ICCE and Cama deem it
advisable and in the best interests of Cama and the Shareholder that Cama,
pursuant to this Agreement and the applicable laws of the state of Florida,
merge with Cama Acquisition, a wholly owned subsidiary of ICCE pursuant to a
reverse triangular merger as more particularly set forth herein;
WHEREAS, the Shareholder will receive shares of ICCE stock pursuant to
such merger;
WHEREAS, the parties intend that the merger qualify as a tax-free
reorganization under Sections 351 and 368(a) of the Internal Revenue Code of
1986;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto agree as follows:
I. DEFINITIONS
Unless the context otherwise requires, capitalized terms used in this
Agreement or in any schedule or exhibit attached hereto and not otherwise
defined herein shall have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended.
"Acquired Party" shall have the meaning set forth in Section 5.21(i).
"Articles of Merger" shall mean the Articles of Merger substantially in
the forms attached hereto as Exhibit A, with such changes as may be required by
Florida laws or agreement among the parties.
"Balance Sheet Date" shall mean December 31, 1996.
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Date" shall have the meaning set forth in Section 4.1.
"COBRA" shall have the meaning set forth in Section 5.19.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company Financial Statements" shall have the meaning set forth in Section
5.8.
"Cama Stock" shall have the meaning set forth in Section 3.1.
"Conversion Ratios" shall have the meaning set forth in Section 3.1.
"Effective Time of the Merger" shall mean the time as set forth in Section
2.2.
"Environmental Laws" shall have the meaning set forth in Section 5.12.
"ERISA" means Employee Retirement Income Security Act of 1974.
"ICCE Documents" shall have the meaning set forth in Section 6.9.
"ICCE Stock" shall mean the common stock, no par value, of ICCE.
"Indemnification Threshold" shall have the meaning set forth in Section
11.6.
"Indemnified Party" shall have the meaning set forth in Section 11.4.
"Indemnifying Party" shall have the meaning set forth in Section 11.4.
"IRS" shall mean the United States Internal Revenue Service.
"Material Adverse Effect" shall mean a material adverse impact on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise) of the party referred to.
"Material Documents" shall have the meaning set forth in Section 5.22.
"Merger" shall mean the merger of Cama Acquisition with and into Cama as
described in Section 2.1 below and pursuant to this Agreement and the
applicable provisions of the State Laws.
"PBGC" means Pension Benefit Guaranty Corporation.
"Permits" shall have the meaning set forth in Section 5.11(a).
"Plans" shall have the meaning set forth in Section 5.18.
"Qualified Plans" shall have the meaning set forth in Section 5.19(ii).
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"Relevant Group" shall have the meaning set forth in Section 5.21(i).
"Returns" shall have the meaning set forth in Section 5.21.
"Rule" shall have the meaning set forth in Section 5.20.
"SEC" shall mean the United States Securities and Exchange Commission.
"State Laws" shall mean the corporation law of each of Georgia and
Florida.
"Statutory Liens" shall have the meaning set forth at the end of Section
7.3(v).
"Shareholder" shall have the meaning set forth in the first paragraph of
this Agreement.
"Tax" shall have the meaning set forth at the end of Section 5.21.
"Tax Losses" shall have the meaning set forth in Section 5.21(xvi).
"Taxing Authority" shall have the meaning set forth in Section 5.21.
II. THE MERGER
2.1 MERGER. Subject to the terms and conditions hereof and of the
Articles of Merger, Cama Acquisition shall be merged with and into Cama in
accordance with the applicable provisions of the State Laws; Cama shall be the
surviving corporation, shall continue its existence under the name of "Cama of
Tampa, Inc.", and shall succeed to and possess all of the assets, rights,
liabilities and debts of Cama Acquisition;
2.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective at
such time as the Articles of Merger (i) have been executed by Cama and Cama
Acquisition in accordance with the applicable provisions of the State Laws,
(ii) have been duly filed with the appropriate authorities in Florida as
required by the State Laws, and (iii) have become effective in accordance with
their terms and the State Laws (the "Effective Time of the Merger").
2.3. EFFECT OF THE MERGER. Upon consummation of the Merger:
(i) the Articles of Incorporation of Cama then in effect shall
remain the Articles of Incorporation of Cama following the Merger;
(ii) the Bylaws of Cama then in effect shall remain the Bylaws of
Cama following the Merger;
(iii) the officers of Cama immediately prior to the Effective
Time of the Merger shall continue as the officers of Cama following the
Merger in the same capacity or capacities;
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(iv) the assets, liabilities, and debts of Cama shall remain the
assets, liabilities, and debts of Cama following the Merger.
2.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF CAMA, CAMA
ACQUISITION, AND ICCE. The respective designations and numbers of outstanding
shares and voting rights of each class of outstanding capital stock of Cama and
of ICCE as of the date of this Agreement are as follows:
(i) the authorized and outstanding capital stock of Cama is:
Authorized Shares Outstanding
of Common Stock Shares
10,000 10,000
(ii) The authorized capital stock of ICCE consists of 45 million
shares of ICCE Stock, of which no shares are issued and outstanding, and 5
million shares of preferred stock, no par value, of which no shares are
issued and outstanding.
(iii) Cama Acquisition has 10,000 authorized shares of no par value
common stock, of which 1,000 shares are outstanding and owned by ICCE.
III. CONVERSION OF STOCK
3.1 CONVERSION OF OUTSTANDING SHARES. At the Effective Time of the
Merger, all of the stock of Cama issued and outstanding immediately prior to
the Effective Time of the Merger (the "Cama Stock") shall be converted into a
total of 131,143 shares of ICCE Stock according to the following conversion
ratio (the "Conversion Ratios"):
(i) Each outstanding share of common stock of Cama shall be
converted into 13.1143 shares of ICCE Stock; and
(ii) Each outstanding share of common stock of Cama Acquisition shall
be converted into one share of Cama common stock.
3.2 NO FRACTIONAL SHARES. No fractional shares shall be issued pursuant
to the Merger. To the extent the Shareholder is entitled to receive a
fractional share of ICCE Stock pursuant to Section 3.1 above, the number of
shares of ICCE Stock that the Shareholder shall be entitled to receive shall be
rounded down to the next lower whole number.
3.3 TREASURY SHARES. All shares of stock that are held by Cama as
treasury stock shall be retired and canceled and no shares of ICCE Stock or
other consideration shall be delivered or paid in exchange therefor.
4
3.4 CHANGE IN NUMBER OF SHARES. (a) If, prior to the Closing Date, there
occurs an increase, decrease, or other change in the number of outstanding
shares of any of the Cama Stock as a result of a stock split, stock dividend,
reverse stock split, or other similar event, the Conversion Ratio under which
shares of such Cama Stock may be converted into the right to receive shares of
ICCE Stock pursuant to this Section 3.4 shall be proportionally adjusted so
that the aggregate number of shares of ICCE Stock to be issued in the Merger
and to be received by the Shareholder remains the same as set forth in Section
3.1 above.
(b) If, prior to the Closing Date, there occurs an increase, decrease, or
other change in the number of outstanding shares of ICCE Stock as a result of a
stock split, stock dividend, reverse stock split, or other similar event, the
Conversion Ratio under which shares of Cama Stock may be converted into the
right to receive shares of ICCE Stock shall be proportionally adjusted so that
the ownership interest of the Shareholder in ICCE shall remain the same.
Nothing in the foregoing shall be deemed to prohibit ICCE from taking any and
all such steps as are reasonably necessary to pursue and consummate such other
business reorganizations, mergers, acquisitions or securities distributions as
ICCE's management or its Board of Directors shall deem to be in the best
interests of ICCE and its shareholders.
3.5 RIGHTS OF THE SHAREHOLDER. All ICCE Stock received by the
Shareholder pursuant to this Agreement shall, except for restrictions on resale
or transfer described in any agreement among the parties hereof, have the same
rights as all outstanding shares of ICCE Stock prior to the Merger, including
all voting rights.
IV. CLOSING
4.1 THE CLOSING DATE. The closing of the Merger and the transactions
hereunder (the "Closing") shall occur on the date as determined by the parties,
which shall in any case be on or before May 15, 1997, unless otherwise agreed
in writing by the parties (the "Closing Date").
4.2 THE CLOSING. The Closing shall occur on the Closing Date at such
time and place as agreed upon by the parties. At the Closing the following
shall occur:
(i) The Articles of Merger shall be filed with the appropriate state
authorities, or if already filed shall become effective as provided
therein and the Merger shall thereby be effected;
(ii) The Shareholder shall deliver to ICCE the certificates
representing all of the applicable Cama Stock, duly endorsed in blank by
the Shareholder, or accompanied by blank stock powers, with all necessary
transfer tax and other revenue stamps, acquired at the Shareholder's
expense, affixed and canceled. To the extent any certificate representing
Cama Stock is lost or missing, the applicable Shareholder shall deliver an
affidavit of lost certificate and associated indemnifications in such form
as may be approved by ICCE and its legal counsel. The Shareholder agrees
to take all further actions necessary to cure any deficiencies with
respect to the endorsement of the stock
5
certificates or other documents of conveyance with respect to such Cama
Stock or with respect to the stock powers accompanying any Cama Stock;
(ii) ICCE shall deliver to the Shareholder newly issued shares of
ICCE Stock in accordance with Section 3.1 above;
(iv) Cama shall deliver to ICCE newly issued shares of its common
stock in accordance with Section 3.1 above;
(v) The certificates representing outstanding stock in Cama
Acquisition shall be canceled; and
(vi) All other transactions contemplated herein shall be completed,
including the execution and delivery of the certificates pursuant to
Sections 8.1 and 9.1 hereunder, the Shareholders Agreement pursuant to
Sections 8.10 and 9.12, the Affiliate Letter pursuant to Section 9.13, the
Registration Rights Agreement pursuant to Section 8.9 and 9.11, and any
and all other documents required to be delivered hereunder.
V. REPRESENTATIONS AND WARRANTIES OF CAMA AND THE SHAREHOLDER
(A) REPRESENTATIONS AND WARRANTIES OF CAMA AND THE SHAREHOLDER.
Cama and the Shareholder represent and warrant to ICCE that, all of the
representations and warranties in this Article V(A) are true at the date of
this Agreement.
5.1 DUE ORGANIZATION. Cama is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and is duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except (i) as set
forth on Schedule 5.1 or (ii) where the failure to be so authorized or
qualified would not have a Material Adverse Effect on Cama. Schedule 5.1
contains a list of all jurisdictions in which Cama is authorized or qualified
to do business. A certified copy of the Certificate or Articles of
Incorporation and a true, complete and correct copy of the Bylaws of Cama are
attached hereto as Schedule 5.1. The minute books and stock records of Cama as
provided to ICCE are correct and complete in all material respects.
5.2 AUTHORIZATION. The execution and delivery of this Agreement by Cama
and the completion of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors and the Shareholder, the
representatives of Cama executing this Agreement have the authority to enter
into and bind Cama to the terms of this Agreement, Cama has the full legal
right, power and authority to enter into this Agreement and to effect the
Merger, and this Agreement is a legal, valid and binding obligation of Cama.
6
5.3 CAPITAL STOCK OF CAMA. The authorized stock of Cama is as set forth
in Section 2.4(i). All of the issued and outstanding shares of the stock of
Cama are owned by the Shareholder in the amounts set forth on Schedule 5.3 and,
except as set forth on Schedule 5.3, such shares are owned free and clear of
all liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. There are no other shareholders of Cama
except as set forth on Schedule 5.3. All of the issued and outstanding shares
of the stock of Cama have been duly authorized and validly issued, are fully
paid and nonassessable, are owned of record and beneficially by the
Shareholder, and were offered, issued, sold and delivered by Cama in compliance
with all applicable state and Federal securities and other laws. No shares
were issued in violation of the preemptive rights of any past or present
shareholder.
5.4 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 5.4,
Cama has not acquired any Cama Stock since January 1, 1992. No option,
warrant, call, conversion right or commitment of any kind exists which
obligates Cama to issue any of its authorized but unissued capital stock. Cama
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. Neither the voting stock
structure of Cama nor the relative ownership of shares among any of its
respective shareholders has been altered or changed in contemplation of the
Merger.
5.5 SUBSIDIARIES. Cama does not own, of record or beneficially, any
capital stock or other equity interest in any entity, nor is Cama, directly or
indirectly, a participant in any joint venture, partnership or other non-
corporate entity.
5.6 PREDECESSOR STATUS, ETC. Schedule 5.6 lists the names of all
predecessor companies of Cama, including the names of any entities acquired by
Cama (by stock purchase, merger, or otherwise) or from whom Cama previously
acquired material assets. Except as set forth on Schedule 5.6, Cama has not
been a subsidiary or division of another corporation or a part of an
acquisition which was later rescinded and Cama has never operated under any
trade or fictitious name in any jurisdiction.
5.7 SPIN-OFF BY CAMA. Except as set forth on Schedule 5.7, there has
never been any sale, spin-off, split-off or split-up of material assets of
either Cama or any other person or entity that directly or indirectly controls,
is controlled by, or is under common control with Cama.
5.8 FINANCIAL STATEMENTS. Schedule 5.8 contains copies of the following
financial statements of Cama (the "Company Financial Statements"): Cama's
preliminary and tentative audited Consolidated Balance Sheets as of December
31, 1996 and 1995, and Statements of Income, Cash Flows and Retained Earnings
for each year in the three-year period ended December 31, 1996. Except as set
forth on Schedule 5.8, the Company Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated, and all such Consolidated
Balance Sheets, Statements of Income, Cash Flows and Retained Earnings present
fairly in all material respects the financial position and results of
operations of Cama as of the dates indicated thereon.
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5.9 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 5.9 or
reflected on or reserved against in the balance sheet of Cama as of the Balance
Sheet Date, Cama does not have any liabilities or obligations, other than
liabilities incurred in the ordinary course of business in accordance with past
practice which would not have a Material Adverse Effect on Cama. Schedule 5.9
contains the following information with respect to any liabilities for pending
or threatened litigation or other liabilities for which the amount thereof has
not been fixed, accrued or reserved:
(i) a summary description of the liability, including amounts
claimed and any other action or relief sought;
(ii) copies of all relevant documentation relating thereto; and
(iii) in the case of litigation, the name of the claimants and
all other parties to the suit, the name of each court or agency before
which such suit is pending, and the date such suit was filed or
instituted.
5.10 ACCOUNTS AND NOTES RECEIVABLE. Schedule 5.10 contains an accurate
list of each of the accounts and notes receivable of Cama as of a date no later
than 60 days prior to the date of this Agreement, and a list of all receivables
from and advances to employees and the Shareholder separately indicated as
such. All accounts and notes receivable are collectible in the amount shown on
Schedule 5.10, except as reserved against in the balance sheet of Cama or as
set forth on Schedule 5.10.
5.11 PERMITS, INTANGIBLES, AND INTELLECTUAL PROPERTY. (a) Cama holds all
licenses, franchises, permits, registrations, and other governmental
authorizations, licenses, franchises, and certificates, the absence of any of
which could have a Material Adverse Effect on its business (the "Permits").
Schedule 5.11 contains an accurate list and summary description of the Permits.
To the best of Cama's or the Shareholder's knowledge, the Permits are valid and
currently in effect, and Cama has not received any notice that any governmental
authority intends to cancel, terminate, or not renew any Permit. Cama has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in applicable permits, licenses,
orders, approvals, variances, rules and regulations and is not in violation of
any of the foregoing except where such non-compliance or violation would not
have a Material Adverse Effect on Cama.
(b) Schedule 5.11 contains a list of (i) all trademarks, service marks,
and trade names owned, used, or licensed by Cama or in which Cama otherwise
claims any rights, (ii) all state or federal registrations and applications for
registration of any trademark or service mark of Cama, and (iii) all copyright
applications and registrations, patents, and patent applications pertaining to
Cama, its business or affairs. Except as set forth on Schedule 5.11, no such
registration or application has been challenged, opposed, or invalidated, and
there are no known claims or encumbrances against any of them. Schedule 5.11
contains a complete and accurate list of all computer software, programs, and
other proprietary computer or other technology owned, developed, or licensed by
Cama or in which Cama otherwise claims any right, other than retail shrink-wrap
license software. To the best of Cama's or the Shareholder's knowledge,
8
except as set forth on Schedule 5.11, no such computer software, program or
other technology infringes upon any copyright, patent, trade secret, or other
intellectual property right of any third party. Except as set forth on
Schedule 5.11, all such computer programs, and all intellectual property rights
therein including copyrights, developed by or for Cama are owned solely by Cama
and have either been produced by employees of Cama as works for hire under
Federal copyright law or have been assigned to Cama in enforceable technology
transfer agreements. Except as set forth on Schedule 5.11, all such computer
software, programs and other technology (i) function properly and (ii) are
capable of functioning and of recognizing and processing dates after January 1,
2000, to the same extent that they currently function.
(c) Except as specifically provided on Schedule 5.11, the transactions
contemplated by this Agreement will not result in a default under, a breach or
violation of, or have a Material Adverse Effect on the rights and benefits
afforded to Cama by any item listed on Schedule 5.11.
5.12 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.12, to the
best of Cama's or the Shareholder's knowledge, (i) Cama has complied with and
is in compliance with all Federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to it or any of its respective properties,
assets, operations and businesses relating to environmental protection
(collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law); (ii) Cama has and is in compliance with all necessary permits and other
approvals necessary to treat, transport, store, dispose of, and otherwise
handle Hazardous Wastes and Hazardous Substances; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from,
in, or on any property owned or operated by Cama in violation of any
Environmental Law; (iv) Cama knows of no on-site or off-site location to which
Cama has transported or disposed of Hazardous Wastes or Hazardous Substances or
arranged for the transportation of Hazardous Wastes or Hazardous Substances,
which site is the subject of any Federal, state, local or foreign enforcement
action or any other investigation which could lead to any claim against Cama or
ICCE for any clean-up cost, remedial work, damage to natural resources or
personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended; and (v) Cama has no contingent liability in connection with any
release of any Hazardous Waste or Hazardous Substance into the environment.
5.13 PERSONAL PROPERTY. Schedule 5.13 contains an accurate list of (i)
all personal property reflected on the balance sheet of Cama at the Balance
Sheet Date, (ii) each other item of personal property owned or used by Cama
which has a value in excess of $2,500 as of the Closing Date, and (iii) all
leases and agreements in respect of personal property. Schedule 5.13 contains
(i) true, complete and correct copies of all such leases, (ii) a listing of the
capital costs of all assets subject to capital leases, and (iii) an indication
of which assets are currently owned, or were formerly owned, by the Shareholder
or business or personal affiliates of Cama or the Shareholder. Except as set
forth on Schedule 5.13, (i) all personal property used by Cama in its business
is either owned by Cama or leased by Cama pursuant to a lease included on
Schedule 5.13, (ii) all of the personal property listed on Schedule 5.13 is in
good working order
9
and condition, ordinary wear and tear excepted, and (iii) all leases and
agreements included on Schedule 5.13 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
5.14 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. (a)
Schedule 5.14 contains an accurate list of all customers representing 5% or
more of Cama's annual revenues for the years ended December 31, 1995 and 1996.
Except to the extent set forth on Schedule 5.14, no such customer has canceled
or substantially reduced or, to the best of Cama's or the Shareholder's
knowledge, is currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by Cama.
(b) Cama has listed on Schedule 5.14 all material contracts, commitments
and similar agreements to which Cama is a party or by which it or any of its
properties are bound, including, but not limited to, contracts with significant
customers, joint venture or partnership agreements, contracts with any labor
organizations, strategic alliances, loan agreements, indemnity or guaranty
agreements, bonds, mortgages, options to purchase land, liens, pledges or other
security agreements, and licenses for software or other intellectual property.
Cama has delivered true, complete and correct copies of such agreements to
ICCE. Cama is not in default under any contracts or agreements and no notice
of default under any such contract or agreement has been received which default
would have a Material Adverse Effect on Cama. Schedule 5.14 contains a summary
description of all plans or projects involving the opening of new operations,
expansion of existing operations, the acquisition of any personal property,
business or assets requiring, in any event, the payment of more than $20,000 by
Cama.
5.15 REAL PROPERTY. Schedule 5.15 includes a list of all real property
owned or leased by Cama and all other real property, if any, used by Cama in
the conduct of its business. Cama has good and insurable title to the real
property owned by it subject to no material mortgage, pledge, lien, conditional
sales agreement, encumbrance or charge, except as reflected on Schedule 5.15.
Schedule 5.15 shall, without limitation, contain true, complete and correct
copies of all title reports and title insurance policies for real property
owned by Cama. Schedule 5.15 contains a true, complete, and correct copy of
all leases and agreements in respect of real property leased by Cama, and an
indication as to which such properties, if any, are currently owned, or were
formerly owned, by the Shareholder or business or personal affiliates of Cama
or the Shareholder. Except as set forth on Schedule 5.15, all of such leases
are in full force and effect and constitute valid and binding agreements of the
parties and their successors in accordance with their respective terms.
5.16 INSURANCE. Schedule 5.16 contains (i) an accurate list of all
insurance policies carried by Cama, (ii) an accurate list of all insurance loss
runs or workers compensation claims received since January 1, 1994, and (iii)
true, complete and correct copies of all insurance policies currently in
effect. Such insurance policies are currently in full force and effect and
shall remain in full force and effect through the Closing Date. Except as set
forth on Schedule 5.16, no insurance carried by Cama has ever been canceled by
the insurer and Cama has never been denied coverage.
10
5.17 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
Schedule 5.17 contains a list of all officers, directors, key employees and
staff of Cama, all employment agreements with any of them, and a description of
the compensation (and the portions thereof attributable to salary, bonus and
other compensation, respectively) of each such person. Cama has provided to
ICCE true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.17. Except as set forth on Schedule 5.17, since the
Balance Sheet Date, there have been no increases in the compensation payable or
any special bonuses to any officer, director, key employee or other employee,
except salary increases in the ordinary course of business implemented on a
basis consistent with past practices. Cama is not bound by or subject to any
arrangement with any labor union. No employees of Cama are represented by any
labor union or covered by any collective bargaining agreement. No campaign to
establish such representation is in progress. There is no pending or, to the
best of Cama's and the Shareholder's knowledge, threatened labor dispute
involving Cama or any group of its employees, nor has Cama experienced any
labor interruptions over the past three years. Neither Cama nor the
Shareholder has any knowledge of the intent of any employee (or employees) to
leave Cama as a result of the Merger or otherwise whose departure(s) would have
a Material Adverse Effect on Cama.
5.18 EMPLOYEE PLANS. Attached hereto as Schedule 5.18 are complete and
accurate copies, as of the date of this Agreement, of all employee benefit
plans, all employee welfare benefit plans, all employee pension benefit plans,
all multi-employer plans and all multi-employer welfare arrangements (as
defined in Sections 3(3), (1), (2), (37) and (40), respectively, of ERISA,
which are currently maintained and/or sponsored by Cama, or any benefit plans
or arrangements, formal or informal, that are not subject to ERISA, including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements, or to which
Cama currently contributes, or has an obligation to contribute in the future
(including, without limitation, benefit plans or arrangements that are not
subject to ERISA, such as employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements),
together with copies of any trusts related thereto and a classification of
employees covered thereby (collectively, the "Plans"). Schedule 5.18 sets
forth all of the Plans that have been terminated within the past three years.
5.19 COMPLIANCE WITH ERISA. (a) Except for the Plans, Cama does not
maintain or sponsor, and is not a contributing employer to, a pension, profit-
sharing, deferred compensation, stock option, employee stock purchase or other
employee benefit plan, employee welfare benefit plan, or any other compensation
or benefit arrangement, formal or informal, with any of their respective
employees, whether or not subject to ERISA.
(b) Except as set forth on the Schedule 5.19 to best of Cama's or the
Shareholder's knowledge, (i) all Plans are in substantial compliance with all
applicable provisions of ERISA and the regulations issued thereunder, as well
as with all other applicable laws, and, in all material respects, have been
administered, operated and managed in substantial accordance with the governing
documents; (ii) all Plans that are intended to qualify (the "Qualified Plans")
under Section 401(a) of the Code are so qualified and have been determined by
the IRS to be so qualified, and copies of the current plan determination
letters, most recent actuarial valuation
11
reports, if any, most recent Form 5500, or, as applicable, Form 5500-C/R filed
with respect to each such Qualified Plan or employee welfare benefit plan and
most recent trustee or custodian report, are included as part of Schedule 5.19;
(iii) to the extent that any Qualified Plans have not been amended to comply
with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within
120 days after the Closing Date; (iv) all reports and other documents required
to be filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Reports, audits or tax returns) have been
timely filed or distributed, or failure to timely file or deliver will not
result in a Material Adverse Effect to Cama; (v) the Shareholder, any Plan, or
Cama has engaged in any transaction prohibited under the provisions of Section
4975 of the Code or Section 406 of ERISA; (vi) no Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; (vii) no circumstances exist pursuant to which Cama
could have any direct or indirect liability whatsoever (including being subject
to any statutory lien to secure payment of any such liability), to the PBGC
under Title IV of ERISA or to the IRS for any excise tax or penalty with
respect to any plan now or hereafter maintained or contributed to by Cama;
(viii) Cama currently has (or at the Closing Date will have) no obligation
whatsoever to contribute to any "multi-employer pension plan" (as defined in
ERISA Section 4001(a)(14)), nor has any withdrawal liability whatsoever
(whether or not yet assessed) arising under, or capable of assertion under,
Title IV of ERISA (including, but not limited to, Sections 4201, 4202, 4203,
4204, or 4205 thereof) been incurred by any Plan; (ix) there have been no
terminations, partial terminations or discontinuance of contributions to any
Qualified Plan without notice to and approval by the IRS; (x) no Plan which is
subject to the provisions of Title IV of ERISA has been terminated; (xi) there
have been no "reportable events" (as that phrase is defined in Section 4043 of
ERISA) with respect to any Plan which were not properly reported; (xii) the
valuation of assets of any Qualified Plan, as of the Closing Date, will exceed
the actuarial present value of all accrued pension benefits under any such
Qualified Plan in accordance with the assumptions contained in the Regulations
of the PBGC governing the funding of terminated defined benefit plans; (xiii)
with respect to Plans which qualify as "group health plans" under Section 4980B
of the and Section 607(l) of ERISA and related regulations (relating to the
benefit continuation rights imposed by "COBRA"), Cama and the Shareholder have
complied (and on the Closing Date will have complied) in all material respects
with all reporting, disclosure, notice, election and other benefit continuation
requirements imposed thereunder as and when applicable to such plans, and Cama
has not incurred (and will not incur) any material direct or indirect liability
and is not (and will not be) subject to any material loss, assessment, excise
tax penalty, loss of Federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by Cama or the
Shareholder, at any time prior to the Closing Date, to comply with any such
Federal or state benefit continuation requirement, which is capable of being
assessed or asserted before or after the Closing Date directly or indirectly
against Cama or the Shareholder with respect to such group health plans; (xiv)
Cama is not now, nor has it been within the past five years, a member of a
"controlled group" as defined in ERISA Section 4001(a)(14); (xv) there is no
pending litigation, arbitration, or disputed claim, settlement or adjudication
proceeding, and to the best of Cama's or the Shareholder's knowledge, there is
no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or
12
sponsor thereof (in their capacities as such), or any party in interest
thereof; (xvi) Company Financial Statements as of the Balance Sheet Date
reflect the approximate total pension, medical and other benefit expense for
all Plans, and no material funding changes or irregularities are reflected
thereon which would cause such Financial Statements to be not
representative of most prior periods; and (xvii) Cama has not incurred
liability under Section 4062 of ERISA.
(c) Cama has not entered into any contract under which it has assumed any
liability related to any other person's qualified retirement plan. Cama has
not made any representation or warranty to any person that the use of Cama's
temporary employees would not have an adverse impact on such person's qualified
benefit plan.
(d) Cama is not subject to regulation or licensing in any jurisdiction in
which it currently operates, pursuant to any Rule, as an employee leasing
company or professional employer organization. Cama does not engage in
"Employee Leasing." For purposes hereof, "Employee Leasing" shall mean an
arrangement whereby a client of Cama places some or all of its workforce onto
the payroll of Cama in a co-employment relationship in which Cama assumes
responsibility for administration of payroll, benefits, and other human
resources activities for the client. "Employee Leasing" does not include a
temporary help arrangement, whereby an organization hires its own employees and
assigns them to a client to support or supplement the client's workforce in
special work situations such as employee absences, temporary skill shortages,
seasonal workloads, and special assignments and projects.
5.20 CONFORMITY WITH LAW, LITIGATION. Except to the extent set forth on
Schedule 5.20, Cama has conducted its business in accordance with, has not
violated, and is not in violation of any law, rule, statute, ordinance,
regulation, or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
including but not limited to the rules and regulations of the U.S. Department
of Justice Immigration and Naturalization Services regarding Employment
Eligibility Verification (a "Rule") which would have a Material Adverse Effect
on Cama. Except to the extent set forth on Schedule 5.20, there are no
material claims, actions, suits or proceedings, pending or, to the best of
Cama's or its Shareholder's knowledge, threatened, against or affecting Cama,
at law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. The delivery of this Agreement and performance
hereunder will not cause Cama to violate any Rule.
5.21 TAXES. Except as set forth on Schedule 5.21:
(i) All Returns required to have been filed with any Taxing
Authority by or with respect to Cama or any affiliated, combined,
consolidated, unitary or similar group of which Cama is or was a member (a
"Relevant Group") have been duly filed, and each such Return correctly and
completely reflects the income, franchise or other Tax liability and all
other information required to be reported thereon. All Taxes (whether or
not shown on any Return) owed by Cama, any subsidiary and any member of a
Relevant Group (individually, the "Acquired Party" and collectively, the
"Acquired Parties") have been paid.
13
(ii) The provisions for Taxes due by Cama and any subsidiaries (as
opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) in Company Financial Statements
are sufficient for all unpaid Taxes.
(iii) No Acquired Party is a party to any agreement extending the
time within which to file any Return. No claim has ever been made by any
Taxing Authority in a jurisdiction in which an Acquired Party does not
file Returns that it is or may be subject to taxation by that
jurisdiction.
(iv) Each Acquired Party has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to
any employee, creditor, independent contractor or other third party.
(v) No Acquired Party expects any Taxing Authority to assess any
additional Taxes against or in respect of it for any past period. There
is no dispute or claim concerning any Tax liability of any Acquired Party
either (i) claimed or raised by any Taxing Authority or (ii) otherwise
known to any Acquired Party. No issues have been raised in any
examination by any Taxing Authority with respect to any Acquired Party
which, by application of similar principles, reasonably could be expected
to result in a proposed deficiency for any other period not so examined.
Schedule 5.21(v) attached hereto lists all Federal, state, local and
foreign income Tax Returns filed by or with respect to any Acquired Party
for all taxable periods ended on or after January 1, 1991, indicates those
Returns, if any, that have been audited, and indicates those Returns that
currently are the subject of audit. Each Acquired Party has delivered to
ICCE complete and correct copies of all federal, state, local and foreign
income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, such Acquired
Party since January 1, 1993.
(vi) No Acquired Party has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any
Tax assessment or deficiency.
(vii) No Acquired Party has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could require it to make any payments, that are not
deductible under Section 280G of the Code.
(viii) No Acquired Party is a party to any Tax allocation or
sharing agreement.
(ix) None of the assets of any Acquired Party constitutes tax-exempt
bond financed property or tax-exempt use property, within the meaning of
Section 168 of the Code. No Acquired Party is a party to any "safe harbor
lease" that is subject to the provisions of Section 168(f)(8) of the Code
as in effect prior to the Tax Reform Act of 1986, or to any "long-term
contract" within the meaning of Section 460 of the Code.
(x) No Acquired Party is a "consenting corporation" within the
meaning of Section 341(f)(1) of the Code, or comparable provisions of any
state statutes, and none
14
of the assets of any Acquired Party is subject to an election under
Section 341(f) of the Code or comparable provisions of any state statutes.
(xi) No Acquired Party is a party to any joint venture, partnership
or other arrangement that is treated as a partnership for Federal income
Tax purposes.
(xii) There are no proposed accounting method changes or, to the
best of Cama's or the Shareholder's knowledge, threatened accounting
method changes, of any Acquired Party that could give rise to an
adjustment under Section 481 of the Code for periods after the Closing
Date.
(xiii) No Acquired Party has received any written ruling of a
Taxing Authority related to Taxes or entered into any written and legally
binding agreement with a Taxing Authority relating to Taxes.
(xiv) Each Acquired Party has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its Federal income Tax Returns
all positions taken therein that could give rise to a substantial
understatement of Federal income Tax within the meaning of Section 6662(d)
of the Code.
(xv) No Acquired Party has any liability for Taxes of any person
other than such Acquired Party (i) under Section 1.1502-6 of the
regulations promulgated pursuant to the Code (the "Treasury Regulations")
(or any similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract, or (iv) otherwise.
(xvi) There currently are no limitations on the utilization of
the net operating losses, built-in losses, capital losses, tax credits or
other similar items of any Acquired Party (collectively, the "Tax Losses")
under (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii)
Section 384 of the Code, (iv) Section 269 of the Code, (v) Section 1.1502-
15 and Section 1.1502-15A of the Treasury Regulations, (vi) Section
1.1502-21 and Section 1.1502-21A of the Treasury Regulations, or (vii)
Sections 1.1502-91 through 1.1502-99 of the Treasury Regulations, in each
case as in effect both prior to and following the Tax Reform Act of 1986.
(xvii) At the Closing Date, Cama will not have outstanding any
warrants, options, convertible securities, or any other type of right
pursuant to which any person could acquire stock in Cama which, if
exercised or converted, would affect ICCE's acquisition or retention of
ownership of more than 100% of the total combined voting power of all
classes of Cama Stock and more than 80% of the total number of shares of
each class of Cama non-voting stock.
(xviii) Cama is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(xix) The fair market value of the assets of Cama exceeds the sum
of its liabilities, plus the amount of liabilities, if any, to which the
assets are subject.
15
(xx) Cama is not under the jurisdiction of a court in a Title II or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
For purposes of this Section 5.21, the following definitions shall apply:
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of any Tax or with any
Taxing Authority.
"Tax" or "Taxes" means all Federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, sales, use,
property, deed, stamp, alternative or add-on minimum, environmental or other
taxes, assessments, duties, fees, levies or other governmental charges of any
nature whatever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States Federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
5.22 NO VIOLATIONS. Cama is not in violation of its Articles of
Incorporation or Bylaws. Neither Cama nor, to best of Cama's or the
Shareholder's knowledge, any other party thereto, is in default under any
lease, instrument, agreement, license, or permit set forth on any Schedule
hereto, or any other material agreement to which it is a party or by which its
properties are bound (the "Material Documents"); and, except as set forth on
Schedule 5.22, the execution of this Agreement and the performance of the
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach, or constitute a default
under, any of the terms or provisions of the Material Documents or the
Certificate or Articles of Incorporation or the Bylaws of Cama, which
violation, breach, or default would have a Material Adverse Effect on Cama.
Except as set forth on Schedule 5.22, none of the Material Documents requires
notice to, or the consent or approval of any third party with respect to any of
the transactions contemplated hereby, and consummation of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation, acceleration, or loss of any right or benefit. Except as set
forth on Schedule 5.22, none of the Material Documents prohibits the use or
publication by Cama or ICCE of the name of any other party to such Material
Document, and none of the Material Documents prohibits or restricts Cama from
freely providing services to any other customer, potential customer, Cama, or
ICCE.
5.23 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.23, Cama is
not now a party to any governmental contracts subject to price redetermination
or renegotiation.
5.24 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.24, there has not been:
(i) any change in the financial condition, assets, liabilities
(contingent or otherwise), income or business of Cama which has had a
Material Adverse Effect on Cama;
16
(ii) any damage, destruction or loss (whether or not covered by
insurance) which had or may have a Materially Adverse Effect on Cama;
(iii) any change in the authorized capital of Cama or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments
with respect to Cama's securities;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of Cama other
than S corporation dividends consistent with past practice;
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by Cama to any of its
officers, directors, shareholders, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice;
(vi) any work interruptions, labor grievances, or claims filed, or
any event or condition of any character which had or may have a Material
Adverse Effect on Cama;
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of Cama to any person, including,
without limitation, the Shareholder and his affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to Cama, including, without limitation, any
indebtedness or obligation of the Shareholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property,
or rights of Cama or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside
of the ordinary course of Cama's business;
(xi) any waiver of any material rights or claims of Cama;
(xii) any breach, amendment, or termination of any material
contract, agreement, license, permit or other right to which Cama is a
party;
(xiii) any transaction by Cama outside the ordinary course of its
business;
(xiv) any cancellation or termination of a material contract with
a customer or client; or
17
(xv) any other distribution of property or assets by Cama.
5.25 DEPOSIT ACCOUNTS, POWERS OF ATTORNEY. Schedule 5.25 sets forth as of
the date of this Agreement:
(i) the name of each financial institution in which Cama has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 5.25 also sets forth the name of each person, corporation, firm
or other entity holding a general or special power of attorney from Cama and a
description of the terms of such power.
5.26 DISCLOSURE. This Agreement, including the schedules hereto, presents
fairly the business and operations of Cama as addressed in the representations
and warranties. Cama's rights under the documents delivered pursuant hereto
would not be materially adversely affected by, and no statement made herein by
Cama or the Shareholder would be rendered untrue by, any other document to
which Cama or the Shareholder is a party, or by which its properties are
subject, or by any other fact or circumstance known to Cama or to the
Shareholder that is not otherwise disclosed herein.
5.27 NOT USED
(B) REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants to ICCE that all of the
representations and warranties in this Article V(B) are true at the date of
this Agreement and shall be true on the Closing Date.
5.28 AUTHORITY, OWNERSHIP. The Shareholder has the full legal right,
power and authority to enter into this Agreement. The Shareholder owns
beneficially and of record all of the shares of the Cama Stock identified on
Schedule 5.3 and, except as set forth on Schedule 5.28, such Cama Stock is
owned free and clear of all liens, encumbrances, and claims of every kind.
5.29 PREEMPTIVE RIGHTS. Except as set forth in the ICCE Shareholders
Agreement, the Shareholder does not have, or hereby permanently waives, any
preemptive or other rights to acquire shares of Cama Stock or ICCE Stock that
the Shareholder has or may have had other than the rights of the Shareholder to
acquire ICCE Stock pursuant to (i) this Agreement or (ii) any option granted by
ICCE.
18
VI. REPRESENTATIONS OF CAMA ACQUISITION AND ICCE
ICCE and Cama Acquisition, as applicable, represent and warrant to Cama
and to the Shareholder that all of the following representations and warranties
in this Article VI are true at the date of this Agreement.
6.1 DUE ORGANIZATION. Each of ICCE and Cama Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
state where it was organized, is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted except where the failure to be so authorized or qualified would not
have a Material Adverse Effect on Cama. True, complete and correct copies of
the Articles of Incorporation and Bylaws of ICCE are attached hereto as
Schedule 6.1.
6.2 AUTHORIZATION. The execution and delivery of this Agreement by ICCE
and Cama Acquisition and the completion of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of ICCE and
Cama Acquisition. The representatives of ICCE and Cama Acquisition executing
this Agreement have the authority to enter into and bind their respective
corporations to the terms of this Agreement, ICCE and Cama Acquisition has the
full legal right, power and authority to enter into this Agreement and the
Merger, and this Agreement is a legal, valid and binding obligation of ICCE and
Cama Acquisition.
6.3 CAPITAL STOCK OF ICCE AND CAMA ACQUISITION. The authorized capital
stock of ICCE and of Cama Acquisition is as set forth in Section 2.4(ii) and
(iii). All of the issued and outstanding stock of Cama Acquisition is owned by
ICCE. All of the issued and outstanding shares of the capital stock of Cama
Acquisition and of ICCE have been duly authorized and validly issued, are fully
paid and nonassessable, were offered, issued, sold and delivered by ICCE and
Cama Acquisition in compliance with all applicable state and Federal laws
concerning the issuance of securities, and were not issued in violation of the
preemptive rights of any past or present shareholder.
6.4 TRANSACTIONS IN CAPITAL STOCK, REORGANIZATION ACCOUNTING. Except as
set forth on Schedule 6.4, no option, warrant, call, conversion right or
commitment of any kind exists which obligates ICCE or Cama Acquisition to issue
any of its authorized but unissued capital stock. Neither ICCE nor Cama
Acquisition has any obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Schedule 6.4
contains a list of all stock option or stock purchase plans for ICCE, including
a list, accurate as of the date of this Agreement hereof, of all outstanding
options, warrants, or other rights to acquire shares of ICCE's stock.
6.5 SUBSIDIARIES. ICCE has no subsidiaries other than Cama Acquisition.
Cama Acquisition has no subsidiaries. Neither ICCE nor Cama Acquisition
presently owns, of record or beneficially, any capital stock or other equity
interest in any entity, nor is ICCE or Cama
19
Acquisition, directly or indirectly, a participant in any joint venture,
partnership, or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. There are no prepared financial statements for
ICCE or Cama Acquisition.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7,
neither ICCE nor Cama Acquisition has any material liabilities, contingent or
otherwise, except as set forth in or contemplated by this Agreement and except
for fees and expenses incurred in connection with the transactions contemplated
hereby and thereby.
6.8 CONFORMITY WITH LAW, LITIGATION. Except to the extent set forth on
Schedule 6.8, neither ICCE nor Cama Acquisition is in violation of any Rule
which would have a Material Adverse Effect. Except to the extent set forth on
Schedule 6.8, there are no material claims, actions, suits or proceedings,
pending or, to the knowledge of ICCE or Cama Acquisition, threatened, against
or affecting ICCE or Cama Acquisition, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over ICCE or any of Cama
Acquisition, and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The delivery of this Agreement and
performance hereunder will not cause ICCE or Cama Acquisition to violate any
Rule.
6.9 NO VIOLATIONS. Neither ICCE nor Cama Acquisition is (i) in violation
of any of its Articles of Incorporation or Bylaws or (ii) in default under any
lease, instrument, agreement, license, or permit to which it is a party, or by
which any of them is bound (collectively, the "ICCE Documents"). The rights
and benefits of ICCE and Cama Acquisition under the ICCE Documents will not be
adversely affected by the transactions contemplated hereby, and the execution
of this Agreement, the performance of the obligations hereunder, and the
consummation of the transactions contemplated hereby will not result in any
material violation or breach or constitute a default under any of the terms or
provisions of the ICCE Documents or the Articles of Incorporation or the Bylaws
of ICCE or Cama Acquisition. Except as set forth on Schedule 6.9, none of the
ICCE Documents requires notice to, or the consent or approval of, any third
party with respect to any of the transactions contemplated hereby in order to
remain in full force and effect, and consummation of the transactions
contemplated hereby will not give rise to any right to termination,
cancellation, or acceleration or loss of any right or benefit.
6.10 ICCE STOCK. Upon the issuance and delivery of the ICCE Stock to the
Shareholder pursuant to this Agreement, such shares will constitute valid and
legally issued shares of ICCE, fully paid and nonassessable.
6.11 NO SIDE AGREEMENTS. Neither ICCE nor Cama Acquisition have entered
nor will they, prior to the Closing, enter into any agreement with Cama or the
Shareholder other than this Agreement and the agreements appearing as Exhibits
hereto. ICCE and Cama Acquisition have made available to Cama copies of all
agreements entered into between ICCE or Cama Acquisition and Cama or the
Shareholder.
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6.12 BUSINESS; REAL PROPERTY, MATERIAL AGREEMENTS. ICCE was formed on
March 10, 1997, and Cama Acquisition was formed on _________, 1997. Each of
them conducted limited or no operations since that time. ICCE and Cama
Acquisition have not conducted any material business since the date of their
inception, except in connection with this Agreement. Neither ICCE nor Cama
Acquisition owns or has at any time owned any real property or any material
personal property or been a party to any other agreement, except as listed on
Schedule 6.12.
6.13 PERMITS AND INTANGIBLES. ICCE and Cama Acquisition hold all permits
the absence of any of which could have a Material Adverse Effect on their
business. To the knowledge of ICCE and Cama Acquisition, the Permits are
valid, and they have not received any notice that any governmental authority
intends to cancel, terminate or not renew any such Permit. ICCE and Cama
Acquisition have conducted and are conducting their business in compliance with
the requirements, standards, criteria and conditions set forth in applicable
permits, licenses, orders, approvals, variances, rules and regulations and are
not in violation of any of the foregoing except where such non-compliance or
violation would not have a Material Adverse Effect on ICCE or Cama Acquisition.
The transactions contemplated by this Agreement will not result in a default
under or a breach or violation of, or adversely affect the rights and benefits
afforded to, ICCE or Cama Acquisition by any such Permits.
6.14 DISCLOSURE. This Agreement, including the schedules hereto, presents
fairly the business and operations of ICCE and Cama Acquisition. ICCE's and
Cama Acquisition's rights under the documents delivered pursuant hereto would
not be materially adversely affected by, and no statement made herein would be
rendered untrue by, any other document to which ICCE or Cama Acquisition is a
party, or by which their properties are subject, or by any other known fact or
circumstance that is not disclosed pursuant hereto.
VII. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Cama agrees to afford the
officers and authorized representatives of ICCE access to all of Cama's sites,
properties, books and records and to furnish ICCE with such additional
financial and operating data and other information as to the business and
properties of Cama as ICCE may from time to time reasonably request. Cama
agrees to cooperate with ICCE and its representatives, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials contemplated by this Agreement.
ICCE, Cama Acquisition, the Shareholder, and Cama agree to treat all
information obtained in connection with the negotiation and performance of this
Agreement, or the due diligence investigations conducted with respect to each
other, as confidential.
(b) ICCE and Cama Acquisition agree to afford the officers and authorized
representatives of Cama access to all of their sites, properties, books and
records and to furnish Cama with such additional financial and operating data
and other information as to the business and properties of ICCE and Cama
Acquisition as Cama may from time to time reasonably request. ICCE and Cama
Acquisition agree to cooperate with Cama and their representatives, auditors
and counsel in the preparation of any documents or other material which may be
21
required in connection with any documents or materials contemplated by this
Agreement. Cama will cause all information obtained in connection with the
negotiation and performance of this Agreement to be treated as confidential.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. During the period commencing on
the date of this Agreement and ending with the earlier to occur of the Closing
Date or the termination of this Agreement in accordance with its terms, Cama
agrees that it will, except as set forth on Schedule 7.2:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective properties and facilities, including
those held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform all of its respective obligations under agreements
relating to or affecting its respective assets, properties, or rights;
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(v) use its best efforts to maintain and preserve its business
organization intact, retain its respective present key employees, and
maintain its respective relationships with suppliers, customers, and
others having business relations with it;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies, and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments.; and
(viii) maintain present salaries and commission levels for all
officers, directors, employees and agents.
7.3 PROHIBITED ACTIVITIES. During the period commencing on the date of
this Agreement and ending with the earlier to occur of the Closing Date or the
termination of this Agreement in accordance with its terms, each of Cama, ICCE,
and Cama Acquisition agrees that it will not, except as set forth on Schedule
7.3:
(i) make any change in its Certificate or Articles ofIncorporation
or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
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(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock or
declare any dividends or make any distributions (other than S Corporation
distributions), nor pay out any extraordinary bonuses in excess of pro
rata bonuses customarily paid, or fees, or commissions to the Shareholder,
directors, management or other personnel;
(iv) enter into any contract or commitment or incur, or agree to
incur, any liability or make any capital expenditures, except in the
normal course of business consistent with past practice, involving amounts
less than $5,000;
(v) create, assume, or permit to exist any mortgage, pledge, or
other lien or encumbrance upon any assets or properties whether now owned
or hereafter acquired, except (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of
the businesses of Cama, (2) liens for taxes either not yet due or being
contested in good faith and by appropriate proceedings (and for which
contested taxes adequate reserves have been established and are being
maintained) or materialmen's, mechanics', workers', repairmen's,
employees', or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedule 5.15 hereto;
(vi) sell, assign, lease, or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up
of any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims;
(x) commit a material breach of or amend or terminate any material
agreement or Permit;
(xi) enter into any other transaction outside the ordinary course of
its business consistent with past business practice or prohibited
hereunder; or
(xii) change its accounts receivable collection practice or factor
its accounts receivable in any way.
7.4 NO SHOP. Except as required under applicable law, Cama and the
Shareholder agree that they will not, and agree to cause each agent, officer,
director, trustee or any representative of Cama not to, during the period
commencing on the date of this Agreement and
23
ending with the earlier to occur of the Closing Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than ICCE or
its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of,
or any equity interest in, Cama or a merger, consolidation, or business
combination of Cama.
7.5 NOTIFICATION OF CERTAIN MATTERS. ICCE and Cama shall each notify the
other of (i) the occurrence or non-occurrence of any event would be likely to
cause any representation or warranty of such party contained herein to be
untrue or inaccurate in any material respect at or prior to the Closing and
(ii) any material failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. The delivery of any notice pursuant to this Section 7.5 shall not
be deemed to (i) modify the representations or warranties hereunder of the
party delivering such notice, which modification may only be made pursuant to
Section 13.13, (ii) modify the conditions set forth in Articles VIII or IX, or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
7.6 FURTHER ASSURANCES. The parties hereto agree to execute and deliver,
or cause to be executed and delivered, such further instruments or documents or
take such other action as may be reasonably necessary or convenient to carry
out the transactions contemplated hereby.
7.7 SALE OF STOCK. The Shareholder shall not sell any stock in Cama
between the date of this Agreement and the date upon which financial statements
are published which cover at least 30 days of post-Merger operations of ICCE on
a consolidated basis.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF CAMA AND THE SHAREHOLDER
The obligations of the Shareholder and of Cama are subject to the
satisfaction or waiver on or prior to the Closing Date of all of the following
conditions.
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of ICCE and Cama Acquisition contained in
Article VI shall be true and correct in all material respects as of the Closing
Date as though such representations and warranties had been made as of that
time; all of the terms, covenants and conditions of this Agreement to be
complied with and performed by ICCE or Cama Acquisition on or before the
Closing Date shall have been duly complied with and performed in all material
respects, and a
24
certificate to the foregoing effect dated the Closing Date and signed by the
President or the Chief Financial Officer of ICCE shall have been delivered to
the Shareholder.
8.2 NO LITIGATION. Prior to the Closing Date, no action or proceeding
before a court or any other governmental agency or body shall have been
instituted to restrain or prohibit the Merger, and no governmental agency or
body shall have taken any other action or made any request of Cama as a result
of which the management of Cama deems it inadvisable to proceed with the
transactions hereunder.
8.3 OPINION OF COUNSEL. Cama shall have received an opinion from counsel
for ICCE, dated the Closing Date, in substantially the form in Exhibit B.
8.4 CONSENTS AND APPROVALS. All necessary consents of and filings
required to be obtained from or made with the SEC, the NASD, the Federal Trade
Commission, the United States Department of Justice, or any other federal,
state, county, local or other governmental or regulatory, authority (including
any self-regulated authority), commission, board or body, required by any Rule,
or required from any third party under any material contract or otherwise
relating to the consummation of the transactions contemplated herein shall have
been obtained or filed and each such consent or filing shall be in full force
and effect as of the Closing Date and all waiting periods required by any Rule
shall have expired. No such consent shall be conditioned or restricted in a
manner which would have a Material Adverse Effect on Cama or the transactions
contemplated herein.
8.5 GOOD STANDING CERTIFICATES. ICCE and Cama Acquisition shall have
delivered to Cama a certificate or certificates, dated no later than ten days
prior to the Closing Date, duly issued by the appropriate governmental
authority in ICCE's and Cama Acquisition's respective states of incorporation,
showing that ICCE and Cama Acquisition are in good standing and authorized to
do business and that no state franchise and/or income tax returns and taxes for
ICCE and Cama Acquisition, respectively, required to be filed or paid prior to
the Closing have not been filed or paid, as the case may be.
8.6 NO MATERIAL ADVERSE CHANGE. No event or circumstance shall have
occurred with respect to ICCE or Cama Acquisition which would have a Material
Adverse Effect on either of them.
8.7 SECRETARY'S CERTIFICATE. Cama shall have received a certificate or
certificates, dated the Closing Date and signed by the Secretary of ICCE,
certifying the truth and correctness of attached copies of ICCE's and Cama
Acquisition's respective Certificate or Articles of Incorporation (including
amendments thereto), Bylaws (including amendments thereto), and resolutions of
the boards of directors and, if required, the shareholders, of ICCE approving
ICCE's and Cama Acquisition's entering into this Agreement and the consummation
of the transactions contemplated hereby.
8.8 EMPLOYMENT AGREEMENTS. The Shareholder shall have entered into an
employment agreement with ICCE substantially in the form of Exhibit C hereto.
25
8.9 REGISTRATION RIGHTS. ICCE shall have executed and delivered a
Registration Rights Agreement in substantially the form attached hereto as
Exhibit D.
8.10 SHAREHOLDERS AGREEMENT. ICCE and each of its other shareholder shall
have executed and delivered a First Amendment to the ICCE Shareholders
Agreement adding the Shareholder as a party to the Shareholders Agreement. The
Shareholders Agreement shall be in substantially the form attached hereto as
Exhibit E.
8.11 FINANCING. ICCE shall have secured financing upon such terms and
conditions as are acceptable to Cama and ICCE sufficient to repay the
liabilities set forth on Schedule 8.13, and either (i) each such liability
shall be retired at or prior to the Closing, or (ii) ICCE shall have received a
waiver from each person as required under any instrument governing any such
debt sufficient to allow the consummation of the transactions contemplated
herein.
8.12 AGREEMENTS. The Shareholder and Cama shall have terminated (i) the
shareholders agreements, voting agreements, voting trusts, and (ii) any
existing agreement between Cama and the Shareholder (not including group
medical, pension, profit-sharing or other plan), at or prior to the Closing
Date.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF ICCE AND CAMA ACQUISITION
The obligations of ICCE and Cama Acquisition at the Closing are subject to
the satisfaction or waiver on or prior to the Closing Date of all of the
following conditions.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the Shareholder and Cama contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same effect as though such representations and warranties had
been made on and as of such date; all of the terms, covenants and conditions of
this Agreement to be complied with or performed by the Shareholder and Cama on
or before the Closing Date shall have been duly performed or complied with in
all material respects; and Cama and the Shareholder shall have delivered to
ICCE a certificate dated the Closing Date and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the merger of Cama Acquisition with and into Cama.
9.3 SECRETARY'S CERTIFICATE. ICCE shall have received a certificate from
Cama, dated the Closing Date and signed by the secretary of Cama, certifying
the truth and correctness of attached copies of Cama's Articles of
Incorporation (including amendments thereto), Bylaws (including amendments
thereto), and resolutions of its board of directors and the Shareholder
approving Cama's entering into this Agreement and the consummation of the
transactions contemplated hereby.
26
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to Cama which would constitute a Material Adverse Effect.
9.5 SHAREHOLDERS' RELEASE. The Shareholder shall have delivered to ICCE
an instrument dated the Closing Date releasing Cama from any and all claims of
the Shareholder against Cama and ICCE and the obligations of Cama and ICCE to
the Shareholder, except for director and officer indemnification claims as
permitted by the Articles of Incorporation and Bylaws of Cama or applicable
state corporate law, items specifically identified on Schedules 5.10 and 5.11
as being claims of or obligations to the Shareholder, continuing obligations to
the Shareholder relating to their employment by Cama, and obligations arising
under this Agreement or the transactions contemplated hereby.
9.6 TERMINATION OF RELATED PARTY AGREEMENTS. All existing agreements
described in Section 8.12 shall have been canceled effective prior to or as of
the Closing Date as required by Section 8.12.
9.7 OPINION OF COUNSEL. ICCE shall have received an opinion from counsel
to Cama, dated the Closing Date, in substantially the form attached hereto as
Exhibit F.
9.8 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all
consents and approvals of third parties listed on Schedule 5.22 shall have been
obtained; and no action or proceeding shall have been instituted or threatened
to restrain or prohibit the Merger and no governmental agency or body shall
have taken any other action or made any request of ICCE which would have a
Material Adverse Effect on the transactions hereunder.
9.9 GOOD STANDING CERTIFICATES. Cama shall have delivered to ICCE a
certificate, dated as of a date no earlier than ten days prior to the Closing
Date, duly issued by the appropriate governmental authority in Florida and,
unless waived by ICCE, in each state in which Cama is authorized to do
business, showing Cama is in good standing and authorized to do business and
that all state franchise and/or income tax returns and taxes for Cama for all
periods prior to the Closing have been filed and paid.
9.10 EMPLOYMENT AGREEMENTS. The Shareholder shall have executed and
delivered an employment agreement substantially in the form of Exhibit C
hereto.
9.11 REGISTRATION RIGHTS. The Shareholder shall have executed and
delivered a Registration Rights Agreement in substantially the form attached
hereto as Exhibit D.
9.12 SHAREHOLDERS AGREEMENT. The Shareholder shall have executed and
delivered a First Amendment to the ICCE Shareholders Agreement adding the
Shareholder as a party to the Shareholders Agreement. The Shareholders
Agreement shall be in substantially the form attached hereto as Exhibit E.
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9.13 AFFILIATES AGREEMENTS. ICCE shall have received from all persons
whom it reasonably believes to be an "affiliate" of Cama as such term is
defined under Rule 145 of the 1933 Act an Affiliates Agreement substantially in
the form attached hereto as Exhibit G.
X. COVENANTS OF ICCE AFTER CLOSING
10.1 PRESERVATION OF TAX AND ACCOUNTING TREATMENT. Except as contemplated
by this Agreement, after the Closing Date, ICCE shall not and shall not permit
any of its subsidiaries to undertake any act that would jeopardize the tax-free
status of the reorganization, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the ICCE Stock issued in connection with the transactions contemplated
hereby;
(b) the entering into of financial arrangements for the benefit of the
Shareholder; or
(c) the disposition of any material part of the assets of ICCE within the
two years following the Closing Date except in the ordinary course of business
or to eliminate duplicate services or excess capacity.
10.2 PREPARATION AND FILING OF TAX RETURNS. (a) Cama shall, if possible,
file, or cause to be filed, all separate Returns of any Acquired Party for all
taxable periods that end on or before the Closing Date. If Cama is an S
Corporation, the Shareholder shall pay or cause to be paid all Tax liabilities
shown by such Returns to be due.
(b) ICCE shall file or cause to be filed all separate Returns of, or that
include, any Acquired Party for all taxable periods ending after the Closing
Date.
(c) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation and
information as any of them reasonably may request in filing any Return, amended
Return, or claim for refund, determining a liability for Taxes or a right to
refund of Taxes, or conducting any audit or other proceeding in respect of
Taxes. Such cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by Taxing Authorities, and relevant records concerning the
ownership and Tax basis of property, which such party may possess. Each party
shall make its employees reasonably available on a mutually convenient basis at
its cost to provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party required to file Returns pursuant
to this Agreement shall bear all costs of filing such Returns.
(d) ICCE, Cama and the Shareholder shall comply with the tax reporting
requirements of Section 1.351-3 of the Treasury Regulations and treat the
transaction as a tax-free reorganization under Section 351 and 368(a) of the
Code.
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10.3 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Except as required under any
applicable Rule, following the Closing, ICCE shall not terminate any health
insurance, life insurance, profit sharing or 401(k) plan in effect at Cama
until such time as ICCE is able to replace such plan with a plan that is
applicable to ICCE and all of its then existing subsidiaries. ICCE shall have
no obligation to provide replacement plans that have the same terms and
provisions as the existing plans, except that any new health insurance plan
shall provide for coverage for preexisting conditions.
XI. INDEMNIFICATION
The Shareholder and ICCE each make the following covenants that are
applicable to them, respectively:
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each of the parties contained herein shall survive the Closing
until the earlier of (i) 15 days following the issuance of post-Merger audited
financial statements for ICCE and its subsidiaries on a consolidated basis
which cover at least 30 days of post-Merger operations, and (ii) the one year
anniversary of the Closing Date.
11.2 INDEMNIFICATION BY THE SHAREHOLDER. The Shareholder covenants and
agrees that he will indemnify, defend, protect and hold harmless ICCE at all
times, from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by ICCE or Cama as a result of or arising from (i) any
breach of the representations and warranties of such Shareholder or Cama set
forth herein, (ii) any breach of any obligation on the part of such Shareholder
or Cama under this Agreement, (iii) any Tax imposed upon or relating to an
Acquired Party for any pre-Closing Date period, or (iv) any Tax to which an
Acquired Party is subject imposed upon or relating to any third party for a
pre-Closing Date period, including, in each case, any such Tax for which an
Acquired Party may be liable under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
11.3 INDEMNIFICATION BY ICCE. ICCE covenants and agrees that it will
indemnify, defend, protect and hold harmless the Shareholder at all times from
and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses, including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation,
incurred by the Shareholder as a result of or arising from (i) any breach by
ICCE or Cama Acquisition of its representations and warranties set forth
herein, (ii) any material breach of any obligation of ICCE or Cama Acquisition
hereunder, or (iii) any liabilities which the Shareholder may incur due to
ICCE's failure to be responsible for the liabilities and obligations of Cama
(except to the extent that ICCE has claims against the Shareholder by reason of
such liabilities).
11.4 CLAIMS. Each person to be indemnified pursuant to this Section 11
(an "Indemnitee") shall, within five days after the discovery by the Indemnitee
of any matters giving
29
arise to a claim for indemnification pursuant to Section 11.2 or 11.3, give
written notice to the person or persons responsible for indemnifying such
Indemnitee (an "Indemnifying Party") setting forth any claim with respect to
which the Indemnitee seeks indemnification, provided that the failure of any
Indemnitee to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Article XI except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action, proceeding or claim is brought against any Indemnitee,
the Indemnifying Party shall be entitled to participate in and, unless in the
reasonable good faith judgment of the Indemnitee a conflict of interest between
such Indemnitee and the Indemnifying Party may exist in respect of such action,
proceeding or claim, assume the defense thereof, with counsel reasonably
satisfactory to the Indemnitee. After notice from the Indemnifying Party to
the Indemnitee of their election so to assume such defense, the Indemnifying
Party shall not be liable to such Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with such defense other
than reasonable costs of investigation. In any event, unless and until the
Indemnifying Party elects in writing to assume and does so assume the defense
of any such claim, proceeding or action, the Indemnitee's costs and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be considered losses subject to indemnification hereunder.
If the Indemnifying Party elects to defend any such action or claim, then the
Indemnitee shall be entitled to participate in such defense with counsel of
their choice at their sole cost and expense. The Indemnifying Party shall not
be liable for any settlement of any action, claim or proceeding effected
without its written consent, provided, however, that the Indemnifying Party
shall not unreasonably withhold, delay or condition its consent. Anything in
this Section 11.4 to the contrary notwithstanding, the Indemnifying Party shall
not, without the Indemnitee's prior written consent (which consent shall not be
unreasonably withheld), settle or compromise any claim or consent to entry of
any judgment in respect thereof which imposes any future obligation on the
Indemnitee or which does not include, as an unconditional term thereof, the
giving by the claimant or the plaintiff to the Indemnitee, a release from all
liability in respect of such claim.
11.5 EXCLUSIVE REMEDY. The indemnification provided in this Article XI
shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.6 LIMITATIONS ON INDEMNIFICATION. ICCE and the other persons
indemnified pursuant to Section 11.2 shall not assert any claim (other than a
claim arising from a third party claim) for indemnification hereunder against
the Shareholder until such time as, and solely to the extent that, the
aggregate of all claims which such persons may have against the Shareholder
shall exceed $50,000 (the "Indemnification Threshold"). Shareholder shall not
assert any claim (other than a claim arising from a third person's claim) for
indemnification hereunder against ICCE until such time as, and solely to the
extent that, the aggregate of all claims which Shareholder may have against
ICCE exceeds $50,000.
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), the Shareholder shall not be liable under this Article XI for
an amount which exceeds the fair market value (at the time when the amount of
liability is determined) of the ICCE stock received
30
by the Shareholder in connection with the Merger, provided that the
Shareholder's indemnification obligations pursuant to Section 11.2(iv) shall
not be so limited.
XII. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date by the unanimous mutual consent of the boards of directors of
ICCE and Cama. Cama may withdraw from this Agreement after May 15, 1997, if
the Closing has not occurred provided that Cama has paid all expenses incurred
by ICCE in connection herewith, including its share of all professional fees.
XIII. GENERAL
13.1 COOPERATION. Cama, the Shareholder, and ICCE shall deliver or cause
to be delivered to the others on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
Cama will cooperate and use its reasonable efforts to have the present
officers, directors and employees of Cama cooperate with ICCE on and after the
Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
13.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
ICCE and Cama, and the heirs and legal representatives of the Shareholder.
13.3 ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the parties hereto and
supersede any prior agreement and understanding relating to the subject matter
of this Agreement, except for paragraphs 4 (relating to confidential
information) and 5 (relating to announcements) of the Memo of Understanding,
which shall remain in effect. This Agreement, upon execution, constitutes a
valid and binding agreement of the parties hereto enforceable in accordance
with its terms and may be modified or amended only by a written instrument
executed by the parties hereto. Any disclosure made on any Schedule delivered
pursuant hereto shall be deemed to have been disclosed for purposes of any
other Schedule required hereby.
13.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with this transaction and agrees to
indemnify the other parties
31
hereto against all loss, cost, damages or expense arising out of claims for
fees or commission of brokers employed or alleged to have been employed by such
indemnifying party.
13.6 EXPENSES. The Shareholder shall pay his or her own personal
professional fees necessary to consummate this transaction, and all sales, use,
transfer, and other similar taxes and fees imposed in connection with the
Merger. The Shareholder shall file all necessary documentation and Returns
with respect to such taxes. Cama shall pay all legal and accounting fees
incurred by such Cama in connection with this transaction.
13.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the
same in person to an officer or agent of such party.
(a) If to ICCE, addressed to it at:
ICCE, Inc.
Five Concourse Parkway
Suite 2700
Atlanta, Georgia 30328
Attn: Timothy Mann, Jr.
with copies to:
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza
999 Peachtree Street, N.E.
Suite 1400
Atlanta, Georgia 30309
Attn: Glenn W. Sturm
(b) If to Cama or the Shareholder, addressed to such party at its address
set forth below; or to such other address or counsel as any party hereto shall
specify pursuant to this Section 13.7 from time to time. Notice shall be
effective upon receipt.
Cama of Tampa, Inc.
One Hundred North Tampa Street
Suite 1925
Tampa, FL 33602
Attn: Stephen S. Tutwiler
13.8 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
32
13.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or
of any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
13.10 TIME. Time is of the essence with respect to this Agreement.
13.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby unless severing such provision(s) results in this Agreement not
providing reasonable assurance to a party that he or it will receive
substantially all of the benefits he or it bargained for.
13.12 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
13.13 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of ICCE and Cama. Any amendment or waiver effected in
accordance with this Section 13.13 shall be binding upon each of the parties
hereto, and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"Cama"
Cama of Tampa, Inc.
By: /s/ Stephen S. Tutwiler
Stephen S. Tutwiler, President
[SIGNATURES CONTINUED ON NEXT PAGE]
33
"Cama Acquisition"
Cama Acquisition, Inc.
By: /s/ Timothy Mann, Jr.
Timothy Mann, Jr., President
ICCE, Inc.
By: /s/ Timothy Mann, Jr.
Timothy Mann, Jr., President
"Shareholder"
/s/ Stephen S. Tutwiler
Stephen S. Tutwiler<PAGE>
SCHEDULE 1
Stephen S. Tutwiler
Cama of Tampa, Inc.
One Hundred North Tampa Street
Suite 1925
Tampa, Flordia 33602
Counsel:
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ICCE, INC.,
RFCG MERGER SUBSIDIARY, INC.,
RYLAN FORBES CONSULTING GROUP, INC.
AND
THE SHAREHOLDERS OF RYLAN FORBES CONSULTING GROUP, INC.
Dated as of July 25, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES................................................................. 1
PREAMBLE................................................................ 1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER............................ 1
1.1 Merger..................................................... 1
1.2 Time and Place of Closing.................................. 2
1.3 Effective Time............................................. 2
ARTICLE 2 - TERMS OF MERGER............................................. 2
2.1 Charter.................................................... 2
2.2 Bylaws..................................................... 2
2.3 Directors and Officers..................................... 2
ARTICLE 3 - MANNER OF CONVERTING SHARES................................. 2
3.1 Conversion of Shares....................................... 2
3.2 Anti-Dilution Provisions................................... 3
3.3 Shares Held by RFCG or ICCE................................ 3
3.4 Exchange of Shares......................................... 3
3.5 Rights of Former RFCG Shareholders......................... 4
3.6 Legending of Securities; Pooling Restrictions.............. 4
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF RFCG AND THE
SHAREHOLDERS................................................ 5
4.1 Organization, Standing, and Power.......................... 5
4.2 Authority of RFCG; No Breach By Agreement.................. 6
4.3 Authority of Shareholders; No Breach By Agreement.......... 6
4.4 Capital Stock.............................................. 7
4.5 RFCG Subsidiaries.......................................... 8
4.6 Financial Statements....................................... 8
4.7 Absence of Undisclosed Liabilities......................... 8
4.8 Absence of Certain Changes or Events....................... 8
4.9 Tax Matters................................................ 9
4.10 Assets..................................................... 10
4.11 Intellectual Property...................................... 11
4.12 Environmental Matters...................................... 11
4.13 Compliance with Laws....................................... 12
4.14 Labor and Employment Matters............................... 12
4.15 Employee Benefit Plans..................................... 13
4.16 Material Contracts......................................... 14
4.17 Legal Proceedings.......................................... 15
4.18 Reports.................................................... 15
4.19 Statements True and Correct................................ 16
4.20 Accounting, Tax and Regulatory Matters..................... 16
4.21 Investment Intention....................................... 16
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF ICCE...................... 16
5.1 Organization, Standing, and Power.......................... 16
5.2 Authority; No Breach By Agreement.......................... 17
5.3 Capital Stock.............................................. 17
5.4 Financial Statements....................................... 18
5.5 Absence of Certain Changes or Events....................... 18
5.6 Compliance With Laws....................................... 18
5.7 Legal Proceedings.......................................... 19
5.8 Statements True and Correct................................ 19
5.9 Authority of Sub........................................... 19
5.10 Accounting, Tax and Regulatory Matters..................... 20
ARTICLE 6 - CONDUCT OF BUSINESS PENDING CONSUMMATION.................... 20
6.1 Affirmative Covenants of RFCG.............................. 20
6.2 Negative Covenants of RFCG................................. 20
6.3 Covenants of ICCE.......................................... 22
6.4 Adverse Changes in Condition............................... 23
ARTICLE 7 - ADDITIONAL AGREEMENTS....................................... 23
7.1 Applications; Antitrust Notification....................... 23
7.2 Filings with State Offices................................. 23
7.3 Agreement as to Efforts to Consummate...................... 23
7.4 Investigation and Confidentiality.......................... 24
7.5 Press Releases............................................. 24
7.6 Certain Actions............................................ 24
7.7 Certain Tax Returns of RFCG................................ 25
7.8 Shareholder Releases....................................... 25
7.9 Accounting and Tax Treatment............................... 26
7.10 Participation in Option Plan............................... 26
ARTICLE 8 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........... 26
8.1 Conditions to Obligations of Each Party.................... 26
8.2 Conditions to Obligations of ICCE.......................... 27
8.3 Conditions to Obligations of RFCG and the Shareholders..... 28
ARTICLE 9 - INDEMNIFICATION............................................. 29
9.1 Agreement of Indemnitors to Indemnify...................... 29
9.2 Procedures for Indemnification............................. 30
9.3 Third Party Claims......................................... 31
9.4 Other Rights and Remedies Not Affected..................... 32
9.5 Survival................................................... 32
9.6 Time Limitations........................................... 32
9.7 Limitations as to Amount................................... 33
9.8 Tax Effect and Insurance................................... 33
9.9 Subrogation................................................ 33
9.10 Appointment of Indemnitor Representative................... 33
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
ARTICLE 10 - TERMINATION................................................ 34
10.1 Termination................................................ 34
10.2 Effect of Termination...................................... 34
ARTICLE 11 - MISCELLANEOUS.............................................. 35
11.1 Definitions................................................ 35
11.2 Expenses................................................... 43
11.3 Brokers and Finders........................................ 43
11.4 Entire Agreement........................................... 43
11.5 Amendments................................................. 43
11.6 Waivers.................................................... 44
11.7 Assignment................................................. 44
11.8 Notices.................................................... 44
11.9 Governing Law.............................................. 45
11.10 Counterparts............................................... 45
11.11 Captions; Articles and Sections............................ 45
11.12 Interpretations............................................ 46
11.13 Severability............................................... 46
SIGNATURES.............................................................. 46
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of July 25, 1997, by and among ICCE, INC. ("ICCE"), a Georgia
corporation; RFCG MERGER SUBSIDIARY, INC. ("Sub"), a New Jersey corporation;
RYLAN FORBES CONSULTING GROUP, INC. ("RFCG"), a New Jersey corporation; and the
shareholders of RFCG identified in Schedule I hereto (each a "Shareholder" and
collectively the "Shareholders").
PREAMBLE
--------
The Shareholders and the respective Boards of Directors of RFCG, Sub and
ICCE are of the opinion that the transactions described herein are in the best
interests of the parties to this Agreement and, in the case of RFCG, Sub and
ICCE, their respective shareholders. This Agreement provides for the
acquisition of RFCG by ICCE pursuant to the merger of Sub with and into RFCG.
At the effective time of such merger, the outstanding shares of the capital
stock of RFCG shall be converted into the right to receive shares of the common
stock of ICCE (except as provided herein). As a result, Shareholders shall
become shareholders of ICCE and RFCG shall continue to conduct its business and
operations as a wholly owned subsidiary of ICCE. The transactions described in
this Agreement are subject to the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code, and for accounting purposes shall qualify for treatment as a pooling of
interests.
Certain terms used in this Agreement are defined in Section 11.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 MERGER. Subject to the terms and conditions of this Agreement,at
------
the Effective Time, Sub shall be merged with and into RFCG in accordance with
the provisions of Section 14A:10-1 of the NJBCA and with the effect provided in
Section 14A:10-6 of the NJBCA (the "Merger"). RFCG shall be the Surviving
Corporation resulting from the Merger and shall become a wholly owned Subsidiary
of ICCE and shall continue to be governed by the Laws of the State of New
Jersey. The Merger shall be consummated pursuant to the terms of this Agreement,
which has been approved and adopted by the respective Boards of Directors of
RFCG, Sub and ICCE, by ICCE, as the sole shareholder of Sub, and by the
Shareholders, as the shareholders of RFCG.
<PAGE>
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
-------------------------
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the Parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such location as may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
--------------
by this Agreement shall become effective on the date and at the time the
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of New Jersey (the "Effective Time"). Subject
to the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the authorized officers of each Party, the Parties shall use their
reasonable efforts to cause the Effective Time to occur on the first business
day following the last to occur of (i) the effective date (including expiration
of any applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger, and (ii)
the date on which the shareholders of RFCG approve this Agreement to the extent
such approval is required by applicable Law; or such later date within 30 days
thereof as may be specified by ICCE.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 CHARTER. The Certificate of Incorporation of RFCG in effect
-------
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of RFCG in effect immediately prior to the
------
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Sub in office immediately
----------------------
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the directors of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. The officers of Sub in office immediately prior to the Effective
Time, together with such additional persons as may thereafter be elected, shall
serve as the officers of the Surviving Corporation from and after the Effective
Time in accordance with the Bylaws of the Surviving Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article 3, at
--------------------
the Effective Time, by virtue of the Merger and without any action on the part
of ICCE, RFCG, Sub or the shareholders of any of the foregoing, the shares of
the constituent corporations shall be converted as follows:
-2-
<PAGE>
(a) Each share of capital stock of ICCE issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding immediately
prior to the Effective Time shall cease to be outstanding and shall be
converted into one share of RFCG Common Stock.
(c) Each share of RFCG Common Stock (excluding shares held by any RFCG
Entity or any ICCE Entity) issued and outstanding immediately prior to the
Effective Time shall cease to be outstanding and shall be converted into and
exchanged for the right to receive 4,622.92 shares (the "Exchange Ratio") of
ICCE Common Stock (the "Merger Shares").
3.2 ANTI-DILUTION PROVISIONS. In the event ICCE changes the number
------------------------
of shares of ICCE Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY RFCG OR ICCE. Each of the shares of RFCG Common
---------------------------
Stock held by any RFCG Entity or by any ICCE Entity shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 EXCHANGE OF SHARES. At the Closing, each Shareholder shall surrender
------------------
each certificate or certificates which represented shares of RFCG Common Stock
immediately prior to the Effective Time (the "Certificates") and shall promptly
upon surrender thereof receive in exchange therefor the number of whole Merger
Shares issuable in respect of all shares of RFCG Common Stock held by such
Shareholder (rounded up the next nearest share). If any Certificate shall have
been lost, stolen, mislaid or destroyed, upon receipt of (i) an affidavit of
that fact from the holder claiming such Certificate to be lost, mislaid, stolen
or destroyed, (ii) such bond, security or indemnity as ICCE may reasonably
require and (iii) any other documents necessary to evidence and effect the bona
fide exchange thereof, ICCE shall issue to such holder the consideration into
which the shares represented by such lost, stolen, mislaid or destroyed
Certificate shall have been converted. ICCE shall not be obligated to deliver
the consideration to which any former holder of RFCG Common Stock is entitled as
a result of the Merger until such holder surrenders such holder's Certificate or
Certificates for exchange as provided in this Section 3.4. Any other provision
of this Agreement notwithstanding, neither ICCE nor the Surviving Corporation
shall be liable to a holder of RFCG Common Stock for any amounts paid or
property delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
-3-
<PAGE>
3.5 RIGHTS OF FORMER RFCG SHAREHOLDERS. At the Effective Time, the stock
----------------------------------
transfer books of RFCG shall be closed as to holders of RFCG Common Stock
immediately prior to the Effective Time and no transfer of RFCG Common Stock by
any such holder shall thereafter be made or recognized. Until surrendered for
exchange in accordance with the provisions of Section 3.4, each Certificate
theretofore representing shares of RFCG Common Stock (other than shares to be
canceled pursuant to Section 3.3) shall from and after the Effective Time
represent for all purposes only the right to receive the consideration provided
in Sections 3.1 in exchange therefor. Whenever a dividend or other distribution
is declared by ICCE on the ICCE Common Stock, the record date for which is at or
after the Effective Time, the declaration shall include dividends or other
distributions on all shares of ICCE Common Stock issuable pursuant to this
Agreement, but no dividend or other distribution payable to the holders of
record of ICCE Common Stock as of any time subsequent to the Effective Time
shall be delivered to the holder of any Certificate until such holder surrenders
such Certificate for exchange as provided in Section 3.4. However, upon
surrender of such Certificate, both the ICCE Common Stock certificate (together
with all such undelivered dividends or other distributions without interest) and
any undelivered dividends payable in respect thereof (without interest) shall be
delivered and paid with respect to each share represented by such Certificate.
3.6 LEGENDING OF SECURITIES; POOLING RESTRICTIONS.
---------------------------------------------
(a) The shares of ICCE Common Stock to be issued in connection with
this Agreement will be issued in a transaction exempt from registration under
the 1933 Act by reason of Section 4(2) thereof or Regulation D promulgated
thereunder, and ICCE is relying on the representations of the Shareholders with
respect to such exemption. Each Shareholder understands and agrees that stop
transfer instructions with respect to the shares of ICCE Common Stock received
by each Shareholder pursuant to the Merger will be given to ICCE's transfer
agent and that, in addition to such legend as may be required pursuant to the
Shareholders Joinder Agreement, there will be placed on the certificates for
such shares, or shares issued in substitution thereof, a legend stating in
substance:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, and may not be offered, sold, transferred or
otherwise disposed of unless registered with the Securities and Exchange
Commission of the United States and the securities regulatory authorities of
applicable states or unless an exemption from such registration is available.
The securities represented by this certificate are subject to the
provisions of an Agreement and Plan of Merger dated as of July 25, 1997, and a
Registration Rights Agreement, dated as of May 16, 1997, and may not be sold or
otherwise transferred, except in accordance therewith. Copies of such agreements
may be obtained at the principal executive offices of ICCE, Inc."
(b) Each Shareholder agrees that he will not sell, transfer, or
otherwise dispose of his interests in, or reduce his risk relative to, any of
the shares of ICCE Common Stock into which his shares of RFCG Common Stock are
converted upon consummation of the Merger until
-4-
<PAGE>
such time as ICCE notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
Each Shareholder understands and agrees that stop transfer instructions with
respect to the shares of ICCE Common Stock received by each Shareholder pursuant
to the Merger will be given to ICCE's transfer agent and that there will be
placed on the certificates for such shares, or shares issued in substitution
thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant
to a business combination which is accounted for as a "pooling of
interests" and may not be sold, nor may the owner thereof reduce his
risks relative thereto in any way, until such time as ICCE, Inc. has
published the financial results covering at least 30 days of combined
operations after the effective date of the merger through which the
business combination was effected."
In any decision by ICCE regarding the application of the limitations described
in such legend, the words "sell," "transfer," "otherwise dispose of" and "reduce
his risk" shall be construed and applied consistent with the criteria of ASR 130
and 135, Staff Accounting Bulletins 75 and 65 and interpretations thereof used
by the staff of the SEC.
(c) The foregoing legends will also be placed on any certificate
representing Buyer securities issued subsequent to the original issuance of the
ICCE Common Stock pursuant to the Merger as a result of any transfer of such
shares or any stock dividend, stock split, or other recapitalization as long as
the ICCE Common Stock issued to the undersigned pursuant to the Merger has not
been transferred in such manner to justify the removal of the legend therefrom.
Upon the request of a Shareholder, ICCE shall cause the certificates
representing the shares of ICCE Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to
restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable
after the requirements of ASR 130 and 135 have been met.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF RFCG AND THE SHAREHOLDERS
-----------------------------------------------------------
The Shareholders and RFCG, jointly and severally, hereby represent and
warrant to ICCE as follows:
4.1 ORGANIZATION, STANDING, AND POWER. RFCG is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
New Jersey, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. RFCG is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, an RFCG Material Adverse Effect. The minute book and other
organizational documents for RFCG have been made available to ICCE
-5-
<PAGE>
for its review and, to the Knowledge of RFCG, except as disclosed in Section 4.1
of the RFCG Disclosure Memorandum, are true and complete in all material
respects.
4.2 AUTHORITY OF RFCG; NO BREACH BY AGREEMENT.
-----------------------------------------
(a) RFCG has the corporate power and authority necessary to execute,
deliver, and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of RFCG. This Agreement
represents a legal, valid, and binding obligation of RFCG, enforceable against
RFCG in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by RFCG, nor
the consummation by RFCG of the transactions contemplated hereby, nor compliance
by RFCG with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of RFCG's Certificate of Incorporation or Bylaws or the
certificate or articles of incorporation or bylaws of any RFCG Subsidiary or any
resolution adopted by the board of directors or the shareholders of any RFCG
Entity, or (ii) except as disclosed in Section 4.2 of the RFCG Disclosure
Memorandum, constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any RFCG
Entity under, any Contract or Permit of any RFCG Entity other than those which
are not reasonably likely to have, individually or in the aggregate, an RFCG
Material Adverse Effect, or, (iii) subject to receipt of the requisite Consents
referred to in Section 8.1(a), constitute or result in a Default under, or
require any Consent pursuant to, any Law or Order applicable to any RFCG Entity
or any of their respective material Assets (including any ICCE Entity or any
RFCG Entity becoming subject to or liable for the payment of any Tax or any of
the Assets owned by any ICCE Entity or any RFCG Entity being reassessed or
revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws and applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by RFCG of the Merger and the other transactions
contemplated in this Agreement.
4.3 AUTHORITY OF SHAREHOLDERS; NO BREACH BY AGREEMENT.
-------------------------------------------------
(a) Each of the Shareholders has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and each of
the Ancillary
-6-
<PAGE>
Agreements to which such Shareholder is party and to perform its obligations
under this Agreement and such Ancillary Agreements. This Agreement represents a
legal, valid, and binding obligation of each Shareholder, enforceable against
each Shareholder in accordance with its terms (except in all cases as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought). Upon the execution and delivery by the Shareholders of the
Ancillary Agreements, the Ancillary Agreements will constitute the legal, valid,
and binding obligations of each Shareholder, enforceable against each
Shareholder in accordance with their respective terms. The execution of this
Agreement by each Shareholder represents the written consent by such Shareholder
to approval of this Agreement by the shareholders of RFCG without a meeting
pursuant to Section 14A:5-6 of the NJBCA.
(b) Neither the execution and delivery of this Agreement by any
Shareholder, nor the consummation by any Shareholder of the transactions
contemplated hereby, nor compliance by any Shareholder with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of RFCG's Certificate of Incorporation or Bylaws or the certificate or articles
of incorporation or bylaws of any RFCG Subsidiary or the governing instruments
of any Shareholder that is not a natural person, or (ii) except as disclosed in
Section 4.3 of the RFCG Disclosure Memorandum, constitute or result in a Default
under, or require any Consent pursuant to, or result in the creation of any Lien
on any Asset of any RFCG Entity under, any Contract or Permit of any RFCG Entity
other than those which are not reasonably likely to have, individually or in the
aggregate, an RFCG Material Adverse Effect, or, (iii) subject to receipt of the
requisite Consents referred to in Section 8.1(a), violate any Law or Order
applicable to any Shareholder or to any RFCG Entity or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, and applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by the Shareholders of the transactions contemplated in
this Agreement.
4.4 CAPITAL STOCK.
-------------
(a) The authorized capital stock of RFCG consists of 100 shares of
RFCG Common Stock, of which 100 shares are issued and outstanding. All of the
issued and outstanding shares of capital stock of RFCG are duly and validly
issued and outstanding and are fully paid and nonassessable under the NJBCA.
None of the outstanding shares of capital stock of RFCG has been issued in
violation of any preemptive rights of the current or past shareholders of RFCG.
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<PAGE>
(b) Except as set forth in Section 4.4(a) or as disclosed in Section
4.4 (b) of the RFCG Disclosure Memorandum, there are no shares of capital stock
or other equity securities of RFCG outstanding and no outstanding Equity Rights
relating to the capital stock of RFCG. Each of the Shareholders is the owner of
all right, title and interest (legal and beneficial) in and to that number or
amount of Shares set forth next to his name Schedule I, free and clear of all
Liens. Collectively, the Shareholders own all right, title and interest (legal
and beneficial) in and to all of the issued and outstanding shares of RFCG's
capital stock. Except as specifically contemplated by this Agreement, no Person
has any Contract or any right or privilege (whether pre-emptive or contractual)
capable of becoming a Contract for the purchase from the Shareholders of any of
the Shares, or any Contract or Equity Right for the purchase, subscription or
issuance of any securities of RFCG.
4.5 RFCG SUBSIDIARIES. RFCG has no Subsidiaries.
-----------------
4.6 FINANCIAL STATEMENTS. Each of the RFCG Financial Statements
--------------------
(including, in each case, any related notes) fairly presented in all material
respects the consolidated financial position of RFCG and its Subsidiaries as at
the respective dates and the consolidated results of operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount or effect. The
balance sheet of RFCG dated as of the Closing Date shall not reflect
indebtedness (other than trade accounts payable arising out of bona fide
purchases of goods and services in the ordinary course of business of RFCG) in
excess of $75,000.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES. No RFCG Entity has any Liabilities
----------------------------------
that are reasonably likely to have, individually or in the aggregate, an RFCG
Material Adverse Effect, except Liabilities which are accrued or reserved
against in the consolidated balance sheet of RFCG as of June 30, 1997, included
in the RFCG Financial Statements delivered prior to the date of this Agreement
or reflected in the notes thereto. No RFCG Entity has incurred or paid any
Liability since June 30, 1997, except for such Liabilities incurred or paid (i)
in the ordinary course of business consistent with past business practice and
which are not reasonably likely to have, individually or in the aggregate, an
RFCG Material Adverse Effect or (ii) in connection with the transactions
contemplated by this Agreement. Except as disclosed in Section 4.7 of the RFCG
Disclosure Memorandum, no RFCG Entity is directly or indirectly liable, by
guarantee, indemnity, or otherwise, upon or with respect to, or obligated, by
discount or repurchase agreement or in any other way, to provide funds in
respect to, or obligated to guarantee or assume any Liability or any Person for
any amounts in excess of $10,000 in the aggregate.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, except
------------------------------------
as disclosed in Section 4.8 of the RFCG Disclosure Memorandum, (i) there have
been no events, changes, or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, an RFCG Material Adverse Effect, and
(ii) the RFCG Entities have not taken any action, or failed to take any action,
prior to the date of this Agreement, which action or failure, if taken after the
date of this Agreement, would represent or result in a material breach or
violation of any of the covenants and agreements of RFCG provided in Article 6.
-8-
<PAGE>
4.9 TAX MATTERS.
-----------
(a) RFCG was incorporated in 1994 and since that time has duly elected
to be, and has always been, treated as an S Corporation under Subchapter S of
the Internal Revenue Code with respect to Federal and all applicable state and
local jurisdictions, and has never been subject to Subchapter C of the Internal
Revenue Code (prior to incorporation, RFCG conducted business as a partnership).
Such election was timely and validly made in all such jurisdictions, remains in
full force and effect, and has not been and will not be revoked or terminated,
intentionally or inadvertently, prior to the Effective Time. Except for the
transactions contemplated by this Agreement, neither RFCG nor any Shareholder
nor any other or previous RFCG shareholder has taken any action or caused any
action to be taken which would have the effect of causing RFCG's S Corporation
election to be terminated.
(b) There does not exist and will not after the Effective Time exist
any liability for taxes which may be asserted by any taxing authority against,
and no lien or other encumbrance for taxes will attach to, any RFCG Entity or
any of their respective Assets. All Tax Returns required to be filed by or on
behalf of any of the RFCG Entities have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1996, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, and all Tax
Returns filed are complete and accurate in all material respects. All Taxes
shown on filed Tax Returns have been paid. There is no audit examination,
deficiency, or refund Litigation with respect to any Taxes. All Taxes and other
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid. There are no Liens with respect to Taxes upon any of
the Assets of the RFCG Entities, except for any such Liens which are not
reasonably likely to have an RFCG Material Adverse Effect.
(c) None of the RFCG Entities has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(d) The provision for any Taxes due or to become due for any of the
RFCG Entities for the period or periods through and including the date of the
respective RFCG Financial Statements that has been made and is reflected on such
RFCG Financial Statements is sufficient to cover all such Taxes.
(e) None of the RFCG Entities is a party to any Tax allocation or
sharing agreement and none of the RFCG Entities has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was RFCG) has any Liability for Taxes of any
Person (other than RFCG and its Subsidiaries) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise.
-9-
<PAGE>
(f) Each of the RFCG Entities is in compliance with, and its records
contain all information and documents necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.
(g) No RFCG Entity has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
4.10 ASSETS.
------
(a) Except as disclosed in Section 4.10 of the RFCG Disclosure
Memorandum, the RFCG Entities have good and marketable title, free and clear of
all Liens, to all of their respective Assets, except for any such Liens or other
defects of title which are not reasonably likely to have a material adverse
effect on the use or value of such Asset or any other Asset. All tangible
properties used in the businesses of the RFCG Entities are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with RFCG's past practices.
(b) Except as disclosed in Section 4.10 of the RFCG Disclosure
Memorandum, the accounts receivable of the RFCG Entities as set forth on the
most recent balance sheet included in the RFCG Financial Statements delivered
prior to the date of this Agreement or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide performance of services, sales
and deliveries of goods, and other business transactions in the ordinary course
of business consistent with past practice; and to the Knowledge of RFCG, are not
subject to valid defenses, set-offs or counterclaims and are collectible within
90 days after billing at the full recorded amount thereof. The most recent RFCG
Financial Statements do not have a recorded allowance for collection losses.
(c) All Assets which are material to RFCG's business on a consolidated
basis, held under leases or subleases by any of the RFCG Entities, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(d) The RFCG Entities currently maintain insurance in amounts, scope,
and coverage that are adequate in the judgment of management of RFCG. None of
the RFCG Entities has received notice from any insurance carrier that (i) any
policy of insurance will be canceled or that coverage thereunder will be reduced
or eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. There are presently no claims for amounts
exceeding in any individual case $5,000 pending under such policies of insurance
and no notices of claims in excess of such amounts have been given by any RFCG
Entity under such policies.
-10-
<PAGE>
(e) The Assets of the RFCG Entities include all Assets required to
operate the business of the RFCG Entities as presently conducted.
4.11 INTELLECTUAL PROPERTY. Each RFCG Entity owns or has a license to use
---------------------
all of the Intellectual Property used by such RFCG Entity in the course of its
business. Each RFCG Entity is the owner of or has a license to any Intellectual
Property sold or licensed to a third party by such RFCG Entity in connection
with such RFCG Entity's business operations, and such RFCG Entity has the right
to convey by sale or license any Intellectual Property so conveyed. No RFCG
Entity is in Default under any of its Intellectual Property licenses. No
proceedings have been instituted, or are pending or to the Knowledge of RFCG
threatened, which challenge the rights of any RFCG Entity with respect to
Intellectual Property used, sold or licensed by such RFCG Entity in the course
of its business, nor has any person claimed or alleged any rights to such
Intellectual Property. To the Knowledge of RFCG, the conduct of the business of
the RFCG Entities does not infringe any Intellectual Property of any other
person. Except as disclosed in Section 4.11 of the RFCG Disclosure Memorandum,
no RFCG Entity is obligated to pay any recurring royalties to any Person with
respect to any such Intellectual Property. Except as disclosed in Section 4.11
of the RFCG Disclosure Memorandum, every officer or director of any RFCG Entity
is a party to a Contract which requires such officer or director to assign any
interest in any Intellectual Property to a RFCG Entity and to keep confidential
any trade secrets, proprietary data, customer information, or other business
information of a RFCG Entity, and no such officer or director is party to any
Contract with any Person other than a RFCG Entity which requires such officer or
director to assign any interest in any Intellectual Property to any Person other
than a RFCG Entity or to keep confidential any trade secrets, proprietary data,
customer information, or other business information of any Person other than a
RFCG Entity and its customers. No officer or director of any RFCG Entity is
party to any Contract which restricts or prohibits such officer or director from
engaging in activities competitive with any Person, including any RFCG Entity.
4.12 ENVIRONMENTAL MATTERS.
---------------------
(a) To the Knowledge of RFCG, each RFCG Entity, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, an RFCG Material Adverse Effect.
(b) To the Knowledge of RFCG, there is no Litigation pending or
threatened before any court, governmental agency, or authority or other forum in
which any RFCG Entity or any of its Operating Properties or Participation
Facilities (or RFCG in respect of such Operating Property or Participation
Facility) has been or, with respect to threatened Litigation, may be named as a
defendant (i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release, discharge, spillage, or
disposal into the environment of any Hazardous Material, whether or not
occurring at, on, under, adjacent to, or affecting (or potentially affecting) a
site owned, leased, or operated by any RFCG Entity or any of its Operating
Properties or Participation Facilities, except for such Litigation pending or
threatened that is not reasonably likely to have, individually or in the
aggregate, an RFCG
-11-
<PAGE>
Material Adverse Effect, nor to the Knowledge of RFCG is there any reasonable
basis for any Litigation of a type described in this sentence, except such as is
not reasonably likely to have, individually or in the aggregate, an RFCG
Material Adverse Effect.
(c) To the Knowledge of RFCG, there have been no releases, discharges,
spillages, or disposals of Hazardous Material in, on, under, adjacent to, or
affecting (or potentially affecting) such properties, except such as are not
reasonably likely to have, individually or in the aggregate, an RFCG Material
Adverse Effect.
4.13 COMPLIANCE WITH LAWS. Each RFCG Entity has in effect all Permits
--------------------
necessary for it to own, lease, or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a RFCG Material
Adverse Effect, and there has occurred no Default under any such Permit, other
than Defaults which are not reasonably likely to have, individually or in the
aggregate, an RFCG Material Adverse Effect. Except as disclosed in Section 4.13
of the RFCG Disclosure Memorandum, none of the RFCG Entities:
(a) is in Default under any of the provisions of its Certificate of
Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to its
business or employees conducting its business (including the Immigration
Reform and Control Act of 1986, as amended, and all applicable regulations
promulgated thereunder and Laws requiring the licensing of temporary
employee staffing companies or otherwise subjecting temporary employee
staffing companies to regulation), except for Defaults which are not
reasonably likely to have, individually or in the aggregate, an RFCG
Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any RFCG Entity is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, (ii)
threatening to revoke any Permits, the revocation of which is reasonably
likely to have, individually or in the aggregate, an RFCG Material Adverse
Effect, or (iii) requiring any RFCG Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding, or to adopt any Board
resolution or similar undertaking.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to ICCE.
4.14 LABOR AND EMPLOYMENT MATTERS. No RFCG Entity is the subject of any
----------------------------
Litigation asserting that it or any other RFCG Entity has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to
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<PAGE>
compel it or any other RFCG Entity to bargain with any labor organization as to
wages or conditions of employment, nor is any RFCG Entity party to any
collective bargaining agreement, nor is there any strike or other labor dispute
involving any RFCG Entity, pending or threatened, or to the Knowledge of RFCG,
is there any activity involving any RFCG Entity's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity. No
RFCG Entity has ever engaged in Employee Leasing.
4.15 EMPLOYEE BENEFIT PLANS.
----------------------
(a) RFCG has disclosed in Section 4.15 of the RFCG Disclosure
Memorandum, and has delivered or made available to ICCE prior to the execution
of this Agreement copies in each case of, all pension, retirement, profit-
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plan, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any RFCG Entity or ERISA Affiliate
thereof for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors, or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate (collectively, the "RFCG Benefit
Plans"). Any of the RFCG Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "RFCG ERISA Plan." Each RFCG ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to
herein as a "RFCG Pension Plan." No RFCG Pension Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) To the Knowledge of RFCG, all RFCG Benefit Plans are in compliance
with the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, an RFCG Material Adverse Effect. Each RFCG
ERISA Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and RFCG is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. No RFCG Entity
has engaged in a transaction with respect to any RFCG Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any RFCG Entity to a Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA.
(c) No RFCG Pension Plan has any "unfunded current liability," as that
term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value of
the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any RFCG Pension Plan, (ii) no change in the actuarial assumptions with respect
to any RFCG Pension Plan, and
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<PAGE>
(iii) no increase in benefits under any RFCG Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, an RFCG Material Adverse Effect or materially
adversely affect the funding status of any such plan. Neither any RFCG Pension
Plan nor any "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any RFCG Entity, or the single-
employer plan of any entity which is considered one employer with RFCG under
Section 4001 of ERISA or Section 414 of the Internal Revenue Code or Section 302
of ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal Revenue
Code or Section 302 of ERISA. No RFCG Entity has provided, or is required to
provide, security to a RFCG Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any RFCG Entity with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No RFCG Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any RFCG Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 4.15 of the RFCG Disclosure
Memorandum, no RFCG Entity has any Liability for retiree health and life
benefits under any of the RFCG Benefit Plans and there are no restrictions on
the rights of such RFCG Entity to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 4.15 of the RFCG Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any RFCG Entity from
any RFCG Entity under any RFCG Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any RFCG Benefit Plan, or (iii) result in any
acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any RFCG Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the RFCG Financial Statements to the extent
required by and in accordance with GAAP.
4.16 MATERIAL CONTRACTS. Except as disclosed in Section 4.16 of the RFCG
------------------
Disclosure Memorandum or otherwise reflected in the RFCG Financial Statements,
none of the RFCG Entities, nor any of their respective Assets, businesses, or
operations, is a party to, or is
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<PAGE>
bound or affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (ii) any Contract
relating to the borrowing of money by any RFCG Entity or the guarantee by any
RFCG Entity of any such obligation (other than Contracts evidencing trade
payables and Contracts relating to borrowings or guarantees made in the ordinary
course of business), (iii) any Contract which prohibits or restricts any RFCG
Entity from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
involving Intellectual Property (other than Contracts entered into in the
ordinary course with customers and "shrink-wrap" software licenses), (v) any
Contract relating to the provision of data processing, network communication, or
other technical services to any RFCG Entity, and (vi) any Contract relating to
the purchase or sale of any goods or the purchase of any services (other than
Contracts entered into in the ordinary course of business and involving payments
under any individual Contract not in excess of $50,000) (together with all
Contracts referred to in Sections 4.10 and 4.15(a), the "RFCG Contracts"). With
respect to each RFCG Contract and except as disclosed in Section 4.16 of the
RFCG Disclosure Memorandum: (i) the Contract is in full force and effect; (ii)
no RFCG Entity is in Default thereunder; (iii) no RFCG Entity has repudiated or
waived any material provision of any such Contract in any material respect; and
(iv) no other party to any such Contract is, to the Knowledge of RFCG, in
Default in any respect or has repudiated or waived any material provision
thereunder. All of the indebtedness of any RFCG Entity for money borrowed is
prepayable at any time by such RFCG Entity without penalty or premium.
4.17 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
-----------------
to the Knowledge of RFCG, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any RFCG Entity, or against any director or
employee benefit plan of any RFCG Entity, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, an RFCG Material Adverse Effect, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any RFCG Entity, that are reasonably likely to have,
individually or in the aggregate, an RFCG Material Adverse Effect. Section 4.17
of the RFCG Disclosure Memorandum contains a summary of all Litigation as of the
date of this Agreement to which any RFCG Entity is a party and which names a
RFCG Entity as a defendant or cross-defendant or for which any RFCG Entity has
any potential Liability (other than Liability for the fees and expenses of its
own counsel).
4.18 REPORTS. Since January 1, 1993, or the date of organization
-------
if later, each RFCG Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, an RFCG Material Adverse Effect). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the
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<PAGE>
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.19 STATEMENTS TRUE AND CORRECT. No statement, certificate, or other
---------------------------
writing furnished or to be furnished by any RFCG Entity, any Shareholder or any
Affiliate thereof to ICCE pursuant to this Agreement or any other document,
agreement, or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. All documents that any RFCG Entity, any Shareholder or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
4.20 ACCOUNTING, TAX AND REGULATORY MATTERS. No RFCG Entity or any
--------------------------------------
Shareholder or any Affiliate thereof has taken or agreed to take any action or
has any Knowledge of any fact or circumstance that is reasonably likely to (i)
prevent the Merger from qualifying for pooling-of-interests accounting treatment
(with the exception of cash distributions paid to Shareholders, which have been
disclosed to ICCE and with respect to which no representation is made in this
Section 4.20) or as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 8.1(a) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
4.21 INVESTMENT INTENTION. Each Shareholder is acquiring the shares of ICCE
--------------------
Common Stock to be issued pursuant to this Agreement for investment only, for
such Shareholder's own account and not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof or
participation therein. Each Shareholder is an "accredited investor" as such term
is defined in Rule 501(a) under the Securities Act. Each Shareholder understands
that the shares of ICCE Common Stock to be issued pursuant to this Agreement
have not been, and will not be, registered under the 1933 Act in reliance upon
the representations set forth herein.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ICCE
--------------------------------------
ICCE hereby represents and warrants to RFCG and the shareholders as
follows:
5.1 ORGANIZATION, STANDING, AND POWER. ICCE is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. ICCE is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except
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for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, an ICCE
Material Adverse Effect.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) ICCE has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of ICCE. This Agreement
represents a legal, valid, and binding obligation of ICCE, enforceable against
ICCE in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by ICCE, nor
the consummation by ICCE of the transactions contemplated hereby, nor compliance
by ICCE with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of ICCE's Articles of Incorporation or Bylaws, or (ii)
except as disclosed in Section 5.2 of the ICCE Disclosure Memorandum, constitute
or result in a Default under, or require any Consent pursuant to, or result in
the creation of any Lien on any Asset of any ICCE Entity under, any Contract or
Permit of any ICCE Entity other than those which are not reasonably likely to
have, individually or in the aggregate, an ICCE Material Adverse Effect, or,
(iii) subject to receipt of the requisite Consents referred to in Section
8.1(a), constitute or result in a Default under, or require any Consent pursuant
to, any Law or Order applicable to any ICCE Entity or any of their respective
material Assets (including any ICCE Entity or any RFCG Entity becoming subject
to or liable for the payment of any Tax or any of the Assets owned by any ICCE
Entity or any RFCG Entity being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws and applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by ICCE of the Merger and the other transactions
contemplated in this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of ICCE consists of (i) 45,000,000
shares of ICCE Common Stock, of which 4,371,429 shares are issued and
outstanding as of the date of this Agreement, and (ii) 5,000,000 shares of ICCE
Preferred Stock, none of which are issued and outstanding. All of the issued and
outstanding shares of ICCE Capital Stock are, and all of the
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shares of ICCE Common Stock to be issued in exchange for shares of RFCG Common
Stock upon consummation of the Merger, when issued in accordance with the terms
of this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the GBCC. None of the outstanding shares of ICCE
Capital Stock has been, and none of the shares of ICCE Common Stock to be issued
in exchange for shares of RFCG Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
shareholders of ICCE.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the ICCE Disclosure Memorandum, there are no shares of capital stock
or other equity securities of ICCE outstanding and no outstanding Equity Rights
relating to the capital stock of ICCE.
5.4 FINANCIAL STATEMENTS. Prior to the date of this Agreement, ICCE has
--------------------
delivered to RFCG the ICCE Preliminary Financial Statements. When delivered to
RFCG pursuant to Section 6.3, each of the ICCE Financial Statements (including,
in each case, any related notes) will (i) be prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements), (ii) fairly present in all
material respects the consolidated financial position of ICCE and its
Subsidiaries as at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount or
effect, (iii) in the case of the ICCE Audited Financial Statements, be
accompanied by a signed report of independent auditors expressing such
independent auditors' opinion as to the conformity of such financial statements
with GAAP in customary form, and (iv) in the case of the ICCE Audited Financial
Statements, not reflect a material adverse change in the financial position or
results of operations of ICCE and the ICCE Companies from that shown in the
Preliminary ICCE Financial Statements.
5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, except
------------------------------------
as disclosed in the ICCE Preliminary Financial Statements delivered prior to the
date of this Agreement or as disclosed in Section 5.5 of the ICCE Disclosure
Memorandum, (i) there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, an ICCE
Material Adverse Effect, and (ii) the ICCE Entities have not taken any action,
or failed to take any action, prior to the date of this Agreement, which action
or failure, if taken after the date of this Agreement, would represent or result
in a material breach or violation of any of the covenants and agreements of ICCE
provided in Article 6.
5.6 COMPLIANCE WITH LAWS. Each ICCE Entity has in effect all Permits
--------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, an ICCE
Material Adverse Effect, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, an ICCE Material Adverse Effect. None of the
ICCE Entities:
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(a) is in Default under its Articles of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for Defaults which
are not reasonably likely to have, individually or in the aggregate, an
ICCE Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any ICCE Entity is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, (ii)
threatening to revoke any Permits, the revocation of which is reasonably
likely to have, individually or in the aggregate, an ICCE Material Adverse
Effect, or (iii) requiring any ICCE Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment or memorandum of understanding, or to adopt any Board resolution
or similar undertaking, which restricts materially the conduct of its
business.
5.7 LEGAL PROCEEDINGS. There is no Litigation instituted or pending, or,
-----------------
to the Knowledge of ICCE, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability of
an unfavorable outcome) against any ICCE Entity, or against any director or
employee benefit plan of any ICCE Entity, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in the
aggregate, an ICCE Material Adverse Effect, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
outstanding against any ICCE Entity, that are reasonably likely to have,
individually or in the aggregate, an ICCE Material Adverse Effect.
5.8 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument or
---------------------------
other writing furnished or to be furnished by any ICCE Entity or any Affiliate
thereof to RFCG pursuant to this Agreement or any other document, agreement or
instrument referred to herein contains or will contain any untrue statement of
material fact or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. All documents that any ICCE Entity or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
5.9 AUTHORITY OF SUB. Sub is a corporation duly organized, validly
----------------
existing and in good standing under the Laws of the State of New Jersey as a
wholly owned Subsidiary of ICCE. The authorized capital stock of Sub consists of
1,000 shares of Sub Common Stock, 100 shares of which are validly issued and
outstanding, fully paid and nonassessable and are owned by ICCE. Sub has the
corporate power and authority necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Sub. This Agreement represents a legal, valid,
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and binding obligation of Sub, enforceable against Sub in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought). The
execution of this Agreement by ICCE represents the written consent by ICCE, as
the sole shareholder of Sub, to approval of this Agreement by the shareholders
of Sub without a meeting pursuant to Section 14A:5-6 of the NJBCA.
5.10 ACCOUNTING, TAX AND REGULATORY MATTERS. No ICCE Entity or any
--------------------------------------
Affiliate thereof has taken or agreed to take any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 8.1(a) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
6.1 AFFIRMATIVE COVENANTS OF RFCG. From the date of this Agreement until
-----------------------------
the earlier of the Effective Time or the termination of this Agreement, unless
the prior written consent of ICCE shall have been obtained, and except as
otherwise expressly contemplated herein, RFCG shall and shall cause each of its
Subsidiaries to (a) operate its business only in the usual, regular, and
ordinary course, (b) preserve intact its business organization and Assets and
maintain its rights and franchises, and (c) take no action which would (i)
materially adversely affect the ability of any Party to obtain any Consents
required for the transactions contemplated hereby without imposition of a
condition or restriction of the type referred to in the last sentences of
Section 8.1(a) or 8.1(b), or (ii) materially adversely affect the ability of any
Party to perform its covenants and agreements under this Agreement.
6.2 NEGATIVE COVENANTS OF RFCG. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of ICCE shall have been obtained, and except as otherwise
expressly contemplated herein, RFCG covenants and agrees that it will not do or
agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following:
(a) amend the Certificate of Incorporation, Bylaws or other governing
instruments of any RFCG Entity, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a RFCG Entity to another RFCG
Entity) in excess of an aggregate of $50,000 (for the RFCG Entities on a
consolidated basis) except in the ordinary course of the business of RFCG
Subsidiaries consistent with past practices, or impose, or
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suffer the imposition, on any Asset of any RFCG Entity of any Lien or
permit any such Lien to exist (other than in connection with Liens in
effect as of the date hereof that are disclosed in the RFCG Disclosure
Memorandum), or permit the balance sheet of RFCG dated as of the Closing
Date to reflect indebtedness (other than trade accounts payable arising out
of bona fide purchases of goods and services in the ordinary course of
business of RFCG) in excess of $75,000; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any RFCG Entity, or declare or pay any dividend or
make any other distribution in respect of RFCG's capital stock, provided
that RFCG may (to the extent legally and contractually permitted to do so),
but shall not be obligated to, declare and pay cash dividends on the shares
of RFCG Common Stock in accordance with the practice disclosed in Section
6.2(c) of the RFCG Disclosure Memorandum; or
(d) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of RFCG Common Stock or any other
capital stock of any RFCG Entity, or any stock appreciation rights, or any
option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any RFCG
Entity or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of RFCG Common Stock, or sell,
lease, mortgage or otherwise dispose of or otherwise encumber (x) any
shares of capital stock of any RFCG Subsidiary (unless any such shares of
stock are sold or otherwise transferred to another RFCG Entity) or (y) any
Assets having a book value in excess of $10,000 in the aggregate other than
in the ordinary course of business for reasonable and adequate
consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of one
year or less, purchase any securities or make any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any Assets, in any Person other than a wholly
owned RFCG Subsidiary, or otherwise acquire direct or indirect control over
any Person; or
(g) grant any increase in compensation or benefits to the employees or
officers of any RFCG Entity, except in accordance with past practice
disclosed in Section 6.2(g) of the RFCG Disclosure Memorandum or as
required by Law; pay any severance or termination pay or any bonus other
than pursuant to written policies or written Contracts in effect on the
date of this Agreement and disclosed in Section 6.2(g) of the RFCG
Disclosure Memorandum; and enter into or amend any severance agreements
with officers of any RFCG Entity; grant any increase in fees or other
compensation or other benefits to directors
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of any RFCG Entity except in accordance with past practice disclosed in
Section 6.2(g) of the RFCG Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any RFCG
Entity and any Person (unless such amendment is required by Law) that the
RFCG Entity does not have the unconditional right to terminate without
Liability, at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any RFCG Entity or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any RFCG Entity other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except as
required by Law, the terms of such plans or consistent with past practice;
or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any RFCG Entity
for material money damages or restrictions upon the operations of any RFCG
Entity; or
(l) enter into, modify, amend or terminate any material Contract or
waive, release, compromise or assign any material rights or claims.
6.3 COVENANTS OF ICCE. From the date of this Agreement until the earlier
-----------------
of the Effective Time or the termination of this Agreement, unless the prior
written consent of RFCG shall have been obtained, and except as otherwise
expressly contemplated herein, ICCE covenants and agrees that it shall (a)
continue to conduct its business and the business of its Subsidiaries in a
manner designed in its reasonable judgment, to enhance the long-term value of
the ICCE Common Stock and the business prospects of the ICCE Entities, (b) take
no action which would (i) materially adversely affect the ability of any Party
to obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentences of Section 8.1(a) or 8.1(b), or (ii) materially adversely affect the
ability of any Party to perform its covenants and agreements under this
Agreement; provided, that the foregoing shall not prevent any ICCE Entity from
acquiring any Assets or other businesses or from discontinuing or disposing of
any of its Assets or business if such action is, in the judgment of ICCE,
desirable in the conduct of the business of ICCE and its Subsidiaries; (c) it
will not, prior to the Effective Time, without the prior written consent of
RFCG, which consent shall not be unreasonably withheld, amend the Articles of
Incorporation or Bylaws of ICCE, in each case in any manner adverse to the
holders of RFCG Common Stock as compared to rights of holders of ICCE Common
Stock generally as of the date of this Agreement, and (d) it will, as soon as
practicable after the date of this Agreement and in any event prior to the
Effective Time, deliver to RFCG the ICCE Audited Financial Statements. ICCE
further covenants and agrees that it will,
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as soon as practicable, either before or after the Effective Time, remove the
Shareholders from the personal guarantees set forth on Schedule 6.3
6.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written notice
----------------------------
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, an RFCG Material Adverse Effect or an ICCE Material Adverse Effect,
as applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same.
ARTICLE 7
ADDITIONAL AGREEMENTS
---------------------
7.1 APPLICATIONS; ANTITRUST NOTIFICATION. ICCE shall promptly prepare and
------------------------------------
file, and RFCG and the Shareholders shall cooperate in the preparation and,
where appropriate, filing of, applications with all Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement seeking
the requisite Consents necessary to consummate the transactions contemplated by
this Agreement. To the extent required by the HSR Act, each of the Parties will
promptly file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for the
transactions contemplated hereby and any supplemental or additional information
which may reasonably be requested in connection therewith pursuant to the HSR
Act and will comply in all material respects with the requirements of the HSR
Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
7.2 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, RFCG and Sub shall execute and file the
Certificate of Merger with the Secretary of State of the State of New Jersey in
connection with the Closing.
7.3 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 8; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use, and
shall cause each of its Subsidiaries to use, its reasonable efforts to obtain
all Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
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7.4 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party shall keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties of it and its
Subsidiaries and of their respective financial and legal conditions as the other
Party reasonably requests, provided that such investigation shall be reasonably
related to the transactions contemplated hereby and shall not interfere
unnecessarily with normal operations. No investigation by a Party shall affect
the representations and warranties of the other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other Party.
(c) Neither party shall, for a period of two years after the date of
this Agreement, directly or indirectly, through one or more intermediaries or
otherwise (i) solicit, direct away or appropriate, or attempt to solicit, direct
away or appropriate any customer or client served by the other Party where
contact with such customer or client was made prior to the date hereof for the
purpose of providing a service or product to such customer or client which is
the same type of service or product offered or provided prior to the date
hereof, or (ii) employ, induce, solicit for employment, or assist others in
employing, inducing or soliciting for employment any individual who is at any
time during such period an employee of the other Party for the purpose of
providing services that are the same or similar to the types of services offered
or engaged in by the other Party as of the date hereof.
(d) RFCG shall use its reasonable efforts to exercise its rights under
confidentiality agreements entered into with Persons which were considering an
Acquisition Proposal with respect to RFCG to preserve the confidentiality of the
information relating to the RFCG Entities provided to such Persons and their
Affiliates and Representatives.
7.5 PRESS RELEASES. Prior to the Effective Time, RFCG and ICCE shall
--------------
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 7.5
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
7.6 CERTAIN ACTIONS. Except with respect to this Agreement and the
---------------
transactions contemplated hereby, no RFCG Entity nor any Shareholder nor any
Affiliate thereof nor any Representatives thereof retained by any RFCG Entity
shall directly or indirectly solicit any Acquisition Proposal by any Person. No
RFCG Entity, any Shareholder or any Affiliate or
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Representative thereof shall furnish any non-public information that it is not
legally obligated to furnish, negotiate with respect to, or enter into any
Contract with respect to, any Acquisition Proposal, but RFCG may communicate
information about such an Acquisition Proposal to its shareholders if and to the
extent that it is required to do so in order to comply with its legal
obligations as advised by outside counsel. Each Shareholder and RFCG shall
promptly advise ICCE following the receipt of any Acquisition Proposal and the
details thereof, and advise ICCE of any developments with respect to such
Acquisition Proposal promptly upon the occurrence thereof. Each Shareholder and
RFCG shall (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (ii) direct and use its reasonable
efforts to cause all of its Affiliates and Representatives not to engage in any
of the foregoing.
7.7 CERTAIN TAX RETURNS OF RFCG. For income tax purposes, (i) the status
---------------------------
of RFCG as an "S corporation" will be terminated by the Merger, (ii) RFCG's
final S corporation Tax year will end at the close of the day before the day on
which occurs the Effective Time, and (iii) a new Tax year for RFCG will begin on
the day on which the Effective Time occurs. The Shareholders shall prepare and
cause to be filed all income Tax Returns of RFCG (including IRS Form 1120S and
Schedule K-1(1120S) and similar state Tax Returns) for the Tax year ending on
the day before the day on which the Effective Time occurs, as well as for all
prior Tax years (if not filed before the Effective Time). ICCE agrees to
cooperate (and to cause RFCG to cooperate) with the Shareholders to the extent
reasonably required after the Effective Time in connection with (i) the
preparation, execution, and filing of all such Tax Returns and other Tax
documents with respect to RFCG's final Tax year as an S corporation and any
prior Tax year of RFCG, (ii) contests concerning the application of any Tax or
the amount of Tax due for any such Tax year, and (iii) audits and other
proceedings conducted by any taxing authority with respect to any such Tax
period. All income Tax Returns of RFCG filed after the Effective Time for Tax
years beginning before the Effective Time shall be based on the same accounting
methods and elections as used for RFCG's Tax year immediately preceding the
period of such Tax Return, except as otherwise agreed upon by ICCE and the
Shareholders.
7.8 SHAREHOLDER RELEASES. Except as set forth in Section 7.8 of the RFCG
--------------------
Disclosure Memorandum, each Shareholder hereby releases, remises, and forever
discharges each RFCG Entity and their respective Representatives, Affiliates,
and insurers, and their respective successors and assigns, and each of them
(hereinafter individually and collectively, the "Releasees") of and from any and
all claims, demands, debts, accounts, covenants, agreements, obligations, costs,
expenses, actions or causes of action of every nature, character or description,
now accrued or which may hereafter accrue, without limitation of law, equity or
otherwise, based in whole or in part on any facts, conduct, activities,
transactions, events or occurrences known or unknown, which have or allegedly
have existed, occurred, happened, arisen or transpired from the beginning of
time to the Effective Time (the "Released Claims"). Each Shareholder represents
and warrants that no Released Claim released herein has been assigned,
expressly, impliedly, or by operation of Law, and that all Released Claims of
such Shareholder released herein are owned by such Shareholder, who has the sole
authority to release them. Each Shareholder agrees that such holder shall
forever refrain and forebear from commencing, instituting or prosecuting any
lawsuit
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action or proceeding, judicial, administrative, or otherwise, or otherwise
attempting to collect or enforce any Released Claims which are released and
discharged herein.
7.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
----------------------------
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify treatment as a pooling of interests
for accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
7.10 PARTICIPATION IN OPTION PLAN. After ICCE becomes subject to the 1934
----------------------------
Act, the employees of RFCG shall be entitled to participate in ICCE's options
plans and programs on a basis comparable to similarly situated employees of
other ICCE Subsidiaries.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations of
---------------------------------------
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 11.6:
(a) REGULATORY APPROVALS. All Consents of, filings and registrations
--------------------
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of ICCE would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement that, had such condition or requirement been known, ICCE would
not, in its reasonable judgment, have entered into this Agreement.
(b) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those
referred to in Section 8.1(b)) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, an RFCG Material
Adverse Effect or an ICCE Material Adverse Effect, as applicable. No Consent
so obtained which is necessary to consummate the transactions contemplated
hereby shall be conditioned or restricted in a manner which in the reasonable
judgment of the Board of Directors of ICCE would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement that, had such condition or requirement been known, ICCE would
not, in its reasonable judgment, have entered into this Agreement.
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(c) LEGAL PROCEEDINGS. No court or governmental or regulatory
-----------------
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes
illegal consummation of the transactions contemplated by this Agreement.
(d) REGISTRATION RIGHTS. Each of the Shareholders shall have executed
-------------------
and delivered an agreement evidencing such Shareholder's agreement to be
bound by the provisions of the Registration Rights Agreement to which certain
existing shareholders of ICCE are party, in the form attached hereto as
Exhibit 1 (the "Registration Rights Joinder Agreement")1.
(e) EMPLOYMENT AGREEMENTS. Each of the Shareholders shall have
---------------------
executed and delivered to ICCE an employment agreement in substantially the
form of Exhibit 22 (collectively, the "Employment Agreements").
8.2 CONDITIONS TO OBLIGATIONS OF ICCE. The obligations of ICCE to perform
---------------------------------
this Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by ICCE pursuant to Section 11.6(a):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
8.2(a), the accuracy of the representations and warranties of RFCG and the
Shareholders set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Effective Time with the same effect as though
all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties set forth in Section 4.4 shall be true and
correct (except for inaccuracies which are de minimus in amount). The
representations and warranties set forth in Section 4.20 shall be true and
correct in all material respects. There shall not exist inaccuracies in the
representations and warranties of RFCG and the Shareholders set forth in this
Agreement (including the representations and warranties set forth in Sections
4.4 and 4.20) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, an RFCG Material Adverse Effect; provided that,
for purposes of this sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse Effect"
or to the "Knowledge" of any Person shall be deemed not to include such
qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of RFCG and the Shareholders to be performed and
complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all material respects.
(c) CERTIFICATES. Each of the Shareholders and RFCG shall have
------------
delivered to ICCE (i) a certificate, dated as of the Effective Time and
signed on its behalf by its chief
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executive officer and its chief financial officer, to the effect that the
conditions set forth in Section 8.1 as relates to RFCG and in Section 8.2(a)
and 8.2(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by RFCG's Board of Directors and shareholders evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as ICCE and its counsel
shall request.
(d) OPINION OF COUNSEL. ICCE shall have received an opinion of Saul,
------------------
Ewing, Remick & Saul, counsel to RFCG and the Shareholders, dated as of the
Closing, in form reasonably satisfactory to ICCE, as to the matters set forth
in Exhibit 33.
(e) NON-SOLICITATION AND NON-COMPETITION AGREEMENTS. Each of the
-----------------------------------------------
Shareholders shall have executed and delivered to ICCE a non-solicitation and
non-competition agreement in substantially the form of Exhibit 44
(collectively, the "Non-Solicitation Agreements").
(f) JOINDER OF SHAREHOLDERS AGREEMENT. Each of the Shareholders shall
---------------------------------
have executed and delivered to ICCE an agreement in substantially the form of
Exhibit 55 evidencing such Shareholder's agreement to be bound by the
provisions of the Shareholders Agreement to which existing shareholders of
ICCE are party (the "Shareholders Joinder Agreement").
8.3 CONDITIONS TO OBLIGATIONS OF RFCG AND THE SHAREHOLDERS. The
------------------------------------------------------
obligations of RFCG and the Shareholders to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by RFCG pursuant
to Section 11.6(b):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
------------------------------
8.3(a), the accuracy of the representations and warranties of ICCE set forth
in this Agreement shall be assessed as of the date of this Agreement and as
of the Effective Time with the same effect as though all such representations
and warranties had been made on and as of the Effective Time (provided that
representations and warranties which are confined to a specified date shall
speak only as of such date). The representations and warranties of ICCE set
forth in Section 5.10 shall be true and correct in all material respects.
There shall not exist inaccuracies in the representations and warranties of
ICCE set forth in this Agreement (including the representations and
warranties set forth in Section 5.10) such that the aggregate effect of such
inaccuracies has, or is reasonably likely to have, an ICCE Material Adverse
Effect; provided that, for purposes of this sentence only, those
representations and warranties which are qualified by references to
"material" or "Material Adverse Effect" or to the "Knowledge" of any Person
shall be deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of ICCE to be performed and complied with pursuant
to this
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Agreement and the other agreements contemplated hereby prior to the Effective
Time shall have been duly performed and complied with in all material
respects.
(c) CERTIFICATES. ICCE shall have delivered to RFCG (i) a
------------
certificate, dated as of the Effective Time and signed on its behalf by its
Chairman of the Board and its chief financial officer, to the effect that the
conditions set forth in Section 8.1 as relates to ICCE and in Section 8.3(a)
and 8.3(b) have been satisfied, and (ii) certified copies of resolutions duly
adopted by ICCE's Board of Directors and Sub's Board of Directors and sole
shareholder evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as RFCG and its counsel shall request.
(d) OPINION OF COUNSEL. RFCG shall have received an opinion of Alston
------------------
& Bird LLP, counsel to ICCE, dated as of the Effective Time, in form
reasonably acceptable to RFCG, as to the matters set forth in Exhibit 66.
ARTICLE 9
INDEMNIFICATION
---------------
9.1 AGREEMENT OF INDEMNITORS TO INDEMNIFY. (a) Subject to the terms and
-------------------------------------
conditions of this Article 9, the Shareholder jointly and severally agree to
indemnify, defend, and hold harmless ICCE, RFCG and their respective officers,
directors, shareholders, controlling persons, Affiliates and Representatives
(the "ICCE Indemnitees"), and each of them, from, against, for and in respect of
any and all Losses asserted against, or paid, suffered or incurred by, an ICCE
Indemnitee and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any Shareholder or RFCG contained in or made
pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by Indemnitors in connection herewith and for purposes of this
Section 9.1(a) any qualification of such representations and warranties by
reference to the materiality of matters stated therein or as to matters
having or not having a "Material Adverse Effect," and any limitation of such
representations and warranties as being "to the knowledge of," or "known to"
or words of similar effect, shall be disregarded, in determining any
inaccuracy, untruth, incompleteness or breach thereof; and
(ii) a breach of or failure to perform any covenant or agreement of
the Shareholders or RFCG made in this Agreement.
(b) Subject to the terms and conditions of this Article 9, ICCE
agrees to indemnify, defend, and hold harmless the Shareholders from, against,
for and in respect of any and all Losses asserted against, or paid, suffered or
incurred by, a Shareholder and resulting from, based upon, or arising out of:
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(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of ICCE contained in or made pursuant to this
Agreement or in any certificate, Schedule, or Exhibit furnished by
Indemnitors in connection herewith and for purposes of this Section 9.1(b)
any qualification of such representations and warranties by reference to the
materiality of matters stated therein or as to matters having or not having a
"Material Adverse Effect," and any limitation of such representations and
warranties as being "to the knowledge of," or "known to" or words of similar
effect, shall be disregarded, in determining any inaccuracy, untruth,
incompleteness or breach thereof; and
(ii) a breach of or failure to perform any covenant or agreement of
ICCE made in this Agreement.
9.2 PROCEDURES FOR INDEMNIFICATION.
------------------------------
(a) An Indemnification Claim shall be made by an Indemnitee by
delivery of a written notice to the Indemnitor Representative (as defined in
Section 9.10 below) requesting indemnification and specifying the basis on which
indemnification is sought and the amount of asserted Losses and, in the case of
a Third Party Claim, containing (by attachment or otherwise) such other
information as such Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 9.3 shall be observed by the Indemnitee and the
Indemnitor Representative.
(c) If the Indemnification Claim involves a matter other than a Third
Party Claim, the Indemnitor Representative shall have 30 days to object to such
Indemnification Claim by delivery of a written notice of such objection to such
Indemnitee specifying in reasonable detail the basis for such objection. Failure
to timely so object shall constitute a final and binding acceptance of the
Indemnification Claim by the Indemnitor Representative on behalf of all
Indemnitors, and the Indemnification Claim shall be paid in accordance with
subsection (d) hereof.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between the Indemnitor Representative and the Indemnitee or
by an arbitration award or by any other final adjudication, the Indemnitors
shall pay the amount of such Indemnification Claim within ten days of the date
such amount is determined. In the event that the Shareholders are the
Indemnitors that are required to pay an Indemnification Claim, if the
Shareholders beneficially own shares of ICCE Common Stock as of such date, the
Shareholders shall, if so required by ICCE, pay the amount of such
Indemnification Claim by surrender to ICCE of such number of shares of ICCE
Common Stock as shall equal the quotient obtained by dividing the amount of such
Indemnification Claim by the amount set forth in Section 9.2 of the ICCE
Disclosure Memorandum; provided, that if the Shareholders do not beneficially
own a sufficient number of shares of ICCE Common Stock to pay in full the amount
of such Indemnification Claim by surrender of such shares as provided in the
preceding clause of this sentence, the Shareholders shall surrender to ICCE such
number of shares of ICCE Common Stock as such Shareholders beneficially own and
shall pay any remaining balance of the Indemnification Amount in cash.
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<PAGE>
9.3 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
------------------
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor Representative written
notice of a Third Party Claim promptly after receipt by the Indemnitee of
notice thereof, and the Indemnitor Representative, on behalf of the
Indemnitors, may undertake the defense, compromise and settlement thereof by
representatives of its own choosing reasonably acceptable to the Indemnitee.
The failure of the Indemnitee to notify the Indemnitor Representative of such
claim shall not relieve the Indemnitors of any liability that they may have
with respect to such claim except to the extent the Indemnitor Representative
demonstrates that the defense of such claim is prejudiced by such failure.
The assumption of the defense, compromise and settlement of any such Third
Party Claim by the Indemnitor Representative shall be an acknowledgment of
the obligation of the Indemnitors to indemnify the Indemnitee with respect to
such claim hereunder unless the Indemnitors provide notice otherwise at the
time such defense is assumed. If the Indemnitee desires to participate in,
but not control, any such defense, compromise and settlement, it may do so at
its sole cost and expense. If, however, the Indemnitor Representative fails
or refuses to undertake the defense of such Third Party Claim within ten (10)
days after written notice of such claim has been given to the Indemnitor
Representative by the Indemnitee, the Indemnitee shall have the right to
undertake the defense, compromise and settlement of such claim with counsel
of its own choosing. In the circumstances described in the preceding
sentence, the Indemnitee shall, promptly upon its assumption of the defense
of such claim, make an Indemnification Claim as specified in Section 9.2
which shall be deemed an Indemnification Claim that is not a Third Party
Claim for the purposes of the procedures set forth herein.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities under
the tax laws of the Indemnitee), the Indemnitee shall have the right to
control the defense, compromise and settlement of such Third Party Claim
undertaken by the Indemnitor Representative, and the costs and expenses of
the Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the Indemnitors hereunder. If the Indemnitee
shall elect to exercise such right, the Indemnitor Representative shall have
the right to participate in, but not control, the defense, compromise and
settlement of such Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitors under this Article 9 shall be made without the
prior written consent by or on behalf of the Indemnitor Representative, which
consent shall not be unreasonably withheld or delayed. Consent shall be
presumed in the case of settlements of $20,000 or less where the Indemnitor
Representative has not responded within five business days of notice of a
proposed settlement. If the Indemnitor Representative assumes the defense of
such a Third
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<PAGE>
Party Claim, (a) no compromise or settlement thereof may be effected by the
Indemnitor Representative without the Indemnitee's consent unless (i) there
is no finding or admission of any violation of law or any violation of the
rights of any person and no effect on any other claim that may be made
against the Indemnitee, (ii) the sole relief provided is monetary damages
that are paid in full by the Indemnitors, and (iii) the compromise or
settlement includes, as an unconditional term thereof, the giving by the
claimant or the plaintiff to the Indemnitee of a release, in form and
substance satisfactory to the Indemnitee, from all liability in respect of
such Third Party Claim, and (b) the Indemnitee shall have no liability with
respect to any compromise or settlement thereof effected without its consent.
(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may reasonably
be related to any such claim or action, shall provide access to the counsel,
accountants and other representatives of each party during normal business
hours to all properties, personnel, books, tax records, contracts,
commitments and all other business records of such other party and will
furnish to such other party copies of all such documents as may reasonably be
requested (certified, if requested).
9.4 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The rights of the Indemnitees
--------------------------------------
under this Article 9 are independent of and in addition to such rights and
remedies as the Indemnitees may have at law or in equity or otherwise based upon
any inaccuracy, untruth, incompleteness or breach of any representation or
warranty of any Indemnitor contained herein or in any certificate, schedule or
exhibit furnished by such party in connection herewith, or based upon the
failure of an Indemnitor to perform any covenant, agreement or undertaking
required by the terms hereof to be performed by such Indemnitor, including
without limitation the right to seek specific performance, recession or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
9.5 SURVIVAL. All representations, warranties and agreements of RFCG and
--------
the Shareholders and ICCE contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Closing notwithstanding
any investigation conducted with respect thereto or any knowledge acquired as to
the accuracy or inaccuracy of any such representation or warranty.
9.6 TIME LIMITATIONS. The Indemnitors will have no liability to the
Indemnitees under or in connection with a breach of any of the representations,
warranties, covenants or agreements made or to be performed by the Indemnitors
contained in this Agreement (other than the representations and warranties set
forth in Sections 4.2, 4.3, 4.9, 4.10, 4.12, 4.15, and 5.2, each of which shall
run for 45 days beyond the applicable statute of limitations with respect to
claims related to such representations and warranties) unless written notice
asserting an Indemnification Claim based thereon is given to the Indemnitor
Representative prior to the earlier of (i) 15 days following the issuance of
post-Merger audited financial statements for ICCE and its subsidiaries on a
consolidated basis which cover at least 30 days of post-Merger operations, and
(ii) the first anniversary of the Closing Date.
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9.7 LIMITATIONS AS TO AMOUNT.
------------------------
(a) Indemnitors shall have no liability with respect to the matters
described in Section 9.1 until the total of all Losses with respect thereto
exceeds the amount set forth in Section 9.7(a) of the ICCE Disclosure Memorandum
(the "Deductible") and then only for the amount by which such Losses exceeds the
Deductible. The limitations set forth in this Section shall not apply to any
intentional misrepresentation or breach of warranty of any Indemnitor or any
intentional failure to perform or comply with any covenant or agreement of any
Indemnitor, and the Indemnitors shall be liable for all Losses with respect
thereto.
(b) In no event shall the aggregate liability of the Indemnitors
under this Article 9 exceed the amount set forth in Section 9.7(b) of the ICCE
Disclosure Memorandum.
9.8 TAX EFFECT AND INSURANCE. The liability of the Indemnitors with
------------------------
respect to any Indemnification Claim shall be reduced by the tax benefit
actually realized and any insurance proceeds received by the Indemnitees as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax detriment actually suffered by the Indemnitees as a result of
such Losses. The amount of any such tax benefit or detriment shall be determined
by taking into account the effect, if any and to the extent determinable, of
timing differences resulting from the acceleration or deferral of items of gain
or loss resulting from such Losses and shall otherwise be determined so that
payment by the Indemnitors of the Indemnification Claim, as adjusted to give
effect to any such tax benefit or detriment, will make the Indemnitee as
economically whole as is reasonably practical with respect to the Losses upon
which the Indemnification Claim is based. Any dispute as to the amount of such
tax benefit or detriment shall be resolved by arbitration as provided in Section
of this Agreement.
9.9 SUBROGATION. Upon payment in full of any Indemnification Claim,
-----------
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitors
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
9.10 APPOINTMENT OF INDEMNITOR REPRESENTATIVE. Each Shareholder constitutes
----------------------------------------
and appoints Robert T. Criscuolo, Jr. as his or her true and lawful attorney-in-
fact to act for and on behalf of such Shareholder as Indemnitor Representative
in all matters relating to or arising out of this Article 9. Each Indemnitor
Representative shall act in all matters relating to or arising out of this
Article 9 and the Liability or asserted Liability of such Indemnitor hereunder,
including specifically, but without limitation, accepting and agreeing to the
Liability of such Indemnitor with respect to any Indemnification Claim,
objecting to any Indemnification Claim, disputing the Liability of such
Indemnitor, or the amount of such Liability, with respect to any Indemnification
Claim and prosecuting and resolving such dispute as herein provided, accepting
the defense, compromise and settlement of any Third Party Claim on behalf of
such Indemnitor or refusing to accept the same, settling and compromising the
Liability of such Indemnitor hereunder, instituting and prosecuting such actions
(including arbitration proceedings) as the Indemnitor Representative
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shall deem appropriate in connection with any of the foregoing, retaining
counsel, accountants, appraisers and other advisers in connection with any of
the foregoing, all for the account of the Indemnitor, such Indemnitor agreeing
to be fully bound by the acts, decisions and agreements of the Indemnitor
Representative taken and done pursuant to the authority herein granted. Each
Indemnitor hereby agrees to indemnify and to save and hold harmless the
Indemnitor Representative from any Liability incurred by the Indemnitor
Representative based upon or arising out of any act, whether of omission or
commission, of the Indemnitor Representative pursuant to the authority herein
granted, other than acts, whether of omission or commission, of the Indemnitor
Representative that constitute gross negligence or willful misconduct in the
exercise by the Indemnitor Representative of the authority herein granted.
ARTICLE 10
TERMINATION
-----------
10.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of RFCG,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of ICCE and RFCG; or
(b) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event of a material breach by
the other Party of any representation, warranty, covenant or agreement
contained in this Agreement which cannot be or has not been cured within 30
days after the giving of written notice to the breaching Party of such
breach; or
(c) By either Party (provided that the terminating Party is not then
in material breach of any representation, warranty, covenant, or other
agreement contained in this Agreement) in the event any Consent of any
Regulatory Authority required for consummation of the Merger and the other
transactions contemplated hereby shall have been denied by final
nonappealable action of such authority or if any action taken by such
authority is not appealed within the time limit for appeal; or
(d) By either Party in the event that the Merger shall not have been
consummated by August 31, 1997, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of
this Agreement by the Party electing to terminate pursuant to this Section
10.1(d).
10.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
10.2 and Article 11 and Section 7.4(b) shall survive any such termination and
abandonment, and (ii) a termination pursuant to Section 10.1(b) shall not
relieve
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the breaching Party from Liability for an uncured willful breach of a
representation, warranty, covenant, or agreement giving rise to such
termination.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 DEFINITIONS.
-----------
(a) Except as otherwise provided herein, the capitalized terms
set forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger, acquisition of
all of the stock or assets of, or other business combination involving the
acquisition of such Party or any of its Subsidiaries or the acquisition of
a substantial equity interest in, or a substantial portion of the assets
of, such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person; (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner of any
10% or greater equity or voting interest of such Person; or (iii) any other
Person for which a Person described in clause (ii) acts in any such
capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits delivered pursuant hereto and incorporated herein by
reference.
"ANCILLARY AGREEMENTS" shall mean the Employment Agreements, the
Non-Solicitation Agreements, the Shareholders Joinder Agreement and the
Registration Rights Joinder Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to
be executed by RFCG and Sub and filed with the Secretary of State of the
State of New Jersey relating to the Merger as contemplated by Section 1.1.
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"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant
to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of, default
under, contravention of, or conflict with, any Contract, Law, Order, or
Permit, (ii) any occurrence of any event that with the passage of time or
the giving of notice or both would constitute a breach or violation of,
default under, contravention of, or conflict with, any Contract, Law,
Order, or Permit, or (iii) any occurrence of any event that with or without
the passage of time or the giving of notice would give rise to a right of
any Person to exercise any remedy or obtain any relief under, terminate or
revoke, suspend, cancel, or modify or change the current terms of, or
renegotiate, or to accelerate the maturity or performance of, or to
increase or impose any Liability under, any Contract, Law, Order, or
Permit.
"EMPLOYEE LEASING" shall mean an arrangement whereby a client of
RFCG places some or all of its workforce onto the payroll of RFCG in a co-
employment relationship in which RFCG assumes responsibility for
administration of payroll, benefits, and other human resources activities
for the client, but does not include a temporary help arrangement, whereby
an organization hires its own employees and assigns them to a client to
support or supplement the client's workforce in special work situations,
such as employee absences, temporary skill shortages, seasonal workloads,
and special assignments and projects.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which
are administered, interpreted, or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. 9601 et seq.
("CERCLA"), the Resource Conservation and Recovery Act, as amended, 42
U.S.C. 6901 et seq. ("RCRA"), and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous
Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever relating
to, or securities or rights convertible into or
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exchangeable for, shares of the capital stock of a Person or by which a
Person is or may be bound to issue additional shares of its capital stock
or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 6, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this Agreement. Such Exhibits are
hereby incorporated by reference herein and made a part hereof, and may be
referred to in this Agreement and any other related instrument or document
without being attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic
substance (as those terms are defined by any applicable Environmental Laws)
and (ii) any chemicals, pollutants, contaminants, petroleum, petroleum
products, or oil (and specifically shall include asbestos requiring
abatement, removal, or encapsulation pursuant to the requirements of
governmental authorities and any polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"ICCE AUDITED FINANCIAL STATEMENTS" shall mean the consolidated
balance sheets of ICCE and the ICCE Companies as of December 31, 1996 and
1995, and consolidated statements of income, changes in shareholders'
equity and cash flows (including related notes and schedules, if any) for
the years ended December 31, 1996, 1995 and 1994, in each case reflecting
consummation of the Reorganization Merger on a pooling of interests basis.
"ICCE CAPITAL STOCK" shall mean, collectively, the ICCE Common
Stock, the ICCE Preferred Stock and any other class or series of capital
stock of ICCE.
"ICCE COMMON STOCK" shall mean the no par value common stock of
ICCE.
"ICCE COMPANIES" shall mean David C. Cooper & Associates, Inc.,
DCCA Professional Temporaries, Inc., EKT, Inc., and Infinity Enterprises,
Inc., together with ICCE Subsidiaries acquired after the date of this
Agreement.
"ICCE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "ICCE, Inc. Disclosure Memorandum" delivered prior to the date of
this Agreement to RFCG describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which
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such disclosure is being made. Information disclosed with respect to one
Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"ICCE ENTITIES" shall mean, collectively, ICCE, all ICCE
Subsidiaries and all predecessors thereto.
"ICCE FINANCIAL STATEMENTS" shall mean (i) the ICCE Audited
Financial Statements, and (ii) the consolidated balance sheets of ICCE
(including related notes and schedules, if any) and related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) with respect to periods ended subsequent to
December 31, 1996.
"ICCE MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of ICCE and its Subsidiaries, taken as a
whole, or (ii) the ability of ICCE to perform its obligations under this
Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement.
"ICCE PREFERRED STOCK" shall mean the no par value preferred
stock of ICCE.
"ICCE PRELIMINARY FINANCIAL STATEMENTS" shall mean the
preliminary and tentative drafts of consolidated balance sheets of ICCE and
the ICCE Companies as of December 31, 1996 and 1995, and consolidated
statements of income, changes in shareholders' equity and cash flows for
the three years ended December 31, 1996, in each case reflecting
consummation of the Reorganization Merger on a pooling of interests basis.
"ICCE SUBSIDIARIES" shall mean the Subsidiaries of ICCE, which
shall include the ICCE Companies from and after the date of consummation of
the Reorganization Merger and any corporation or other organization
acquired as a Subsidiary of ICCE in the future and held as a Subsidiary by
ICCE at the Effective Time.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification
under Article 9.
"INDEMNITEES" shall mean the Shareholders or the ICCE
Indemnitees, as the case may be, as the party asserting an Indemnification
Claim.
"INDEMNITORS" shall mean the Shareholders or ICCE, as the case
may be, as the party against whom an Indemnification Claim is asserted.
"INDEMNITOR REPRESENTATIVE" shall mean ICCE, in the case of ICCE,
and Robert T. Criscuolo, Jr., in the case of the Shareholders.
"INTELLECTUAL PROPERTY" shall mean copyrights, patents,
trademarks, service marks, service names, trade names, applications
therefor, technology rights and licenses,
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computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including
references to such Person being aware of a particular matter) shall mean
those facts that are known or should reasonably have been known after due
inquiry by the chairman, president, chief financial officer, chief
accounting officer, chief operating officer, general counsel, any assistant
or deputy general counsel, or any senior, executive or other vice president
of such Person and the knowledge of any such persons obtained or which
would have been obtained from a reasonable investigation, and in the case
of RFCG, shall include the Knowledge of the Shareholders.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection
or deposit in the ordinary course of business) of any type, whether
accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (ii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination
or investigation, hearing, administrative or other proceeding relating to
or affecting a Party, its business, its Assets (including Contracts related
to it), or the transactions contemplated by this Agreement.
"LOSSES" shall mean any and all demands, claims, actions or
causes of action, assessments, losses, diminution in value, damages
(including special and consequential damages), liabilities, costs, and
expenses, including interest, penalties, cost of investigation and defense,
and reasonable attorneys' and other professional fees and expenses.
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"MATERIAL" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NJBCA" shall mean the New Jersey Business Corporation Act.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which
such Party or Subsidiary holds a security interest or other interest
(including an interest in a fiduciary capacity), and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in
which the Party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
"PARTY" shall mean either RFCG or ICCE, and "PARTIES" shall mean
both RFCG and ICCE.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a party
or that is or may be binding upon or inure to the benefit of any Person or
its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the
Federal Trade Commission, the United States Department of Justice, and all
other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over
the Parties and their respective Subsidiaries.
"REORGANIZATION AGREEMENT" shall mean that certain Agreement and
Plan of Reorganization, dated as of April 16, 1997, by and among ICCE, the
ICCE Companies, Cooper Acquisition, Inc., DCCA Acquisition, Inc., EKT
Acquisition, Inc. and Infinity Acquisition, Inc., as the same may be
amended from time to time.
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"REORGANIZATION MERGER" shall mean the "Merger" defined in the
Reorganization Agreement.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative engaged
by a Person.
"RFCG COMMON STOCK" shall mean the no par value common stock of
RFCG.
"RFCG DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Rylan Forbes Consulting Group, Inc. Disclosure Memorandum"
delivered prior to the date of this Agreement to ICCE describing in
reasonable detail the matters contained therein and, with respect to each
disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed
with respect to one Section shall not be deemed to be disclosed for
purposes of any other Section not specifically referenced with respect
thereto.
"RFCG ENTITIES" shall mean, collectively, RFCG and all
predecessors thereto.
"RFCG FINANCIAL STATEMENTS" shall mean (i) the balance sheets
(including related notes and schedules, if any) of RFCG as of June 30,
1997, and as of December 31, 1996 and 1995, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the six months ended June 30, 1997, and
for each of the three fiscal years ended December 31, 1996, 1995 and 1994,
and (ii) the balance sheets of RFCG (including related notes and schedules,
if any) and related statements of income, changes in shareholders' equity,
and cash flows (including related notes and schedules, if any) with respect
to periods ended subsequent to June 30, 1997.
"RFCG SUBSIDIARIES" shall mean the Subsidiaries of RFCG, which
shall include the RFCG Subsidiaries described in Section 4.5 and any
corporation or other organization acquired as a Subsidiary of RFCG in the
future and held as a Subsidiary by RFCG at the Effective Time.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"SUB COMMON STOCK" shall mean the $1.00 par value common stock of
Sub.
"SUBSIDIARIES" shall mean all those corporations, associations,
or other business entities of which the entity in question either (i) owns
or controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which 50%
or more of the outstanding equity securities is owned directly or
indirectly by its parent (provided, there shall not be included any such
entity the equity securities of which are owned or controlled in a
fiduciary capacity), (ii) in the case of partnerships, serves as a general
partner, (iii) in the case of a limited liability company,
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serves as a managing member, or (iv) otherwise has the ability to elect a
majority of the directors, trustees or managing members thereof.
"SURVIVING CORPORATION" shall mean RFCG as the surviving
corporation resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return,
or other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined or
unitary group that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposes or required to be withheld by the United
States or any state, county, local or foreign government or subdivision or
agency thereof, including any interest, penalties, and additions imposed
thereon or with respect thereto.
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
ASR 130 and 135 Section 3.6(b)
Certificates Section 3.4
Closing Section 1.2
Deductible Section 9.7(a)
Effective Time Section 1.3
Employment Agreements Section 8.1(e)
ERISA Affiliate Section 4.15(c)
Exchange Ratio Section 3.1(c)
ICCE Indemnitees Section 9.1(a)
Merger Section 1.1
Merger Shares Section 3.1(c)
Non-Solicitation Agreements Section 8.2(e)
Registration Rights Joinder Agreement Section 8.1(d)
Released Claims Section 7.8
Releasees Section 7.8
RFCG Benefit Plans Section 4.15
RFCG Contracts Section 4.16
RFCG ERISA Plan Section 4.15
RFCG Pension Plan Section 4.15
Shareholders Joinder Agreement Section 8.2(f)
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(c) Any singular term in this Agreement shall be deemed to
include the plural, and any plural term the singular. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation."
11.2 EXPENSES.
--------
(a) Except as otherwise provided in this Section 11.2, each of
the Parties shall bear and pay all direct costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including filing, registration and application fees, printing fees, and fees and
expenses of its own financial or other consultants, investment bankers,
accountants, and counsel; provided, that the fees and expenses of counsel for
RFCG incurred in connection with this Agreement and the transactions
contemplated hereby shall not exceed $25,000 (and any such fees and expenses
incurred in excess of such amount shall be the sole obligation of the
Shareholders).
(b) Nothing contained in this Section 11.2 shall constitute or
shall be deemed to constitute liquidated damages for the willful breach by a
Party of the terms of this Agreement or otherwise limit the rights of the
nonbreaching Party.
11.3 BROKERS AND FINDERS. Each of the Parties represents and warrants
-------------------
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
RFCG or any Shareholder or by ICCE, each of RFCG and the Shareholders and ICCE,
as the case may be, agrees to indemnify and hold the other Party harmless of and
from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may
----------
be amended by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after shareholder approval of
this Agreement has been obtained; provided, that after any such approval by the
holders of RFCG Common Stock, there shall be made no amendment that pursuant to
Section 14A:10-3 of the NJBCA requires further approval by such shareholders
without the further approval of such shareholders.
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11.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, ICCE, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by RFCG or the Shareholders, to waive or extend the time for the
compliance or fulfillment by RFCG or the Shareholders of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of ICCE under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of ICCE.
(b) Prior to or at the Effective Time, RFCG, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by ICCE, to waive or extend the time for the compliance or fulfillment
by ICCE of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of RFCG and the
Shareholders under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of RFCG.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
----------
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are required
-------
or permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid, or
by courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
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RFCG or
any Shareholder: Rylan Forbes Consulting Group, Inc.
379 Thornall Street
7th Floor
Edison, New Jersey 08837
Telecopy Number: (908) 205-1901
Attention: Robert T. Criscuolo, Jr. and
Joseph K. Stauffer
Copy to Counsel: Saul, Ewing, Remick & Saul
1055 Westlakes Drive
Suite 150
Berwyn, Pennsylvania 19312
Telecopy Number: (610) 651-5930
Attention: Patrick G. Oakes
ICCE: ICCE, Inc.
Five Concourse Parkway
Suite 2700
Atlanta, Georgia 30328
Telecopy Number: (770) 395-6521
Attention: Timothy Mann, Jr.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: David E. Brown, Jr.
11.9 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Georgia, except to the extent that
the Laws of the State of New Jersey shall govern the provisions of Articles 1, 2
and 3, in each case without regard to any applicable conflicts of Laws.
11.10 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all
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references to particular Articles or Sections shall mean and refer to the
referenced Articles and Sections of this Agreement.
11.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
11.13 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
IN WITNESS WHEREOF, each of the each of the other Parties has caused
this Agreement to be executed on its behalf by its duly authorized officers as
of the day and year first above written.
ICCE, INC.
BY: /s/ David C. Cooper
------------------------------
CHAIRMAN OF THE BOARD
RFCG MERGER SUBSIDIARY, INC.
BY: /s/ David C. Cooper
------------------------------
PRESIDENT
RYLAN FORBES CONSULTING GROUP, INC.
BY: /s/ Robert T. Criscuolo, Jr.
------------------------------
PRESIDENT
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THE SHAREHOLDERS:
/s/ Robert T. Criscuolo, Jr.
---------------------------- (SEAL)
ROBERT T. CRISCUOLO, JR.
/s/ Joseph K. Stauffer
---------------------------- (SEAL)
JOSEPH K. STAUFFER
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ICCE, INC.,
THE SHAREHOLDERS OF ICCE, INC.,
ASRI MERGER SUBSIDIARY, INC.,
ACSYS RESOURCES, INC.
AND
THE SHAREHOLDERS OF ACSYS RESOURCES, INC.
DATED AS OF SEPTEMBER 3, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
PARTIES................................................................... 1
PREAMBLE.................................................................. 1
ARTICLE 1 - TRANSACTIONS AND TERMS OF MERGER.............................. 1
1.1 Merger..................................................... 1
1.2 Time and Place of Closing.................................. 2
1.3 Effective Time............................................. 2
ARTICLE 2 - TERMS OF MERGER............................................... 2
2.1 Charter.................................................... 2
2.2 Bylaws..................................................... 2
2.3 Directors and Officers..................................... 2
2.4 Board of Directors of ICCE................................. 2
ARTICLE 3 - MANNER OF CONVERTING SHARES................................... 2
3.1 Conversion of Shares....................................... 2
3.2 Anti-Dilution Provisions................................... 3
3.3 Shares Held by ACSYS or ICCE............................... 3
3.4 Exchange of Shares......................................... 3
3.5 Rights of Former ACSYS Shareholders........................ 4
3.6 Legending of Securities; Pooling Restrictions.............. 4
3.7 Conversion of Stock Options................................ 5
3.8 Escrow Arrangements........................................ 6
3.9 Escrow Agreement........................................... 7
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF ACSYS AND THE
ACSYS SHAREHOLDERS................................................... 7
4.1 Organization, Standing, and Power.......................... 7
4.2 Authority of ACSYS; No Breach By Agreement................. 7
4.3 Authority of ACSYS Shareholders; No Breach By
Agreement.................................................. 8
4.4 Capital Stock.............................................. 9
4.5 Financial Statements....................................... 9
4.6 Absence of Undisclosed Liabilities......................... 10
4.7 Absence of Certain Changes or Events....................... 10
4.8 Tax Matters................................................ 11
4.9 Assets..................................................... 12
4.10 Intellectual Property...................................... 13
4.11 Environmental Matters...................................... 13
4.12 Compliance with Laws....................................... 14
4.13 Labor and Employment Matters............................... 15
4.14 Employee Benefit Plans..................................... 15
4.15 Material Contracts......................................... 17
4.16 Legal Proceedings.......................................... 17
4.17 Reports.................................................... 18
4.18 Statements True and Correct................................ 18
</TABLE>
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<TABLE>
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4.19 Accounting, Tax and Regulatory Matters...................... 18
4.20 Investment Intention........................................ 18
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF ICCE AND THE ICCE
SHAREHOLDERS.......................................................... 19
5.1 Organization, Standing, and Power........................... 19
5.2 Authority; No Breach By Agreement........................... 19
5.3 Capital Stock............................................... 20
5.4 Financial Statements........................................ 20
5.5 Absence of Undisclosed Liabilities.......................... 21
5.6 Absence of Certain Changes or Events........................ 21
5.7 Tax Matters................................................. 22
5.8 Assets...................................................... 23
5.9 Intellectual Property....................................... 24
5.10 Environmental Matters....................................... 24
5.11 Compliance With Laws........................................ 25
5.12 Legal Proceedings........................................... 25
5.13 Labor and Employment Matters................................ 26
5.14 Employee Benefit Plans...................................... 26
5.15 Statements True and Correct................................. 28
5.16 Authority of Sub............................................ 28
5.17 Accounting, Tax and Regulatory Matters...................... 28
5.18 Material Contracts.......................................... 28
5.19 Reports..................................................... 29
5.20 Authority of ICCE Shareholders; No Breach By
Agreement................................................... 29
ARTICLE 6 - CERTAIN AGREEMENTS............................................. 30
6.1 Filings with State Offices.................................. 30
6.2 Certain Tax Returns of ACSYS................................ 30
6.3 ACSYS Shareholder Releases.................................. 31
6.4 Accounting and Tax Treatment................................ 31
ARTICLE 7 - CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.............. 31
7.1 Conditions to Obligations of Each Party..................... 31
7.2 Conditions to Obligations of ICCE........................... 32
7.3 Conditions to Obligations of ACSYS and the
ACSYS Shareholders.......................................... 33
ARTICLE 8 - INDEMNIFICATION................................................ 34
8.1 Agreement of Indemnitors to Indemnify....................... 34
8.2 Procedures for Indemnification.............................. 36
8.3 Third Party Claims.......................................... 36
8.4 Indemnification Exclusive Remedy............................ 38
8.5 Survival.................................................... 38
8.6 Time Limitations............................................ 38
8.7 Limitations as to Amount.................................... 38
8.8 Tax Effect and Insurance.................................... 39
8.9 Escrow Claim................................................ 39
8.10 Subrogation................................................. 39
</TABLE>
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8.11 Appointment of Indemnitor Representatives................... 39
ARTICLE 9 - TERMINATION.................................................... 40
9.1 Termination................................................. 40
9.2 Effect of Termination....................................... 41
ARTICLE 10 - MISCELLANEOUS................................................. 41
10.1 Definitions................................................. 41
10.2 Expenses.................................................... 49
10.3 Brokers and Finders......................................... 49
10.4 Entire Agreement............................................ 50
10.5 Amendments.................................................. 50
10.6 Waivers..................................................... 50
10.7 Assignment.................................................. 51
10.8 Notices..................................................... 51
10.9 Governing Law............................................... 52
10.10 Counterparts................................................ 52
10.11 Captions; Articles and Sections............................. 52
10.12 Interpretations............................................. 52
10.13 Severability................................................ 52
SIGNATURES................................................................. 53
</TABLE>
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AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of September 3, 1997, by and among ICCE, INC. ("ICCE"), a
Georgia corporation; the shareholders of ICCE identified in Schedule I hereto
(the "ICCE Shareholders"); ASRI MERGER SUBSIDIARY, INC. ("Sub"), a Pennsylvania
corporation; ACSYS RESOURCES, INC. ("ACSYS"), a Pennsylvania corporation; and
the shareholders of ACSYS identified in Schedule II hereto (each an "ACSYS
Shareholder" and collectively the "ACSYS Shareholders").
PREAMBLE
--------
The ACSYS Shareholders, the ICCE Shareholders and the respective
Boards of Directors of ACSYS, Sub and ICCE are of the opinion that the
transactions described herein are in the best interests of the parties to this
Agreement and, in the case of ACSYS, Sub and ICCE, their respective
shareholders. This Agreement provides for the acquisition of ACSYS by ICCE
pursuant to the merger of Sub with and into ACSYS. At the effective time of
such merger, the outstanding shares of the capital stock of ACSYS shall be
converted into the right to receive shares of the common stock of ICCE (except
as provided herein). As a result, ACSYS Shareholders shall become shareholders
of ICCE and ACSYS shall continue to conduct its business and operations as a
wholly owned subsidiary of ICCE. The transactions described in this Agreement
are subject to the satisfaction of certain other conditions described in this
Agreement. It is the intention of the parties to this Agreement that the Merger
for federal income tax purposes shall qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code, and for accounting
purposes shall qualify for treatment as a pooling of interests.
Certain terms used in this Agreement are defined in Section 10.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants, and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
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1.1 MERGER. Subject to the terms and conditions of this Agreement,
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at the Effective Time, Sub shall be merged with and into ACSYS in accordance
with the provisions of Section 1921(a) of the PBCL and with the effect provided
in Section 1929 of the PBCL (the "Merger"). ACSYS shall be the Surviving
Corporation resulting from the Merger and shall become a wholly owned Subsidiary
of ICCE and shall continue to be governed by the Laws of the Commonwealth of
Pennsylvania. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of ACSYS, Sub and
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ICCE, by ICCE, as the sole shareholder of Sub, and by the ACSYS Shareholders, as
the sole shareholders of ACSYS.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
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contemplated hereby (the "Closing") will take place at 12:00 P.M. on the date
that the Effective Time occurs, or at such other time as the Parties, acting
through their authorized officers, may mutually agree. The Closing shall be
held at such location as may be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
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by this Agreement shall become effective on the date and at the time the
Certificate of Merger reflecting the Merger shall become effective with the
Secretary of State of the Commonwealth of Pennsylvania (the "Effective Time").
ARTICLE 2
TERMS OF MERGER
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2.1 CHARTER. The Articles of Incorporation of ACSYS in effect
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immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation until duly amended or repealed.
2.2 BYLAWS. The Bylaws of ACSYS in effect immediately prior to the
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Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of Sub in office
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immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Sub in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of the Surviving Corporation from and after
the Effective Time in accordance with the Bylaws of the Surviving Corporation.
2.4 BOARD OF DIRECTORS OF ICCE. Effective as of the Effective Time,
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the Board of Directors of ICCE shall take all action necessary to remove or
obtain the resignations of Edward K. Turner, Kevin W. Cole, Patricia Homrich and
Stephen Tutwiler as directors of ICCE, to elect Harry Sauer, Edward Baumstein
and John Ficquette to fill such vacancies, and to reduce the size of the Board
to seven.
ARTICLE 3
MANNER OF CONVERTING SHARES
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3.1 CONVERSION OF SHARES. Subject to the provisions of this Article
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3, at the Effective Time, by virtue of the Merger and without any action on the
part of ICCE, ACSYS,
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Sub or the shareholders of any of the foregoing, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of capital stock of ICCE issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
(b) Each share of Sub Common Stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into one share of ACSYS Common Stock.
(c) Subject to Section 3.8, each share of ACSYS Common Stock
(excluding shares held by any ACSYS Entity or any ICCE Entity) issued and
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to
receive a number of shares (the "Exchange Ratio") of ICCE Common Stock (the
"Merger Shares") equal to the quotient obtained by dividing 3,659,500 by the
number of shares of ACSYS Common Stock (excluding shares held by any ACSYS
Entity or any ICCE Entity) issued and outstanding immediately prior to the
Effective Time.
3.2 ANTI-DILUTION PROVISIONS. In the event ICCE changes the number
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of shares of ICCE Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted.
3.3 SHARES HELD BY ACSYS OR ICCE. Each of the shares of ACSYS Common
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Stock held by any ACSYS Entity or by any ICCE Entity shall be canceled and
retired at the Effective Time and no consideration shall be issued in exchange
therefor.
3.4 EXCHANGE OF SHARES. At the Closing, each ACSYS Shareholder shall
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surrender each certificate or certificates which represented shares of ACSYS
Common Stock immediately prior to the Effective Time (the "Certificates") and
shall promptly upon surrender thereof receive in exchange therefor the number of
whole Merger Shares issuable in respect of all shares of ACSYS Common Stock held
by such ACSYS Shareholder (rounded up to the next nearest share). If any
Certificate shall have been lost, stolen, mislaid or destroyed, upon receipt of
(i) an affidavit of that fact from the holder claiming such Certificate to be
lost, mislaid, stolen or destroyed, (ii) such bond, security or indemnity as
ICCE may reasonably require and (iii) any other documents necessary to evidence
and effect the bona fide exchange thereof, ICCE shall issue to such holder the
consideration into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. ICCE shall not be obligated to
deliver the consideration to which any former holder of ACSYS Common Stock is
entitled as a result of the Merger until such holder surrenders such holder's
Certificate or Certificates for exchange as provided in this Section 3.4. Any
other provision of this Agreement notwithstanding, neither ICCE nor the
Surviving Corporation shall be liable to a holder of ACSYS Common
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Stock for any amounts paid or property delivered in good faith to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
3.5 RIGHTS OF FORMER ACSYS SHAREHOLDERS. At the Effective Time, the
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stock transfer books of ACSYS shall be closed as to holders of ACSYS Common
Stock immediately prior to the Effective Time and no transfer of ACSYS Common
Stock by any such holder shall thereafter be made or recognized. Until
surrendered for exchange in accordance with the provisions of Section 3.4, each
Certificate theretofore representing shares of ACSYS Common Stock (other than
shares to be canceled pursuant to Section 3.3) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Sections 3.1 in exchange therefor. Whenever a
dividend or other distribution is declared by ICCE on the ICCE Common Stock, the
record date for which is at or after the Effective Time, the declaration shall
include dividends or other distributions on all shares of ICCE Common Stock
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of ICCE Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any Certificate until
such holder surrenders such Certificate for exchange as provided in Section 3.4.
However, upon surrender of such Certificate, both the ICCE Common Stock
certificate (together with all such undelivered dividends or other distributions
without interest) and any undelivered dividends payable in respect thereof
(without interest) shall be delivered and paid with respect to each share
represented by such Certificate.
3.6 LEGENDING OF SECURITIES; POOLING RESTRICTIONS.
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(a) The shares of ICCE Common Stock to be issued in connection
with this Agreement will be issued in a transaction exempt from registration
under the 1933 Act by reason of Section 4(2) thereof or Regulation D promulgated
thereunder, and ICCE is relying on the representations of the ACSYS Shareholders
with respect to such exemption. Each ACSYS Shareholder understands and agrees
that stop transfer instructions with respect to the shares of ICCE Common Stock
received by each ACSYS Shareholder pursuant to the Merger will be given to
ICCE's transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be offered, sold,
transferred or otherwise disposed of unless registered with the Securities
and Exchange Commission of the United States and the securities regulatory
authorities of applicable states or unless an exemption from such
registration is available.
The securities represented by this certificate are subject to the
provisions of an Agreement and Plan of Merger, dated as of September 3, 1997,
and may not be sold or otherwise transferred, except in accordance therewith.
Copies of such agreement may be obtained at the principal executive offices
of ICCE, Inc."
(b) Each ACSYS Shareholder agrees that he will not sell,
transfer, or otherwise dispose of his interests in, or reduce his risk relative
to, any of the shares of ICCE
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Common Stock into which his shares of ACSYS Common Stock are converted upon
consummation of the Merger until such time as ICCE notifies the undersigned that
the requirements of SEC Accounting Series Release Nos. 130 and 135 ("ASR 130 and
135") have been met. Each ACSYS Shareholder understands and agrees that stop
transfer instructions with respect to the shares of ICCE Common Stock received
by each ACSYS Shareholder pursuant to the Merger will be given to ICCE's
transfer agent and that there will be placed on the certificates for such
shares, or shares issued in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued
pursuant to a business combination which is accounted for as a
"pooling of interests" and may not be sold, nor may the owner
thereof reduce his risks relative thereto in any way, until such
time as ICCE, Inc. has published the financial results covering at
least 30 days of combined operations after the effective date of
the merger through which the business combination was effected."
In any decision by ICCE regarding the application of the limitations described
in such legend, the words "sell," "transfer," "otherwise dispose of" and "reduce
his risk" shall be construed and applied consistent with the criteria of ASR 130
and 135, Staff Accounting Bulletins 75 and 65 and interpretations thereof used
by the staff of the SEC.
(c) The foregoing legends will also be placed on any certificate
representing securities issued subsequent to the original issuance of the ICCE
Common Stock pursuant to the Merger as a result of any transfer of such shares
or any stock dividend, stock split, or other recapitalization as long as the
ICCE Common Stock issued to the undersigned pursuant to the Merger has not been
transferred in such manner to justify the removal of the legend therefrom. Upon
the request of a ACSYS Shareholder, ICCE shall cause the certificates
representing the shares of ICCE Common Stock issued to the undersigned in
connection with the Merger to be reissued free of any legend relating to
restrictions on transfer by virtue of ASR 130 and 135 as soon as practicable
after the requirements of ASR 130 and 135 have been met.
3.7 CONVERSION OF STOCK OPTIONS.
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(a) At the Effective Time, each ACSYS Option which is outstanding
at the Effective Time, whether or not exercisable, shall be converted into and
become rights with respect to ICCE Common Stock, and ICCE shall assume each
ACSYS Option, in accordance with the terms of the ACSYS stock option plan and
stock option agreement by which it is evidenced (collectively, "ACSYS Stock
Plan"), except that from and after the Effective Time, (i) ICCE and its Stock
Option Committee shall be substituted for ACSYS and the Committee of ACSYS's
Board of Directors (including, if applicable, the entire Board of Directors of
ACSYS) administering such ACSYS Stock Plan, (ii) each ACSYS Option assumed by
ICCE may be exercised solely for shares of ICCE Common Stock, (iii) the number
of shares of ICCE Common Stock subject to such ACSYS Option shall be equal to
the number of shares of ACSYS Common Stock subject to such ACSYS Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, and
(iv) the per share exercise price under each such ACSYS Option shall be adjusted
by dividing the per share exercise price under each such ACSYS Option by the
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Exchange Ratio and rounding up to the nearest cent. Notwithstanding the
provisions of clause (iii) of the preceding sentence, ICCE shall not be
obligated to issue any fraction of a share of ICCE Common Stock upon exercise of
ACSYS Options and any fraction of a share of ICCE Common Stock that otherwise
would be subject to a converted ACSYS Option shall represent the right to
receive a cash payment upon exercise of such converted ACSYS Option equal to the
product of such fraction and the difference between the market value of one
share of ICCE Common Stock at the time of exercise of such Option and the per
share exercise price of such Option. The market value of one share of ICCE
Common Stock at the time of exercise of an Option shall be the price determined
in accordance with the ICCE Stock Option Plan. In addition, notwithstanding
clauses (iii) and (iv) of the first sentence of this Section 3.7, each ACSYS
Option which is an "incentive stock option" (if any) shall be adjusted as
required by Section 424 of the Internal Revenue Code, and the regulations
promulgated thereunder, so as not to constitute a modification, extension or
renewal of the option, within the meaning of Section 424(h) of the Internal
Revenue Code. ACSYS and ICCE agree to take all necessary steps to effectuate the
foregoing provisions of this Section 3.7, including using its reasonable efforts
to obtain from each holder of a ACSYS Option any Consent or Contract that may be
deemed necessary or advisable in order to effect the transactions contemplated
by this Section 3.7.
(b) As soon as practicable after the Effective Time, ICCE shall
deliver to the participants in each ACSYS Stock Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants subject
to such ACSYS Stock Plan shall continue in effect on the same terms and
conditions (subject to the adjustments required by Section 3.7(a) after giving
effect to the Merger), and ICCE shall comply with the terms of each ACSYS Stock
Plan to ensure, to the extent required by, and subject to the provisions of,
such ACSYS Stock Plan, that ACSYS Options which qualified as incentive stock
options prior to the Effective Time (if any) continue to qualify as incentive
stock options after the Effective Time. At or prior to the Effective Time, ICCE
shall take all corporate action necessary to reserve for issuance sufficient
shares of ICCE Common Stock for delivery upon exercise of ACSYS Options assumed
by it in accordance with this Section 3.7.
3.8 ESCROW ARRANGEMENTS. In connection with the Closing, ICCE and
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the ACSYS Shareholders will establish (or cause to be established) an escrow
account (the "Escrow") to satisfy the maximum aggregate payments that may be
required to be paid to ICCE pursuant to Section 8.1(a) arising out of a breach
of the representations and warranties contained in Section 4.5 ("Escrow
Claims"). Each ACSYS Shareholder shall contribute to the Escrow the number of
shares (rounded up to the nearest share) equal to the product of each share of
ICCE Common Stock held by such ACSYS Shareholder at the Effective Time
multiplied by the quotient obtained by dividing 129,000 by the number of shares
of ACSYS Common Stock held by ACSYS Shareholders immediately prior to the
Effective Time (so that the Escrow shall contain 129,005 shares of ICCE Common
Stock, after giving effect to such rounding-up). Upon satisfaction of all
Escrow Claims, the remaining escrowed amount relating to the satisfied claim,
reduced by payment of the fees and expenses of the escrow agent, will be
returned to the ACSYS Shareholders in proportion to their respective
contributions of ICCE Common Stock to the Escrow.
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3.9 ESCROW AGREEMENT. In connection with the Closing, ICCE, each
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ACSYS Shareholder and the Indemnitor Representative for the ACSYS Shareholders
shall have executed and delivered to the other an escrow agreement (the "Escrow
Agreement"), which shall be in the form of Exhibit 1. The number of shares of
ICCE Common Stock set forth in Section 3.8 shall be issued pursuant to the terms
of the Escrow Agreement and held by Timothy Mann, Jr., as escrow agent.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACSYS AND THE ACSYS SHAREHOLDERS
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The ACSYS Shareholders and ACSYS, severally, not jointly, hereby
represent and warrant to ICCE as follows (except to the extent that any
exceptions are made with respect to these representations and warranties in the
ACSYS Disclosure Memorandum):
4.1 ORGANIZATION, STANDING, AND POWER. ACSYS is a corporation duly
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organized, validly existing, and in good standing under the Laws of the
Commonwealth of Pennsylvania, and has the corporate power and authority to carry
on its business as now conducted and to own, lease and operate its Assets.
ACSYS is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or the nature or conduct of its
business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, an ACSYS Material
Adverse Effect. The minute book and other organizational documents for ACSYS
have been made available to ICCE for its review and, except as disclosed in
Section 4.1 of the ACSYS Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments thereto and all proceedings of
the Board of Directors and shareholders thereof. Except as set forth in Section
4.1 of the ACSYS Disclosure Memorandum, ACSYS has no Subsidiaries.
4.2 AUTHORITY OF ACSYS; NO BREACH BY AGREEMENT.
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(a) ACSYS has the corporate power and authority necessary to
execute, deliver, and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of ACSYS. This
Agreement represents a legal, valid, and binding obligation of ACSYS,
enforceable against ACSYS in accordance with its terms (except in all cases as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, conservatorship, moratorium, or similar Laws
affecting the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought).
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(b) Neither the execution and delivery of this Agreement by
ACSYS, nor the consummation by ACSYS of the transactions contemplated hereby,
nor compliance by ACSYS with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of ACSYS's Certificate of
Incorporation or Bylaws or the certificate or articles of incorporation or
bylaws of any ACSYS Subsidiary or any resolution adopted by the board of
directors or the shareholders of any ACSYS Entity, or (ii) except as disclosed
in Section 4.2 of the ACSYS Disclosure Memorandum, constitute or result in a
Default under, or require any Consent pursuant to, or result in the creation of
any Lien on any Asset of any ACSYS Entity under, any Contract or Permit of any
ACSYS Entity other than those which are not reasonably likely to have,
individually or in the aggregate, an ACSYS Material Adverse Effect, or, (iii)
subject to receipt of the requisite Consents referred to in Section 7.1(a),
constitute or result in a Default under, or require any Consent pursuant to, any
Law or Order applicable to any ACSYS Entity or any of their respective material
Assets (including any ICCE Entity or any ACSYS Entity becoming subject to or
liable for the payment of any Tax or any of the Assets owned by any ICCE Entity
or any ACSYS Entity being reassessed or revalued by any Taxing authority).
(c) Other than in connection or compliance with the provisions of
the Securities Laws and applicable state corporate and securities Laws, and
other than Consents required from Regulatory Authorities, and other than notices
to or filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by ACSYS of the Merger and the other transactions
contemplated in this Agreement.
4.3 AUTHORITY OF ACSYS SHAREHOLDERS; NO BREACH BY AGREEMENT.
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(a) Each of the ACSYS Shareholders has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and each of the Ancillary Agreements to which such ACSYS Shareholder
is party and to perform its obligations under this Agreement and such Ancillary
Agreements. This Agreement represents a legal, valid, and binding obligation of
each ACSYS Shareholder, enforceable against each ACSYS Shareholder in accordance
with its terms (except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought). Upon the execution and
delivery by the ACSYS Shareholders of the Ancillary Agreements, the Ancillary
Agreements will constitute the legal, valid, and binding obligations of each
ACSYS Shareholder, enforceable against each ACSYS Shareholder in accordance with
their respective terms.
(b) Neither the execution and delivery of this Agreement by any
ACSYS Shareholder, nor the consummation by any ACSYS Shareholder of the
transactions contemplated hereby, nor compliance by any ACSYS Shareholder with
any of the provisions hereof, will (i) conflict with or result in a breach of
any provision of ACSYS's Certificate of Incorporation or Bylaws or the
certificate or articles of incorporation or bylaws of any ACSYS Subsidiary or
the
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governing instruments of any ACSYS Shareholder that is not a natural person, or
(ii) except as disclosed in Section 4.3 of the ACSYS Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any ACSYS Entity under, any
Contract or Permit of any ACSYS Entity other than those which are not reasonably
likely to have, individually or in the aggregate, an ACSYS Material Adverse
Effect, or, (iii) subject to receipt of the requisite Consents referred to in
Section 7.1(a), violate any Law or Order applicable to any ACSYS Shareholder or
to any ACSYS Entity or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, and applicable state corporate and securities Laws, and
other than Consents required from Regulatory Authorities, and other than notices
to or filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by the ACSYS Shareholders of the transactions contemplated
in this Agreement.
4.4 CAPITAL STOCK.
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(a) The authorized capital stock of ACSYS consists of 60,000,000
shares of ACSYS Common Stock, of which 9,747,760 shares are issued and
outstanding. All of the issued and outstanding shares of capital stock of ACSYS
are duly and validly issued and outstanding and are fully paid and nonassessable
under the PBCL. None of the outstanding shares of capital stock of ACSYS has
been issued in violation of any preemptive rights of the current or past
shareholders of ACSYS. In addition, there are issued and outstanding option
agreements between ACSYS and a number of persons whereby such persons will have
the right to purchase an aggregate of an additional 297,500 shares of ACSYS
Common Stock (a listing of which option agreements is contained in the ACSYS
Disclosure Memorandum) (the "ACSYS Options").
(b) Except as set forth in Section 4.4(a), there are no shares of
capital stock or other equity securities of ACSYS outstanding and no outstanding
Equity Rights relating to the capital stock of ACSYS. Each of the ACSYS
Shareholders is the owner of all right, title and interest (legal and
beneficial) in and to that number or amount of Shares set forth next to his name
in Section 4.4(a) of the ACSYS Disclosure Memorandum, free and clear of all
Liens. Collectively, the ACSYS Shareholders own all right, title and interest
(legal and beneficial) in and to all of the issued and outstanding shares of
ACSYS's capital stock. Except as specifically contemplated by this Agreement
and set forth in Section 4.4(b) of the ACSYS Disclosure Memorandum, no Person
has any Contract or any right or privilege (whether pre-emptive or contractual)
capable of becoming a Contract for the purchase from the ACSYS Shareholders of
any of the Shares, or any Contract or Equity Right for the purchase,
subscription or issuance of any securities of ACSYS.
4.5 FINANCIAL STATEMENTS. Each of the ACSYS Financial Statements
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(including, in each case, any related notes) has been (i) prepared in accordance
with GAAP applied on a
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consistent basis throughout the periods involved (except as may be indicated in
the notes to such financial statements) and (ii) fairly presented in all
material respects the financial position of ACSYS and its Subsidiaries as at the
respective dates and the results of operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount or effect.
4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
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Section 4.6 of the ACSYS Disclosure Memorandum, no ACSYS Entity has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, an ACSYS Material Adverse Effect, except Liabilities which are
accrued or reserved against in the balance sheets of ACSYS and its Subsidiaries
as of June 30, 1997, included in the ACSYS Financial Statements delivered prior
to the date of this Agreement or reflected in the notes thereto. No ACSYS
Entity has incurred or paid any Liability since June 30, 1997, except for such
Liabilities incurred or paid (i) in the ordinary course of business consistent
with past business practice and which are not reasonably likely to have,
individually or in the aggregate, an ACSYS Material Adverse Effect or (ii) in
connection with the transactions contemplated by this Agreement. Except as
disclosed in Section 4.6 of the ACSYS Disclosure Memorandum, no ACSYS Entity is
directly or indirectly liable, by guarantee, indemnity, or otherwise, upon or
with respect to, or obligated, by discount or repurchase agreement or in any
other way, to provide funds in respect to, or obligated to guarantee or assume
any Liability of any Person for any amounts in excess of $10,000 in the
aggregate.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997,
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except as disclosed in Section 4.7 of the ACSYS Disclosure Memorandum, (i) there
have been no events, changes, or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, an ACSYS Material Adverse
Effect, and (ii) the ACSYS Entities have not:
(a) incurred any additional debt obligation or other obligation
for borrowed money (other than indebtedness of a ACSYS Entity to another
ACSYS Entity) in excess of an aggregate of $50,000 (for the ACSYS Entities on
a consolidated basis) except in the ordinary course of the business
consistent with past practices; or
(b) repurchased, redeemed, or otherwise acquired or exchanged,
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any ACSYS Entity, or declared or paid any
dividend or made any other distribution in respect of ACSYS's capital stock;
or
(c) sold, leased, mortgaged or otherwise disposed of or otherwise
encumbered (x) any shares of capital stock of any ACSYS Subsidiary or (y) any
Assets having a book value in excess of $10,000 in the aggregate other than
in the ordinary course of business for reasonable and adequate consideration;
or
(d) purchased any securities or made any material investment,
either by purchase of stock of securities, contributions to capital, Asset
transfers, or purchase of any
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Assets, in any Person other than a wholly owned ACSYS Subsidiary, or
otherwise acquired direct or indirect control over any Person; or
(e) granted any increase in compensation or benefits to the
employees or officers of any ACSYS Entity, except in accordance with past
practice or as required by Law or entered into or amended any severance
agreements with officers of any ACSYS Entity; or
(f) made any significant change in any Tax or accounting methods
or systems of internal accounting controls, except to conform to changes in
Tax Laws or GAAP; or
(g) commenced any Litigation other than in accordance with past
practice or settled any Litigation involving any Liability of any ACSYS
Entity for material money damages or restrictions upon the operations of any
ACSYS Entity.
4.8 TAX MATTERS.
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(a) Except as set forth in Section 4.8(a) of the ACSYS Disclosure
Memorandum, since the incorporation of ACSYS, it has duly elected to be, and has
always been, treated as an S Corporation under Subchapter S of the Internal
Revenue Code with respect to Federal and all applicable state and local
jurisdictions, and has never been subject to Subchapter C of the Internal
Revenue Code. Such election was timely and validly made in all such
jurisdictions, remains in full force and effect, and has not been and will not
be revoked or terminated, intentionally or inadvertently, prior to the Effective
Time. Except for the transactions contemplated by this Agreement, neither ACSYS
nor any ACSYS Shareholder nor any other or previous ACSYS shareholder has taken
any action or caused any action to be taken which would have the effect of
causing ACSYS's S Corporation election to be terminated.
(b) Except as set forth in Section 4.8(b) of the ACSYS Disclosure
Memorandum, there does not exist and will not after the Effective Time exist any
Liability for Taxes which may be asserted by any taxing authority against, and
no Lien for Taxes will attach to, any ACSYS Entity or any of their respective
Assets, except for taxes incurred in the ordinary course of business which are
not due and payable at the time of execution of this Agreement. All Tax returns
required to be filed by or on behalf of any of the ACSYS Entities have been
timely filed or requests for extensions have been timely filed, granted, and
have not expired for periods ended on or before December 31, 1996, and on or
before the date of the most recent fiscal year end immediately preceding the
Effective Time, and all Tax returns filed are complete and accurate in all
material respects. All Taxes shown on filed Tax returns have been paid. There
is no audit examination, deficiency, or refund Litigation with respect to any
Taxes. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid.
(c) None of the ACSYS Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due (excluding such statutes that
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relate to years currently under examination by the Internal Revenue Service or
other applicable taxing authorities) that is currently in effect.
(d) None of the ACSYS Entities is a party to any Tax allocation
or sharing agreement and none of the ACSYS Entities has any Liability for Taxes
of any Person (other than ACSYS and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor or by Contract or otherwise. None of the ACSYS Entities
has been a member of an affiliated group filing a consolidated federal income
Tax Return (other than a group the common parent of which was ACSYS).
(e) Except as set forth in Section 4.8(e) of the ACSYS Disclosure
Memorandum, each of the ACSYS Entities is in compliance with, and its records
contain all information and documents necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.
(f) No ACSYS Entity has or has had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
4.9 ASSETS.
------
(a) Except as disclosed in Section 4.9 of the ACSYS Disclosure
Memorandum, the ACSYS Entities have good and marketable title, free and clear of
all Liens, to all of their respective Assets, except for any such Liens or other
defects of title which are not reasonably likely to have a material adverse
effect on the use or value of such Asset or any other Asset. All tangible
properties which are material to the businesses of the ACSYS Entities are in
good condition, reasonable wear and tear excepted.
(b) Except as disclosed in Section 4.9 of the ACSYS Disclosure
Memorandum, the accounts receivable of the ACSYS Entities as set forth on the
most recent balance sheet included in the ACSYS Financial Statements delivered
prior to the date of this Agreement or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide performance of services, sales
and deliveries of goods, and other business transactions in the ordinary course
of business consistent with past practice; and are not subject to valid
defenses, set-offs or counterclaims and are collectible at the full recorded
amount thereof except to the extent of any reserves for collection losses set
forth in the ACSYS Financial Statements.
(c) All Assets which are material to ACSYS's business on a
consolidated basis, held under leases or subleases by any of the ACSYS Entities,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the
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court before which any proceedings may be brought), and each such Contract is in
full force and effect.
(d) None of the ACSYS Entities has received notice from any
insurance carrier that (i) any policy of insurance will be canceled or that
coverage thereunder will be reduced or eliminated, or (ii) premium costs with
respect to such policies of insurance will be substantially increased. There are
presently no claims for amounts exceeding in any individual case $5,000 pending
under such policies of insurance and no notices of claims in excess of such
amounts have been given by any ACSYS Entity under such policies, other than any
claims that may be incurred under the self-insured portion of any medical plan
maintained by any ACSYS Entity.
(e) The Assets of the ACSYS Entities include all Assets required
to operate the business of the ACSYS Entities as presently conducted.
4.10 INTELLECTUAL PROPERTY. Each ACSYS Entity owns or has a license
---------------------
to use all of the Intellectual Property used by such ACSYS Entity in the course
of its business. Each ACSYS Entity is the owner of or has a license to any
Intellectual Property sold or licensed to a third party by such ACSYS Entity in
connection with such ACSYS Entity's business operations, and such ACSYS Entity
has the right to convey by sale or license any Intellectual Property so
conveyed. No ACSYS Entity is in Default under any of its Intellectual Property
licenses. No proceedings have been instituted or are pending (in which an ACSYS
Entity has received process or otherwise has Knowledge of the existence thereof)
or, to the Knowledge of ACSYS threatened, which challenge the rights of any
ACSYS Entity with respect to Intellectual Property used, sold or licensed by
such ACSYS Entity in the course of its business, nor has any person claimed or
alleged any rights to such Intellectual Property. To the Knowledge of ACSYS,
the conduct of the business of the ACSYS Entities does not infringe any
Intellectual Property of any other person. Except as disclosed in Section 4.10
of the ACSYS Disclosure Memorandum, no ACSYS Entity is obligated to pay any
recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 4.10 of the ACSYS Disclosure
Memorandum, all rights to Intellectual Property developed by or for any ACSYS
Entity are owned solely by the ACSYS Entities and have either been produced by
employees of the ACSYS Entities as works for hire under Federal copyright law or
have been assigned to the ACSYS Entities in enforceable technology transfer
agreements.
4.11 ENVIRONMENTAL MATTERS.
---------------------
(a) To the Knowledge of ACSYS, each ACSYS Entity, its
Participation Facilities, and its Operating Properties are, and have been, in
compliance with all Environmental Laws, except for violations which are not
reasonably likely to have, individually or in the aggregate, an ACSYS Material
Adverse Effect.
(b) To the Knowledge of ACSYS, there is no Litigation pending (in
which an ACSYS Entity has received process or otherwise has Knowledge of the
existence thereof) or threatened before any court, governmental agency, or
authority or other forum in which any
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<PAGE>
ACSYS Entity or any of its Operating Properties or Participation Facilities (or
ACSYS in respect of such Operating Property or Participation Facility) has been
or, with respect to threatened Litigation, may be named as a defendant (i) for
alleged noncompliance (including by any predecessor) with any Environmental Law
or (ii) relating to the release, discharge, spillage, or disposal into the
environment of any Hazardous Material, whether or not occurring at, on, under,
adjacent to, or affecting (or potentially affecting) a site owned, leased, or
operated by any ACSYS Entity or any of its Operating Properties or Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, an ACSYS Material
Adverse Effect, nor to the Knowledge of ACSYS is there any reasonable basis for
any Litigation of a type described in this sentence, except such as is not
reasonably likely to have, individually or in the aggregate, an ACSYS Material
Adverse Effect.
(c) To the Knowledge of ACSYS, there have been no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under,
adjacent to, or affecting (or potentially affecting) such properties, except
such as are not reasonably likely to have, individually or in the aggregate, an
ACSYS Material Adverse Effect.
4.12 COMPLIANCE WITH LAWS. Each ACSYS Entity has in effect all
--------------------
Permits necessary for it to own, lease, or operate its material Assets and to
carry on its business as now conducted, except for those Permits the absence of
which are not reasonably likely to have, individually or in the aggregate, an
ACSYS Material Adverse Effect, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, an ACSYS Material Adverse Effect. Except as
disclosed in Section 4.12 of the ACSYS Disclosure Memorandum, none of the ACSYS
Entities:
(a) is in Default under any of the provisions of its Certificate
of Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable
to its business or employees conducting its business (including the
Immigration Reform and Control Act of 1986, as amended, and all applicable
regulations promulgated thereunder and Laws requiring the licensing of
temporary employee staffing companies or otherwise subjecting temporary
employee staffing companies to regulation), except for Defaults which are not
reasonably likely to have, individually or in the aggregate, an ACSYS
Material Adverse Effect; or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any ACSYS Entity is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, (ii)
threatening to revoke any Permits, the revocation of which is reasonably
likely to have, individually or in the aggregate, an ACSYS Material Adverse
Effect, or (iii) requiring any ACSYS Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive,
commitment, or memorandum of understanding,
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<PAGE>
or to adopt any Board resolution or similar undertaking, which restricts
materially the conduct of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action against any ACSYS Entity by a Regulatory Authority have been
made available to ICCE.
4.13 LABOR AND EMPLOYMENT MATTERS. No ACSYS Entity is the subject of
----------------------------
any Litigation (in which ACSYS has received process or otherwise has Knowledge
of the existence thereof) asserting that it or any other ACSYS Entity has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel it or any other
ACSYS Entity to bargain with any labor organization as to wages or conditions of
employment, nor is any ACSYS Entity party to any collective bargaining
agreement, nor is there any strike or other labor dispute involving any ACSYS
Entity, pending or threatened, or to the Knowledge of ACSYS, is there any
activity involving any ACSYS Entity's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity. No ACSYS Entity
has ever engaged in Employee Leasing.
4.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) ACSYS has disclosed in Section 4.14 of the ACSYS Disclosure
Memorandum or has delivered or made available to ICCE prior to the execution of
this Agreement, copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by any ACSYS Entity or ERISA Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "ACSYS Benefit Plans"). Any of
the ACSYS Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as an "ACSYS
ERISA Plan." Each ACSYS ERISA Plan which is also a "defined benefit plan" (as
defined in Section 414(j) of the Internal Revenue Code) is referred to herein as
a "ACSYS Pension Plan." No ACSYS Pension Plan is or has been a multiemployer
plan within the meaning of Section 3(37) of ERISA.
(b) All ACSYS Benefit Plans are in substantial compliance with
the applicable terms of ERISA, the Internal Revenue Code, and any other
applicable Laws so that any breach or violation of such laws would not be
reasonably likely to have, individually or in the aggregate, an ACSYS Material
Adverse Effect. Each ACSYS ERISA Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code has received a favorable
determination letter from the Internal Revenue Service, and ACSYS is not aware
of any circumstances likely to result in revocation of any such favorable
determination letter. No
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<PAGE>
ACSYS Entity has engaged in a transaction with respect to any ACSYS Benefit Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, would subject any ACSYS Entity to a Tax imposed by either Section 4975
of the Internal Revenue Code or Section 502(i) of ERISA.
(c) No ACSYS Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any ACSYS Pension Plan, (ii) no change in the actuarial assumptions with respect
to any ACSYS Pension Plan, and (iii) no increase in benefits under any ACSYS
Pension Plan as a result of plan amendments or changes in applicable Law which
is reasonably likely to have, individually or in the aggregate, an ACSYS
Material Adverse Effect or materially adversely affect the funding status of any
such plan. Neither any ACSYS Pension Plan nor any "single-employer plan,"
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any ACSYS Entity, or the single-employer plan of any entity which
is considered one employer with ACSYS under Section 4001 of ERISA or Section 414
of the Internal Revenue Code or Section 302 of ERISA (whether or not waived) (an
"ERISA Affiliate") has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA. No ACSYS
Entity has provided, or is required to provide, security to an ACSYS Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any ACSYS Entity with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No ACSYS Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any ACSYS Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 4.14 of the ACSYS Disclosure
Memorandum, no ACSYS Entity has any Liability for retiree health and life
benefits under any of the ACSYS Benefit Plans and there are no restrictions on
the rights of such ACSYS Entity to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder.
(f) Except as disclosed in Section 4.14 of the ACSYS Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any ACSYS Entity from
any ACSYS Entity under any ACSYS Benefit Plan or
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<PAGE>
otherwise, (ii) increase any benefits otherwise payable under any ACSYS Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of any ACSYS Entity and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the ACSYS Financial Statements to the extent
required by and in accordance with GAAP.
4.15 MATERIAL CONTRACTS. Except as disclosed in Section 4.15 of the
------------------
ACSYS Disclosure Memorandum, none of the ACSYS Entities, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (ii) any Contract
relating to the borrowing of money by any ACSYS Entity or the guarantee by any
ACSYS Entity of any such obligation (other than Contracts evidencing trade
payables and Contracts relating to borrowings or guarantees made in the ordinary
course of business), (iii) any Contract which prohibits or restricts any ACSYS
Entity from engaging in any business activities in any geographic area, line of
business or otherwise in competition with any other Person, (iv) any Contract
involving Intellectual Property (other than Contracts entered into in the
ordinary course with customers and "shrink-wrap" software licenses), (v) any
Contract relating to the provision of data processing, network communication, or
other technical services to any ACSYS Entity, and (vi) any Contract relating to
the purchase or sale of any goods or the purchase of any services (other than
Contracts entered into in the ordinary course of business and involving payments
under any individual Contract not in excess of $50,000) (together with all
Contracts referred to in Sections 4.9 and 4.14(a), the "ACSYS Contracts"). With
respect to each ACSYS Contract and except as disclosed in Section 4.15 of the
ACSYS Disclosure Memorandum: (i) the Contract is in full force and effect; (ii)
no ACSYS Entity is in Default thereunder; (iii) no ACSYS Entity has repudiated
or waived any material provision of any such Contract in any material respect;
and (iv) no other party to any such Contract is, to the Knowledge of ACSYS, in
Default in any respect or has repudiated or waived any material provision
thereunder. Except as stated in Section 4.15 of the ACSYS Disclosure
Memorandum, all of the indebtedness of any ACSYS Entity for money borrowed is
prepayable at any time by such ACSYS Entity without penalty or premium.
4.16 LEGAL PROCEEDINGS. There is no Litigation instituted or pending
-----------------
(in which an ACSYS Entity has received process or otherwise has Knowledge of the
existence thereof), or, to the Knowledge of ACSYS, threatened against any ACSYS
Entity, or against any director or employee benefit plan of any ACSYS Entity, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, an ACSYS Material Adverse Effect, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any ACSYS Entity, that are
reasonably likely to have, individually or in the aggregate, an ACSYS Material
Adverse Effect. Section 4.16 of the
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<PAGE>
ACSYS Disclosure Memorandum contains a summary of all Litigation as of the date
of this Agreement to which any ACSYS Entity is a party and which names a ACSYS
Entity as a defendant or cross-defendant or for which any ACSYS Entity has any
potential Liability (other than Liability for the fees and expenses of its own
counsel).
4.17 REPORTS. Since January 1, 1993, or the date of organization if
-------
later, each ACSYS Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, an ACSYS Material Adverse Effect). As
of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, have been in compliance
in all material respects with all applicable Laws. As of its respective date,
each such report and document did not, in all material respects, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
4.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
---------------------------
instrument, or other writing furnished or to be furnished by any ACSYS Entity,
any ACSYS Shareholder or any Affiliate thereof to ICCE pursuant to this
Agreement or any other document, agreement, or instrument referred to herein
contains or will contain any untrue statement of material fact or will omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. All documents that
any ACSYS Entity, any ACSYS Shareholder or any Affiliate thereof is responsible
for filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
4.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No ACSYS Entity or any
--------------------------------------
ACSYS Shareholder or any Affiliate thereof has taken or agreed to take any
action or has any Knowledge of any fact or circumstance that is reasonably
likely to (i) prevent the Merger from qualifying for pooling-of-interests
accounting treatment or as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code, or (ii) materially impede or delay receipt of any
Consents of Regulatory Authorities referred to in Section 7.1(a) or result in
the imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
4.20 INVESTMENT INTENTION. Each ACSYS Shareholder is acquiring the
--------------------
shares of ICCE Common Stock to be issued pursuant to this Agreement for
investment only, for such ACSYS Shareholder's own account and not as a nominee
or agent, and not with the view to, or for resale in connection with, any
distribution thereof or participation therein. Each ACSYS Shareholder is an
"accredited investor" as such term is defined in Rule 501(a) under the
Securities Act. Each ACSYS Shareholder understands that the shares of ICCE
Common Stock to be issued pursuant to this Agreement have not been, and will not
be, registered under the 1933 Act in reliance upon the representations set forth
herein.
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<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ICCE AND THE ICCE SHAREHOLDERS
----------------------------------------------------------------
The ICCE Shareholders and ICCE, severally, not jointly, hereby
represent and warrant to ACSYS and the ACSYS Shareholders as follows (except to
the extent that any exceptions are made with respect to these representations
and warranties in the ICCE Disclosure Memorandum):
5.1 ORGANIZATION, STANDING, AND POWER. ICCE is a corporation duly
---------------------------------
organized, validly existing, and in good standing under the Laws of the State of
Georgia, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. ICCE is duly qualified
or licensed to transact business as a foreign corporation in good standing in
the States of the United States and foreign jurisdictions where the character of
its Assets or the nature or conduct of its business requires it to be so
qualified or licensed, except for such jurisdictions in which the failure to be
so qualified or licensed is not reasonably likely to have, individually or in
the aggregate, an ICCE Material Adverse Effect. The minute book and other
organizational documents for ICCE have been made available to ACSYS and the
ACSYS Shareholders for its review and, except as disclosed in Section 5.1 of the
ICCE Disclosure Memorandum, are true and complete in all material respects as in
effect as of the date of this Agreement and accurately reflect in all material
respects all amendments thereto and all proceedings of the Board of Directors
and shareholders thereof. Except as set forth in Section 5.1 of the ICCE
Disclosure Memorandum, ICCE has no Subsidiaries.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) ICCE has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and each of the
Ancillary Documents to which ICCE is a party and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of ICCE. This Agreement
represents a legal, valid, and binding obligation of ICCE, enforceable against
ICCE in accordance with its terms (except in all cases as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium, or similar Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by ICCE, nor
the consummation by ICCE of the transactions contemplated hereby, nor compliance
by ICCE with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of ICCE's Articles of Incorporation or Bylaws or the
certificate or articles of incorporation or bylaws of any ICCE Subsidiary, or
any resolution adopted by the board of directors or the shareholders of any ICCE
Entity, or (ii) except as disclosed in Section 5.2 of the ICCE Disclosure
Memorandum,
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<PAGE>
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any ICCE Entity under, any
Contract or Permit of any ICCE Entity other than those which are not reasonably
likely to have, individually or in the aggregate, an ICCE Material Adverse
Effect, or, (iii) subject to receipt of the requisite Consents referred to in
Section 7.1(a), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to any ICCE Entity or any of their
respective material Assets (including any ICCE Entity or any ACSYS Entity
becoming subject to or liable for the payment of any Tax or any of the Assets
owned by any ICCE Entity or any ACSYS Entity being reassessed or revalued by any
Taxing authority).
(c) Other than in connection or compliance with the provisions of the
Securities Laws and applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by ICCE of the Merger and the other transactions
contemplated in this Agreement.
5.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of ICCE consists of (i) 45,000,000
shares of ICCE Common Stock, of which 4,833,721 shares are issued and
outstanding as of the date of this Agreement, and (ii) 5,000,000 shares of ICCE
Preferred Stock, none of which are issued and outstanding. All of the issued
and outstanding shares of ICCE Capital Stock are, and all of the shares of ICCE
Common Stock to be issued in exchange for shares of ACSYS Common Stock upon
consummation of the Merger, when issued in accordance with the terms of this
Agreement, will be, duly and validly issued and outstanding and fully paid and
nonassessable under the GBCC. None of the outstanding shares of ICCE Capital
Stock has been, and none of the shares of ICCE Common Stock to be issued in
exchange for shares of ACSYS Common Stock upon consummation of the Merger will
be, issued in violation of any preemptive rights of the current or past
shareholders of ICCE.
(b) Except as set forth in Section 5.3(a), or as disclosed in Section
5.3(b) of the ICCE Disclosure Memorandum, there are no shares of capital stock
or other equity securities of ICCE outstanding and no outstanding Equity Rights
relating to the capital stock of ICCE. Except as specifically contemplated by
this Agreement and set forth in Section 5.3(b) of the ICCE Disclosure
Memorandum, no Person has any Contract or any right or privilege (whether pre-
emptive or contractual) capable of becoming any Contract or Equity Right for the
purchase, subscription or issuance of any securities of ICCE.
5.4 FINANCIAL STATEMENTS. Except as disclosed in Section 5.4 of the
--------------------
ICCE Disclosure Memorandum, each of the ICCE Financial Statements (including, in
each case, any related notes) has been (i) prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements) and (ii) fairly presented
in all material respects the consolidated financial position of
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ICCE and its Subsidiaries as at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect.
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section 5.5
----------------------------------
of the ICCE Disclosure Memorandum, no ICCE Entity has any Liabilities that are
reasonably likely to have, individually or in the aggregate, an ICCE Material
Adverse Effect, except Liabilities which are accrued or reserved against in the
consolidated balance sheet of ICCE as of June 30, 1997, included in the ICCE
Financial Statements delivered prior to the date of this Agreement or reflected
in the notes thereto. No ICCE Entity has incurred or paid any Liability since
June 30, 1997, except for such Liabilities incurred or paid (i) in the ordinary
course of business consistent with past business practice and which are not
reasonably likely to have, individually or in the aggregate, an ICCE Material
Adverse Effect or (ii) in connection with the transactions contemplated by this
Agreement. Except as disclosed in Section 5.5 of the ICCE Disclosure Memorandum,
no ICCE Entity is directly or indirectly liable, by guarantee, indemnity or
otherwise, upon or with respect to, or obligated by discount or repurchase
agreement or in any other way, to provide funds in respect to, or obligated to
guarantee or assume, any Liability of any Person for any amounts in excess of
$10,000 in the aggregate.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997, except as
------------------------------------
disclosed in Section 5.6 of the ICCE Disclosure Memorandum, (i) there have been
no events, changes or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, an ICCE Material Adverse Effect, and
(ii) the ICCE Entities have not:
(a) incurred any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a ICCE Entity to another ICCE
Entity) in excess of an aggregate of $50,000 (for the ICCE Entities on a
consolidated basis) except in the ordinary course of the business consistent
with past practices; or
(b) repurchased, redeemed, or otherwise acquired or exchanged,
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of any ICCE Entity, or declared or paid any
dividend or made any other distribution in respect of ICCE's capital stock;
or
(c) made any significant change in any Tax or accounting methods or
systems of internal accounting controls, except to conform to changes in Tax
Laws or GAAP; or
(d) sold, leased, mortgaged or otherwise disposed of or otherwise
encumbered (x) any shares of capital stock of any ICCE Subsidiary or (y) any
Assets having a book value in excess of $10,000 in the aggregate other than
in the ordinary course of business for reasonable and adequate
consideration; or
(e) purchased any securities or made any material investment, either
by purchase of stock or securities, contributions to capital, Asset
transfers, or purchase of any
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Assets, in any Person other than a wholly owned ICCE Subsidiary, or
otherwise acquired direct or indirect control over any Person; or
(f) granted any increase in compensation or benefits to the employees
or officers of any ICCE Entity, except in accordance with past practice or
as required by Law or entered into or amended any severance agreements with
officers of any ICCE Entity; or
(g) commenced any Litigation other than in accordance with past
practice or settled any Litigation involving any Liability of any ICCE
Entity for material money damages or restrictions upon the operations of any
ICCE Entity.
5.7 TAX MATTERS.
-----------
(a) Since the incorporation of ICCE, it has duly elected to be, and
has always been, treated as an S Corporation under Subchapter S of the Internal
Revenue Code with respect to Federal and all applicable state and local
jurisdictions, and has never been subject to Subchapter C of the Internal
Revenue Code. Such election was timely and validly made in all such
jurisdictions, remains in full force and effect, and has not been and will not
be revoked or terminated, intentionally or inadvertently, prior to the Effective
Time. Neither ICCE nor any present or previous ICCE shareholder has taken any
action or caused any action to be taken which would have the effect of causing
ICCE's S Corpo ration election to be terminated.
(b) There does not exist and will not after the Effective Time exist
any Liability for Taxes which may be asserted by any taxing authority against,
and no Lien for Taxes will attach to, any ICCE Entity or any of their respective
Assets. All Tax Returns required to be filed by or on behalf of any of the ICCE
Entities have been timely filed or requests for extensions have been timely
filed, granted, and have not expired for periods ended on or before December 31,
1996, and on or before the date of the most recent fiscal year end immediately
preceding the Effective Time, and all Tax Returns filed are complete and
accurate in all material respects. All Taxes shown on filed Tax Returns have
been paid. There is no audit examination, deficiency, or refund Litigation with
respect to any Taxes. All Taxes and other Liabilities due with respect to
completed and settled examinations or concluded Litigation have been paid.
(c) None of the ICCE Entities is a party to any Tax allocation or
sharing agreement with any Person that is not an ICCE Entity and none of the
ICCE Entities has been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
ICCE) or has any Liability for Taxes of any Person (other than ICCE and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law) as a transferee or successor or by
Contract or otherwise.
(d) None of the ICCE Entities has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by the
Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
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(e) Each of the ICCE Entities is in compliance with, and its records
contain all information and documents necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state, and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code.
(f) No ICCE Entity has or has had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
5.8 ASSETS.
------
(a) Except as disclosed in Section 5.8 of the ICCE Disclosure
Memorandum, the ICCE Entities have good and marketable title, free and clear of
all Liens, to all of their respective Assets, except for any such Liens or other
defects of title which are not reasonably likely to have a material adverse
effect on the use or value of such Asset or any other Asset. All tangible
properties which are material to the businesses of the ICCE Entities are in good
condition, reasonable wear and tear excepted.
(b) All Assets which are material to ICCE's business on a
consolidated basis, held under leases or subleases by any of the ICCE Entities,
are held under valid Contracts enforceable in accordance with their respective
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other Laws affecting the enforcement
of creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(c) Except as disclosed in Section 5.8 of the ICCE Disclosure
Memorandum, the accounts receivable of the ICCE Entities as set forth on the
most recent balance sheet included in the ICCE Financial Statements delivered
prior to the date of this Agreement or arising since the date thereof are valid
and genuine; have arisen solely out of bona fide performance of services, sales
and deliveries of goods, and other business transactions in the ordinary course
of business consistent with past practice; and are not subject to valid
defenses, set-offs or counterclaims and are collectible at the full recorded
amount thereof except to the extent of any reserves for collection losses set
forth in the ICCE Financial Statements.
(d) None of the ICCE Entities has received notice from any insurance
carrier that (i) any policy of insurance will be canceled or that coverage
thereunder will be reduced or eliminated, or (ii) premium costs with respect to
such policies of insurance will be substantially increased. There are presently
no claims for amounts exceeding in any individual case $5,000 pending under such
policies of insurance and no notices of claims in excess of such amounts have
been given by any ICCE Entity under such policies, other than any claims that
may be incurred under the self-insured portion of any medical plan maintained by
any ICCE Entity.
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<PAGE>
(e) The Assets of the ICCE Entities include all Assets required to
operate the business of the ICCE Entities as presently conducted.
5.9 INTELLECTUAL PROPERTY. Each ICCE Entity owns or has a license to use
---------------------
all of the Intellectual Property used by such ICCE Entity in the course of its
business. Each ICCE Entity is the owner of or has a license to any Intellectual
Property sold or licensed to a third party by such ICCE Entity in connection
with such ICCE Entity's business operations, and such ICCE Entity has the right
to convey by sale or license any Intellectual Property so conveyed. No ICCE
Entity is in Default under any of its Intellectual Property licenses. No
proceedings have been instituted, or are pending or to the Knowledge of ICCE
threatened, which challenge the rights of any ICCE Entity with respect to
Intellectual Property used, sold or licensed by such ICCE Entity in the course
of its business, nor has any person claimed or alleged any rights to such
Intellectual Property. To the Knowledge of ICCE, the conduct of the business of
the ICCE Entities does not infringe any Intellectual Property of any other
person. Except as disclosed in Section 5.9 of the ICCE Disclosure Memorandum,
no ICCE Entity is obligated to pay any recurring royalties to any Person with
respect to any such Intellectual Property. Except as disclosed in Section 5.9
of the ICCE Disclosure Memorandum, all rights to Intellectual Property developed
by or for any ICCE Entity are owned solely by the ICCE Entities and have either
been produced by employees of the ICCE Entities as works for hire under Federal
copyright law or have been assigned to the ICCE Entities in enforceable
technology transfer agreements.
5.10 ENVIRONMENTAL MATTERS.
---------------------
(a) To the Knowledge of ICCE, each ICCE Entity, its Participation
Facilities, and its Operating Properties are, and have been, in compliance with
all Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, an ICCE Material Adverse Effect.
(b) To the Knowledge of ICCE, there is no Litigation pending (in
which an ICCE Entity has received process or otherwise has Knowledge of the
existence thereof) or threatened before any court, governmental agency, or
authority or other forum in which any ICCE Entity or any of its Operating
Properties or Participation Facilities (or ICCE in respect of such Operating
Property or Participation Facility) has been or, with respect to threatened
Litigation, may be named as a defendant (i) for alleged noncompliance (including
by any predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by any ICCE Entity or
any of its Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, an ICCE Material Adverse Effect, nor to the
Knowledge of ICCE is there any reasonable basis for any Litigation of a type
described in this sentence, except such as is not reasonably likely to have,
individually or in the aggregate, an ICCE Material Adverse Effect.
(c) To the Knowledge of ICCE, there have been no releases,
discharges, spillages, or disposals of Hazardous Material in, on, under,
adjacent to, or affecting (or
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potentially affecting) such properties, except such as are not reasonably likely
to have, individually or in the aggregate, an ICCE Material Adverse Effect.
5.11 COMPLIANCE WITH LAWS. Each ICCE Entity has in effect all Permits
--------------------
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, an ICCE
Material Adverse Effect, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, an ICCE Material Adverse Effect. Except as
disclosed in Section 5.11 of the ICCE Disclosure Memorandum, none of the ICCE
Entities:
(a) is in Default under its Articles of Incorporation or Bylaws (or
other governing instruments); or
(b) is in Default under any Laws, Orders or Permits applicable to its
business or employees conducting its business (including the Immigration
Reform and Control Act of 1986, as amended, and all applicable regulations
promulgated thereunder and Laws requiring the licensing of temporary employee
staffing companies or otherwise subjecting temporary employee staffing
companies to regulation), except for Defaults which are not reasonably likely
to have, individually or in the aggregate, an ICCE Material Adverse Effect;
or
(c) since January 1, 1993, has received any notification or
communication from any agency or department of federal, state, or local
government or any Regulatory Authority or the staff thereof (i) asserting
that any ICCE Entity is not in compliance with any of the Laws or Orders
which such governmental authority or Regulatory Authority enforces, (ii)
threatening to revoke any Permits, the revocation of which is reasonably
likely to have, individually or in the aggregate, an ICCE Material Adverse
Effect, or (iii) requiring any ICCE Entity to enter into or consent to the
issuance of a cease and desist order, formal agreement, directive, commitment
or memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action against any ICCE Entity by a Regulatory Authority have been
made available to ACSYS.
5.12 LEGAL PROCEEDINGS. There is no Litigation instituted or pending
-----------------
(in which an ICCE Entity has received process or otherwise has Knowledge of the
existence thereof), or, to the Knowledge of ICCE, threatened against any ICCE
Entity, or against any director or employee benefit plan of any ICCE Entity, or
against any Asset, interest, or right of any of them, that is reasonably likely
to have, individually or in the aggregate, an ICCE Material Adverse Effect, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any ICCE Entity, that are
reasonably likely to have, individually or in the aggregate, an ICCE Material
Adverse Effect. Section 5.12 of the ICCE Disclosure Memorandum contains a
summary of all Litigation as of the date of this Agreement to which any ICCE
Entity is
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<PAGE>
a party and which names a ICCE Entity as a defendant or cross-defendant or for
which any ICCE Entity has any potential Liability (other than Liability for the
fees and expenses of its own counsel).
5.13 LABOR AND EMPLOYMENT MATTERS. No ICCE Entity is the subject of any
----------------------------
Litigation asserting that it or any other ICCE Entity has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other ICCE Entity to
bargain with any labor organization as to wages or conditions of employment, nor
is any ICCE Entity party to any collective bargaining agreement, nor is there
any strike or other labor dispute involving any ICCE Entity, pending or
threatened, or to the Knowledge of ICCE, is there any activity involving any
ICCE Entity's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) ICCE has disclosed in Section 5.14 of the ICCE Disclosure
Memorandum or has delivered or made available to ACSYS prior to the execution of
this Agreement, copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by any ICCE Entity or ERISA Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
are eligible to participate (collectively, the "ICCE Benefit Plans"). Any of
the ICCE Benefit Plans which is an "employee pension benefit plan," as that term
is defined in Section 3(2) of ERISA, is referred to herein as a "ICCE ERISA
Plan." Each ICCE ERISA Plan which is also a "defined benefit plan" (as defined
in Section 414(j) of the Internal Revenue Code) is referred to herein as a "ICCE
Pension Plan." No ICCE Pension Plan is or has been a multiemployer plan within
the meaning of Section 3(37) of ERISA.
(b) All ICCE Benefit Plans are in substantial compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws so that any breach or violation of such laws would not be reasonably likely
to have, individually or in the aggregate, an ICCE Material Adverse Effect.
Each ICCE ERISA Plan which is intended to be qualified under Section 401(a) of
the Internal Revenue Code has received a favorable determination letter from the
Internal Revenue Service, and ICCE is not aware of any circumstances likely to
result in revocation of any such favorable determination letter. No ICCE Entity
has engaged in a transaction with respect to any ICCE Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any ICCE Entity to a Tax imposed by either Section 4975 of the
Internal Revenue Code or Section 502(i) of ERISA.
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<PAGE>
(c) No ICCE Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA, when determined under actuarial
factors that would apply if the plan terminated in accordance with all
applicable legal requirements. Since the date of the most recent actuarial
valuation, there has been (i) no material change in the financial position of
any ICCE Pension Plan, (ii) no change in the actuarial assumptions with respect
to any ICCE Pension Plan, and (iii) no increase in benefits under any ICCE
Pension Plan as a result of plan amendments or changes in applicable Law which
is reasonably likely to have, individually or in the aggregate, an ICCE Material
Adverse Effect or materially adversely affect the funding status of any such
plan. Neither any ICCE Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
ICCE Entity, or the single-employer plan of any ERISA Affiliate has an
"accumulated funding deficiency" within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. No ICCE Entity has provided, or
is required to provide, security to an ICCE Pension Plan or to any single-
employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any ICCE Entity with respect to any ongoing,
frozen, or terminated single-employer plan or the single-employer plan of any
ERISA Affiliate. No ICCE Entity has incurred any withdrawal Liability with
respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate). No notice
of a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any ICCE Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) Except as disclosed in Section 5.14 of the ICCE Disclosure
Memorandum, no ICCE Entity has any Liability for retiree health and life
benefits under any of the ICCE Benefit Plans and there are no restrictions on
the rights of such ICCE Entity to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder.
(f) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any ICCE Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been fully reflected on the ICCE Financial Statements to the extent
required by and in accordance with GAAP.
(g) Except as disclosed in Section 5.14 of the ICCE Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any ICCE Entity from
any ICCE Entity under any ICCE Benefit Plan or otherwise, (ii) increase
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any benefits otherwise payable under any ICCE Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit.
5.15 STATEMENTS TRUE AND CORRECT. No statement, certificate, instrument
---------------------------
or other writing furnished or to be furnished by any ICCE Entity or any
Affiliate thereof to ACSYS pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. All documents that any ICCE Entity or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
5.16 AUTHORITY OF SUB. Sub is a corporation duly organized, validly
----------------
existing and in good standing under the Laws of the Commonwealth of Pennsylvania
as a wholly owned Subsidiary of ICCE. The authorized capital stock of Sub
consists of 1,000 shares of Sub Common Stock, all of which is validly issued and
outstanding, fully paid and nonassessable and is owned by ICCE. Sub has the
corporate power and authority necessary to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein, including the Merger, have
been duly and validly authorized by all necessary corporate action in respect
thereof on the part of Sub. This Agreement represents a legal, valid, and
binding obligation of Sub, enforceable against Sub in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought). The
execution of this Agreement by ICCE represents the written consent by ICCE, as
the sole shareholder of Sub, to approval of this Agreement by the shareholders
of Sub without a meeting pursuant to Section 1766(a) of the PBCL.
5.17 ACCOUNTING, TAX AND REGULATORY MATTERS. No ICCE Entity or any
--------------------------------------
Affiliate thereof has taken or agreed to take any action or has any Knowledge of
any fact or circumstance that is reasonably likely to (i) prevent the Merger
from qualifying for pooling-of-interests accounting treatment or as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (ii) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 7.1(a) or result in the imposition of a
condition or restriction of the type referred to in the last sentence of such
Section.
5.18 MATERIAL CONTRACTS. Except as disclosed in Section 5.18 of the
------------------
ICCE Disclosure Memorandum, none of the ICCE Entities, nor any of their
respective Assets, businesses, or operations, is a party to, or is bound or
affected by, or receives benefits under, (i) any employment, severance,
termination, consulting, or retirement Contract providing for aggregate payments
to any Person in any calendar year in excess of $50,000, (ii) any Contract
relating to the borrowing of money by any ICCE Entity or the guarantee by any
ICCE Entity of any such obligation (other than Contracts evidencing trade
payables and Contracts relating to
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borrowings or guarantees made in the ordinary course of business), (iii) any
Contract which prohibits or restricts any ICCE Entity from engaging in any
business activities in any geographic area, line of business or otherwise in
competition with any other Person, (iv) any Contract involving Intellectual
Property (other than Contracts entered into in the ordinary course with
customers and "shrink-wrap" software licenses), (v) any Contract relating to the
provision of data processing, network communication, or other technical services
to any ICCE Entity, and (vi) any Contract relating to the purchase or sale of
any goods or the purchase of any services (other than Contracts entered into in
the ordinary course of business and involving payments under any individual
Contract not in excess of $50,000) (together with all Contracts referred to in
Sections 4.9 and 4.14(a), the "ICCE Contracts"). With respect to each ICCE
Contract and except as disclosed in Section 5.18 of the ICCE Disclosure
Memorandum: (i) the Contract is in full force and effect; (ii) no ICCE Entity is
in Default thereunder; (iii) no ICCE Entity has repudiated or waived any
material provision of any such Contract in any material respect; and (iv) no
other party to any such Contract is, to the Knowledge of ICCE, in Default in any
respect or has repudiated or waived any material provision thereunder. Except as
stated in Section 5.18 of the ICCE Disclosure Memorandum, all of the
indebtedness of any ICCE Entity for money borrowed is prepayable at any time by
such ICCE Entity without penalty or premium.
5.19 REPORTS. Since January 1, 1993, or the date of organization if
-------
later, each ICCE Entity has timely filed all reports and statements, together
with any amendments required to be made with respect thereto, that it was
required to file with Regulatory Authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, an ICCE Material Adverse Effect). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, have been complied in all
material respects with all applicable Laws. As of its respective date, each
such report and document did not, in all material respects, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
5.20 AUTHORITY OF ICCE SHAREHOLDERS; NO BREACH BY AGREEMENT.
------------------------------------------------------
(a) Each of the ICCE Shareholders has the absolute and unrestricted
right, power, authority, and capacity to execute and deliver this Agreement and
each of the Ancillary Agreements to which such ICCE Shareholder is party and to
perform its obligations under this Agreement and such Ancillary Agreements.
This Agreement represents a legal, valid, and binding obligation of each ICCE
Shareholder, enforceable against each ICCE Shareholder in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship,
moratorium, or similar Laws affecting the enforcement of creditors' rights
generally and except that the availability of the equitable remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding may be brought). Upon the execution and delivery by
the ICCE Shareholders of the Ancillary Agreements, the Ancillary Agreements will
constitute the legal, valid, and binding obligations of each ICCE Shareholder,
enforceable against each ICCE Shareholder in accordance with their respective
terms.
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<PAGE>
(b) Neither the execution and delivery of this Agreement by any ICCE
Shareholder, nor the consummation by any ICCE Shareholder of the transactions
contemplated hereby, nor compliance by any ICCE Shareholder with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of ICCE's Certificate of Incorporation or Bylaws or the certificate or articles
of incorporation or bylaws of any ICCE Subsidiary or the governing instruments
of any ICCE Shareholder that is not a natural person, or (ii) except as
disclosed in Section 5.19 of the ICCE Disclosure Memorandum, constitute or
result in a Default under, or require any Consent pursuant to, or result in the
creation of any Lien on any Asset of any ICCE Entity under, any Contract or
Permit of any ICCE Entity other than those which are not reasonably likely to
have, individually or in the aggregate, an ICCE Material Adverse Effect, or,
(iii) subject to receipt of the requisite Consents referred to in Section
7.1(a), violate any Law or Order applicable to any ICCE Shareholder or to any
ICCE Entity or any of their respective material Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, and applicable state corporate and securities Laws, and other
than Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation with respect to any employee benefit plans, or under the HSR Act, no
notice to, filing with, or Consent of, any public body or authority is necessary
for the consummation by the ICCE Shareholders of the transactions contemplated
in this Agreement.
ARTICLE 6
CERTAIN AGREEMENTS
------------------
6.1 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, ACSYS and Sub shall execute and file the
Certificate of Merger with the Secretary of State of the Commonwealth of
Pennsylvania in connection with the Closing.
6.2 CERTAIN TAX RETURNS OF ACSYS. For income tax purposes, (i) ACSYS's
----------------------------
final S corporation Tax year will end at the close of the day before the day on
which occurs the Effective Time, and (ii) a new Tax year for ACSYS will begin on
the day on which the Effective Time occurs. The ACSYS Shareholders shall
prepare and cause to be filed all income Tax Returns of ACSYS (including IRS
Form 1120S and Schedule K-1(1120S) and similar state Tax Returns) for the Tax
year ending on the day before the day on which the Effective Time occurs, as
well as for all prior Tax years (if not filed before the Effective Time). ICCE
agrees to cooperate (and to cause ACSYS to cooperate) with the ACSYS
Shareholders to the extent reasonably required after the Effective Time in
connection with (i) the preparation, execution, and filing of all such Tax
Returns and other Tax documents with respect to ACSYS's final Tax year as an S
corporation and any prior Tax year of ACSYS, (ii) contests concerning the
application of any Tax or the amount of Tax due for any such Tax year, and (iii)
audits and other proceedings conducted by any taxing authority with respect to
any such Tax period. All income Tax Returns of ACSYS filed after the Effective
Time for Tax years beginning before the
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Effective Time shall be based on the same accounting methods and elections as
used for ACSYS's Tax year immediately preceding the period of such Tax Return,
except as otherwise agreed upon by ICCE and the ACSYS Shareholders.
6.3 ACSYS SHAREHOLDER RELEASES. Except as set forth in Section 6.3 of
--------------------------
the ACSYS Disclosure Memorandum, each ACSYS Shareholder hereby releases,
remises, and forever discharges each ACSYS Entity and their respective
Representatives, Affiliates, and insurers, and their respective successors and
assigns, and each of them (hereinafter individually and collectively, the
"Releasees") of and from any and all claims, demands, debts, accounts,
covenants, agreements, obligations, costs, expenses, actions or causes of action
of every nature, character or description, now accrued or which may hereafter
accrue, without limitation of law, equity or otherwise, based in whole or in
part on any facts, conduct, activities, transactions, events or occurrences
known or unknown, which have or allegedly have existed, occurred, happened,
arisen or transpired from the beginning of time to the Effective Time (the
"Released Claims"). Each ACSYS Shareholder represents and warrants that no
Released Claim released herein has been assigned, expressly, impliedly, or by
operation of Law, and that all Released Claims of such ACSYS Shareholder
released herein are owned by such ACSYS Shareholder, who has the sole authority
to release them. Each ACSYS Shareholder agrees that such holder shall forever
refrain and forebear from commencing, instituting or prosecuting any lawsuit
action or proceeding, judicial, administrative, or otherwise, or otherwise
attempting to collect or enforce any Released Claims which are released and
discharged herein.
6.4 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes and
----------------------------
agrees to use its reasonable efforts to cause the Merger, and to take no action
which would cause the Merger not, to qualify for treatment as a pooling of
interests for accounting purposes or as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code for federal income tax purposes.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
---------------------------------------
of each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6:
(A) REGULATORY APPROVALS. All Consents of, filings and
--------------------
registrations with, and notifications to, all Regulatory Authorities required
for consummation of the Merger shall have been obtained or made and shall be
in full force and effect and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is necessary
to consummate the transactions contemplated hereby shall be conditioned or
restricted in a manner (including requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either ICCE or ACSYS would so
materially adversely impact the
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economic or business benefits of the transactions contemplated by this
Agreement that, had such condition or requirement been known, ICCE or ACSYS
would not, in its reasonable judgment, have entered into this Agreement.
(B) CONSENTS AND APPROVALS. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those
referred to in Section 7.1(a)) or for the preventing of any Default under any
Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, an ACSYS
Material Adverse Effect or an ICCE Material Adverse Effect, as applicable.
No Consent so obtained which is necessary to consummate the transactions
contemplated hereby shall be conditioned or restricted in a manner which in
the reasonable judgment of the Board of Directors of either ICCE or ACSYS
would so materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, ICCE or ACSYS would not, in its reasonable judgment,
have entered into this Agreement.
(C) LEGAL PROCEEDINGS. No court or governmental or Regulatory
-----------------
Authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) or taken any other action which prohibits, restricts or makes
illegal the consummation of the transactions contemplated by this Agreement.
(D) REGISTRATION RIGHTS. ICCE and each of the ACSYS Shareholders
-------------------
shall have executed and delivered a counterpart of the Amended and Restated
Registration Rights Agreement to which all existing shareholders of ICCE are
party, in the form attached hereto as Exhibit 2 (the "Registration Rights
Agreement").
(E) EMPLOYMENT AGREEMENTS. ICCE and each of the ACSYS Shareholders
---------------------
(other than Albert Dettore, Louis Boohaker and John Ficquette) shall have
executed and delivered to ICCE an employment agreement in substantially the
form of Exhibit 3 (collectively, the "Employment Agreements").
(F) NON-SOLICITATION AND NON-COMPETITION AGREEMENTS. Each of the
-----------------------------------------------
ACSYS Shareholders (other than Albert Dettore) shall have executed and
delivered to ICCE a non-solicitation and non-competition agreement in
substantially the form of Exhibit 4 (collectively, the "Non-Solicitation
Agreements").
(G) POOLING LETTERS. Each of the Parties shall have received one
---------------
or more letters, dated as of the Effective Time, addressed to the Parties, in
form and substance reasonably acceptable to the Parties, from Arthur Andersen
LLP to the effect that the Merger will qualify for pooling-of-interests
accounting treatment.
7.2 CONDITIONS TO OBLIGATIONS OF ICCE. The obligations of ICCE to
---------------------------------
perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are
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subject to the satisfaction of the following conditions, unless waived by ICCE
pursuant to Section 10.6(a):
(A) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties set forth in Section 4.4 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties set forth in Section 4.19 shall be true and correct in all
material respects. There shall not exist inaccuracies in the representations
and warranties of ACSYS and the ACSYS Shareholders set forth in this
Agreement (including the representations and warranties set forth in Sections
4.4 and 4.19) such that the aggregate effect of such inaccuracies has, or is
reasonably likely to have, an ACSYS Material Adverse Effect; provided that,
for purposes of this sentence only, those representations and warranties
which are qualified by references to "material" or "Material Adverse Effect"
or to the "Knowledge" of any Person shall be deemed not to include such
qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of ACSYS and the ACSYS Shareholders to be performed
and complied with pursuant to this Agreement and the other agreements
contemplated hereby prior to the Effective Time shall have been duly
performed and complied with in all material respects.
(C) CERTIFICATES. ACSYS shall have delivered to ICCE certified
------------
copies of resolutions duly adopted by ACSYS's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as ICCE and its counsel shall request.
(D) OPINION OF COUNSEL. ICCE shall have received an opinion of
------------------
Morgan, Lewis & Bockius LLP, counsel to ACSYS and the ACSYS Shareholders,
dated as of the Closing, in form reasonably satisfactory to ICCE, as to the
matters set forth in Exhibit 5.
(E) STOCK OPTIONS. The compensation or other relevant committee of
-------------
ACSYS's Board of Directors shall have taken, or caused to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable on behalf of ACSYS to effect the conversion of all ACSYS Options
into rights with respect to ICCE Common Stock, as contemplated by Section 3.7
hereof, without any other change in the terms of the ACSYS Options (other
than changes contemplated by Section 3.7).
7.3 CONDITIONS TO OBLIGATIONS OF ACSYS AND THE ACSYS SHAREHOLDERS. The
-------------------------------------------------------------
obligations of ACSYS and the ACSYS Shareholders to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by ACSYS pursuant
to Section 10.6(b):
(A) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties set forth in Section 5.3 shall be true and correct (except for
inaccuracies which are de minimus in amount). The representations and
warranties of ICCE set forth in Section 5.17 shall be
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true and correct in all material respects. There shall not exist inaccuracies
in the representations and warranties of ICCE set forth in this Agreement
(including the representations and warranties set forth in Section 5.17) such
that the aggregate effect of such inaccuracies has, or is reasonably likely
to have, an ICCE Material Adverse Effect; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" or to the "Knowledge"
of any Person shall be deemed not to include such qualifications.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
---------------------------------------
agreements and covenants of ICCE to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(C) CERTIFICATES. ICCE shall have delivered to ACSYS certified
------------
copies of resolutions duly adopted by ICCE's Board of Directors and Sub's
Board of Directors and sole shareholder evidencing the taking of all
corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as ACSYS and its counsel
shall request.
(D) OPINION OF COUNSEL. ACSYS shall have received an opinion of
------------------
Alston & Bird LLP, counsel to ICCE, dated as of the Effective Time, in form
reasonably acceptable to ACSYS, as to the matters set forth in Exhibit 6.
(E) STOCK OPTIONS. The compensation or other relevant committee of
-------------
ICCE's Board of Directors shall have taken, or caused to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable on behalf of ICCE to effect the conversion of all ACSYS Options
into rights with respect to ICCE Common Stock, as contemplated by Section 3.7
hereof, without any other change in the terms of the ACSYS Options (other
than changes contemplated by Section 3.7 hereof).
ARTICLE 8
INDEMNIFICATION
---------------
8.1 AGREEMENT OF INDEMNITORS TO INDEMNIFY.
-------------------------------------
(a) Subject to the terms and conditions of this Article 8, the
ACSYS Shareholders severally (in proportion to their respective ownership of
shares of ICCE Common Stock issued in the Merger to ACSYS Shareholders), not
jointly, agree to indemnify, defend, and hold harmless ICCE from, against, for
and in respect of any and all Losses asserted against, or paid, suffered or
incurred by, ICCE or any of its Subsidiaries and resulting from, based upon, or
arising out of:
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(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of any ACSYS Shareholder or ACSYS contained in or
made pursuant to this Agreement or in any certificate, Schedule, or Exhibit
furnished by ACSYS or any ACSYS Shareholder in connection herewith and for
purposes of this Section 8.1(a) any qualification of such representations and
warranties by reference to the materiality of matters stated therein or as to
matters having or not having a "Material Adverse Effect" shall be disregarded
in determining any inaccuracy, untruth, incompleteness or breach thereof; and
(ii) a breach of or failure to perform any covenant or
agreement of the ACSYS Shareholders or ACSYS made in this Agreement.
(b) Subject to the terms and conditions of this Article 8, ICCE
agrees to indemnify, defend, and hold harmless the ACSYS Shareholders from,
against, for and in respect of any and all Losses asserted against, or paid,
suffered or incurred by, a ACSYS Shareholder and resulting from, based upon, or
arising out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of ICCE contained in or made pursuant to this
Agreement or in any certificate, Schedule, or Exhibit furnished by ICCE in
connection herewith and for purposes of this Section 8.1(b) any qualification
of such representations and warranties by reference to the materiality of
matters stated therein or as to matters having or not having a "Material
Adverse Effect" shall be disregarded in determining any inaccuracy, untruth,
incompleteness or breach thereof; and
(ii) a breach of or failure to perform any covenant or
agreement of ICCE made in this Agreement.
(c) Subject to the terms and conditions of this Article 8, the ICCE
Shareholders severally (in proportion to their respective ownership of shares of
ICCE Common Stock held as of the date hereof by ICCE Shareholders), not jointly,
agree to indemnify, defend, and hold harmless ICCE from, against, for and in
respect of any and all Losses asserted against, or paid, suffered or incurred
by, ICCE or any of its Subsidiaries and resulting from, based upon, or arising
out of:
(i) the inaccuracy, untruth, incompleteness or breach of any
representation or warranty of ICCE contained in or made pursuant to this
Agreement or in any certificate, Schedule, or Exhibit furnished by ICCE in
connection herewith and for purposes of this Section 8.1(c) any qualification
of such representations and warranties by reference to the materiality of
matters stated therein or as to matters having or not having a "Material
Adverse Effect" shall be disregarded in determining any inaccuracy, untruth,
incompleteness or breach thereof; and
(ii) a breach of or failure to perform any covenant or
agreement of ICCE made in this Agreement.
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8.2 PROCEDURES FOR INDEMNIFICATION.
------------------------------
(a) An Indemnification Claim shall be made by an Indemnitee by
delivery of a written notice to the Indemnitor Representative (as defined in
Section 9.10 below) requesting indemnification and specifying the basis on which
indemnification is sought and the amount of asserted Losses and, in the case of
a Third Party Claim, containing (by attachment or otherwise) such other
information as such Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 8.3 shall be observed by the Indemnitee and the
Indemnitor Representative(s).
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor Representative(s) shall have 30 days to object
to such Indemnification Claim by delivery of a written notice of such objection
to such Indemnitee specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the Indemnification Claim by the Indemnitor Representative(s) on behalf of all
Indemnitors, and the Indemnification Claim shall be paid in accordance with
subsection (d) hereof.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between the Indemnitor Representative(s) and the Indemnitee
or by an arbitration award or by any other final adjudication, the Indemnitors
shall pay the amount of such Indemnification Claim within ten days of the date
such amount is determined. In the event that the ACSYS Shareholders are the
Indemnitors that are required to pay an Indemnification Claim, if the ACSYS
Shareholders beneficially own shares of ICCE Common Stock as of such date, the
ACSYS Shareholders shall, if so required by ICCE, pay the amount of such
Indemnification Claim by surrender to ICCE of such number of shares of ICCE
Common Stock as shall equal the quotient obtained by dividing the amount of such
Indemnification Claim by the amount set forth in Section 8.2 of the ICCE
Disclosure Memorandum; provided, that if the ACSYS Shareholders do not
beneficially own a sufficient number of shares of ICCE Common Stock to pay in
full the amount of such Indemnification Claim by surrender of such shares as
provided in the preceding clause of this sentence, the ACSYS Shareholders shall
surrender to ICCE such number of shares of ICCE Common Stock as such ACSYS
Shareholders beneficially own and shall pay any remaining balance of the
Indemnification Amount in cash.
8.3 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
------------------
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor Representative(s)
written notice of a Third Party Claim promptly after receipt by the
Indemnitee of notice thereof, and the Indemnitor Representative(s), on behalf
of the Indemnitors, may undertake the defense, compromise and settlement
thereof by representatives of its own choosing reasonably acceptable to the
Indemnitee. The failure of the Indemnitee to notify the Indemnitor
Representative(s) of such claim shall not relieve the Indemnitors of any
liability that they
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<PAGE>
may have with respect to such claim except to the extent the Indemnitor
Representative(s) demonstrates that the defense of such claim is prejudiced
by such failure. The assumption of the defense, compromise and settlement of
any such Third Party Claim by the Indemnitor Representative(s) shall be an
acknowledgment of the obligation of the Indemnitors to indemnify the
Indemnitee with respect to such claim hereunder unless the Indemnitors
provide notice otherwise at the time such defense is assumed. If the
Indemnitee desires to participate in, but not control, any such defense,
compromise and settlement, it may do so at its sole cost and expense. If,
however, the Indemnitor Representative(s) fail or refuse to undertake the
defense of such Third Party Claim within ten (10) days after written notice
of such claim has been given to the Indemnitor Representative(s) by the
Indemnitee, the Indemnitee shall have the right to undertake the defense,
compromise and settlement of such claim with counsel of its own choosing. In
the circumstances described in the preceding sentence, the Indemnitee shall,
promptly upon its assumption of the defense of such claim, make an
Indemnification Claim as specified in Section 8.2 which shall be deemed an
Indemnification Claim that is not a Third Party Claim for the purposes of the
procedures set forth herein.
(b) If, in the reasonable opinion of the Indemnitee, any Third
Party Claim or the litigation or resolution thereof involves an issue or
matter which could have a material adverse effect on the business,
operations, assets, properties or prospects of the Indemnitee (including,
without limitation, the administration of the tax returns and
responsibilities under the tax laws of the Indemnitee), the Indemnitee shall
have the right to control the defense, compromise and settlement of such
Third Party Claim undertaken by the Indemnitor Representative(s), and the
costs and expenses of the Indemnitee in connection therewith shall be
included as part of the indemnification obligations of the Indemnitors
hereunder. If the Indemnitee shall elect to exercise such right, the
Indemnitor Representative(s) shall have the right to participate in, but not
control, the defense, compromise and settlement of such Third Party Claim at
its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitors under this Article 8 shall be made without the
prior written consent by or on behalf of the Indemnitor Representative(s),
which consent shall not be unreasonably withheld or delayed. Consent shall
be presumed in the case of settlements of $20,000 or less where the
Indemnitor Representative(s) has not responded within five business days of
notice of a proposed settlement. If the Indemnitor Representative(s) assume
the defense of such a Third Party Claim, (a) no compromise or settlement
thereof may be effected by the Indemnitor Representative(s) without the
Indemnitee's consent unless (i) there is no finding or admission of any
violation of law or any violation of the rights of any person and no effect
on any other claim that may be made against the Indemnitee, (ii) the sole
relief provided is monetary damages that are paid in full by the Indemnitors,
and (iii) the compromise or settlement includes, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the Indemnitee of a
release, in form and substance satisfactory to the Indemnitee, from all
liability in respect of such Third Party Claim, and (b) the Indemnitee shall
have no liability with respect to any compromise or settlement thereof
effected without its consent.
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(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers of
attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may reasonably
be related to any such claim or action, shall provide access to the counsel,
accountants and other representatives of each party during normal business
hours to all properties, personnel, books, tax records, contracts,
commitments and all other business records of such other party and will
furnish to such other party copies of all such documents as may reasonably be
requested (certified, if requested).
8.4 INDEMNIFICATION EXCLUSIVE REMEDY. If the Closing occurs, the
--------------------------------
indemnification provided in this Article 8 and in the Escrow Agreement shall
(except as prohibited by ERISA) be the exclusive remedy in any action seeking
damages or any other form of monetary relief brought by any party to this
Agreement against any other party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
8.5 SURVIVAL. All representations, warranties and agreements of ACSYS
--------
and the ACSYS Shareholders and ICCE contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the Closing
notwithstanding any investigation conducted with respect thereto or any
knowledge acquired as to the accuracy or inaccuracy of any such representation
or warranty.
8.6 TIME LIMITATIONS. The Indemnitors will have no liability to the
----------------
Indemnitees under or in connection with a breach of any of the representations,
warranties, covenants or agreements made or to be performed by the Indemnitors
contained in this Agreement unless written notice asserting an Indemnification
Claim based thereon is given to the Indemnitor Representative(s) prior to the
earlier of (i) 15 days following the issuance of post-Merger audited financial
statements for ICCE and its subsidiaries on a consolidated basis which cover at
least 30 days of post-Merger operations, and (ii) the first anniversary of the
Closing Date.
8.7 LIMITATIONS AS TO AMOUNT. Indemnitors shall have no liability with
------------------------
respect to the matters described in Section 8.1 until the total of all Losses
with respect thereto exceeds $100,000 and then only for the amount by which such
Losses exceeds $100,000 with respect to the relevant class of Indemnitors. The
limitations set forth in this Section shall not apply to any intentional
misrepresentation or breach of warranty of any Indemnitor or any intentional
failure to perform or comply with any covenant or agreement of any Indemnitor,
and the Indemnitors shall be liable for all Losses with respect thereto.
Notwithstanding any other term of this Agreement (except the proviso to this
sentence), no ACSYS Shareholder shall be liable under this Article 8 for an
amount which exceeds the fair market value (at the time when the amount of
liability is determined) of the ICCE Common Stock received by such ACSYS
Shareholder in connection with the Merger, provided that a ACSYS Shareholder's
indemnification obligations pursuant to Section 8.1(a)(i) with respect to the
representations and warranties made in Section 4.8 shall not be so limited.
Notwithstanding any other term of this Agreement (except the proviso to this
sentence), no ICCE Shareholder shall be liable under this Article 8 for an
amount
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which exceeds the fair market value (at the time when the amount of liability is
determined) of the ICCE Common Stock beneficially owned by such ICCE Shareholder
as of the date hereof, provided that an ICCE Shareholder's indemnification
obligations pursuant to Section 8.1(c)(i) with respect to the representations
and warranties made in Section 5.7 shall not be so limited, and ICCE shall not
be liable under this Article 8 for any amounts which exceed the aggregate
limitation on the liability of all ICCE Shareholders as a group.
8.8 TAX EFFECT AND INSURANCE. The liability of the Indemnitors with
------------------------
respect to any Indemnification Claim shall be reduced by the tax benefit
actually realized and any insurance proceeds received by the Indemnitees as a
result of any Losses upon which such Indemnification Claim is based, and shall
include any tax detriment actually suffered by the Indemnitees as a result of
such Losses. The amount of any such tax benefit or detriment shall be
determined by taking into account the effect, if any and to the extent
determinable, of timing differences resulting from the acceleration or deferral
of items of gain or loss resulting from such Losses and shall otherwise be
determined so that payment by the Indemnitors of the Indemnification Claim, as
adjusted to give effect to any such tax benefit or detriment, will make the
Indemnitee as economically whole as is reasonably practical with respect to the
Losses upon which the Indemnification Claim is based.
8.9 ESCROW CLAIM. Upon notice to the Indemnitor Representative for the
------------
ACSYS Shareholders specifying in reasonable detail the basis therefor, ICCE may
give notice of an Escrow Claim under the Escrow Agreement. Neither the giving
of nor the failure to give such notice of an Escrow Claim under the Escrow
Agreement shall constitute an election of remedies nor limit ICCE in any manner
in the enforcement of any other remedies that may be available to it under this
Agreement or the Escrow Agreement.
8.10 SUBROGATION. Upon payment in full of any Indemnification Claim,
-----------
whether such payment is effected by set-off or otherwise, or the payment of any
judgment or settlement with respect to a Third Party Claim, the Indemnitors
shall be subrogated to the extent of such payment to the rights of the
Indemnitee against any person or entity with respect to the subject matter of
such Indemnification Claim or Third Party Claim.
8.11 APPOINTMENT OF INDEMNITOR REPRESENTATIVES.
-----------------------------------------
(a) Each ACSYS Shareholder constitutes and appoints Edward S.
Baumstein as his or her true and lawful attorney-in-fact to act for and on
behalf of such ACSYS Shareholder as Indemnitor Representative in all matters
relating to or arising out of this Article 8. Each Indemnitor Representative
shall act in all matters relating to or arising out of this Article 8 and the
Liability or asserted Liability of such Indemnitor hereunder, including
specifically, but without limitation, accepting and agreeing to the Liability of
such Indemnitor with respect to any Indemnification Claim, objecting to any
Indemnification Claim, disputing the Liability of such Indemnitor, or the amount
of such Liability, with respect to any Indemnification Claim and prosecuting and
resolving such dispute as herein provided, accepting the defense, compromise and
settlement of any Third Party Claim on behalf of such Indemnitor or refusing to
accept the same, settling and compromising the Liability of such Indemnitor
hereunder, instituting and
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prosecuting such actions (including arbitration proceedings) as such Indemnitor
Representative shall deem appropriate in connection with any of the foregoing,
retaining counsel, accountants, appraisers and other advisers in connection with
any of the foregoing, all for the account of each Indemnitor, each such
Indemnitor agreeing to be fully bound by the acts, decisions and agreements of
such Indemnitor Representative taken and done pursuant to the authority herein
granted. Each ACSYS Shareholder hereby agrees to indemnify and to save and hold
harmless such Indemnitor Representative from any Liability incurred by such
Indemnitor Representative based upon or arising out of any act, whether of
omission or commission, of such Indemnitor Representative pursuant to the
authority herein granted, other than acts, whether of omission or commission, of
such Indemnitor Representative that constitute gross negligence or willful
misconduct in the exercise by such Indemnitor Representative of the authority
herein granted.
(b) Each ICCE Shareholder constitutes and appoints each of Mark E.
Strassman and David C. Cooper, or either of them, as his or her true and lawful
attorney-in-fact to act for and on behalf of such ICCE Shareholder as Indemnitor
Representative in all matters relating to or arising out of this Article 8.
Each such Indemnitor Representative shall act in all matters relating to or
arising out of this Article 8 and the Liability or asserted Liability of such
Indemnitor hereunder, including specifically, but without limitation, accepting
and agreeing to the Liability of such Indemnitor with respect to any
Indemnification Claim, objecting to any Indemnification Claim, disputing the
Liability of such Indemnitor, or the amount of such Liability, with respect to
any Indemnification Claim and prosecuting and resolving such dispute as herein
provided, accepting the defense, compromise and settlement of any Third Party
Claim on behalf of such Indemnitor or refusing to accept the same, settling and
compromising the Liability of such Indemnitor hereunder, instituting and
prosecuting such actions (including arbitration proceedings) as each such
Indemnitor Representatives shall deem appropriate in connection with any of the
foregoing, retaining counsel, accountants, appraisers and other advisers in
connection with any of the foregoing, all for the account of each Indemnitor,
each such Indemnitor agreeing to be fully bound by the acts, decisions and
agreements of either such Indemnitor Representative taken and done pursuant to
the authority herein granted. Each ICCE Shareholder hereby agrees to indemnify
and to save and hold harmless each such Indemnitor Representative from any
Liability incurred by such Indemnitor Representative based upon or arising out
of any act, whether of omission or commission, of such Indemnitor Representative
pursuant to the authority herein granted, other than acts, whether of omission
or commission, of such Indemnitor Representative that constitute gross
negligence or willful misconduct in the exercise by such Indemnitor
Representative of the authority herein granted.
ARTICLE 9
TERMINATION
-----------
9.1 TERMINATION. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the shareholders of ACSYS,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) By mutual consent of ICCE and ACSYS; or
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(b) By either Party, if the Effective Time has not occurred by 5:00
P.M. on the first business day following the date of this Agreement.
9.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 9.1, this Agreement shall
become void and have no effect, except that the provisions of this Section 9.2
and Article 10 shall survive any such termination and abandonment.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 DEFINITIONS.
-----------
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"AFFILIATE" of a Person shall mean: (i) any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other Person
for which a Person described in clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by reference.
"ANCILLARY AGREEMENTS" shall mean the Employment Agreements, the
Non-Solicitation Agreements, and the Registration Rights Agreement.
"ACSYS COMMON STOCK" shall mean the no par value common stock of
ACSYS.
"ACSYS DISCLOSURE MEMORANDUM" shall mean the written information
entitled "ACSYS Resources, Inc. Disclosure Memorandum" delivered prior to the
date of this Agreement to ICCE describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made. Information disclosed with respect to one Section
shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
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"ACSYS ENTITIES" shall mean, collectively, ACSYS, all ACSYS
Subsidiaries and all predecessors thereto.
"ACSYS FINANCIAL STATEMENTS" shall mean (i) the balance sheets
(including related notes and schedules, if any) of ACSYS as of June 30, 1997,
and as of December 31, 1996 and 1995, the related statements of income for
the six months ended June 30, 1997, and for each of the three fiscal years
ended December 31, 1996, 1995 and 1994, and the related changes in
shareholders' equity and cash flows (including related notes and schedules,
if any) for each of the three fiscal years ended December 31, 1996, 1995 and
1994, and (ii) the balance sheets (including related notes and schedules, if
any) of CPA as of June 30, 1997, and as of December 31, 1996, the related
statements of income for the six months ended June 30, 1997, and for the
fiscal year ended December 31, 1996, and the related changes in shareholders'
equity and cash flows (including related notes and schedules, if any) for the
fiscal year ended December 31, 1996.
"ACSYS MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of ACSYS and its Subsidiaries, taken as a
whole, or (ii) the ability of ACSYS to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated
by this Agreement.
"ACSYS SUBSIDIARIES" shall mean the Subsidiaries of ACSYS, which
shall include the ACSYS Subsidiaries described in Section 4.1 and any
corporation or other organization acquired as a Subsidiary of ACSYS in the
future and held as a Subsidiary by ACSYS at the Effective Time.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued
or contingent, or otherwise relating to or utilized in such Person's
business, directly or indirectly, in whole or in part, whether or not carried
on the books and records of such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and wherever located.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger to be
executed by ACSYS and Sub and filed with the Secretary of State of the
Commonwealth of Pennsylvania relating to the Merger as contemplated by
Section 1.1.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person pursuant
to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan,
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practice, restriction, understanding, or undertaking of any kind or character,
or other document to which any Person is a party or that is binding on any
Person or its capital stock, Assets or business.
"CPA" shall mean Career Placement Associates, Inc., C.P.A. Staffing,
Inc., and C.P.A. Search, Inc. acquired by ACSYS as of August 12, 1997, with
the merger effective August 22, 1997.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit, or
(iii) any occurrence of any event that with or without the passage of time or
the giving of notice would give rise to a right of any Person to exercise any
remedy or obtain any relief under, terminate or revoke, suspend, cancel, or
modify or change the current terms of, or renegotiate, or to accelerate the
maturity or performance of, or to increase or impose any Liability under, any
Contract, Law, Order, or Permit.
"EMPLOYEE LEASING" shall mean an arrangement whereby a client of
ACSYS places some or all of its workforce onto the payroll of ACSYS in a co-
employment relationship in which ACSYS assumes responsibility for administration
of payroll, benefits, and other human resources activities for the client;
provided, however, that the term "Employee Leasing" does not include a temporary
help arrangement, whereby an ACSYS Entity hires its own employees and assigns
them to a client to support or supplement the client's workforce in special work
situations, such as employee absences, temporary skill shortages, seasonal
workloads, and special assignments and projects.
"ENVIRONMENTAL LAWS" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq. ("CERCLA"), the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901 et seq. ("RCRA"), and other Laws
relating to emissions, discharges, releases, or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of any
Hazardous Material.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants, or
other binding obligations of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for, shares of the capital stock of a
Person or by which a Person is or may be bound to issue additional shares of its
capital stock or other Equity Rights.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXHIBITS" 1 through 6, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof, and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"HAZARDOUS MATERIAL" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance (as
those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil (and
specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by Title
II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"ICCE AUDITED FINANCIAL STATEMENTS" shall mean the consolidated
balance sheets of ICCE and the ICCE Companies as of December 31, 1996 and 1995,
and consolidated statements of income, changes in shareholders' equity and cash
flows (including related notes and schedules, if any) for the years ended
December 31, 1996, 1995 and 1994, in each case reflecting consummation of the
Reorganization Merger on a pooling of interests basis.
"ICCE CAPITAL STOCK" shall mean, collectively, the ICCE Common Stock,
the ICCE Preferred Stock and any other class or series of capital stock of
ICCE.
"ICCE COMMON STOCK" shall mean the no par value common stock of ICCE.
"ICCE COMPANIES" shall mean David C. Cooper & Associates, Inc., DCCA
Professional Temporaries, Inc., EKT, Inc., and Infinity Enterprises, Inc.,
together with ICCE Subsidiaries acquired after the date of this Agreement.
"ICCE DISCLOSURE MEMORANDUM" shall mean the written information
entitled "ICCE, Inc. Disclosure Memorandum" delivered prior to the date of this
Agreement to ACSYS describing in reasonable detail the matters contained therein
and, with respect to each disclosure made therein, specifically referencing each
Section of this Agreement under which such disclosure is being made. Information
disclosed with respect to one Section
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shall not be deemed to be disclosed for purposes of any other Section not
specifically referenced with respect thereto.
"ICCE ENTITIES" shall mean, collectively, ICCE, all ICCE Subsidiaries
and all predecessors thereto.
"ICCE FINANCIAL STATEMENTS" shall mean (i) the ICCE Audited Financial
Statements, and (ii) the consolidated balance sheets of ICCE (including related
notes and schedules, if any) and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) with respect to periods ended subsequent to December 31, 1996.
"ICCE MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of ICCE and its Subsidiaries, taken as a
whole, or (ii) the ability of ICCE to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this Agreement.
"ICCE PREFERRED STOCK" shall mean the no par value preferred stock of
ICCE.
"ICCE PRELIMINARY FINANCIAL STATEMENTS" shall mean the preliminary
and tentative drafts of consolidated balance sheets of ICCE and the ICCE
Companies as of December 31, 1996 and 1995, and consolidated statements of
income, changes in shareholders' equity and cash flows for the three years ended
December 31, 1996, in each case reflecting consummation of the Reorganization
Merger on a pooling of interests basis.
"ICCE SUBSIDIARIES" shall mean the Subsidiaries of ICCE, which shall
include the ICCE Companies from and after the date of consummation of the
Reorganization Merger and any corporation or other organization acquired as a
Subsidiary of ICCE in the future and held as a Subsidiary by ICCE at the
Effective Time.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification under
Article 8.
"INDEMNITEES" shall mean the ACSYS Shareholders or the ICCE
Indemnitees, as the case may be, as the parties asserting an Indemnification
Claim.
"INDEMNITOR REPRESENTATIVE(S)" shall mean ICCE, in the case of ICCE,
either of Mark E. Strassman or David C. Cooper, in the case of the ICCE
Shareholders, and Edward S. Baumstein, in the case of the ACSYS Shareholders.
"INDEMNITORS" shall mean the ACSYS Shareholders, the ICCE
Shareholders or ICCE, as the case may be, as the parties against whom an
Indemnification Claim is asserted.
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"INTELLECTUAL PROPERTY" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor, technology
rights and licenses, computer software (including any source or object codes
therefor or documentation relating thereto), trade secrets, franchises, know-
how, inventions, and other intellectual property rights.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that are
known or should reasonably have been known after due inquiry by the chairman,
president, chief financial officer, chief accounting officer, chief operating
officer, general counsel, any assistant or deputy general counsel, or any
senior, executive or other vice president of such Person, and in the case of
ACSYS, shall include the Knowledge of the ACSYS Shareholders.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable to a
Person or its Assets, Liabilities, or business, including those promulgated,
interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including costs
of investigation, collection and defense), claim, deficiency, guaranty or
endorsement of or by any Person (other than endorsements of notes, bills,
checks, and drafts presented for collection or deposit in the ordinary course of
business) of any type, whether accrued, absolute or contingent, liquidated or
unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reserva reservation, restriction, security interest, title
retention or other security arrangement, or any ad verse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property Taxes
not yet due and payable, and (ii) Liens which do not materially impair the use
of or title to the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a Party, its business, its Assets (including Contracts related to it),
or the transactions contemplated by this Agreement.
"LOSSES" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including special and
consequential damages), liabilities, costs, and expenses, including interest,
penalties, cost of investigation and defense, and reasonable attorneys' and
other professional fees and expenses.
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"MATERIAL" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided that
any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries or in which such
Party or Subsidiary holds a security interest or other interest (including an
interest in a fiduciary capacity), and, where required by the context, includes
the owner or operator of such property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency, or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
and, where required by the context, said term means the owner or operator of
such facility or property, but only with respect to such facility or property.
"PARTY" shall mean either ACSYS or ICCE, and "PARTIES" shall mean
both ACSYS and ICCE.
"PBCL" shall mean the Pennsylvania Business Corporation Law.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the
Federal Trade Commission, the United States Department of Justice, and all other
federal, state, county, local or other governmental or regulatory agencies,
authorities (including self-regulatory authorities), instrumentalities,
commissions, boards or bodies having jurisdiction over the Parties and their
respective Subsidiaries.
"REORGANIZATION AGREEMENT" shall mean that certain Agreement and Plan
of Reorganization, dated as of April 16, 1997, by and among ICCE, the ICCE
Companies, Cooper Acquisition, Inc., DCCA Acquisition, Inc., EKT Acquisition,
Inc. and Infinity Acquisition, Inc., as the same may be amended from time to
time.
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"REORGANIZATION MERGER" shall mean the "Merger" defined in the
Reorganization Agreement.
"REPRESENTATIVE" shall mean any investment banker, financial advisor,
attorney, accountant, consultant, or other representative engaged by a Person.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940,
as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SUB COMMON STOCK" shall mean the $1.00 par value common stock of
Sub.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly or
through an unbroken chain of entities as to each of which 50% or more of the
outstanding equity securities is owned directly or indirectly by its parent
(provided, there shall not be included any such entity the equity securities of
which are owned or controlled in a fiduciary capacity), (ii) in the case of
partnerships, serves as a general partner, (iii) in the case of a limited
liability company, serves as a managing member, or (iv) otherwise has the
ability to elect a majority of the directors, trustees or managing members
thereof.
"SURVIVING CORPORATION" shall mean ACSYS as the surviving corporation
resulting from the Merger.
"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary group
that includes a Party or its Subsidiaries.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
license, payroll, franchise, severance, stamp, occupation, windfall profits,
environmental, federal highway use, commercial rent, customs duties, capital
stock, paid-up capital, profits, withholding, Social Security, single business
and unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, or other tax or
governmental fee of any kind whatsoever, imposed or required to be withheld by
the United States or any state, county, local or foreign government or
subdivision or agency thereof, including any interest, penalties, and additions
imposed thereon or with respect thereto.
(b) The terms set forth below shall have the meanings ascribed
thereto in the referenced sections:
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ACSYS Options Section 4.4(a)
ACSYS Benefit Plans Section 4.14
ACSYS Contracts Section 4.15
ACSYS ERISA Plan Section 4.14
ACSYS Pension Plan Section 4.14
ACSYS Options Section 4.4
ACSYS Shareholders Article 4
ACSYS Stock Plan Section 3.7
ASR 130 and 135 Section 3.6(b)
Certificates Section 3.4
Closing Section 1.2
Dettore Agreement Section 7.2(f)
Escrow Section 3.8
Escrow Agreement Section 3.9
Effective Time Section 1.3
Employment Agreements Section 7.1(e)
ERISA Affiliate Section 4.14(c)
Exchange Ratio Section 3.1(c)
ICCE Benefit Plans Section 5.14
ICCE Contracts Section 5.18
ICCE ERISA Plan Section 5.14
ICCE Pension Plan Section 5.14
Merger Section 1.1
Merger Shares Section 3.1(c)
Non-Solicitation Agreements Section 7.1(f)
Registration Rights Agreement Section 7.1(d)
Released Claims Section 6.3
Releasees Section 6.3
(c) Any singular term in this Agreement shall be deemed to include
the plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
10.2 EXPENSES.
--------
(a) Except as otherwise provided in this Section 10.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel.
(b) Nothing contained in this Section 10.2 shall constitute or shall
be deemed to constitute liquidated damages for the willful breach by a Party of
the terms of this Agreement or otherwise limit the rights of the nonbreaching
Party.
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10.3 BROKERS AND FINDERS. Each of the Parties represents and warrants
-------------------
that neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions contemplated
hereby; provided, however, that Janney Montgomery Scott shall be due a brokerage
fee in connection with the Merger, which fee will be paid by ACSYS Entities at
the Effective Time. In the event of a claim by any other broker or finder based
upon his or its representing or being retained by or allegedly representing or
being retained by ACSYS or any ACSYS Shareholder or by ICCE, each of ACSYS and
the ACSYS Shareholders and ICCE, as the case may be, agrees to indemnify and
hold the other Party harmless of and from any Liability in respect of any such
claim.
10.4 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
----------------
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
10.5 AMENDMENTS. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties, whether before or after shareholder approval of this
Agreement has been obtained; provided, that after any such approval by the
holders of ACSYS Common Stock, there shall be made no amendment that pursuant to
Section 1924(a) of the PBCL requires further approval by such shareholders
without the further approval of such shareholders.
10.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, ICCE, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by ACSYS or the ACSYS Shareholders, to waive or extend the time for the
compliance or fulfillment by ACSYS or the ACSYS Shareholders of any and all of
its obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of ICCE under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law (or that would
constitute an amendment that, without shareholder consent, would be prohibited
by the PBCL). No such waiver shall be effective unless in writing signed by a
duly authorized officer of ICCE.
(b) Prior to or at the Effective Time, ACSYS, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by ICCE, to waive or extend the time for the compliance or fulfillment
by ICCE of any and all of its obligations under this Agreement, and to waive any
or all of the conditions precedent to the obligations of ACSYS and the ACSYS
Shareholders under this Agreement, except any condition which, if not satisfied,
would result in
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the violation of any Law (or that would constitute an amendment
that, without shareholder consent, would be prohibited by the PBCL). No such
waiver shall be effective unless in writing signed by a duly authorized officer
of ACSYS.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 ASSIGNMENT. Except as expressly contemplated hereby, neither this
----------
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
10.8 NOTICES. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
ACSYS or
any ACSYS Shareholder: ACSYS Resources, Inc.
530 East Swedesford Road
Suite 202
Wayne, Pennsylvania 19087
Telecopy Number: (610) 687-9456
Attention: Edward S. Baumstein
Copy to Counsel: Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, Pennsylvania 19103-6993
Telecopy Number: (215) 963-5299
Attention: Stephen M. Goodman
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ICCE: ICCE, Inc.
Five Concourse Parkway
Suite 2700
Atlanta, Georgia 30328
Telecopy Number: (770) 395-6521
Attention: Timothy Mann, Jr.
Copy to Counsel: Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: David E. Brown, Jr.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the Laws of the State of Georgia, except to the extent that
the Laws of the Commonwealth of Pennsylvania shall govern the provisions of
Articles 1, 2 and 3, in each case without regard to any applicable conflicts of
Laws.
10.10 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.11 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
-------------------------------
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
10.12 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
---------------
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
10.13 SEVERABILITY. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf by its duly authorized officers and each of the ICCE
Shareholders and the ACSYS Shareholders has executed this Agreement under seal
as of the day and year first above written.
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ICCE, INC. SHAREHOLDERS:
/s/ David C. Cooper
-------------------
David C. Cooper
/s/ Mark E. Strassman
---------------------
Mark E. Strassman
/s/ Mary Beth Chase
-------------------
Mary Beth Chase
/s/ D. Perry Brown
------------------
D. Perry Brown
/s/ Kevin W. Cole
-----------------
Kevin W. Cole
/s/ Rosemarie Mahoney
---------------------
Rosemarie Mahoney
/s/ Stephen S.Tutwiler
----------------------
Stephen S. Tutwiler
/s/ Edward K. Turner
--------------------
Edward K. Turner
/s/ Teresa Gordon
-----------------
Teresa Gordon
/s/ Joseph Stauffer
-------------------
Joseph Stauffer
/s/ Robert Criscuolo
--------------------
Robert Criscuolo
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ASRI MERGER SUBSIDIARY, INC.
By: /s/ Timothy Mann, Jr.
_____________________
President
ACSYS RESOURCES, INC.
By: /s/ Edward S. Baumstein
-----------------------
Edward S. Baumstein
President
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THE SHAREHOLDERS:
/s/ Edward S. Baumstein (SEAL)
-----------------------
EDWARD S. BAUMSTEIN
/s/ Harold Sauer (SEAL)
-----------------
HAROLD SAUER
/s/ Domenic L. Vacca (SEAL)
---------------------
DOMENIC L. VACCA
/s/ Albert Dettore (SEAL)
-------------------
ALBERT DETTORE
/s/ Louis J. Boohaker (SEAL)
----------------------
LOUIS J. BOOHAKER
/s/ John R. Ficquette (SEAL)
----------------------
JOHN R. FICQUETTE
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
ACSYS RESOURCES, INC.,
ACSYS STAFFING ACQUISITION CORP.,
ACSYS SEARCH ACQUISITION CORP.,
ACSYS CAREER ACQUISITION CORP.
AND
C.P.A. STAFFING, INC.,
C.P.A. SEARCH, INC.,
CAREER PLACEMENT ASSOCIATES, INC.
AND
JOHN FICQUETTE,
AND
LOUIS BOOHAKER
DATED AS OF AUGUST 12, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS..........................................................1
- -----------
1.1 Definitions.........................................1
-----------
1.2 Knowledge...........................................7
---------
ARTICLE II
MERGERS.........................................................8
-------
2.1 Mergers.............................................8
-------
2.2 Effective Times.....................................8
---------------
2.3 Closing.............................................9
-------
2.4 Articles of Incorporation; By-Laws..................9
----------------------------------
2.5 Directors and Officers..............................9
----------------------
ARTICLE III
MERGER CONSIDERATION; CONVERSION OF SHARES.....................10
------------------------------------------
3.1 Merger Consideration...............................10
--------------------
3.2 Conversion of Shares...............................10
--------------------
3.3 Lost, Stolen or Destroyed Certificates.............12
--------------------------------------
3.4 Taking of Necessary Action; Further Action.........12
------------------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF C.P.A. STAFFING,
C.P.A. SEARCH AND CAREER PLACEMENT AND THE SHAREHOLDERS........12
-------------------------------------------------------
4.1 Corporate Status..................................12
----------------
4.2 Authorization.....................................12
-------------
4.3 Capitalization....................................13
--------------
4.4 No Conflict.......................................13
-----------
4.5 Consents and Approvals............................14
----------------------
4.6 Stock Ownership...................................14
---------------
4.7 Financial Statements..............................14
--------------------
4.8 Title to Assets and Related Matters...............15
-----------------------------------
4.9 Accounts Receivable...............................15
-------------------
4.10 Accounts Payable..................................15
----------------
4.11 Product Warranties and Price Guarantees...........15
---------------------------------------
4.12 No Undisclosed Liabilities........................16
--------------------------
4.13 Taxes.............................................16
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4.14 Legal Proceedings and Compliance with Law.........16
-----------------------------------------
4.15 Contracts.........................................18
---------
4.16 Insurance.........................................19
---------
4.17 Intellectual Property and Software Products.......20
-------------------------------------------
4.18 Employee Relations................................20
------------------
4.19 ERISA.............................................21
-----
4.20 Corporate Records.................................24
-----------------
4.21 Absence of Certain Changes........................24
--------------------------
4.22 Clients...........................................25
-------
4.23 Finder's Fees.....................................25
-------------
4.24 Securities Laws Matters...........................25
-----------------------
4.25 Additional Information............................28
----------------------
4.26 Transactions with Affiliates......................28
----------------------------
4.27 Reports...........................................28
-------
4.28 Full Disclosure...................................28
---------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACSYS........................29
---------------------------------------
5.1 Corporate Status..................................29
----------------
5.2 Authorization.....................................29
-------------
5.3 Capitalization....................................29
--------------
5.4 No Conflict.......................................30
-----------
5.5 Consents and Approvals............................30
----------------------
5.6 Financial Statements..............................30
--------------------
5.7 Title to Assets and Related Matters...............31
-----------------------------------
5.8 Accounts Receivable...............................31
-------------------
5.9 Accounts Payable..................................31
----------------
5.10 Product Warranties and Price Guarantees...........31
---------------------------------------
5.11 No Undisclosed Liabilities........................31
--------------------------
5.12 Taxes.............................................31
-----
5.13 Legal Proceedings and Compliance with Law.........32
-----------------------------------------
5.14 Contracts.........................................33
---------
5.15 Insurance.........................................34
---------
5.16 Intellectual Property and Software Products.......35
-------------------------------------------
5.17 Employee Relations................................35
------------------
5.18 ERISA.............................................36
-----
5.19 Corporate Records.................................38
-----------------
5.20 Absence of Certain Changes........................38
--------------------------
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5.21 Clients...........................................39
-------
5.22 Finder's Fees.....................................40
-------------
5.23 Transactions with Affiliates......................40
----------------------------
5.24 Full Disclosure...................................40
---------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARIES.........40
-----------------------------------------------------
6.1 Corporate Status..................................40
----------------
6.2 Authorization.....................................40
-------------
6.3 Capitalization....................................40
--------------
6.4 No Conflict.......................................41
-----------
6.5 Consents and Approvals............................41
----------------------
ARTICLE VII
COVENANTS OF C.P.A. STAFFING, C.P.A SEARCH,
CAREER PLACEMENT AND THE SHAREHOLDERS........................41
------------------------------------
7.1 Access............................................41
------
7.2 Regulatory Matters................................41
------------------
7.3 Exclusivity.......................................41
-----------
7.4 Financial Information.............................42
---------------------
7.5 Restrictive Covenants.............................42
---------------------
7.6 Required Consents.................................44
-----------------
7.7 Conduct of the Business Prior to the Closing......44
--------------------------------------------
7.8 Shareholder Releases..............................45
--------------------
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ACSYS............................46
----------------------------------
8.1 No Court Order or Litigation......................46
----------------------------
8.2 Representations, Warranties and Agreements........46
------------------------------------------
8.3 Actions and Proceedings...........................46
-----------------------
8.4 Employment Agreements.............................47
---------------------
8.5 Shareholders Agreement............................47
----------------------
8.6 Escrow Agreement..................................47
----------------
8.7 Legal Opinion.....................................47
-------------
8.8 Due Diligence.....................................47
-------------
8.9 Regulatory Approvals..............................47
--------------------
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TABLE OF CONTENTS (continued)
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<S> <C>
8.10 Financing..........................................47
---------
8.11 Termination of Existing Agreements.................47
----------------------------------
ARTICLE IX
CONDITION TO OBLIGATIONS OF C.P.A. STAFFING, C.P.A. SEARCH,
CAREER PLACEMENT AND THE SHAREHOLDERS..........................48
-------------------------------------
9.1 No Court Order or Litigation........................48
----------------------------
9.2 Representations, Warranties and Agreements..........48
------------------------------------------
9.3 Actions and Proceedings.............................48
-----------------------
9.4 Employment Agreements...............................49
---------------------
9.5 Regulatory Approvals................................49
--------------------
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION...................49
--------------------------------------------
10.1 Survival of Representations, Etc....................49
--------------------------------
10.2 Indemnification by the Shareholders.................49
-----------------------------------
10.3 Indemnification by ACSYS...........................50
------------------------
10.4 Limitation on Liabilities..........................50
-------------------------
10.5 Procedure for Claims...............................50
--------------------
10.6 Third Party Claims.................................51
------------------
10.7 Exceptions to Limitations..........................51
-------------------------
10.8 Escrow.............................................51
------
10.9 Effect of Investigation............................52
-----------------------
10.10 Contingent Claims..................................52
-----------------
ARTICLE XI
TERMINATION....................................................52
-----------
11.1 Termination........................................52
-----------
11.2 Effect of Termination..............................53
---------------------
ARTICLE XII
MISCELLANEOUS..................................................53
-------------
12.1 Payment of Expenses................................53
-------------------
12.2 Entire Agreement...................................53
----------------
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12.3 Amendment, Parties in Interest, Assignment, Etc...53
-----------------------------------------------
12.4 Interpretation....................................53
--------------
12.5 Notices...........................................54
-------
12.6 Governing Law.....................................55
-------------
12.7 Counterparts......................................55
------------
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made as of the 12th
day of August, 1997, by and among ACSYS Resources, Inc., a Pennsylvania
corporation ("ACSYS"), ACSYS Staffing Acquisition Corp., a Georgia corporation
and wholly owned subsidiary of ACSYS ("Staffing Acquisition"), ACSYS Search
Acquisition Corp., a Georgia corporation and wholly owned subsidiary of ACSYS
("Search Acquisition"), ACSYS Career Acquisition Corp., a Georgia corporation
and wholly owned subsidiary of ACSYS ("Career Acquisition"), and C.P.A.
Staffing, Inc., a Georgia corporation ("C.P.A. Staffing"), C.P.A. Search, Inc.,
a Georgia corporation ("C.P.A. Search"), Career Placement Associates, Inc., a
Georgia corporation ("Career Placement"), and John Ficquette and Louis Boohaker
(together, the "Shareholders").
R E C I T A L S:
- - - - - - - -
WHEREAS, in consideration of the mutual agreements of the parties as set
forth herein, the boards of directors of ACSYS, Staffing Acquisition, Search
Acquisition, Career Acquisition, C.P.A. Staffing, C.P.A. Search and Career
Placement deem it in the best interests of their respective shareholders that
Staffing Acquisition be merged with and into C.P.A. Staffing, Search Acquisition
be merged with and into C.P.A. Search and Career Acquisition be merged with and
into Career Placement, in each case upon the terms and subject to the conditions
of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that each such
merger shall qualify as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"),
pursuant to which the common stock of each of C.P.A. Staffing, C.P.A. Search and
Career Placement shall be converted into the right to receive cash and common
stock of ACSYS;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, intending to be legally bound hereby, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. In addition to the terms defined elsewhere herein, the
-----------
following terms have the meanings specified or referred to in this Article 1.1
-----------
and shall be equally applicable to both the singular and plural forms. Any
agreement referred to below shall mean such agreement as amended, supplemented
and modified from time to time to the extent permitted by the applicable
provisions thereof and by this Agreement
"Acquisition Proposal" is defined in Section 7.3.
"ACSYS" is defined in the preamble to this Agreement.
<PAGE>
"ACSYS Balance Sheet" is defined in Section 5.6.
"ACSYS Balance Sheet Date" is defined in Section 5.6.
"ACSYS Disclosure Schedule" is defined in the preamble to Article V.
"ACSYS Interim Balance Sheet" is defined in Section 5.6.
"ACSYS Interim Balance Sheet Date" is defined Section 5.6.
"ACSYS Financial Statements" is defined in Section 5.6.
"ACSYS Preliminary Audited Financial Statements" is defined in Section 5.6.
"ACSYS Required Consents" is defined in Section 5.5.
"ACSYS Unaudited Financial Statements" is defined in Section 5.6.
"ACSYS Shares" means shares of the common stock of ACSYS issued to the
Shareholders in the Staffing Merger, the Search Merger and the Career Merger.
"Action" is defined in Section 10.6
"Affiliates" means, with respect to a particular party, persons or entities
controlling, controlled by or under common control with that party, as well as
the officers, directors and majority-owned entities of that party and of its
other Affiliates.
"Agent" is defined in Section 7.3.
"Agreement" means this Agreement.
"Balance Sheet Date" is defined in Section 4.7.
"Benefit Plan" is defined in Section 4.19.
"Career Certificate" is defined in Section 3.2(c).
"Career Certificate of Merger" is defined in Section 2.2(c).
"Career Merger" is defined in Section 2.1(c).
"Career Merger Effective Time" is defined in Section 2.2(c).
"Career Per Share Cash Consideration" is defined in Section 3.2(c).
2
<PAGE>
"Career Placement Shares" is defined in Section 3.2(c).
"Career Per Share Stock Consideration" is defined in Section 3.2(c).
"Certificate" means any Staffing Certificate, Search Certificate or Career
Certificate, as the context requires.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Claim Notice" is defined in Section 10.5(a).
"Claim Response" is defined in Section 10.5(a).
"Closing" is defined in Section 2.3.
"Closing Date" is defined in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means C.P.A. Staffing, C.P.A. Search or Career Placement, as the
context requires.
"Company Balance Sheet" is defined in Section 4.7.
"Company Disclosure Schedule" is defined in the preamble to Article IV.
"Confidential Information" means any confidential information or trade
secrets, including, without limitation, information and knowledge pertaining to
products and services offered, innovations, designs, ideas, plans, trade
secrets, proprietary information, know-how and other technical information,
advertising, distribution and sales methods and systems, sales and profit
figures, customer and client lists, and relationships with dealers,
distributors, wholesalers, customers, clients, suppliers and others who have
business dealings with the Business.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document or commitment, arrangement, undertaking, practice
or authorization that is or may be binding on any Person or its property under
applicable law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
3
<PAGE>
"Court Order" means any judgment, decree, injunction, order or ruling of
any federal, state, local or foreign court or governmental or regulatory body or
arbitrator or authority that is binding on any Person or its property under
applicable law.
"Damages" is defined in Section 10.2.
"Default" means (a) a breach, default or violation, (b) the occurrence of
an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability or voting, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property interest.
"Environmental Condition" is defined in Section 4.14(b).
"Environmental Law" is defined in Section 4.14(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Mellon Bank, N.A.
"Escrow Agreement" means the Escrow Agreement to be entered into at the
Closing by and among ACSYS, the Shareholders and the Escrow Agent substantially
in the form attached as Exhibit C hereto.
"Escrow Deposit" is defined in Section 10.8.
"Financial Statements" is defined in Section 4.7.
"GAAP" means United States generally accepted accounting principles.
"GBCC" is defined in Section 2.1(a).
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory or judicial body.
"Hazardous Substances" means (i) any gasoline, fuel oil or any other
petroleum products, explosives, alcohols or chemical solvents or polychlorinated
biphenyls, (ii) any substance, waste, material or product defined as hazardous,
radioactive, extremely hazardous or toxic under any Environmental Law, and (iii)
asbestos, asbestos-containing substances or urea formaldehyde insulation.
4
<PAGE>
"Indemnified ACSYS Party" is defined in Section 10.2.
"Indemnified Party" is defined in Section 10.5(a).
"Indemnified Seller Party" is defined in Section 10.3.
"Indemnitor" is defined in Section 10.5(a).
"Interim Company Balance Sheet" is defined in Section 4.7.
"Interim Company Balance Sheet Date" is defined in Section 4.7.
"Intellectual Property" means any Copyrights, Patents, Trademarks, know-
how, trade secrets (including, without limitation, all results of research and
development), product formulae, franchises, inventions, rights-to-use and other
industrial or intellectual property rights.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Liquidated Claim Notice" is defined in Section 10.5(a).
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means, with respect to any party, a material
adverse effect on the business, assets, financial condition, results of
operations, liquidity, products, prospects, competitive position, customers or
customer relations of such party.
"Mears Financial Statements" is defined in Section 4.7.
"Merger Cash Portion" is defined in Section 3.1.
"Merger Share Portion" is defined in Section 3.1.
"Merger Consideration" is defined in Section 3.1.
"Merger Debt Repayment Portion" is defined in Section 3.1.
"Merger Subsidiary" means ACSYS Staffing Acquisition Corp., ACSYS Search
Acquisition Corp. or ACSYS Career Acquisition Corp., as the context requires.
"Mergers" is defined in Section 3.1.
5
<PAGE>
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent in nature and, where relevant, amount with
past practices.
"Patents" means all patents and patent applications.
"Pension Plan" is defined in Section 4.19(b).
"Permit" means any governmental permit, license, registration, certificate
of occupancy, approval and other authorization.
"Permitted Encumbrances" means those encumbrances specifically set forth on
the Company Disclosure Schedule.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Plan" is defined in Section 4.19.
"Preliminary Audited Financial Statements" is defined in Section 4.7.
"Regulation" means any statute, law, ordinance, regulation, order or rule
of any Governmental Body.
"Released Claims" is defined in Section 7.8.
"Releases" is defined in Section 7.8.
"Required Consents" is defined in Section 4.5.
"Response Period" is defined in Section 10.5(a).
"Restricted Business" is defined in Section 7.5(a).
"Search Certificate" is defined in Section 3.2(b).
"Search Certificate of Merger" is defined in Section 2.2(b).
"Search Merger" is defined in Section 2.1(b).
"Search Merger Effective Time" is defined in Section 2.2(b).
"Search Per Share Cash Consideration" is defined in Section 3.2(b).
"Search Per Share Stock Consideration" is defined in Section 3.2(b).
6
<PAGE>
"Search Shares" is defined in Section 3.2(b).
"Securities Act" is defined in Section 4.24(a).
"Shareholders" is defined in the preamble to this Agreement.
"Staffing Certificate" is defined in Section 3.2(a).
"Staffing Certificate of Merger" is defined in Section 2.2(a).
"Staffing Merger" is defined in Section 2.1(a).
"Staffing Merger Effective Time" is defined in Section 2.2(a).
"Staffing Per Share Cash Consideration" is defined in Section 3.2(a).
"Staffing Per Share Stock Consideration" is defined in Section 3.2(a).
"Staffing Shares" is defined in Section 3.2(a).
"Taxes" means any taxes, duties, assessments, fees, levies, or similar
governmental charges, together with any interest, penalties, and additions to
tax, imposed by any taxing authority, wherever located (i.e. whether federal,
----
state, local, municipal, or foreign), including, without limitation, all net
income, gross income, gross receipts, net receipts, sales, use, transfer,
franchise, privilege, profits, social security, disability, withholding,
payroll, unemployment, employment, excise, severance, property, windfall
profits, value added, ad valorem, occupation, or any other similar governmental
-- -------
charge or imposition.
"Tax Returns" is defined in Section 4.13.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Unaudited Financial Statements" is defined in Section 4.7.
"Unliquidated Claim" is defined in Section 10.5(a).
1.2 Knowledge. The term "to the knowledge of", or words to that effect as
---------
used herein, shall mean those facts that are known or should reasonably have
been known after due inquiry by the corporate executive officers of the
corporation and the knowledge that would have been obtained from a reasonable
investigation.
7
<PAGE>
ARTICLE II
MERGERS
-------
2.1 Mergers.
-------
(a) Upon the terms and subject to the conditions of this Agreement
and in accordance with the Georgia Business Corporation Code (the "GBCC"), at
the Staffing Merger Effective Time (as defined in Section 2.2(a)), Staffing
Acquisition shall be merged with and into C.P.A. Staffing (the "Staffing
Merger") and the separate corporate existence of Staffing Acquisition shall
thereupon cease, C.P.A. Staffing shall be the successor or surviving corporation
in the Staffing Merger and shall continue to be governed by the laws of the
State of Georgia and the separate corporate existence of C.P.A. Staffing with
all its rights, privileges and immunities, powers and franchises shall continue
unaffected by the Staffing Merger.
(b) Upon the terms and subject to the conditions of this Agreement
and in accordance with the GBCC, at the Search Merger Effective Time (as defined
in Section 2.2(b)), Search Acquisition shall be merged with and into C.P.A.
Search (the "Search Merger") and the separate corporate existence of Search
Acquisition shall thereupon cease, C.P.A. Search shall be the successor or
surviving corporation in the Search Merger and shall continue to be governed by
the laws of the State of Georgia and the separate corporate existence of C.P.A.
Search with all its rights, privileges and immunities, powers and franchises
shall continue unaffected by the Search Merger.
(c) Upon the terms and subject to the conditions of this Agreement
and in accordance with the GBCC, at the Career Merger Effective Time (as defined
in Section 2.2(c)), Career Acquisition shall be merged with and into Career
Placement (the "Career Merger") and the separate corporate existence of Career
Acquisition shall thereupon cease, Career Placement shall be the successor or
surviving corporation in the Career Merger and shall continue to be governed by
the laws of the State of Georgia and the separate corporate existence of Career
Placement with all its rights, privileges and immunities, powers and franchises
shall continue unaffected by the Career Merger.
2.2 Effective Times.
---------------
(a) On the Closing Date, upon the terms and subject to the conditions
hereof, Staffing Acquisition and C.P.A. Staffing shall file a Certificate of
Merger (the "Staffing Certificate of Merger") with the Secretary of State of the
State of Georgia, in such form as may be required by, and executed in accordance
with, the GBCC. The Staffing Merger shall become effective at such time as such
document is so filed or at such time as is set forth in the Staffing Certificate
of Merger, if different, which time is hereinafter referred to as the "Staffing
Merger Effective Time." The Staffing Merger shall have the effects set forth in
the applicable provisions of the GBCC and this Agreement.
8
<PAGE>
(b) On the Closing Date, upon the terms and subject to the conditions
hereof, Search Acquisition and C.P.A. Search shall file a Certificate of Merger
(the "Search Certificate of Merger") with the Secretary of State of the State of
Georgia, in such form as may be required by, and executed in accordance with,
the GBCC. The Search Merger shall become effective at such time as such
document is so filed or at such time as is set forth in the Staffing Certificate
of Merger, if different, which time is hereinafter referred to as the "Search
Merger Effective Time." The Search Merger shall have the effects set forth in
the applicable provisions of the GBCC and this Agreement.
(c) On the Closing Date, upon the terms and subject to the conditions
hereof, Career Acquisition and Career Placement shall file a Certificate of
Merger (the "Career Certificate of Merger") with the Secretary of State of the
State of Georgia, in such form as may be required by, and executed in accordance
with, the GBCC. The Career Merger shall become effective at such time as such
document is so filed or at such time as is set forth in the Career Certificate
of Merger, if different, which time is hereinafter referred to as the "Career
Merger Effective Time." The Career Merger shall have the effects set forth in
the applicable provisions of the GBCC and this Agreement.
2.3 Closing. The closing of the Staffing Merger, the Search Merger and
-------
the Career Merger (the "Closing") shall take place on August ___, 1997 at the
offices of Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, at 10:00
a.m. or such other place, time and date as the parties may mutually agree. The
consummation of the Staffing Merger shall occur immediately prior to the
consummation of the Search Merger and the consummation of the Search Merger will
occur immediately prior to the consummation of the Career Merger. The date on
which the Closing shall occur is hereinafter referred to as the "Closing Date".
2.4 Articles of Incorporation; By-Laws.
----------------------------------
(a) The Articles of Incorporation and By-Laws of C.P.A. Staffing at
the Staffing Merger Effective Time shall be the Articles of Incorporation and
By-Laws of the surviving corporation of the Staffing Merger until thereafter
amended as provided therein and the GBCC.
(b) The Articles of Incorporation and By-Laws of C.P.A. Search at the
Search Merger Effective Time shall be the Articles of Incorporation and By-Laws
of the surviving corporation of the Search Merger until thereafter amended as
provided therein and the GBCC.
(c) The Articles of Incorporation and By-Laws of Career Placement at
the Career Merger Effective Time shall be the Articles of Incorporation and By-
Laws of the surviving corporation of the Career Merger until thereafter amended
as provided therein and the GBCC.
2.5 Directors and Officers.
----------------------
(a) The directors and officers of C.P.A. Staffing after the Staffing
Merger Effective Time shall be as set forth on Schedule 2.5 hereto until their
successors have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the Articles of Incorporation
and Bylaws of the surviving corporation of the Staffing Merger.
9
<PAGE>
(b) The directors and officers of C.P.A. Search after the Search
Merger Effective Time shall be as set forth on Schedule 2.5 hereto until their
successors have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the Articles of Incorporation
and Bylaws of the surviving corporation of the Search Merger.
(c) The directors and officers of Career Placement after the Career
Merger Effective Time shall be as set forth on Schedule 2.5 hereto until their
successors have been duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with the Articles of Incorporation
and Bylaws of the surviving corporation of the Career Merger.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OF SHARES
------------------------------------------
3.1 Merger Consideration. The aggregate purchase price payable by ACSYS
--------------------
in the Staffing Merger, the Search Merger and the Career Merger (collectively,
the "Mergers") shall be $9,570,245 (the "Merger Consideration"), of which
$7,023,825.83 shall be payable in the Staffing Merger, $2,545,419.17 shall be
payable in the Search Merger and $1,000 shall be payable in the Career Merger.
The Merger Consideration shall consist of $1,634,049, without interest (the
"Merger Cash Portion"), $280,000 less applicable withholding taxes, without
interest, to be paid to Ruth Gottlieb in repayment of a $280,000 principal
amount demand note from C.P.A. Staffing to Ruth Gottlieb (the "Merger Debt
Repayment Portion") and 3,247,762 ACSYS Shares (the "Merger Share Portion"). The
Merger Cash Portion shall be allocated $1,124,765.17 to the Staffing Merger,
$509,083.83 to the Search Merger and $200 to the Career Merger. The Merger Debt
Repayment Portion shall be allocated entirely to the Staffing Merger. The Merger
Share Portion shall be allocated pro rata to the Staffing Merger, the Search
Merger and the Career Merger based on the purchase price payable by ACSYS in
each such merger as set forth in this Section 3.1 bears to the Merger
Consideration.
3.2 Conversion of Shares.
--------------------
(a) At the Staffing Merger Effective Time, by virtue of the Staffing
Merger and without any action on the part of C.P.A. Staffing, Staffing
Acquisition or the holder of any of the securities thereof, (i) each share of
C.P.A. Staffing common stock issued and outstanding immediately prior to the
Staffing Merger Effective Time ("Staffing Shares") shall be canceled and
extinguished and be converted into and represent the right to receive (A)
$5623.83 in cash, without interest (the "Staffing Per Share Cash
Consideration"), and (B) 11,918.041 ACSYS Shares (the "Staffing Per Share Stock
Consideration"). All Staffing Shares, by virtue of the Staffing Merger and
without any action on the part of the holders thereof, shall no longer be
outstanding and shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any Staffing Shares ("Staffing
Certificate") shall thereafter cease to have any rights with respect thereto,
except the right to receive the Staffing Per Share Cash Consideration and the
Staffing Per Share Stock Consideration for such Staffing Shares upon the
surrender of such certificate in accordance with this Section 3.2(a).
10
<PAGE>
At the Closing, upon surrender of Staffing Certificates representing all the
Staffing Shares to ACSYS for cancellation, each of the Shareholders shall be
entitled to receive, subject to Section 10.8 hereof, $562,383 in cash, without
interest, and a certificate representing 1,191,804.1 ACSYS Common Shares. At the
Staffing Merger Effective Time, each share of common stock of Staffing
Acquisition issued and outstanding immediately prior thereto shall, by virtue of
the Staffing Merger and without any action on the part of the holder thereof, be
converted into one share of common stock of C.P.A. Staffing as the surviving
corporation.
(b) At the Search Merger Effective Time, by virtue of the Search
Merger and without any action on the part of C.P.A. Search, Search Acquisition
or the holder of any of the securities thereof, (i) each share of C.P.A. Search
common stock issued and outstanding immediately prior to the Search Merger
Effective Time ("Search Shares") shall be canceled and extinguished and be
converted into and represent the right to receive (A) $2,545.42 in cash, without
interest (the "Search Per Share Cash Consideration"), and (B) 4,319.072 ACSYS
Shares (the "Search Per Share Stock Consideration"). All Search Shares, by
virtue of the Search Merger and without any action on the part of the holders
thereof, shall no longer be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate representing any Search
Shares ("Search Certificate") shall thereafter cease to have any rights with
respect thereto, except the right to receive the Search Per Share Cash
Consideration and the Search Per Share Stock Consideration for such Search
Shares upon the surrender of such certificate in accordance with this Section
3.2(b). At the Closing, upon surrender of Search Certificates representing all
the Search Shares to ACSYS for cancellation, each of the Shareholders shall be
entitled to receive, subject to Section 10.8 hereof, $254,542 in cash, without
interest, and a certificate representing 431,907.2 ACSYS Common Shares. At the
Search Merger Effective Time, each share of common stock of Search Acquisition
issued and outstanding immediately prior thereto shall, by virtue of the Search
Merger and without any action on the part of the holder thereof, be converted
into one share of common stock of C.P.A. Search as the surviving corporation.
(c) At the Career Merger Effective Time, by virtue of the Career
Merger and without any action on the part of Career Placement, Career
Acquisition or the holder of any of the securities thereof, (i) each share of
Career Placement common stock issued and outstanding immediately prior to the
Career Merger Effective Time ("Career Placement Shares") shall be canceled and
extinguished and be converted into and represent the right to receive (A) $0.20
in cash, without interest (the "Career Per Share Cash Consideration"), and (B)
0.3394 ACSYS Shares (the "Career Per Share Stock Consideration"). All Career
Placement Shares, by virtue of the Career Merger and without any action on the
part of the holders thereof, shall no longer be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any Career Placement Shares ("Career Certificate") shall thereafter
cease to have any rights with respect thereto, except the right to receive the
Career Per Share Cash Consideration and the Career Per Share Stock Consideration
for such Career Placement Shares upon the surrender of such certificate in
accordance with this Section 3.2(c). At the Closing, upon surrender of Career
Certificates representing all the Career Placement Shares to ACSYS for
cancellation, each of the Shareholders shall be entitled to receive, subject to
Section 10.8 hereof, $100.00 in cash, without interest, and a certificate
representing 169.7 ACSYS Common Shares. At the Career Merger Effective Time,
each share of
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common stock of Career Acquisition issued and outstanding immediately prior
thereto shall, by virtue of the Career Merger and without any action on the part
of the holder thereof, be converted into one share of common stock of Career
Placement as the surviving corporation.
3.3 Lost, Stolen or Destroyed Certificates. In the event any Certificate
--------------------------------------
shall have been lost, stolen or destroyed, ACSYS may, in its discretion and as a
condition precedent to the disbursement of the Merger Cash Consideration and the
Merger Share Consideration in respect of shares represented by such Certificate,
require the owner of such lost, stolen or destroyed Certificate to make an
affidavit of that fact containing such indemnification provisions as ACSYS may
reasonably deem appropriate, including, without limitation, the posting of a
bond as indemnity against any claim that may be made against it or the surviving
corporation with respect to such Certificate.
3.4 Taking of Necessary Action; Further Action. If any further action is
------------------------------------------
necessary or desirable to carry out the purposes of this Agreement and to vest
any of the surviving corporations with full rights and title to and possession
of all assets, properties, rights, privileges, immunities and franchises of
either of the constituent corporations, the officers and directors of each such
corporation are fully authorized in the name of such corporation or otherwise to
take, and shall take, all such lawful and necessary action.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF C.P.A. STAFFING,
C.P.A. SEARCH AND CAREER PLACEMENT AND THE SHAREHOLDERS
-------------------------------------------------------
Except as disclosed in a schedule attached to this Agreement (the
"Company Disclosure Schedule") which identifies with particularity an exception
to a representation and warranty in this Agreement, C.P.A. Staffing, C.P.A.
Search, Career Placement and the Shareholders jointly and severally represent
and warrant to ACSYS and the Merger Subsidiaries as set forth below.
4.1 Corporate Status. Each of C.P.A. Staffing, C.P.A. Search and Career
----------------
Placement is a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia and is qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of its properties or the nature or conduct of its business requires
it to be so qualified, except where the failure to so qualify is not likely to
have, individually or in the aggregate, a Material Adverse Effect. C.P.A.
Staffing, C.P.A. Search and Career Placement do not own or control, or have any
equity interest in any other Person.
4.2 Authorization. Each of C.P.A. Staffing, C.P.A. Search and Career
-------------
Placement has the requisite power and authority to own, lease and operate its
properties and carry on its business as currently conducted, and to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement and the performance of the transactions
contemplated herein have been duly authorized by all necessary corporate action
on the part of C.P.A. Staffing, C.P.A. Search and Career Placement, including,
without limitation, approval by the requisite
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vote of the shareholders of each such Company. Each Shareholder has the
requisite power, capacity, legal right and authority to execute and deliver this
Agreement and to perform the transactions contemplated herein. This Agreement
has been duly executed and delivered by each of C.P.A. Staffing, C.P.A. Search
and Career Placement and constitutes a valid and binding obligation of C.P.A.
Staffing, C.P.A. Search and Career Placement, enforceable against each of them
in accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and except that such enforceability
is subject to general principles of equity). This Agreement has been duly
executed and delivered by each Shareholder and constitutes a valid and binding
obligation of each such Shareholder, enforceable against each such Shareholder
in accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and except that such enforceability
is subject to general principles of equity).
4.3 Capitalization. The authorized capital stock of C.P.A. Staffing
--------------
consists of 10,000 shares of common stock, $1.00 par value per share, of which
200 Staffing Shares are issued and outstanding and owned by the Shareholders.
All of the issued and outstanding Staffing Shares have been duly authorized and
are validly issued, fully paid and non-assessable. The authorized capital stock
of C.P.A. Search consists of 10,000 shares of common stock, $1.00 par value per
share, of which 200 Search Shares are issued and outstanding and owned by the
Shareholders. All of the issued and outstanding Search Shares have been duly
authorized and are validly issued, fully paid and non-assessable. The authorized
capital stock of Career Placement consists of 100,000 shares of common stock, no
par value per share, of which 1,000 Career Placement Shares are issued and
outstanding and owned by the Shareholders. All of the issued and outstanding
Career Placement Shares have been duly authorized and are validly issued, fully
paid and non-assessable. The Company Disclosure Schedule contains a true and
complete list of the record holders of all issued and outstanding Shares of each
Company and sets forth the full name and number of Shares of each Company owned
by each. Except as set forth on the Company Disclosure Schedule, none of C.P.A.
Staffing, C.P.A. Search or Career Placement has outstanding (i) any
subscription, option, put, call, warrant or other right or commitment to issue,
nor any obligation or commitment to redeem or purchase, any of its authorized
capital stock, or securities or other instruments convertible into, or
exchangeable or exercisable for its capital stock, or (ii) any securities
convertible into, or exchangeable or exercisable for any of its capital stock.
There are no shares of capital stock of C.P.A. Staffing, C.P.A. Search or Career
Placement that have been issued in violation of, or are subject to, any
preemptive rights or subscription agreements. Except as set forth on the Company
Disclosure Schedule, there are no stockholder agreements, voting agreements,
voting trusts or any such other similar arrangements which have the effect of
restricting or limiting the transfer, voting or other rights associated with the
capital stock of C.P.A. Staffing, C.P.A. Search or Career Placement.
4.4 No Conflict. Except as set forth on the Company Disclosure Schedule,
-----------
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein by C.P.A. Staffing, C.P.A. Search, Career
Placement and the Shareholders, will (i) violate or conflict with any of the
provisions of any of the Charter Documents or bylaws of C.P.A. Staffing,
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C.P.A. Search or Career Placement, (ii) violate or constitute a default, an
event of default or an event creating rights of acceleration, termination,
cancellation or other additional rights, or loss of rights under, any mortgage,
indenture, deed of trust, lease, contract, agreement, license or other
instrument or any statute, rule, regulation, injunction, decree, order, judgment
or ruling of any Governmental Body to which C.P.A. Staffing, C.P.A. Search,
Career Placement or any Shareholder is a party, or by which they or any of their
assets or property are bound other than those which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect, or (iii)
result in the creation of any Encumbrances upon any of the assets or property of
C.P.A. Staffing, C.P.A. Search, Career Placement or any Shareholder other than
those which are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect.
4.5 Consents and Approvals. Except for the consents specified in the
----------------------
Company Disclosure Schedule (the "Required Consents"), neither the execution or
delivery by C.P.A. Staffing, C.P.A. Search, Career Placement or any Shareholder
of this Agreement, nor the performance of the transactions hereunder, will
require any filing, consent or approval, constitute a Default or cause any
payment obligation to arise under (a) any Regulation or Court Order to which
C.P.A. Staffing, C.P.A. Search, Career Placement or any Shareholder is subject,
(b) the Charter Documents or bylaws of C.P.A. Staffing, C.P.A. Search or Career
Placement or (c) any Contract, Permit or other document to which C.P.A.
Staffing, C.P.A. Search, Career Placement or any Shareholder is a party or by
which they or their properties may be bound, including, with respect to (a), (b)
and (c), ACSYS or any of the Companies becoming subject to or liable for the
payment of any Taxes or any of the properties owned by ACSYS or any of the
Companies being reassessed or revalued by any tax authority.
4.6 Stock Ownership. Each Shareholder owns of record and beneficially all
---------------
title, right and interest to the number of Staffing Shares, Search Shares and
Career Shares set forth opposite his or her name on the Company Disclosure
Schedule free and clear of all Encumbrances.
4.7 Financial Statements. The Company Disclosure Schedule includes
--------------------
correct and complete copies of financial statements of the combined Companies
consisting of a balance sheet as of December 31, 1996 and the related statements
of income, retained earnings and cash flows for the year then ended (the
"Preliminary Audited Financial Statements"), which were prepared by Arthur
Andersen LLP. The Company Disclosure Schedule also includes correct and complete
copies of unaudited financial statements of the combined Companies consisting of
a balance sheet of as of the end of the period ended June 30, 1997 and the
related statements of income for the twelve-month period then ended (the
"Unaudited Financial Statements," and together with the Preliminary Audited
Financial Statements, the "Financial Statements"). The Financial Statements of
the combined Companies are consistent with the books and records of the
Companies, and there are no material transactions required by GAAP to be
recorded in accounting records that have not been recorded in the accounting
records underlying such Financial Statements. The Financial Statements have been
prepared in accordance with GAAP consistently applied (including, in each case,
any related notes thereto) and present fairly the financial position and assets
and liabilities of the combined Companies as of the dates thereof and the
results of their operations for the year and twelve-month period then ended,
subject to the absence of notes and a cash flow statement in the case of the
Unaudited Financial Statements. The balance sheet of the combined Companies as
of December 31, 1996 that
14
<PAGE>
is included in the Preliminary Audited Financial Statements is referred to
herein as the "Company Balance Sheet" and the date thereof is referred to as the
"Balance Sheet Date." The balance sheet of the combined Companies as of June 30,
1997 that is included in the Unaudited Financial Statements is referred to
herein as the "Interim Company Balance Sheet" and the date thereof is referred
to as the "Interim Balance Sheet Date."
4.8 Title to Assets and Related Matters.
-----------------------------------
(a) Each of C.P.A. Staffing, C.P.A. Search and Career Placement has
good and marketable title to, or valid leasehold interests in, all its
properties and assets, free and clear of all Encumbrances other than (i)
mechanics and other statutory liens and the lien of current taxes not yet due
and payable, and (ii) possible minor liens which do not in any case materially
detract from the value of the property subject thereto or materially impair the
operations of C.P.A. Staffing, C.P.A. Search and Career Placement, and which
have not arisen otherwise than in the ordinary course of business. Except as set
forth on the Company Disclosure Schedule, all of the assets used in the
operations of C.P.A. Staffing, C.P.A. Search and Career Placement are in good
working condition and repair, subject to normal wear and tear, (b) are usable in
the ordinary course of business and (c) conform in all material respects with
all applicable Regulations relating to their construction, use and operation.
C.P.A. Staffing, C.P.A. Search and Career Placement own or have valid licenses
to use all the assets and properties required to operate their business as
currently conducted.
(b) Each of C.P.A. Staffing, C.P.A. Search and Career Placement has
complied in all material respects with the terms of all leases to which it is a
party and under which it is in occupancy, all such leases are in full force and
effect and, to the best knowledge of C.P.A. Staffing, C.P.A. Search and Career
Placement, the parties thereto other than C.P.A. Staffing, C.P.A. Search and
Career Placement have complied, and are complying, with all of their material
obligations and are not in material default under (nor does there exist any
condition which, upon the passage of time or the giving of notice, would cause
such a material violation of default under) any of such leases. C.P.A. Staffing,
C.P.A. Search and Career Placement enjoy peaceful and undisturbed possession
under all such leases.
4.9 Accounts Receivable. The accounts receivable of C.P.A. Staffing,
-------------------
C.P.A. Search and Career Placement are bona fide accounts receivable created in
the ordinary course of business and are not subject to defenses, set-offs or
counterclaims and are and will be collectible in the ordinary course of business
no later than 90 days after billing at the full recorded amounts thereof (net of
any allowance for bad debts reflected on the Interim Company Balance Sheet).
4.10 Accounts Payable. All accounts payable as set forth on the Interim
----------------
Company Balance Sheet or arising since the date thereof have been incurred in
the ordinary course of business.
4.11 Product Warranties and Price Guarantees. The Company Disclosure
---------------------------------------
Schedule sets forth all express product or service warranties and price
guarantees made by C.P.A. Staffing, C.P.A. Search or Career Placement.
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<PAGE>
4.12 No Undisclosed Liabilities. None of C.P.A. Staffing, C.P.A. Search or
--------------------------
Career Placement has any Liabilities except (a) as specifically disclosed on the
Interim Company Balance Sheet, (b) Liabilities incurred in the ordinary course
since the Interim Balance Sheet Date, and (c) Liabilities under any Contracts
specifically disclosed on the Company Disclosure Schedule (or not required to be
disclosed because of the term or amount involved) that were not required under
GAAP to have been specifically disclosed or reserved for on the Interim Company
Balance Sheet.
4.13 Taxes. Except as disclosed on the Company Disclosure Schedule, with
-----
respect to C.P.A. Staffing, C.P.A. Search and Career Placement, (i) all reports,
returns, statements (including estimated reports, returns, or statements), and
other similar filings required to be filed on or before the Closing Date (the
"Tax Returns") with respect to any Taxes have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns correctly reflect the
liability of C.P.A. Staffing, C.P.A. Search and Career Placement for Taxes for
the periods, properties, or events covered thereby; (ii) all Taxes payable with
respect to the Tax Returns referred to in the preceding clause have been paid;
(iii) none of C.P.A. Staffing, C.P.A. Search or Career Placement has knowledge
of any unassessed Tax deficiencies or of any audits or investigations pending or
threatened against any of them with respect to any Taxes; (iv) all Taxes and
other Liabilities due with respect to completed and settled examinations have
been paid; (v) there is in effect no extension for the filing of any Tax Return
and none of C.P.A. Staffing, C.P.A. Search or Career Placement has extended or
waived the application of any statute of limitations of any jurisdiction
regarding the assessment or collection of any Tax; (vi) no claim has ever been
made by any Tax authority in a jurisdiction in which any of C.P.A. Staffing,
C.P.A. Search or Career Placement does not file Tax returns that it is or may be
subject to taxation by that jurisdiction; (vii) there are no liens for Taxes
upon any asset of C.P.A. Staffing, C.P.A. Search or Career Placement except for
liens for current Taxes not yet due; (viii) C.P.A. Staffing, C.P.A. Search and
Career Placement have maintained all records necessary to comply with applicable
tax laws and have timely made, or caused to be made, all deposits required to be
made with respect to employees' withholding and other payroll, employment, or
other withholding taxes. Each of C.P.A. Staffing, C.P.A. Search and Career
Placement has been appropriately taxable as an S corporation for Federal, State
and local tax purposes for all periods of their existence. No action has been
taken that would have the effect of causing the S Corporation election of C.P.A.
Staffing, C.P.A. Search or Career Placement to be terminated. None of C.P.A.
Staffing, C.P.A. Search or Career Placement is or has been a party to any tax
allocation or sharing agreement and none of them is or has been a member of an
affiliated group within the meaning of Section 1504 of the Code.
4.14 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as disclosed on the Company Disclosure Schedule, there is
no Litigation that is pending or, to knowledge of C.P.A. Staffing, C.P.A.
Search, Career Placement or any Shareholder, threatened or unasserted but
considered probable of assertion, against or related to C.P.A. Staffing, C.P.A.
Search or Career Placement, any Shareholder or any director thereof or against
any property or interest of any of them that is likely to have, individually or
in the aggregate, a Material Adverse Effect. There has been no Default under
any Regulation applicable to C.P.A. Staffing, C.P.A. Search or Career Placement
or the employees conducting their business, including
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any Regulation relating to pollution or protection of the environment, except
for any Defaults that have been cured without material cost or that would not
have a Material Adverse Effect, and none of C.P.A. Staffing, C.P.A. Search or
Career Placement has ever received any notices from any governmental entity
regarding any alleged Default under, or failure to comply with, any Regulation
except those that have been cured without material cost or that would not have a
Material Adverse Effect. None of C.P.A. Staffing, C.P.A. Search or Career
Placement is a party to any Court Order.
(b) Without limiting the generality of Section 4.14(a), except as
described on the Company Disclosure Schedule, there has not been any
Environmental Condition (i) at any premises at which the business of C.P.A.
Staffing, C.P.A. Search or Career Placement (or any predecessor of C.P.A.
Staffing, C.P.A. Search or Career Placement) is currently conducted, (ii) at any
property owned, leased or operated at any time by C.P.A. Staffing, C.P.A. Search
or Career Placement (or any predecessor of C.P.A. Staffing, C.P.A. Search or
Career Placement) or any Person controlled by any Affiliate of C.P.A. Staffing,
C.P.A. Search or Career Placement, or (iii) at any property at which wastes have
been deposited or disposed by or at the behest or direction of C.P.A. Staffing,
C.P.A. Search or Career Placement (or any predecessor of C.P.A. Staffing, C.P.A.
Search or Career Placement) or any Person controlled by any Affiliate of C.P.A.
Staffing, C.P.A. Search or Career Placement, and none of C.P.A. Staffing, C.P.A.
Search or Career Placement has received written notice of any such Environmental
Condition. "Environmental Condition" means any condition or circumstance,
including the presence of Hazardous Substances, whether created by C.P.A.
Staffing, C.P.A. Search or Career Placement (or any predecessor of C.P.A.
Staffing, C.P.A. Search or Career Placement) or any third party, at or relating
to any such property or premises that would (i) require abatement or correction
under an Environmental Law, (ii) give rise to any civil or criminal liability
under an Environmental Law,or (iii) create a public or private nuisance.
"Environmental Law" means all Regulations and Court Orders relating to pollution
or protection of the environment as well as any principles of common law under
which a Person may be held liable for the release or discharge of any materials
into the environment.
(c) C.P.A. Staffing, C.P.A. Search and Career Placement have
delivered to ACSYS correct and complete copies of any written reports, studies
or assessments in the possession or control of C.P.A. Staffing, C.P.A. Search,
Career Placement or any Shareholder that relate to any Environmental Condition.
None of C.P.A. Staffing, C.P.A. Search, Career Placement or any Shareholder
knows of any other written reports, studies or assessments, whether or not in
the possession or control of C.P.A. Staffing, C.P.A. Search, Career Placement or
any Shareholder, that relate to any Environmental Condition.
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) C.P.A. Staffing, C.P.A. Search and Career Placement have
obtained and are in full compliance with all Permits that are required for the
operations currently conducted by them, (ii) all of the Permits are currently
valid and in full force and (iii) C.P.A. Staffing, C.P.A. Search and Career
Placement have filed such timely and complete renewal applications as may be
required with respect to their Permits. To the knowledge of C.P.A. Staffing,
C.P.A. Search, Career Placement and each Shareholder, no revocation,
cancellation or withdrawal of a Permit has been threatened.
17
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4.15 Contracts.
---------
(a) The Company Disclosure Schedule lists each Contract of the
following types to which any of C.P.A. Staffing, C.P.A. Search or Career
Placement is a party or by which it is bound:
(i) Contracts with any present or former shareholder,
director, officer, employee, partner or consultant or with any
Affiliate of any Shareholder providing for aggregate payments in any
calendar year in excess of $50,000;
(ii) Contracts for the purchase of, or payment for, supplies
or products, or for the performance of services, from or by a third
party, in excess of $20,000 with respect to any one supplier or other
party;
(iii) Contracts to sell or supply products, inventory or other
property to, or to perform services for, a third party, that involve
an amount in excess of $20,000 with respect to any one customer or
other party;
(iv) Contracts to sell any product or provide any service to a
governmental or regulatory body;
(v) Contracts limiting or restraining it from engaging or
competing in any lines of business with any Person;
(vi) Contracts with any customer providing for a volume
refund, retrospective price adjustment or price guarantee;
(vii) Contracts to lease to or from any other party any assets
that involve an amount in excess of $20,000 in any individual case;
(viii) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts for the
borrowing or lending of money (including loans to or from officers,
directors, partners or stockholders or with Affiliates of any
Shareholder or any members of such Shareholder's immediate family), or
agreements or arrangements for a line of credit or for a guarantee of,
or other undertaking in connection with, the indebtedness of any other
Person;
(ix) Contracts creating or recognizing any Encumbrances with
respect to any assets or properties of the Company;
(x) Contracts with distributors, manufacturers sales
representatives or other sales agents;
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(xi) Contracts which relate in whole or in part to any
software, technical assistance or other know-how or other Intellectual
Property right;
(xii) Contracts for any capital expenditure or leasehold
improvement in excess of $20,000;
(xiii) Contracts not terminable without penalty on not more than
thirty (30) days' notice.
(xiv) Any other Contracts (other than those that may be
terminated on not more than 30 days' notice without Liability and
those described in any of (i) through (xii) above) not made in the
ordinary course of business or which are material to the Company.
(b) None of C.P.A. Staffing, C.P.A. Search or Career Placement is in
Default under any Contract. None of C.P.A. Staffing, C.P.A. Search or Career
Placement has received any communication from, or given any communication to,
any other party indicating that C.P.A. Staffing, C.P.A. Search, Career Placement
or such other party, as the case may be, is in Default under any Contract. To
the knowledge of C.P.A. Staffing, C.P.A. Search, Career Placement and each
Shareholder, none of the other parties to any such Contract to which C.P.A.
Staffing, C.P.A. Search or Career Placement is a party is in Default thereunder.
The Contracts are in full force and effect and are enforceable in accordance
with their respective terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and except that such enforceability
is subject to general principles of equity).
4.16 Insurance. The Company Disclosure Schedule lists all policies or
---------
binders of insurance held by or on behalf of C.P.A. Staffing, C.P.A. Search or
Career Placement or relating to their operations, specifying with respect to
each policy the insurer, the type of insurance, the amount of the coverage, the
insured, the expiration date, the policy number and any pending claims
thereunder. There is no Default with respect to any such policy or binder, nor
has there been any failure to give any notice or present any claim under any
such policy or binder in a timely fashion or in the manner or detail required by
the policy or binder, except for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect. There is no
notice of nonrenewal, cancellation, reduction in coverage or substantial
increase in premiums with respect to, or disallowance of any claim under, any
such policy or binder that has been received by C.P.A. Staffing, C.P.A. Search
or Career Placement, except for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect. Such policies
will continue in full force and effect following the consummation of the Merger
and, except as disclosed on the Company Disclosure Schedule, do not provide for
any retrospective premium based adjustment or other experience-based liability
on the part of C.P.A. Staffing, C.P.A. Search or Career Placement. The Company
Disclosure Schedule describes any self-insurance arrangements maintained by
C.P.A. Staffing, C.P.A. Search or Career Placement. Such policies and self-
insurance arrangements are reasonable and adequate in amount, scope and
coverage, in light of the risks attendant to the businesses conducted by them.
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4.17 Intellectual Property and Software Products. None of C.P.A. Staffing,
-------------------------------------------
C.P.A. Search or Career Placement currently uses nor has any of them previously
used in their operations (including in the development or marketing of products
and services) any Copyright, Patent or Trademark except for those listed on the
Company Disclosure Schedule. Except as listed in the Company Disclosure
Schedule, C.P.A. Staffing, C.P.A. Search and Career Placement own or have the
lawful right to use all Intellectual Property that is used or has been used in
their operations. All of the Intellectual Property listed on the Company
Disclosure Schedule is owned by C.P.A. Staffing, C.P.A. Search or Career
Placement free and clear of all Encumbrances, or is used pursuant to an
agreement that is identified and described in the Company Disclosure Schedule.
None of C.P.A. Staffing, C.P.A. Search or Career Placement infringes upon or
unlawfully or wrongfully uses any Intellectual Property rights owned or claimed
by another Person. Except as disclosed on the Company Disclosure Schedule, none
of C.P.A. Staffing, C.P.A. Search or Career Placement is obligated to pay
royalties to any Person. None of C.P.A. Staffing, C.P.A. Search or Career
Placement is in Default, nor has any of them received any notice of any claim of
infringement or any other claim or proceeding, with respect to any Intellectual
Property. No current or former employee of C.P.A. Staffing, C.P.A. Search or
Career Placement or any other Person owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part, and including any right
to royalties or other compensation, in any Intellectual Property to C.P.A.
Staffing, C.P.A. Search or Career Placement and are not required to assign any
such interest to any other Person. All such officers and directors have executed
agreements not to disclose the confidential and proprietary information of
C.P.A. Staffing, C.P.A. Search or Career Placement to any Person. None of such
officers or directors is a party to any agreement that restricts such officer or
director from competing with any Person.
4.18 Employee Relations.
------------------
(a) Except as described in the Company Disclosure Schedule, none of
C.P.A. Staffing, C.P.A. Search or Career Placement is (i) a party to or
otherwise bound by any collective bargaining or other type of union agreement,
(ii) a party to, involved in or, to the knowledge of C.P.A. Staffing, C.P.A.
Search, Career Placement or any Shareholder, threatened by, any labor dispute or
unfair labor practice charge, or (iii) currently negotiating any collective
bargaining agreement, and none of C.P.A. Staffing, C.P.A. Search or Career
Placement has experienced any work stoppage during the last three years. The
Company Disclosure Schedule sets forth the names and current annual salary rates
or current hourly wages of all present employees of the Company.
(b) C.P.A. Staffing, C.P.A. Search and Career Placement are in
compliance with all applicable Regulations respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice. There are no outstanding claims against
C.P.A. Staffing, C.P.A. Search or Career Placement (whether under any
Regulation, Contract, policy or otherwise) asserted by or on behalf of any
present or former employee or job applicant of C.P.A. Staffing, C.P.A. Search or
Career Placement on account of or for (i) overtime pay, other than overtime pay
for work done in the current payroll period, (ii) wages or
20
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salary for any period other than the current payroll period, (iii) any amount of
vacation pay or pay in lieu of vacation time off, other than vacation time off
or pay in lieu thereof earned in or in respect of the current fiscal year, (iv)
any amount of severance pay or similar benefits, (v) unemployment insurance
benefits, (vi) workers' compensation or disability benefits, (vii) any violation
of any statute, ordinance, order, rule or regulation relating to plant closings,
employment terminations or layoffs, including but not limited to the Worker
Adjustment and Retraining Notification Act, (viii) any violation of any statute,
ordinance, order, rule or other Regulation relating to employee "whistle blower"
or "right-to-know" rights and protection, (ix) any violation of any statute,
ordinance, order, rule or other Regulation relating to the employment
obligations of federal contractors or subcontractors or (x) any violation of any
Regulation relating to minimum wages or maximum hours of work, and none of
C.P.A. Staffing, C.P.A. Search, Career Placement or any Shareholder is aware of
any such claims which have not been asserted. No Person (including any
governmental body) has asserted or threatened any claims against C.P.A.
Staffing, C.P.A. Search or Career Placement arising under or arising out of any
Regulation relating to discrimination or occupational safety in employment or
employment practices.
4.19 ERISA. Except as set forth in the Company Disclosure Schedule, none
-----
of C.P.A. Staffing, C.P.A. Search or Career Placement is, or has previously
been, a party, or contributed, to (1) any "employee benefit plan" as defined in
Section 3(3) of ERISA ("Plan") or (2) any deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement ("Benefit Plan"). None of C.P.A. Staffing, C.P.A. Search
or Career Placement has any intent or commitment to create any additional Plan
or amend any Plan so as to increase benefits thereunder except in the ordinary
course of business consistent with past practice. A current, accurate and
complete copy of each such Plan and each Benefit Plan has been made available to
ACSYS.
(a) Each Plan is in compliance with all reporting, disclosure and
other requirements of ERISA and the Code and other laws applicable to such Plan
the breach or violation of which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect.
(b) Each Plan which is an employee pension benefit plan (a "Pension
Plan"), as defined in Section 3(2) of ERISA, and which is intended to be
qualified under Section 401(a) of the Code, has been determined by the Internal
Revenue Service to be so qualified and, to the best of the Company's knowledge,
no condition exists that would adversely affect any such determination.
(c) Neither any Plan nor any of C.P.A. Staffing, C.P.A. Search or
Career Placement, nor any trustee or agent has been or are presently engaged in
any prohibited transactions as defined by Section 406 of ERISA or Section 4975
of the Code for which an exemption is not applicable which could subject C.P.A.
Staffing, C.P.A. Search or Career Placement to the tax or penalty imposed by
Section 4975 of the Code or Section 502 of ERISA.
(d) There is no event or condition existing which could be deemed a
"reportable event" (within the meaning of Section 4043 of ERISA) with respect to
which the thirty-day notice
21
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requirement has not been waived; to the best of C.P.A. Staffing, C.P.A. Search
or Career Placement's knowledge, no condition exists which could subject C.P.A.
Staffing, C.P.A. Search or Career Placement to a penalty under Section 4071 of
ERISA.
(e) None of C.P.A. Staffing, C.P.A. Search or Career Placement is, or
has been, a party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA.
(f) With respect to each Plan and Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the best of C.P.A. Staffing, C.P.A. Search or Career Placement's
knowledge, threatened against any Plan or Benefit Plan, C.P.A. Staffing, C.P.A.
Search or Career Placement or any trustee or agent of any Plan or Benefit Plan.
(h) With respect to each welfare benefit plan to which C.P.A.
Staffing, C.P.A. Search or Career Placement is a party which constitutes a group
health plan subject to Section 4980B of the Code, each such Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in the Company Disclosure Schedule:
(i) there is no outstanding liability (except for premiums
due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation nor
C.P.A. Staffing, C.P.A. Search or Career Placement has instituted
proceedings to terminate any Pension Plan and the Pension Benefit
Guaranty Corporation has not informed C.P.A. Staffing, C.P.A. Search
or Career Placement of its intent to institute proceedings to
terminate any Pension Plan;
(iii) full payment has been made of all amounts which C.P.A.
Staffing, C.P.A. Search or Career Placement was required to have paid
as a contribution to the Plans as of the last day of the most recent
fiscal year of each of the Plans ended prior to the date of this
Agreement, and none of the Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent
fiscal year of each such Plan ended prior to the date of this
Agreement;
(iv) to the best of C.P.A. Staffing, C.P.A. Search or Career
Placement's knowledge, the actuarial assumptions utilized, where
appropriate, in connection with determining the funding of each
Pension Plan which is a defined benefit pension plan (as set forth in
the actuarial report for such Pension Plan) are reasonable. Based on
such actuarial assumptions, as of June 30, 1997, the fair market value
of the assets or properties held under each such Pension Plan exceeds
the actuarially determined present value of all accrued benefits of
such Pension Plan (whether or not vested)
22
<PAGE>
determined as if such Pension Plan were terminated in accordance with
all applicable legal requirements;
(v) each of the Plans and Benefit Plans is, and its
administration is and has been during the six-year period preceding
the date of this Agreement, in substantial compliance with, and none
of C.P.A. Staffing, C.P.A. Search or Career Placement has received any
claim or notice that any such Plan or Benefit Plan is not in
compliance with, all applicable laws and orders and prohibited
transaction exemptions, including without limitation, to the extent
applicable, the requirements of ERISA;
(vi) none of C.P.A. Staffing, C.P.A. Search or Career
Placement is in default in performing any of its contractual
obligations under any of the Plans or Benefit Plans or any related
trust agreement or insurance contract;
(vii) there are no material outstanding liabilities of any Plan
or Benefit Plan other than liabilities for benefits to be paid to
participants in such Plan or Benefit Plan and their beneficiaries in
accordance with the terms of such Plan or Benefit Plan;
(viii) each Plan or Benefit Plan may be amended or modified by
C.P.A. Staffing, C.P.A. Search or Career Placement at any time without
liability except under any defined pension benefit plan;
(ix) no Plan or Benefit Plan other than a Pension Plan
provides benefits to any individual after termination of employment;
(x) the consummation of the transactions contemplated by this
Agreement will not (in and of itself) (i) entitle any employee of
C.P.A. Staffing, C.P.A. Search or Career Placement to severance pay,
unemployment compensation or any other payment; (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due
to any such employee; (iii) result in any liability under Title IV of
ERISA; (iv) result in any prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code for which an exemption is not
available or (v) result (either alone or in conjunction with any other
event) in the payment or series of payments by the Company or any of
its Affiliates to any person of an Aexcess parachute payment@ within
the meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded wholly
or partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid, all
premiums required to be paid under the insurance policy through the
Closing will have been paid on or before the Closing and, as of the
Closing, there will be no liability of the Company under any insurance
policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially
out of events occurring prior to the Closing; and
23
<PAGE>
(xii) each Plan that constitutes a "welfare benefit plan,"
within the meaning of Section 3(1) of ERISA, and for which
contributions are claimed by C.P.A. Staffing, C.P.A. Search or Career
Placement as deductions under any provision of the Code, is in
material compliance with all applicable requirements pertaining to
such deduction, (ii) with respect to any welfare benefit fund (within
the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax
under Section 4976(a) of the Code, and (iii) all welfare benefit funds
intended to be exempt from tax under Section 501(a) of the Code have
been determined by the Internal Revenue Service to be so exempt and no
event or condition exists which would adversely affect any such
determination.
4.20 Corporate Records. The minute books of the C.P.A. Staffing, C.P.A.
-----------------
Search and Career Placement contain complete and correct copies of their Charter
Documents and bylaws and accurately reflect in all material respects all minutes
of meetings, resolutions and other proceedings of their Boards of Directors and
shareholders. The stock record books of C.P.A. Staffing, C.P.A. Search and
Career Placement are complete and correct.
4.21 Absence of Certain Changes. Except as contemplated by this Agreement,
--------------------------
since the Balance Sheet Date, C.P.A. Staffing, C.P.A. Search and Career
Placement have conducted their business in the ordinary course and there has not
been:
(a) any material adverse change in the financial condition, results
of operations, liabilities, or assets of C.P.A. Staffing, C.P.A. Search or
Career Placement, or any other events or conditions that, in the aggregate,
would reasonably be expected to have a material adverse effect on the financial
condition, results of operations, liabilities, or assets of C.P.A. Staffing,
C.P.A. Search or Career Placement.
(b) any damage, destruction or loss (whether or not covered by
insurance), which reasonably may be expected to materially and adversely affect
the financial condition or results of operations of C.P.A. Staffing, C.P.A.
Search or Career Placement;
(c) except for the sale of products in the ordinary course of
business, any sale, lease, mortgage, pledge or Encumbrance of any properties or
assets of C.P.A. Staffing, C.P.A. Search or Career Placement having a value,
individually or in the aggregate, in excess of $20,000;
(d) any loss of any supplier, distributor or customer which
materially and adversely affects, or could reasonably be expected to materially
and adversely affect, the financial condition or results of operations of C.P.A.
Staffing, C.P.A. Search or Career Placement;
(e) any increase by C.P.A. Staffing, C.P.A. Search or Career
Placement, except as consistent with past practices, in the wages, salaries,
compensation, pension or other benefits payable to any employee who, as of the
date hereof, receives from C.P.A. Staffing, C.P.A. Search or Career Placement
annual compensation in excess of $50,000;
24
<PAGE>
(f) the payment of any bonus or other compensation in excess of
regular salary to any employee who, as of the date hereof, receives from C.P.A.
Staffing, C.P.A. Search or Career Placement, annual compensation in excess of
$50,000;
(g) any cancellation, release or waiver of debts owed to C.P.A.
Staffing, C.P.A. Search or Career Placement outside the ordinary course of
business;
(h) any issuance or sale of any of its capital stock or grant of any
options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(i) any declaration or payment of any dividend or distribution with
respect to its capital stock or redemption, purchase or other acquisition of any
capital stock;
(j) any increase in indebtedness for borrowed money, except current
borrowings from banks in the ordinary course of business;
(k) any change in any method of accounting or accounting practice; or
(l) any agreement, whether or not in writing, to do any of the
foregoing.
4.22 Clients. C.P.A. Staffing, C.P.A. Search and Career Placement have
-------
used their reasonable business efforts to maintain and currently maintain, good
working relationships with all of their clients. The Company Disclosure
Schedule contains a list of the names of each of the ten clients that, for the
twelve months ended June 30, 1997, were the largest dollar volume clients of
products and services sold and provided by C.P.A. Staffing, C.P.A. Search and
Career Placement. Except as specified on the Company Disclosure Schedule, none
of such clients has given C.P.A. Staffing, C.P.A. Search or Career Placement
notice terminating, canceling or threatening to terminate or cancel any Contract
or relationship with such Company.
4.23 Finder's Fees. No Person retained by C.P.A. Staffing, C.P.A. Search,
-------------
Career Placement or any Shareholder is or will be entitled to any commission or
finder's or similar fee in connection with the Merger.
4.24 Securities Laws Matters. Each Shareholder acknowledges, represents and
-----------------------
warrants to ACSYS and Merger Sub as follows:
(a) Each Shareholder understands that the ACSYS Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
and applicable state securities laws by reason of specific exemptions under the
provisions thereof which depend in part upon the representations made by each
Shareholder in this Agreement. Each Shareholder understands that ACSYS is
relying upon each Shareholder's representations and agreements contained in this
Agreement for the purpose of determining whether the issuance of the ACSYS
Shares pursuant to this Agreement meets the requirements for such exemptions.
25
<PAGE>
(b) Each Shareholder has such knowledge, skill and experience in
business, financial and investment matters so that each Shareholder is capable
of evaluating the merits and risks of an investment in the ACSYS Shares. To the
extent that each Shareholder has deemed it appropriate to do so, each
Shareholder has retained, and relied upon, appropriate professional advice
regarding the tax, legal and financial merits and consequences of the investment
in the ACSYS Shares.
(c) Each Shareholder has made, either alone or together with his
advisors (if any), such independent investigation of ACSYS, its management, and
related matters as each Shareholder deems to be, or such advisors (if any) have
advised to be, necessary or advisable in connection with an investment in the
ACSYS Shares; and each Shareholder and his advisors (if any) have received all
information and data which they believe to be necessary in order to reach an
informed decision as to the advisability of an investment in the ACSYS Shares.
Each Shareholder is satisfied that there are no material facts regarding ACSYS
or the ACSYS Shares as to which they have not been fully informed.
(d) Each Shareholder represents that he has reviewed his financial
condition and commitments, alone and together with his advisors (if any), and
that, based on such review, he is satisfied that (i) each Shareholder has
adequate means of providing for his financial needs and possible contingencies
and has assets or sources of income which, taken together, are more than
sufficient so that each Shareholder could bear the risk of loss of his entire
investment in the ACSYS Shares, (ii) each Shareholder has no present or
contemplated future need to dispose of all or any portion of the ACSYS Shares to
satisfy any existing or contemplated undertaking, need or indebtedness and (iii)
each Shareholder is capable of bearing the economic risk of an investment in the
ACSYS Shares for the indefinite future. Each Shareholder agrees to furnish any
additional information requested by ACSYS to assure compliance of the issuance
of the ACSYS Shares with applicable federal and state securities laws in
connection with the purchase and sale of the ACSYS Shares.
(e) Each Shareholder understands that the ACSYS Shares are
"restricted securities" under applicable federal securities laws and that the
Securities Act and the rules of the Securities and Exchange Commission provide
in substance that each Shareholder may dispose of the ACSYS Shares only pursuant
to an effective registration statement under the Securities Act or an exemption
from such registration if available. Each Shareholder further understands that
ACSYS has no obligation or intention to register any of the ACSYS Shares under
or to take action so as to permit sales pursuant to the Securities Act.
Accordingly, each Shareholder may dispose of the ACSYS Shares only in certain
transaction which are exempt from registration under the Securities Act,
including "private placements," in which event the transferee will acquire
"restricted securities" subject to the same limitations as in the hands of each
Shareholder. Each Shareholder further understands that applicable states
securities laws allow sales of the ACSYS Shares only if the ACSYS Shares are
registered or the transaction is subject to an applicable exemption. As a
consequence, each Shareholder understands that he must bear the economic risks
of the investment in the ACSYS Shares for an indefinite period of time.
26
<PAGE>
(f) Each Shareholder hereby confirms that he is acquiring the ACSYS
Shares for investment for his own account only and not with a view to or in
connection with any resale or distribution of the ACSYS Shares. Each
Shareholder hereby affirms that he has no present intention of making any sale,
assignment, pledge, gift, transfer or other disposition of the ACSYS Shares or
any interest therein.
(g) Each Shareholder acknowledges and agrees that ACSYS may sell
shares of its capital stock at a price greater or less than the effective price
per share of ACSYS Shares issued to such Shareholder pursuant to this Agreement.
Each Shareholder acknowledges and agrees that the ACSYS Shares may ultimately
prove to be worth significantly more or significantly less than they perceive
them to be worth now, and that no representation or warranty is made by ACSYS as
to the "fair value" of the ACSYS Shares or the interest in ACSYS that they
represent, either now or in the future.
(h) Each Shareholder acknowledges and agrees that the certificate(s)
evidencing the ACSYS Shares will bear the following legends:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER
THE SECURITIES ACT OF 1933 AND APPLICABLE
STATE SECURITIES LAWS.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN
RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-
5-9 OF THE "GEORGIA SECURITIES ACT OF 1973,"
AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT
OR PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER SUCH ACT.
In addition, such certificates shall also bear such other legends as counsel for
ACSYS reasonably determines are required under the applicable laws of any state.
(i) Each Shareholder has had an adequate opportunity to ask questions
and receive answers from the officers of ACSYS concerning any and all matters
relating to the transactions described herein; including, without limitation,
the background and experience of the officers and directors of ACSYS, the plans
for the operations of the business of ACSYS, and the business, operations and
financial condition of ACSYS. The Shareholders have asked any and all questions
in the nature described in the preceding sentence and all questions have been
answered to their satisfaction.
27
<PAGE>
4.25 Additional Information. The Company Disclosure Schedule accurately
----------------------
lists the following:
(a) the names of all officers and directors of C.P.A. Staffing,
C.P.A. Search and Career Placement;
(b) the names and addresses of every bank or other financial
institution in which C.P.A. Staffing, C.P.A. Search or Career Placement
maintains an account (whether checking, saving or otherwise), lock box or safe
deposit box, and the account numbers and names of the Persons having signing
authority or other access thereto;
(c) the names of all Persons authorized to borrow money or incur or
guarantee indebtedness on behalf of C.P.A. Staffing, C.P.A. Search and Career
Placement;
(d) the names of all Persons holding powers of attorney from C.P.A.
Staffing, C.P.A. Search or Career Placement and a summary statement of the terms
thereof; and
(e) all names under which C.P.A. Staffing, C.P.A. Search and Career
Placement have conducted any business or which they have otherwise used at any
time during the past five years.
4.26 Transactions with Affiliates. Except as set forth on the Company
----------------------------
Disclosure Schedule, no Affiliate of C.P.A. Staffing, C.P.A. Search or Career
Placement and no Shareholder or member of his immediate family, owns or has a
controlling ownership interest in any corporation or other entity that is a
party to any Contract with C.P.A. Staffing, C.P.A. Search or Career Placement.
The Company Disclosure Schedule sets forth a summary of all purchases of goods
or services by Affiliates of C.P.A. Staffing, C.P.A. Search or Career Placement,
or any Shareholder or any member of his immediate family in the three years
prior to the date hereof.
4.27 Reports. Since inception, C.P.A. Staffing, C.P.A. Search and Career
-------
have timely filed all reports and statements, together with any amendments
required to be made with respect thereto, that they were required to file with
any Governmental Body (except, in the case of state securities authorities,
failures to file which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect). As of their respective dates, each of
such reports and documents, including, without limitation, the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of its respective date, each such report and
document did not, in all material respects, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
4.28 Full Disclosure. There are and will be no materially misleading
---------------
misstatements in any of the representations and warranties made by C.P.A.
Staffing, C.P.A. Search, Career Placement or any Shareholder in this Agreement,
the Company Disclosure Schedule or in any of the documents, certificates and
instruments delivered or to be delivered by C.P.A. Staffing, C.P.A. Search,
Career Placement or any Shareholder pursuant to this Agreement and none of
C.P.A. Staffing, C.P.A.
28
<PAGE>
Search, Career Placement and each Shareholder has omitted to state any fact
necessary to make statements made herein or therein not materially misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACSYS
---------------------------------------
Except as disclosed in a schedule attached to this Agreement (the
"ACSYS Disclosure Schedule") which identifies with particularity an exception to
a representation and warranty in this Agreement, ACSYS represents and warrants
to C.P.A. Staffing, C.P.A. Search, Career Placement and the Shareholders as set
forth below.
5.1 Corporate Status. ACSYS is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and is qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where it is required to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect. ACSYS does not
own or control, or have any equity interest in any other Person.
5.2 Authorization. ACSYS has the requisite power and authority to own its
-------------
properties and carry on its business as currently conducted, and to execute and
deliver this Agreement and to perform its obligations hereunder. The execution
and delivery of this Agreement and the performance of the transactions
contemplated herein have been duly authorized by all necessary corporate action.
This Agreement has been duly executed and delivered by ACSYS and constitutes a
valid and binding obligation of ACSYS, enforceable against it in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and except that such enforceability is subject to
general principles of equity).
5.3 Capitalization. The authorized capital stock of ACSYS consists of
--------------
60,000,000 shares of Common Stock, no par value per share, of which 6,499,998
ACSYS Shares are issued and outstanding. All of the issued and outstanding ACSYS
Shares have been duly authorized and are validly issued, fully paid and non-
assessable. The ACSYS Disclosure Schedule contains a true and complete list of
the record holders of all issued and outstanding ACSYS Shares and sets forth the
full name and number of ACSYS Shares owned by each. Except as set forth on the
ACSYS Disclosure Schedule, ACSYS does not have outstanding (i) any subscription,
option, put, call, warrant or other right or commitment to issue, nor any
obligation or commitment to redeem or purchase, any of its authorized capital
stock, or securities or other instruments convertible into, or exchangeable or
exercisable for, its capital stock, or (ii) any securities convertible into, or
exchangeable or exercisable for, any of its capital stock. There are no shares
of capital stock that have been issued in violation of, or are subject to, any
preemptive rights or subscription agreements. Except as set forth on the ACSYS
Disclosure Schedule, there are no stockholder agreements, voting agreements,
voting trusts or any such other similar arrangements which have the effect of
restricting or limiting the transfer, voting or other rights associated with the
capital stock of ACSYS.
29
<PAGE>
5.4 No Conflict. Except as set forth on the ACSYS Disclosure Schedule,
-----------
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein by ACSYS will (i) violate or conflict with
any of the provisions of any of the Charter Documents or bylaws of ACSYS, (ii)
violate or constitute a default, an event of default or an event creating rights
of acceleration, termination, cancellation or other additional rights, or loss
of rights under, any mortgage, indenture, deed of trust, lease, contract,
agreement, license or other instrument or any statute, rule, regulation,
injunction, decree, order, judgment or ruling of any Governmental Body to which
ACSYS is a party, or by which it or any of its assets or property is bound other
than those which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect, or (iii) result in the creation of any
Encumbrances upon any of the assets or property of ACSYS other than those which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect.
5.5 Consents and Approvals. Except for the consents specified in the ACSYS
----------------------
Disclosure Schedule (the "ACSYS Required Consents"), neither the execution or
delivery by ACSYS of this Agreement, nor the performance of the transactions
hereunder, will require any filing, consent or approval, constitute a Default or
cause any payment obligation to arise under (a) any Regulation or Court Order to
which ACSYS is subject, (b) the Charter Documents or bylaws of ACSYS or (c) any
Contract, Permit or other document to which ACSYS is a party or by which its
properties may be bound.
5.6 Financial Statements. The ACSYS Disclosure Schedule includes correct
--------------------
and complete copies of ACSYS's preliminary audited financial statements
consisting of a balance sheet of ACSYS as of December 31, 1996 and the related
statements of income, retained earnings and cash flows for the year then ended
(collectively, the "ACSYS Preliminary Audited Financial Statements"). The ACSYS
Disclosure Schedule also includes correct and complete copies of unaudited
financial statements of ACSYS consisting of a balance sheet of as of the end of
the period ended June 30, 1997 and the related statement of income for the
period then ended (the "ACSYS Unaudited Financial Statements," and together with
the ACSYS Preliminary Audited Financial Statements, the "ACSYS Financial
Statements"). The ACSYS Financial Statements are consistent with the books and
records of ACSYS, and there are no material transactions required by GAAP to be
recorded in accounting records that have not been recorded in the accounting
records underlying such ACSYS Financial Statements. The ACSYS Financial
Statements have been prepared in accordance with GAAP consistently applied and
present fairly the financial position and assets and liabilities of ACSYS as of
the date thereof and its cash flows and the results of its operations for the
year and period then ended, subject to the absence of notes and cash flow
statements in the case of the ACSYS Unaudited Financial Statements. The balance
sheet of ACSYS as of December 31, 1996 that is included in the ACSYS Preliminary
Financial Statements is referred to herein as the "ACSYS Balance Sheet" and the
date thereof is referred to as the "ACSYS Balance Sheet Date." The balance sheet
of ACSYS as of June 30, 1997 that is included in the ACSYS Unaudited Financial
Statements are referred to herein as the "ACSYS Interim Balance Sheet" and the
date thereof is referred to as the "ACSYS Interim Balance Sheet Date."
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<PAGE>
5.7 Title to Assets and Related Matters.
-----------------------------------
(a) Except as set forth on the ACSYS Disclosure Schedule, ACSYS has
good and marketable title to, or valid leasehold interests in, all its
properties and assets, free and clear of all Encumbrances other than (i)
mechanics and other statutory liens and the lien of current taxes not yet due
and payable, and (ii) possible minor liens which do not in any case materially
detract from the value of the property subject thereto or materially impair the
operations of ACSYS, and which have not arisen otherwise than in the ordinary
course of business. Except as set forth on the ACSYS Disclosure Schedule, all of
the assets used in the operations of ACSYS are in good working condition and
repair, subject to normal wear and tear, (b) are usable in the ordinary course
of business and (c) conform in all material respects with all applicable
Regulations relating to its construction, use and operation. ACSYS owns or has
valid licenses to use all the assets and properties required to operate its
business as currently conducted.
(b) ACSYS has complied in all material respects with the terms of all
leases to which it is a party and under which it is in occupancy, all such
leases are in full force and effect and, to the best knowledge of ACSYS, the
parties thereto other than ACSYS have complied, and are complying, with all of
their material obligations and are not in material default under (nor does there
exist any condition which, upon the passage of time or the giving of notice,
would cause such a material violation of or default under) any of such leases.
ACSYS enjoys peaceful and undisturbed possession under all such leases.
5.8 Accounts Receivable. The accounts receivable of ACSYS are bona fide
-------------------
accounts receivable created in the ordinary course of business and are not
subject to defenses, set-offs or counterclaims and are and will be collectible
at the aggregate recorded amounts thereof in the ordinary course of business no
later than 90 days after billing at the full recorded amounts thereof (net of
any allowance for bad debts reflected on the ACSYS Interim Balance Sheet).
5.9 Accounts Payable. All accounts payable as set forth on the ACSYS
----------------
Interim Balance Sheet or arising since the date thereof have been incurred in
the ordinary course of business.
5.10 Product Warranties and Price Guarantees. The ACSYS Disclosure
---------------------------------------
Schedule sets forth all express product or service warranties and price
guarantees made by ACSYS.
5.11 No Undisclosed Liabilities. ACSYS does not have any Liabilities
--------------------------
except (a) as specifically disclosed on the ACSYS Interim Balance Sheet, (b)
Liabilities incurred in the ordinary course since the ACSYS Interim Balance
Sheet Date, and (c) Liabilities under any Contracts specifically disclosed on
the ACSYS Disclosure Schedule (or not required to be disclosed because of the
term or amount involved) that were not required under GAAP to have been
specifically disclosed or reserved for on the ACSYS Interim Balance Sheet.
5.12 Taxes. Except as set forth on the ACSYS Disclosure Schedule (i) Tax
-----
Returns with respect to any Taxes have been timely filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns correctly
31
<PAGE>
reflect the liability of ACSYS for Taxes for the periods, properties, or events
covered thereby; (ii) all Taxes payable with respect to the Tax Returns referred
to in the preceding clause, and all Taxes accruable or otherwise attributable to
events occurring prior to the Closing Date, whether disputed or not, whether or
not shown on any Tax Return, and whether or not currently due or payable, will
have been paid in full prior to the Closing Date, or an adequate accrual in
accordance with generally accepted accounting principles has been provided with
respect thereto; (iii) ACSYS has no knowledge of any unassessed Tax deficiencies
or of any audits or investigations pending or threatened against ACSYS with
respect to any Taxes; (iv) there is in effect no extension for the filing of any
Tax Return and ACSYS has not extended or waived the application of any statute
of limitations of any jurisdiction regarding the assessment or collection of any
Tax; (v) no claim has ever been made by any Tax authority in a jurisdiction in
which ACSYS does not file Tax returns that it is or may be subject to taxation
by that jurisdiction; (vi) there are no liens for Taxes upon any asset of ACSYS
except for liens for current Taxes not yet due; (vii) ACSYS has timely made all
deposits required by law to be made with respect to employees' withholding and
other payroll, employment, or other withholding taxes. ACSYS has been
appropriately taxable as an S corporation for all periods since January 1, 1994.
ACSYS has taken no action that would have the effect of causing ACSYS's S
corporation election to be terminated.
5.13 Legal Proceedings and Compliance with Law.
-----------------------------------------
(a) Except as disclosed on the ACSYS Disclosure Schedule, there is no
Litigation that is pending or, to the knowledge of ACSYS, threatened against or
related to ACSYS. There has been no Default under any Regulation applicable to
ACSYS, including any Regulation relating to pollution or protection of the
environment, except for any Defaults that have been cured without material cost
or that would not have a Material Adverse Effect, and ACSYS has not received any
notices from any governmental entity regarding any alleged Default under any
Regulation except those that have been cured without material cost or that would
not have a Material Adverse Effect. ACSYS is not subject to any Court Order.
(b) Without limiting the generality of Section 5.13(a), except as
described on the ACSYS Disclosure Schedule, there has not been any Environmental
Condition (i) at any premises at which the business of ACSYS (or any predecessor
of ACSYS) is currently conducted, (ii) at any property owned, leased or operated
at any time by ACSYS (or any predecessor of ACSYS) or any Person controlled by
any Affiliate of ACSYS, or (iii) at any property at which wastes have been
deposited or disposed by or at the behest or direction of ACSYS (or any
predecessor of ACSYS) or any Person controlled by any Affiliate of ACSYS, nor
has ACSYS received written notice of any such Environmental Condition.
(c) ACSYS has delivered to the Shareholders correct and complete
copies of any written reports, studies or assessments in the possession or
control of ACSYS that relate to any Environmental Condition. ACSYS knows of no
other written reports, studies or assessments, whether or not in the possession
or control of ACSYS, that relate to any Environmental Condition.
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<PAGE>
(d) Except in those cases where the failure would not have a Material
Adverse Effect, (i) ACSYS has obtained and is in full compliance with all
Permits that are required for the operations currently conducted by ACSYS, (ii)
all of the Permits are currently valid and in full force and (iii) ACSYS has
filed such timely and complete renewal applications as may be required with
respect to its Permits. To the knowledge of ACSYS, no revocation, cancellation
or withdrawal of a Permit has been threatened.
5.14 Contracts.
---------
(a) The ACSYS Disclosure Schedule lists each Contract of the
following types to which ACSYS is a party or by which it is bound:
(i) Contracts with any present or former shareholder, director,
officer, employee, partner or consultant providing for aggregate
payments in any calendar year in excess of $50,000;
(ii) Contracts for the purchase of, or payment for, supplies or
products, or for the performance of services, from or by a third
party, in excess of $20,000 with respect to any one supplier or other
party;
(iii) Contracts to sell or supply products, inventory or other
property to, or to perform services for, a third party, that involve
an amount in excess of $20,000 with respect to any one customer or
other party;
(iv) Contracts to sell any product or provide any service to a
governmental or regulatory body;
(v) Contracts limiting or restraining it from engaging or
competing in any lines of business with any Person;
(vi) Contracts with any customer providing for a volume refund,
retrospective price adjustment or price guarantee;
(vii) Contracts to lease to or from any other party any assets
that involve an amount in excess of $50,000 in any individual case;
(viii) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit agreements,
reimbursement agreements, loan agreements or other Contracts for the
borrowing or lending of money (including loans to or from officers,
directors, partners or stockholders or any members of such
stockholder's immediate family), or agreements or arrangements for a
line of credit or for a guarantee of, or other undertaking in
connection with, the indebtedness of any other Person;
33
<PAGE>
(ix) Contracts creating or recognizing any Encumbrances with
respect to any assets or properties of the Company;
(x) Contracts with distributors, manufacturers sales
representatives or other sales agents;
(xi) Contracts which relate in whole or in part to any
software, technical assistance or other know-how or other Intellectual
Property right;
(xii) Contracts for any capital expenditure or leasehold
improvement in excess of $20,000; and
(xiii) Any other Contracts (other than those that may be
terminated on not more than 30 days' notice without Liability and
those described in any of (i) through (xii) above) not made in the
ordinary course of business or which are material to the Company.
(b) ACSYS is not in Default under any such Contract. ACSYS has not
received any communication from, or given any communication to, any other party
indicating that ACSYS or such other party, as the case may be, is in Default
under any such Contract. To the knowledge of ACSYS, none of the other parties
to any such Contract to which ACSYS is a party is in Default thereunder. Such
Contracts are enforceable in accordance with their respective terms (except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and except that such enforceability is subject to general principles
of equity).
5.15 Insurance. The ACSYS Disclosure Schedule lists all policies or
---------
binders of insurance held by or on behalf of ACSYS or relating to its
operations, specifying with respect to each policy the insurer, the type of
insurance, the amount of the coverage, the insured, the expiration date, the
policy number and any pending claims thereunder. There is no Default with
respect to any such policy or binder, nor has there been any failure to give any
notice or present any claim under any such policy or binder in a timely fashion
or in the manner or detail required by the policy or binder, except for any of
the foregoing that would not, individually or in the aggregate, have a Material
Adverse Effect. There is no notice of nonrenewal, cancellation, reduction in
coverage or substantial increase in premiums with respect to, or disallowance of
any claim under, any such policy or binder that has been received by ACSYS,
except for any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect. Such policies will continue in full
force and effect following the consummation of the Merger and, except as
disclosed on the ACSYS Disclosure Schedule, do not provide for any retrospective
premium based adjustment or other experience-based liability on the part of
ACSYS. The ACSYS Disclosure Schedule describes any self-insurance arrangements
maintained by ACSYS. Such policies and self-insurance arrangements are
reasonable and adequate in amount, scope and coverage, in light of the risks
attendant to the businesses conducted by it.
34
<PAGE>
5.16 Intellectual Property and Software Products. ACSYS does not currently
-------------------------------------------
use nor has it previously used in its operations (including in the development
or marketing of products and services) any Copyright, Patent or Trademark except
for those listed on the ACSYS Disclosure Schedule. Except as listed in the
ACSYS Disclosure Schedule, ACSYS owns or has the lawful right to use all
Intellectual Property that is used or has been used in its operations. All of
the Intellectual Property listed on the ACSYS Disclosure Schedule is owned by
ACSYS free and clear of all Encumbrances, or is used pursuant to an agreement
that is identified and described in the ACSYS Disclosure Schedule. ACSYS does
not infringe upon or unlawfully or wrongfully use any Intellectual Property
rights owned or claimed by another Person. The Company is not in Default, nor
has it received any notice of any claim of infringement or any other claim or
proceeding, with respect to any Intellectual Property. No current or former
employee of ACSYS and no other Person owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part, and including any right
to royalties or other compensation, in any of the Intellectual Property, or in
any application therefor.
5.17 Employee Relations.
------------------
(a) Except as described in the ACSYS Disclosure Schedule, ACSYS is
not (i) a party to or otherwise bound by any collective bargaining or other type
of union agreement, (ii) a party to, involved in or, to the knowledge of ACSYS,
threatened by, any labor dispute or unfair labor practice charge, or (iii)
currently negotiating any collective bargaining agreement, and ACSYS has not
experienced any work stoppage during the last three years. The ACSYS Disclosure
Schedule sets forth the names and current annual salary rates or current hourly
wages of all present employees of ACSYS.
(b) ACSYS is in compliance with all applicable Regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice.
There are no outstanding claims against ACSYS (whether under any Regulation,
Contract, policy or otherwise) asserted by or on behalf of any present or former
employee or job applicant of ACSYS on account of or for (i) overtime pay, other
than overtime pay for work done in the current payroll period, (ii) wages or
salary for any period other than the current payroll period, (iii) any amount of
vacation pay or pay in lieu of vacation time off, other than vacation time off
or pay in lieu thereof earned in or in respect of the current fiscal year, (iv)
any amount of severance pay or similar benefits, (v) unemployment insurance
benefits, (vi) workers' compensation or disability benefits, (vii) any violation
of any statute, ordinance, order, rule or regulation relating to plant closings,
employment terminations or layoffs, including but not limited to the Worker
Adjustment and Retraining Notification Act, (viii) any violation of any statute,
ordinance, order, rule or other Regulation relating to employee "whistle blower"
or "right-to-know" rights and protection, (ix) any violation of any statute,
ordinance, order, rule or other Regulation relating to the employment
obligations of federal contractors or subcontractors or (x) any violation of any
Regulation relating to minimum wages or maximum hours of work, and ACSYS is not
aware of any such claims which have not been asserted. No Person (including any
governmental body) has asserted or threatened any claims against ACSYS under or
arising out of any Regulation relating to discrimination or occupational safety
in employment or employment practices.
35
<PAGE>
5.18 ERISA. Except as set forth in the ACSYS Disclosure Schedule, ACSYS is
-----
not, and has not previously been, a party, or contributed, to (1) any "employee
benefit plan" as defined in Section 3(3) of ERISA ("Plan") or (2) any deferred
compensation, bonus, performance compensation, stock purchase, stock option,
stock appreciation, severance, vacation, sick leave, holiday pay, fringe
benefits, personnel policy, reimbursement program, incentive, insurance, welfare
or similar plan, program, policy or arrangement ("Benefit Plan").
(a) Each Plan is in compliance with all reporting, disclosure and
other requirements of ERISA and the Code and other laws applicable to such Plan
the breach or violation of which are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect.
(b) Each Plan which is an employee pension benefit plan (a "Pension
Plan"), as defined in Section 3(2) of ERISA, and which is intended to be
qualified under Section 401(a) of the Code, has been determined by the Internal
Revenue Service to be so qualified and, to the best of ACSYS's knowledge, no
condition exists that would adversely affect any such determination.
(c) Neither any Plan nor ACSYS, nor any trustee or agent has been or
are presently engaged in any prohibited transactions as defined by Section 406
of ERISA or Section 4975 of the Code for which an exemption is not applicable
which could subject ACSYS to the tax or penalty imposed by Section 4975 of the
Code or Section 502 of ERISA.
(d) There is no event or condition existing which could be deemed a
"reportable event" (within the meaning of Section 4043 of ERISA) with respect to
which the thirty-day notice requirement has not been waived; to the best of
ACSYS's knowledge, no condition exists which could subject ACSYS to a penalty
under Section 4071 of ERISA.
(e) ACSYS is not a party to any "multi-employer plan," as that term
is defined in Section 3(37) of ERISA.
(g) With respect to each Plan and Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the best of ACSYS's knowledge, threatened against any Plan or
Benefit Plan, ACSYS or any trustee or agent of any Plan or Benefit Plan.
(h) With respect to each welfare benefit plan to which ACSYS is a
party which constitutes a group health plan subject to Section 4980B of the
Code, each such Plan substantially complies, and in each case has substantially
complied, with all applicable requirements of Section 4980B of the Code.
(i) Except as set forth in the ACSYS Disclosure Schedule:
(i) there is no outstanding liability (except for premiums
due) under Title IV of ERISA with respect to any Pension Plan;
36
<PAGE>
(ii) neither the Pension Benefit Guaranty Corporation nor ACSYS
has instituted proceedings to terminate any Pension Plan and the
Pension Benefit Guaranty Corporation has not informed ACSYS of its
intent to institute proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which ACSYS was
required to have paid as a contribution to the Plans as of the last
day of the most recent fiscal year of each of the Plans ended prior to
the date of this Agreement, and none of the Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of each such Plan ended prior to
the date of this Agreement;
(iv) to the best of ACSYS's knowledge, the actuarial
assumptions utilized, where appropriate, in connection with
determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such
Pension Plan) are reasonable. Based on such actuarial assumptions, as
of June 30, 1997, the fair market value of the assets or properties
held under each such Pension Plan exceeds the actuarially determined
present value of all accrued benefits of such Pension Plan (whether or
not vested) determined on an ongoing Pension Plan basis;
(v) each of the Plans and Benefit Plans is, and its
administration is and has been during the six-year period preceding
the date of this Agreement, in substantial compliance with, and ACSYS
has not received any claim or notice that any such Plan or Benefit
Plan is not in compliance with, all applicable laws and orders and
prohibited transaction exemptions, including without limitation, to
the extent applicable, the requirements of ERISA;
(vi) ACSYS is not in default in performing any of its
contractual obligations under any of the Plans or Benefit Plans or any
related trust agreement or insurance contract;
(vii) there are no material outstanding liabilities of any Plan
or Benefit Plan other than liabilities for benefits to be paid to
participants in such Plan or Benefit Plan and their beneficiaries in
accordance with the terms of such Plan or Benefit Plan;
(viii) each Plan or Benefit Plan may be amended or modified by
ACSYS at any time without liability except under any defined pension
benefit plan;
(ix) no Plan or Benefit Plan other than a Pension Plan or
severance plan provides benefits to any individual after termination
of employment;
(x) the consummation of the transactions contemplated by this
Agreement will not (in and of itself) (i) entitle any employee of
ACSYS to severance pay,
37
<PAGE>
unemployment compensation or any other payment; (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due
to any such employee; (iii) result in any liability under Title IV of
ERISA; (iv) result in any prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code for which an exemption is not
available or (v) result (either alone or in conjunction with any other
event) in the payment or series of payments by ACSYS or any of its
Affiliates to any person of an Aexcess parachute payment@ within the
meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded wholly
or partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid, all
premiums required to be paid under the insurance policy through the
Closing will have been paid on or before the Closing and, as of the
Closing, there will be no liability of ACSYS under any insurance
policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially
out of events occurring prior to the Closing; and
(xii) each Plan that constitutes a "welfare benefit plan,"
within the meaning of Section 3(1) of ERISA, and for which
contributions are claimed by ACSYS as deductions under any provision
of the Code, is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any
welfare benefit fund (within the meaning of Section 419 of the Code)
related to a welfare benefit plan, there is no disqualified benefit
(within the meaning of Section 4976(b) of the Code) that would result
in the imposition of a tax under Section 4976(a) of the Code, and
(iii) all welfare benefit funds intended to be exempt from tax under
Section 501(a) of the Code have been determined by the Internal
Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination.
5.19 Corporate Records. The minute books of ACSYS contain complete and
-----------------
correct copies of its Charter Documents and bylaws and of all minutes of
meetings, resolutions and other proceedings of its Board of Directors and
stockholders. The stock record book of ACSYS is complete and correct.
5.20 Absence of Certain Changes. Except as contemplated by this Agreement,
--------------------------
since the ACSYS Interim Balance Sheet Date, ACSYS has conducted its business in
the ordinary course and there has not been:
(a) any material adverse change in the financial condition, results
of operations, liabilities, or assets of ACSYS, or any other events or
conditions that, in the aggregate, would reasonably be expected to have a
material adverse effect on the financial condition, results of operations,
liabilities, or assets of ACSYS.
38
<PAGE>
(b) any damage, destruction or loss (whether or not covered by
insurance), which reasonably may be expected to materially and adversely affect
the financial condition or results of operations of ACSYS;
(c) except for the sale of products in the ordinary course of
business, any sale, lease, mortgage, pledge or Encumbrance of any properties or
assets of ACSYS having a value, individually or in the aggregate, in excess of
$20,000;
(d) any loss of any supplier, distributor or customer which
materially and adversely affects, or could reasonably be expected to materially
and adversely affect, the financial condition or results of operations of ACSYS;
(e) any increase by ACSYS, except as consistent with past practices,
in the wages, salaries, compensation, pension or other benefits payable to any
employee who, as of the date hereof, receives from the Company annual
compensation in excess of $50,000;
(f) the payment of any bonus or other compensation in excess of
regular salary to any employee who, as of the date hereof, receives from ACSYS,
annual compensation in excess of $50,000;
(g) any cancellation, release or waiver of debts owed to ACSYS
outside the ordinary course of business;
(h) any issuance or sale of any of its capital stock, or grant of
any options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(i) any declaration or payment of any dividend or distribution to the
Shareholders or redemption, purchase or other acquisition of any capital stock
of the Shareholders;
(j) any increase in indebtedness for borrowed money, except current
borrowings from banks in the ordinary course of business;
(k) any change in any method of accounting or accounting practice; or
(l) any agreement, whether or not in writing, to do any of the
foregoing.
5.21 Clients. ACSYS has used its reasonable business efforts to maintain
-------
and currently maintains, good working relationships with all of its clients.
The ACSYS Disclosure Schedule contains a list of the names of each of the ten
clients that, for the twelve months ended June 30, 1997 were the largest dollar
volume customers of services sold and provided by the Company. Except as
specified on the ACSYS Disclosure Schedule, none of such clients has given ACSYS
notice terminating, canceling or threatening to terminate or cancel any Contract
or relationship with ACSYS.
39
<PAGE>
5.22 Finder's Fees. No Person retained by ACSYS is or will be entitled to
-------------
any com mission or finder's or similar fee in connection with the Mergers.
5.23 Transactions with Affiliates. Except as set forth on the ACSYS
----------------------------
Disclosure Schedule, no Affiliate of ACSYS or member of his immediate family,
owns or has a controlling ownership interest in any corporation or other entity
that is a party to any Contract with ACSYS. The ACSYS Disclosure Schedule sets
forth a summary of all purchases of goods or services from ACSYS by Affiliates
of ACSYS or member of their immediate families in excess of $10,000 in the
aggregate in the three years prior to the date hereof.
5.24 Full Disclosure. There are and will be no materially misleading
---------------
misstatements in any of the representations and warranties made by ACSYS in this
Agreement, the ACSYS Disclosure Schedule or in any of the documents,
certificates and instruments delivered or to be delivered by ACSYS pursuant to
this Agreement and ACSYS has not omitted to state any fact necessary to make
statements made herein or therein not materially misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARIES
-----------------------------------------------------
Except as disclosed in the ACSYS Disclosure Schedule, each of the
Merger Subsidiaries represents and warrants to C.P.A. Staffing, C.P.A. Search,
Career Placement and the Shareholders as set forth below.
6.1 Corporate Status. The Merger Subsidiary is a corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
Georgia and is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where it is required to be so qualified, except
where the failure to so qualify would not have a Material Adverse Effect.
6.2 Authorization. The Merger Subsidiary has the requisite power and
-------------
authority to own its properties and carry on its business as currently
conducted, and to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance of the transactions contemplated herein have been duly authorized by
all necessary corporate action. This Agreement has been duly executed and
delivered by the Merger Subsidiary and constitutes a valid and binding
obligation of the Merger Subsidiary, enforceable against it in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the enforcement
of creditors' rights generally and except that such enforceability is subject to
general principles of equity).
6.3 Capitalization. The authorized capital stock of the Merger
--------------
Subsidiary consists of 1,000 shares of Common Stock, of which 100 shares are
issued and outstanding. All of the issued
40
<PAGE>
and outstanding shares of the Merger Subsidiary have been duly authorized and
are validly issued, fully paid and non-assessable.
6.4 No Conflict. Except as set forth on the ACSYS Disclosure Schedule,
-----------
neither the execution and delivery of this Agreement, nor the consummation of
the transactions contemplated herein by the Merger Subsidiary will (i) violate
or conflict with any of the provisions of any of the Charter Documents or bylaws
of the Merger Subsidiaries, (ii) violate or constitute a default, an event of
default or an event creating rights of acceleration, termination, cancellation
or other additional rights, or loss of rights under, any mortgage, indenture,
deed of trust, lease, contract, agreement, license or other instrument or any
statute, rule, regulation, injunction, decree, order, judgment or ruling of any
Governmental Body to which the Merger Subsidiary is a party, or by which it or
any of its assets or property is bound other than those which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect, or
(iii) result in the creation of any Encumbrances upon any of the assets or
property of the Merger Subsidiary other than those which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect.
6.5 Consents and Approvals. Except for the consents specified in the
----------------------
ACSYS Disclosure Schedule, neither the execution or delivery by the Merger
Subsidiary of this Agreement, nor the performance of the transactions hereunder,
will require any filing, consent or approval, constitute a Default or cause any
payment obligation to arise under (a) any Regulation or Court Order to which the
Merger Subsidiary is subject, (b) the Charter Documents or bylaws of the Merger
Subsidiary or (c) any Contract, Permit or other document to which the Merger
Subsidiary is a party or by which its properties may be bound.
ARTICLE VII
COVENANTS OF C.P.A. STAFFING, C.P.A SEARCH,
CAREER PLACEMENT AND THE SHAREHOLDERS
-------------------------------------
7.1 Access. Between the date of this Agreement and the Closing Date,
------
C.P.A. Staffing, C.P.A. Search and Career Placement shall (a) give ACSYS and its
authorized representatives and legal counsel full access to all their
properties, books, Contracts, assets and records, (b) permit ACSYS to make
inspections thereof, and (c) cause their officers and its advisors to furnish
ACSYS with such financial and operating data and other information with respect
to their business and operations and to discuss with ACSYS and its authorized
representatives and legal counsel their affairs, all as ACSYS may from time to
time request.
7.2 Regulatory Matters. C.P.A. Staffing, C.P.A. Search and Career
------------------
Placement shall file with applicable regulatory authorities any applications and
related documents required to be filed by them in order to consummate the
transactions contemplated herein.
7.3 Exclusivity. Except with respect to this Agreement and the
-----------
transactions contemplated hereby, none of C.P.A. Staffing, C.P.A. Search, Career
Placement or any Shareholder nor any of their
41
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Affiliates shall, and they shall cause their employees, agents and
representatives (including, without limitation, any investment banking, legal or
accounting firm retained by them and any individual member or employee of the
foregoing) (each, an "Agent") not to, (a) initiate, solicit or seek, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its shareholders
or any of them) with respect to a merger, acquisition, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase of all or any portion of the assets or any equity securities of
(including, without limitation, any investment by any venture capital investor
or other financial or strategic investor), the Companies (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal"), or (b) engage
in any negotiations concerning, or provide any confidential information or data
to, or have any substantive discussions with, any person relating to an
Acquisition Proposal, (c) otherwise cooperate in any effort or attempt to make,
implement or accept an Acquisition Proposal, or (d) enter into or consummate any
agreement or understanding with any Person relating to an Acquisition Proposal,
except for the Merger contemplated hereby. C.P.A. Staffing, C.P.A. Search,
Career Placement, the Shareholders and their respective Agents shall immediately
cease and cause to be terminated any existing activities, including discussions
or negotiations with any parties, conducted heretofore with respect to any
Acquisition Proposal and shall take the necessary steps to inform the
individuals and entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.3. If C.P.A. Staffing, C.P.A. Search,
Career Placement, the Shareholders, or their respective Agents have provided any
Person (other than ACSYS) with any Confidential Information or data relating to
an Acquisition Proposal, they shall request the immediate return thereof. C.P.A.
Staffing, C.P.A. Search, Career Placement and the Shareholders shall notify
ACSYS immediately if any inquiries, proposals or offers related to an
Acquisition Proposal are received by, any Confidential Information or data is
requested from, or any negotiations or discussions related to an Acquisition
Proposal are sought to be initiated or continued with, it or any individual or
entity referred to in the first sentence of this Section 7.3.
7.4 Financial Information. Until the Closing, C.P.A. Staffing, C.P.A.
---------------------
Search and Career Placement shall provide ACSYS, within 15 days after the end of
each month, with an unaudited consolidated balance sheet and income statement of
the Companies as of and for the month then ended, consistent with the books and
records of the Companies prepared in accordance with GAAP consistently applied,
presenting fairly the financial position and assets and liabilities of the
Companies as of the dates thereof and the results of its operations for the
periods then ended, subject to normal recurring year-end adjustments and the
absence of notes, all certified as such by the chief financial officers of the
Companies.
7.5 Restrictive Covenants.
---------------------
(a) Each Shareholder covenants that for the period ending five years
after the Closing Date, he or she will not, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as a partner, principal,
agent, representative, consultant or otherwise, with or use or permit his or her
name to be used in connection with, any business or enterprise which is engaged
directly or indirectly in competition anywhere in the United States with ACSYS,
C.P.A. Staffing, C.P.A. Search, Career
42
<PAGE>
Placement or any of their Affiliates during such period in interviewing or
placing job candidates for temporary or permanent employment as financial
personnel (the "Restricted Business"). It is recognized by each Shareholder that
the Restricted Business is expected to be conducted throughout the United States
and that more narrow geographical limitations of any nature on this non-
competition covenant (and the non-solicitation covenant set forth in Section
6.6(b)) are therefore not appropriate. The foregoing restriction shall not be
construed to prohibit the ownership by a Shareholder as a passive investment of
not more than five percent (5%) of any class of securities of any corporation
which is engaged in any of the foregoing businesses having a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended.
(b) Each Shareholder further covenants that for the period ending five
years after the Closing Date, he or she will not, either directly or indirectly,
(i) call on or solicit any clients or prospective clients of ACSYS, C.P.A.
Staffing, C.P.A. Search or Career Placement to perform services in the
Restricted Business anywhere in the United States or (ii) solicit the employment
of any person who is employed by ACSYS, C.P.A. Staffing, C.P.A. Search or Career
Placement during such period on a full- or part-time basis.
(c) Each Shareholder recognizes and acknowledges that by reason of his
ownership of and employment by the Company he has had access to Confidential
Information relating to the Restricted Business. Each Shareholder acknowledges
that such Confidential Information is a valuable and unique asset and covenants
that he will not disclose any such Confidential Information after the Closing
Date to any person for any reason whatsoever, unless he can show that such
information (a) is in the public domain through no wrongful act of such
Shareholder, (b) has been rightfully received from a third party without
restriction and without breach of this Agreement or (c) is required by law so to
be disclosed (provided that such Shareholder shall have given ACSYS notice of
such requirement and full opportunity to contest such disclosure).
(d) Each Shareholder acknowledges that the restrictions contained in
this Section 6.6 are reasonable and necessary to protect the legitimate
interests of ACSYS, and that any violation will result in irreparable injury to
ACSYS.
(e) Each Shareholder agrees that ACSYS shall be entitled to
preliminary and permanent injunctive relief, without the necessity of proving
actual damages, as well as an equitable accounting of all earnings, profits and
other benefits arising from any violation of this Section 6.5, which rights
shall be cumulative and in addition to any other rights or remedies to which
ACSYS may be entitled. In the event that any of the provisions of this Section
7.5 should ever be adjudicated to exceed the time, geographic, product or
service, or other limitations permitted by applicable law in any jurisdiction,
then such provisions shall be deemed reformed in such jurisdiction to the
maximum time, geographic, product or service, or other limitations permitted by
applicable law.
(f) The covenants set forth in this Section 7.5 shall be in addition
to and not in limitation of any similar covenants set forth in any employment
agreement between ACSYS or any of its Affiliates and any Shareholder.
43
<PAGE>
7.6 Required Consents. C.P.A. Staffing, C.P.A. Search, Career Placement
-----------------
and each Shareholder shall use their best efforts to take, or cause to be taken,
such action to execute and deliver, or cause to be executed and delivered, such
additional documents and instruments and to do, or cause to be done, all things
necessary, proper or advisable to obtain the Required Consents.
7.7 Conduct of the Business Prior to the Closing.
--------------------------------------------
(a) Between the date of this Agreement and the Closing Date, C.P.A.
Staffing, C.P.A. Search and Career Placement shall conduct their business in all
material respects in the ordinary course and shall use commercially reasonable
efforts to maintain all current business relationships.
(b) Between the date of this Agreement and the Closing Date, C.P.A.
Staffing, C.P.A. Search and Career Placement shall use commercially reasonable
efforts to preserve substantially intact their business organizations and keep
available the services of the current officers and employees of such Companies.
(c) Between the date of this Agreement and the Closing Date, C.P.A.
Staffing, C.P.A. Search and Career Placement shall not amend their Charter
Documents or bylaws and shall not:
(i) issue, sell or otherwise dispose of any of their capital
stock, or create, sell or otherwise dispose of any options, rights,
conversion rights or other agreements or commitments of any kind
relating to the issuance, sale or disposition of any of their capital
stock;
(ii) reclassify, split up or otherwise change their capital
stock;
(iii) be party to any merger, consolidation or other business
combination;
(iv) sell, lease, license or otherwise dispose of any of their
assets, except in the ordinary course of business; or
(v) organize any subsidiary or acquire any equity securities
of any Person or any equity or ownership interest in any business.
(d) Between the date of this Agreement (the Interim Balance Sheet Date
with respect to Section 7.7(d)(i)) and the Closing Date, except as mutually
agreed, C.P.A. Staffing, C.P.A. Search and Career Placement shall not:
(i) except as set forth in the Company Disclosure Schedule,
declare, make or pay any dividends or other distributions;
44
<PAGE>
(ii) borrow any funds or otherwise become subject to, whether
directly or by way of guarantee or otherwise, any indebtedness for
borrowed money;
(iii) create any Encumbrance on any of their assets;
(iv) except in the ordinary course of business, increase in any
manner the compensation of any director or officer or increase in any
manner the compensation of any class of employees;
(v) create or materially modify any bonus, deferred
compensation, pension, profit sharing, retirement, insurance, stock
purchase, stock option, or other fringe benefit plan, arrangement or
practice or any other employee benefit plan (as defined in section
3(3) of ERISA);
(vi) make any capital expenditure or acquire any property or
assets (other than raw materials and supplies) for a cost in excess of
$5,000 in any one case or $25,000 in the aggregate;
(vii) enter into any agreement that materially restricts them
from carrying on their business;
(viii) cancel any material debts of others or waive any material
claims or rights; or
(ix) act or omit from taking any action which would cause any
of the representations and warranties in Section 4 to be inaccurate.
(e) The Shareholders shall cause C.P.A. Staffing, C.P.A. Search and
Career Placement to take or refrain from taking, as applicable, the actions
set forth elsewhere in this Section 6.7.
7.8 Shareholder Releases. Each Shareholder hereby releases and discharges
--------------------
C.P.A. Staffing, C.P.A. Search and Career Placement and their respective
Affiliates, successors and assigns (collectively, the "Releasees") of and from
any and all claims, demands, debts, accounts, covenants, agreements,
obligations, costs, expenses, actions or causes of action of every nature,
character or description, now accrued or which may hereafter accrue, in law,
equity or otherwise, based in whole or in part on any facts, conduct,
activities, transactions, events or occurrences known or unknown, which have or
allegedly have existed, occurred, happened, arisen or transpired prior to the
Effective Times (the "Released Claims"). Each Shareholder represents and
warrants that he or she has the sole authority to release the Released Claims.
Each Shareholder agrees that such holder shall forever refrain and forbear from
commencing, instituting or prosecuting any lawsuit, action or proceeding,
judicial, administrative, or otherwise, or otherwise attempting to collect or
enforce any Released Claims which are released and discharged herein.
45
<PAGE>
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ACSYS
----------------------------------
The obligations of ACSYS to effect the Closing shall be subject to the
satisfaction at or prior to the Closing of the following conditions, any one or
more of which may be waived by ACSYS:
8.1 No Court Order or Litigation. No Court Order or Litigation shall have
----------------------------
been commenced or threatened, and no investigation by any Governmental Body
shall have been threatened, against any of the parties to this Agreement or any
of the principals, officers or directors of any of them seeking to restrain,
prevent or change the transactions contemplated hereby or questioning the
validity or legality of any of such transactions or seeking damages in
connection with any of such transactions.
8.2 Representations, Warranties and Agreements.
------------------------------------------
(a) The representations and warranties of C.P.A. Staffing, C.P.A.
Search, Career Placement and the Shareholders set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing Date
with the same force and effect as though made as of the Closing Date (except
where a representation and warranty is qualified by its terms by a reference to
materiality in which case such representation and warranty as so qualified shall
be true and correct in all respects). C.P.A. Staffing, C.P.A. Search, Career
Placement and each Shareholder shall have delivered to ACSYS certificates to
such effect, dated as of the Closing Date, signed by the Presidents of C.P.A.
Staffing, C.P.A. Search and Career Placement and each Shareholder, in form and
substance reasonably satisfactory to counsel to ACSYS.
(b) C.P.A. Staffing, C.P.A. Search, Career Placement and the
Shareholders shall have each performed or tendered performance in all material
respects of all covenants and agreements contained in this Agreement required to
be performed and complied with by them at or prior to the Closing. C.P.A.
Staffing, C.P.A. Search, Career Placement and the Shareholders shall have
delivered to ACSYS certificates to such effect, dated as of the Closing Date,
signed by the Presidents of C.P.A. Staffing, C.P.A. Search, Career Placement and
each Shareholder, in form and substance reasonably satisfactory to counsel to
ACSYS.
(c) There shall have been no material adverse change in the business,
financial condition, results of operations or assets of C.P.A. Staffing, C.P.A.
Search or Career Placement from the date hereof through the Closing Date, and
ACSYS shall have received certificates, dated as of the Closing Date, signed by
the Presidents of C.P.A. Staffing, C.P.A. Search and Career Placement in form
and substance reasonably satisfactory to counsel to ACSYS.
8.3 Actions and Proceedings. All corporate actions and proceedings
-----------------------
required to perform the transactions contemplated herein shall have been taken
and counsel to ACSYS shall have been furnished with copies of all such corporate
actions and proceedings certified by the Secretaries of C.P.A. Staffing, C.P.A.
Search and Career Placement.
46
<PAGE>
8.4 Employment Agreements. Louis Boohaker and John Ficquette shall have
---------------------
executed and delivered to ACSYS Employment Agreements substantially in the form
attached hereto as Exhibit A-1 and Ruth Gottlieb shall have executed and
delivered to ACSYS an Employment Agreement substantially in the form attached
hereto as Exhibit A-2.
8.5 Shareholders Agreement. Each of the Shareholders shall have executed
----------------------
and delivered to ACSYS a Shareholders Agreement substantially in the form
attached hereto as Exhibit B.
8.6 Escrow Agreement. Each of the Shareholders shall have executed and
----------------
delivered to ACSYS an Escrow Agreement substantially in the form attached hereto
as Exhibit C.
8.7 Legal Opinion. C.P.A. Staffing, C.P.A. Search, Career Placement and
-------------
the Shareholders shall have tendered a legal opinion of Gibson, Deal & Fletcher
PC, counsel to C.P.A. Staffing, C.P.A. Search, Career Placement and the
Shareholders, in the form attached hereto as Exhibit D.
8.8 Due Diligence. ACSYS shall have completed its due diligence
-------------
investigation of C.P.A. Staffing, C.P.A. Search and Career Placement the results
of which shall have been satisfactory to ACSYS in its sole discretion,
including, without limitation, the delivery of financial statements of the
combined Companies for the year ended December 31, 1996 audited by the firm of
Arthur Andersen LLP.
8.9 Regulatory Approvals. All authorizations, approvals or consents of any
--------------------
and all Governmental Bodies or other Persons required to be obtained by C.P.A.
Staffing, C.P.A. Search, Career Placement and the Shareholders to consummate the
transactions contemplated by this Agreement shall have been validly obtained and
copies thereof shall have been delivered to ACSYS.
8.10 Financing. ACSYS shall have entered into a borrowing facility to
---------
obtain, on terms satisfactory to ACSYS, all funds necessary for the payment of
the Merger Cash Portion.
8.11 Termination of Existing Agreements. All employment, compensation or
----------------------------------
benefit agreements, arrangements or understandings, oral or written, between any
of C.P.A. Staffing, C.P.A. Search and Career Placement, on the one hand, and any
of the Shareholders and/or Ruth Gottlieb, on the other, shall have been
terminated without liability to any of the Companies other than the payment of
$702,465 to Ruth Gottlieb in lieu of Section 9 of that certain Compensation
Agreement dated as of July 16, 1996, by and between Ruth Gottlieb and C.P.A.
Staffing, Inc., which obligation is comprised of (i) a $280,000 demand note from
C.P.A. Staffing to Ruth Gottlieb that is being repaid on the Closing Date by
ACSYS as part of the Merger Consideration and (ii) a $422,465 installment note
from C.P.A. Staffing to Ruth Gottlieb that has been assumed by the Shareholders
prior to the Closing. Evidence of such terminations and assumption shall have
been provided to ACSYS to its satisfaction.
47
<PAGE>
ARTICLE IX
CONDITION TO OBLIGATIONS OF C.P.A. STAFFING, C.P.A. SEARCH,
CAREER PLACEMENT AND THE SHAREHOLDERS
-------------------------------------
The obligations of C.P.A. Staffing, C.P.A. Search and Career placement to
effect the Closing shall be subject to the satisfaction at or prior to the
Closing of the following conditions, any one or more of which may be waived by
such Companies:
9.1 No Court Order or Litigation. No Court Order or Litigation shall have
----------------------------
been commenced or threatened, and no investigation by any Governmental Body
shall have been threatened, against any of the parties to this Agreement or any
of the principals, officers or directors of any of them seeking to restrain,
prevent or change the transactions contemplated hereby or questioning the
validity or legality of any of such transactions or seeking damages in
connection with any of such transactions.
9.2 Representations, Warranties and Agreements.
------------------------------------------
(a) The representations and warranties of ACSYS set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date with the same force and effect as though made as of the Closing
Date (except where a representation and warranty is qualified by its terms by a
reference to materiality in which case such representation and warranty as so
qualified shall be true and correct in all respects). ACSYS shall have
delivered to C.P.A. Staffing, C.P.A. Search and Career Placement a certificate
to such effect, dated as of the Closing Date, signed by the President of ACSYS,
in form and substance reasonably satisfactory to counsel to C.P.A. Staffing,
C.P.A. Search and Career Placement.
(b) ACSYS shall have performed or tendered performance in all material
respects of all covenants and agreements contained in this Agreement required to
be performed and complied with by it at or prior to the Closing. ACSYS shall
have delivered to C.P.A. Staffing, C.P.A. Search and Career Placement a
certificate to such effect, dated as of the Closing Date, signed by the
President of ACSYS, in form and substance reasonably satisfactory to counsel to
C.P.A. Staffing, C.P.A. Search and Career Placement.
(c) There shall have been no material adverse change in the business,
financial condition, results of operations or assets of ACSYS from the date
hereof through the Closing Date, and C.P.A. Staffing, C.P.A. Search and Career
Placement shall have received a certificate, dated as of the Closing Date,
signed by the Presidents of ACSYS in form and substance reasonably satisfactory
to counsel to C.P.A. Staffing, C.P.A. Search and Career Placement.
9.3 Actions and Proceedings. All corporate actions and proceedings on the
-----------------------
part of ACSYS required to perform the transactions contemplated herein shall
have been taken and counsel
48
<PAGE>
to C.P.A. Staffing, C.P.A. Search and Career Placement shall have been furnished
with copies of all such corporate actions and proceedings certified by the
Secretary of ACSYS.
9.4 Employment Agreements. ACSYS shall have executed and delivered to
---------------------
Louis Boohaker and John Ficquette an Employment Agreement substantially in the
form attached hereto as Exhibit A-1 and to Ruth Gottlieb an Employment Agreement
substantially in the form attached hereto as Exhibit A-2..
9.5 Regulatory Approvals. All authorizations, approvals or consents of any
--------------------
and all Governmental Bodies or other Persons required to be obtained by ACSYS to
consummate the transactions contemplated by this Agreement shall have been
validly obtained and copies thereof shall have been delivered to the Company.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
--------------------------------------------
10.1 Survival of Representations, Etc. The representations and warranties
--------------------------------
given by C.P.A. Staffing, C.P.A. Search, Career Placement, each Shareholder and
ACSYS under this Agreement shall survive the Closing for a period of one (1)
year after the Closing Date, except that all representations and warranties
contained in Sections 4.2, 4.4, 4.8, 4.13, 4.14(b), 4.19, 5.2, 5.4, 5.7, 5.12,
5.13(b) and 5.18 shall survive the Closing for a period of 45 days beyond the
period of the applicable statute of limitations plus any extensions or waivers
thereof. Except as expressly provided in this Agreement, all covenants,
agreements, undertakings and indemnities set forth in this Agreement shall
survive indefinitely.
10.2 Indemnification by the Shareholders. The Shareholders hereby agree to
-----------------------------------
indemnify and hold harmless jointly and severally ACSYS, its officers,
directors, employees, representatives, Affiliates, and their successors and
assigns, (each, an "Indemnified ACSYS Party") from and against any and all
Liabilities, claims, demands, judgments, settlement payments, losses, costs,
damages, penalties and expenses whatsoever (including reasonable attorneys',
consultants' and other professional fees and disbursements of every kind, nature
and description incurred by such Indemnified ACSYS Party in connection
therewith) (collectively, "Damages") that such Indemnified ACSYS Party may
sustain, suffer or incur that result from, arise out of or relate to (a) any
breach of or any inaccuracy in any representation, warranty, covenant or
agreement of C.P.A. Staffing, C.P.A. Search, Career Placement or any Shareholder
contained in this Agreement, including any breach of the obligation to indemnify
hereunder, and (b) any failure to file a Tax Return for the year ended December
31, 1995 that correctly reflected the Companies' level of income or liability
for taxes in the period covered thereby. For purposes of this Section 10.2, any
qualification of such representations and warranties by reference to materiality
or knowledge shall be disregarded in determining the inaccuracy, untruth,
incompleteness or breach thereof.
49
<PAGE>
10.3 Indemnification by ACSYS. ACSYS hereby agrees to indemnify and hold
------------------------
harmless the Shareholders ("Indemnified Seller Party") from and against any
Damages that such Indemnified Seller Party may sustain, suffer or incur that
result from, arise out of or relate to any breach of or inaccuracy in any
representation, warranty, covenant or agreement of ACSYS contained in this
Agreement, including any breach of the obligation to indemnify hereunder. For
purposes of this Section 10.3, any qualification of such representations and
warranties by reference to materiality or knowledge shall be disregarded in
determining the inaccuracy, untruth, incompleteness or breach thereof.
10.4 Limitation on Liabilities. Notwithstanding anything in this
-------------------------
Agreement to the contrary, an indemnifying party shall not have any liability to
an indemnified party in respect of any claim for indemnification unless a Claim
Notice with respect thereto is delivered to the indemnifying party specifying
the factual basis of the claim in reasonable detail to the extent then known by
the indemnified party prior to the termination of the survival period for such
representation and warranty set forth in Section 10.1 hereof.
10.5 Procedure for Claims.
--------------------
(a) An Indemnified ACSYS Party or an Indemnified Seller Party that
desires to seek indemnification under any part of this Article X (each, an
"Indemnified Party") shall give notice (a "Claim Notice") to each party
responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor"). Such notice shall briefly explain the nature of the claim and
the parties known to be involved, and shall specify the amount thereof. If the
matter to which a claim relates shall not have been resolved as of the date of
the Claim Notice, the Indemnified Party shall estimate the amount of the claim
in the Claim Notice, but also specify therein that the claim has not yet been
liquidated (an "Unliquidated Claim"). If an Indemnified Party gives a Claim
Notice for an Unliquidated Claim, the Indemnified Party shall also give a second
Claim Notice (the "Liquidated Claim Notice") within 60 days after the matter
giving rise to the claim becomes finally resolved, and the Liquidated Claim
Notice shall specify the amount of the claim. Each Indemnitor to which or whom
a Claim Notice is given shall respond to any Indemnified Party that has given a
Claim Notice (a "Claim Response") within 30 days (the "Response Period") after
the later of (i) the date that the Claim Notice is given or (ii) if a Claim
Notice is first given with respect to an Unliquidated Claim, the date on which
the Liquidated Claim Notice is given. Any Claim Notice or Claim Response shall
be given in accordance with the notice requirements hereunder, and any Claim
Response shall specify whether or not the Indemnitor giving the Claim Response
disputes the claim described in the Claim Notice. If any Indemnitor fails to
give a Claim Response within the Response Period, such Indemnitor shall be
deemed not to dispute the claim described in the related Claim Notice. If any
Indemnitor elects not to dispute a claim described in a Claim Notice, whether by
failing to give a timely Claim Response or otherwise, then the amount of such
claim shall be conclusively deemed to be an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an Indemnified
Party hereunder, such Indemnitor shall pay to such Indemnified Party within 30
days after the last day of the applicable Response Period the amount to which
such Indemnified Party shall be entitled. If there
50
<PAGE>
shall be a dispute as to the amount or manner of indemnification under this
Article X, the Indemnitor and the Indemnified Party shall seek to resolve such
dispute through negotiations and, if such dispute is not resolved within twenty
days, the Indemnified Party may pursue whatever legal remedies may be available
for recovery of the Damages claimed from any Indemnitor. If any Indemnitor fails
to pay all or part of any indemnification obligation when due, then such
Indemnitor shall also be obligated to pay to the applicable Indemnified Party
interest on the unpaid amount for each day during which the obligation remains
unpaid at an annual rate equal to 10% or the maximum rate permitted by
applicable law, whichever is less.
10.6 Third Party Claims. An Indemnified Party that desires to seek
------------------
indemnification under any part of this Article X with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor
may, or if so requested by such Indemnified Party, any Indemnitor shall,
participate in such Action or assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that such
Indemnified Party shall have the right to participate at its own expense in the
defense of such Action; and provided, further, that the Indemnitor shall not
consent to the entry of any judgment or enter into any settlement, except with
the written consent of such Indemnified Party (which consent shall not be
unreasonably withheld), that (a) fails to include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of any such Action or (b) grants the
claimant or plaintiff any injunctive relief against the Indemnified Party. Any
failure to give prompt notice under this Section 10.6 shall not bar an
Indemnified Party's right to claim indemnification under this Article X, except
to the extent that an Indemnitor shall have been harmed by such failure.
10.7 Exceptions to Limitations. Nothing herein shall be deemed to limit or
-------------------------
restrict in any manner any rights or remedies which any party has, or might
have, at law, in equity or otherwise, based on a willful misrepresentation or
willful breach of warranty hereunder.
10.8 Escrow. At the Closing, each Shareholder shall deliver to the Escrow
------
Agent a certificate representing that number of ACSYS Shares received by him or
her in the Mergers which equal ten percent (10%) of the Merger Consideration
received by such Shareholders in the Mergers (based on a price of $2.35737611
per ACSYS Share) together with three stock powers endorsed in blank
(collectively, the "Escrow Deposit") to be held, subject to the terms of the
Escrow Agreement, for a period ending on the day prior to the first anniversary
of the Closing Date. The Escrow Deposit shall be held and disbursed by the
Escrow Agent in accordance with the terms of the Escrow Agreement. In addition
to any other remedies ACSYS may have for Damages described in Section 10.2
hereof, ACSYS may make a claim against the Escrow Deposit for the amount of such
Damages by sending a Claim Notice described in Section 10.5 to the Escrow Agent.
The Escrow Deposit shall be held and disbursed by the Escrow Agent in accordance
with the terms of the Escrow Agreement. The parties agree and acknowledge that
ACSYS's recourse to the Escrow Deposit shall be without prejudice to any and all
other remedies ACSYS may have pursuant to this Article X or otherwise. ACSYS's
remedies for Damages shall not be limited to the assets comprising the Escrow
Deposit
51
<PAGE>
10.9 Effect of Investigation. Any party's right to indemnification or
-----------------------
other remedies based upon the representations and warranties, covenants,
agreements and undertakings of the other party will not be affected by any
investigation, knowledge or waiver of any condition of such party. Any
investigation by such party shall be for its own protection only and shall not
affect or impair any right or remedy hereunder.
10.10 Contingent Claims. Nothing herein shall be deemed to prevent an
-----------------
Indemnified Party from making a claim hereunder for potential or contingent
claims or demands provided the Claim Notice sets forth the specific basis for
any such potential or contingent claim to the extent then feasible and the
Indemnified Party has reasonable grounds to believe that such a claim or demand
may be made.
ARTICLE XI
TERMINATION
-----------
11.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing Date:
(a) by mutual written consent of ACSYS and C.P.A. Staffing, C.P.A.
Search and Career Placement;
(b) by C.P.A. Staffing, C.P.A. Search and Career Placement or ACSYS,
if there shall be any Regulation that makes consummation of the Merger illegal
or otherwise prohibited or if any Court Order enjoining C.P.A. Staffing, C.P.A.
Search, Career Placement or ACSYS from consummating the Merger is entered and
such Court Order shall have become final and nonappealable;
(c) by ACSYS or C.P.A. Staffing, C.P.A. Search and Career Placement,
if the Merger shall not have been consummated by August 31, 1997.
(d) by ACSYS if its due diligence investigation and review of the
Company shall not have been completed to its sole satisfaction;
(e) by ACSYS, if C.P.A. Staffing, C.P.A. Search, Career Placement or
the Shareholders shall have breached any of their covenants hereunder or if
their representations and warranties contained in this Agreement or in any
certificate or other writing delivered by them pursuant hereto shall not be true
and correct, except for such changes as are contemplated by this Agreement; and
(f) by C.P.A. Staffing, C.P.A. Search and Career Placement, if the
representations and warranties of ACSYS contained in this Agreement or in any
certificate or other writing delivered
52
<PAGE>
by ACSYS pursuant hereto shall not be true and correct, except for such changes
as are contemplated by this Agreement.
11.2 Effect of Termination. If this Agreement is terminated pursuant to
---------------------
Section 11.1, any party may pursue any legal or equitable remedies that may be
available if such termination is based on a breach of another party.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Payment of Expenses. The Shareholders shall pay their own fees and
-------------------
expenses and all fees and expenses incurred by C.P.A. Staffing, C.P.A. Search
and Career Placement in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby, including without
limitation, the fees and expenses of lawyers, accountants, consultants,
investment bankers, brokers, finders and other advisors with respect to the
transactions contemplated hereby whether or not the Merger is consummated. ACSYS
shall pay its own fees and expenses.
12.2 Entire Agreement. This Agreement, together with the Escrow Agreement,
----------------
the Employment Agreements and the Shareholders Agreement, sets forth the entire
understanding of the parties hereto with respect to the Merger and the other
transactions contemplated herein and supersedes all prior agreements or
understandings among the parties regarding those matters.
12.3 Amendment, Parties in Interest, Assignment, Etc. This Agreement may
-----------------------------------------------
be amended, modified or supplemented only by a written instrument duly executed
by each of the parties hereto. If any provision of this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument duly executed by
such party. The parties hereto shall execute and deliver any and all documents
and take any and all other actions that may be deemed reasonably necessary by
their respective counsel to consummate the Merger.
12.4 Interpretation. Unless the context of this Agreement clearly requires
--------------
otherwise, (a) references to the plural include the singular, the singular the
plural, and the part the whole, (b) "or" has the inclusive meaning frequently
identified with the phrase "and/or" and (c) "including" has the inclusive
meaning frequently identified with the phrase "but not limited to." The section
and other headings contained in this Agreement are for reference purposes only
and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified. Each
53
<PAGE>
accounting term used herein that is not specifically defined herein shall have
the meaning given to it under GAAP.
12.5 Notices. All notices that are required or permitted hereunder shall
-------
be in writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto given in accordance with the foregoing notice procedures:
If to ACSYS or the Merger Subsidiaries:
ACSYS Resources, Inc.
Suite 202, 530 E. Swedesford Road
Wayne, PA 19087
FAX: 610-687-9456
Attention: Edward S. Baumstein, President
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
FAX: 215-963-5299
Attention: Stephen M. Goodman
If to C.P.A. Staffing, C.P.A. Search or Career Placement:
C.P.A. Staffing, Inc.
5901-B Peachtree-Dunwoody Road
Suite 330
Atlanta, Georgia 30328
Attention: John Ficquette or Louis Boohaker
with a required copy to:
Gibson, Deal and Fletcher, P.C.
Spalding Exchange
3953 Holcomb Bridge Road, Suite 200
Norcross, Georgia 30092
Attention: John W. Gibson
54
<PAGE>
If to John Ficquette:
4657 Glenshire Place
Atlanta, Georgia 30338
If to Louis Boohaker:
2370 Norwich Way
Tucker, GA 30084
12.6 Governing Law. This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its provisions concerning conflict of laws.
12.7 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
55
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
on the day and year first written above.
ACSYS RESOURCES, INC.
By:/s/ Edward S. Baumstein
_______________________
Edward S. Baumstein
President
ACSYS STAFFING ACQUISITION CORP.
By:/s/ Edward S. Baumstein
_______________________
Edward S. Baumstein
President
ACSYS SEARCH ACQUISITION CORP.
By:/s/ Edward S. Baumstein
_______________________
Edward S. Baumstein
President
ACSYS CAREER ACQUISITION CORP.
By:/s/ Edward S. Baumstein
_______________________
Edward S. Baumstein
President
C.P.A. STAFFING, INC.
By:/s/ Louis J. Boohaker
_____________________
Louis J. Boohaker
President
56
<PAGE>
C.P.A. SEARCH, INC.
By:/s/ Louis J. Boohaker
_____________________
Louis J. Boohaker
President
CAREER PLACEMENT ASSOCIATES, INC.
By:/s/ Louis J. Boohaker
_____________________
Louis J. Boohaker
President
/s/ John Ficquette
-------------------------
John Ficquette
/s/ Louis Boohaker
-------------------------
Louis Boohaker
57
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ICCE, INC.
ARTICLE ONE
NAME
The name of the corporation is ICCE, Inc.
ARTICLE TWO
CAPITALIZATION
The total number of shares of all classes which the Corporation has
authority to issue is fifty million (50,000,000), of which forty-five million
(45,000,000) shares shall be designated as "Common Stock", and five million
(5,000,000) shares shall be designated as "Preferred Stock". All or any part
of the shares of the common and preferred capital stock may be issued by the
Corporation from time to time and for such consideration as may be determined
and fixed by the Board of Directors, as provided by law, with due regard to the
interest of the existing shareholders; and when such consideration has been
received by the Corporation, such shares shall be deemed fully paid and
nonassessable.
Pursuant to the Official Code of Georgia Annotated (O.C.G.A.) Section 14-
2-602, the Board of Directors may determine, in whole or in part, the
preferences, limitations, and relative rights of one or more series of any
class of shares of the Corporation, and designate the number of shares within
that series, before the issuance of any shares of that series. Each such
series of stock shall be given a distinguishing designation. All shares of
each series must have preferences, limitations, and relative rights identical
with those of other shares of the same series and, except to the extent
otherwise provided in the description of the series, with those of other series
in the same class; provided, however, that any of the voting powers,
preferences, designations, rights, qualifications, limitations, or restrictions
of or on the series of shares, or the holders thereof, may be dependent upon
facts ascertainable outside these Articles of Incorporation if the manner in
which the facts shall operate upon voting powers, designations, preferences,
rights, qualifications, limitations, or restrictions of or on the shares, or
the holders thereof, is clearly and expressly set forth in the Articles of
Incorporation. Before issuing any shares of a series created under this
Section, the Corporation must deliver to the Secretary of State for filing
articles of amendment, which are effective without shareholder action, that set
forth:
(1) the name of the Corporation;
(2) the text of the amendment determining the terms of the series of
shares;
(3) the date the amendment was adopted; and
(4) a statement that the amendment was duly adopted by the Board of
Directors.
After a series of shares is established, the Board of Directors at any time and
from time to time may increase or decrease the number of shares contained in a
series, but not below the number of shares then issued, by filing articles of
amendment, which are effective without shareholder action, in the manner
provided in O.C.G.A. Section 14-2-602. As an initial matter, unless and until
amendment by the Board of Directors, the Corporation shall be authorized to
issue up to 49,000,000 shares of common stock, which shares shall have
unlimited voting rights and, subject to any preferential rights of subsequently
issued series of shares, shall be entitled to receive the net assets of the
Corporation upon dissolution.
ARTICLE THREE
INITIAL REGISTERED OFFICE AND AGENT
The street address and county of the initial registered office of the
corporation shall be at 999 Peachtree Street, N.E., Suite 1400, Atlanta,
Georgia 30309 (Fulton County). The initial registered agent of the
corporation at such address shall be Glenn W. Sturm.
ARTICLE FOUR
INCORPORATOR
The name and address of the incorporator is as follows:
C. Russell Pickering
999 Peachtree Street, N.E., Suite 1400
Atlanta, GA 30309
ARTICLE FIVE
MAILING ADDRESS OF PRINCIPAL OFFICE
The mailing address of the initial principal office of the corporation is
as follows:
First Union Plaza
999 Peachtree St., N.E., Suite. 1400
Atlanta, Georgia 30309
ARTICLE SIX
LIMITATION ON DIRECTOR LIABILITY
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for breach of the duty of
care or any other duty as a director, except that such liability shall not be
eliminated for:
(i) any appropriation, in violation of the director's duties, of any
business opportunity of the corporation;
(ii) acts or omissions that involve intentional misconduct or a knowing
violation of law;
(iii) liability under Section 14-2-832 (or any successor provision or
redesignation thereof) of the Georgia Business Corporation Code; and
(iv) any transaction from which the director derived an improper personal
benefit.
If at any time the Georgia Business Corporation Code (the "Code") shall
have been amended to authorize the further elimination or limitation of the
liability of a director, then the liability of each director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Code, as
so amended, without further action by the shareholders, unless the provisions
of the Code, as amended, require further action by the shareholders.
Any repeal or modification of the foregoing provisions of this Article Six
shall not adversely affect the elimination or limitation of liability or
alleged liability pursuant hereto of any director of the corporation for or
with respect to any alleged act or omission of the director occurring prior to
such a repeal or modification.
ARTICLE SEVEN
CONSTITUENCY INTERESTS
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the Corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any action on the Corporation or its
shareholders, may consider the interests of the employees, customers, suppliers
and creditors of the Corporation and its subsidiaries, the communities in which
offices or other establishments of the Corporation and its subsidiaries are
located, and all other factors such directors consider pertinent. This
provision solely grants discretionary authority to the directors and shall not
be deemed to provide to any other constituency any right to be considered.
ARTICLE EIGHT
CUMULATIVE VOTING
All shareholders having the right to vote for directors shall be entitled
to cumulate their votes for directors.
These Amended and Restated Articles of Incorporation were duly approved by
the Incorporator of the Corporation, without shareholder action, on April 1,
1997 in accordance with Section 14-2-1006 of the Georgia Business Corporation
Code (the "Code"). The Corporation does not yet have shareholders.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed and attested by its duly authorized officer on April 1, 1997.
ICCE, INC.
By: /s/ C. Russell Pickering
--------------------------------------
C. Russell Pickering
Incorporator
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
ICCE, INC.
I
The name of the corporation is ICCE, Inc. (the "Corporation").
II
Article Two of the Articles of Incorporation of ICCE, Inc. shall be
deleted in its entirety and the following shall be inserted in lieu thereof:
"ARTICLE TWO
CAPITALIZATION
The total number of shares of all classes which the Corporation has
authority to issue is fifty million (50,000,000), of which forty-five million
(45,000,000) shares shall be designated as "Common Stock", and five million
(5,000,000) shares shall be designated as "Preferred Stock". All or any part
of the shares of the common and preferred capital stock may be issued by the
Corporation from time to time and for such consideration as may be determined
and fixed by the Board of Directors, as provided by law, with due regard to the
interest of the existing shareholders; and when such consideration has been
received by the Corporation, such shares shall be deemed fully paid and
nonassessable.
Pursuant to the Official Code of Georgia Annotated (O.C.G.A.) Section 14-
2-602, the Board of Directors may determine, in whole or in part, the
preferences, limitations, and relative rights of one or more series of any
class of shares of the Corporation, and designate the number of shares within
that series, before the issuance of any shares of that series. Each such
series of stock shall be given a distinguishing designation. All shares of
each series must have preferences, limitations, and relative rights identical
with those of other shares of the same series and, except to the extent
otherwise provided in the description of the series, with those of other series
in the same class; provided, however, that any of the voting powers,
preferences, designations, rights, qualifications, limitations, or restrictions
of or on the series of shares, or the holders thereof, may be dependent upon
facts ascertainable outside these Articles of Incorporation if the manner in
which the facts shall operate upon voting powers, designations, preferences,
rights, qualifications, limitations, or restrictions of or on the shares, or
the holders thereof, is clearly and expressly set forth in the Articles of
Incorporation. Before issuing any shares of a series created under this
Section, the Corporation must deliver to the Secretary of State for filing
articles of amendment, which are effective without shareholder action, that set
forth:
(1) the name of the Corporation;
(2) the text of the amendment determining the terms of the series of
shares;
(3) the date the amendment was adopted; and
(4) a statement that the amendment was duly adopted by the Board of
Directors.
After a series of shares is established, the Board of Directors at any time and
from time to time may increase or decrease the number of shares contained in a
series, but not below the number of shares then issued, by filing articles of
amendment, which are effective without shareholder action, in the manner
provided in O.C.G.A. Section 14-2-602. As an initial matter, unless and until
amendment by the Board of Directors, the Corporation shall be authorized to
issue up to 45,000,000 shares of common stock, which shares shall have
unlimited voting rights and, subject to any preferential rights of subsequently
issued series of shares, shall be entitled to receive the net assets of the
Corporation upon dissolution."
All other provisions of the Articles of Incorporation shall remain in full
force and effect.
III
This amendment was duly approved by the shareholders and the board of
directors of the Corporation on April 15, 1997 in accordance with the
provisions of Section 14-2-1003 of the Georgia Business Corporation Code (the
"Code").
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed and attested by its duly authorized officer on April 15, 1997.
ICCE, INC.
By: /s/ C. Russell Pickering
----------------------------------
C. Russell Pickering
Incorporator
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ICCE, INC.
ARTICLE I
The name of the corporation is ICCE, Inc.
ARTICLE II
Effective the date hereof, Article I of the Articles of Incorporation of
ICCE, Inc. is amended to read as follows:
The name of the corporation is ACSYS, Inc.
All other provisions of the Articles of Incorporation shall remain in full
force and effect.
ARTICLE III
This amendment to The Articles of Incorporation was duly approved by the
Board of Directors, without shareholder approval, on September 18, 1997, in
accordance with Section 14-2-1002 of the Georgia Business Corporation Code (the
"Code").
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed and attested by its duly authorized officers as of this 8th day
of October, 1997.
ICCE, Inc.
/s/ Timothy Mann, Jr.
----------------------------------
Timothy Mann, Jr.
Executive Vice President and
Secretary
ATTEST:
By: /s/ David C. Cooper
--------------------------------------
David C. Cooper
Chairman of the Board
BYLAWS
OF
ICCE, INC.
<PAGE>
BYLAWS
OF
ICCE, INC.
TABLE OF CONTENTS
Page
ARTICLE ONE Office 1
1.1 Registered office and agent 1
1.2 Principal office 1
1.3 Other offices 1
ARTICLE TWO Shareholders' Meetings 1
2.1 Place of meetings 1
2.2 Annual meetings 1
2.3 Special meetings 2
2.4 Notice of meetings 2
2.5 Waiver of notice 2
2.6 Voting group; quorum; vote required to act 2
2.7 Voting of shares 3
2.8 Proxies 3
2.9 Presiding officer 3
2.10 Adjournments 3
2.11 Conduct of the meeting 4
2.12 Action of shareholders without a meeting 4
2.13 Matters considered at annual meetings 4
ARTICLE THREE Board of Directors 5
3.1 General powers 5
3.2 Number, election and term of office 5
3.3 Removal of directors 5
3.4 Vacancies 5
3.5 Compensation 6
3.6 Committees of the board of directors 6
3.7 Qualification of directors 6
3.8 Certain nomination requirements 6
ARTICLE FOUR Meetings of the Board of Directors 7
4.1 Regular meetings 7
4.2 Special meetings 7
4.3 Place of meetings 7
4.4 Notice of meetings 7
4.5 Quorum 8
4.6 Vote required for action 8
4.7 Participation by conference telephone 8
4.8 Action by directors without a meeting 8
4.9 Adjournments 8
4.10 Waiver of notice 8
ARTICLE FIVE Officers 9
5.1 Offices 9
5.2 Term 9
5.3 Compensation 9
5.4 Removal 9
5.5 Chairman of the board 9
5.6 President 10
5.7 Vice presidents 10
5.8 Secretary 10
5.9 Treasurer 10
ARTICLE SIX Distributions and Dividends 11
ARTICLE SEVEN Shares 11
7.1 Share certificates 11
7.2 Rights of corporation with respect to registered owners 11
7.3 Transfers of shares 11
7.4 Duty of corporation to register transfer 11
7.5 Lost, stolen, or destroyed certificates 12
7.6 Fixing of record date 12
7.7 Record date if none fixed 12
7.8 Fair price requirements 12
ARTICLE EIGHT Indemnification 12
8.1 Indemnification of directors 12
8.2 Indemnification of others 13
8.3 Other organizations 13
8.4 Advances 13
8.5 Non-exclusivity 14
8.6 Insurance 14
8.7 Notice 14
8.8 Security 14
8.9 Amendment 14
8.10 Agreements 15
8.11 Continuing benefits 15
8.12 Successors 15
8.13 Severability 15
8.14 Additional indemnification 15
ARTICLE NINE Miscellaneous 16
9.1 Inspection of books and records 16
9.2 Fiscal year 16
9.3 Corporate seal 16
9.4 Annual statements 16
9.5 Notice 16
ARTICLE TEN Amendments 17
<PAGE>
BYLAWS
OF
ICCE, INC.
_____________________________________________________________________________
References in these Bylaws to "Articles of Incorporation" are to the
Articles of Incorporation of ICCE, INC., a Georgia corporation (the
"Corporation"), as amended and restated from time to time.
All of these Bylaws are subject to contrary provisions, if any, of the
Articles of Incorporation (including provisions designating the preferences,
limitations, and relative rights of any class or series of shares), the Georgia
Business Corporation Code (the "Code"), and other applicable law, as in effect
on and after the effective date of these Bylaws. References in these Bylaws to
"Sections" shall refer to sections of the Bylaws, unless otherwise indicated.
_____________________________________________________________________________
ARTICLE ONE
OFFICE
1.1 REGISTERED OFFICE AND AGENT. The Corporation shall maintain a
registered office and shall have a registered agent whose business office is
the same as the registered office.
1.2 PRINCIPAL OFFICE. The principal office of the Corporation shall be
at the place designated in the Corporation's annual registration with the
Georgia Secretary of State.
1.3 OTHER OFFICES. In addition to its registered office and principal
office, the Corporation may have offices at other locations either in or
outside the State of Georgia.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Meetings of the Corporation's shareholders may be
held at any location inside or outside the State of Georgia designated by the
Board of Directors or any other person or persons who properly call the
meeting, or if the Board of Directors or such other person or persons do not
specify a location, at the Corporation's principal office.
2.2 ANNUAL MEETINGS. The Corporation shall hold an annual meeting of
shareholders, at a time determined by the Board of Directors, to elect
directors and to transact any business that properly may come before the
meeting. The annual meeting may be combined with any other meeting of
shareholders, whether annual or special.
2.3 SPECIAL MEETINGS. Special meetings of shareholders of one or more
classes or series of the Corporation's shares may be called at any time by the
Board of Directors, the Chairman of the Board, or the President, and shall be
called by the Corporation upon the written request (in compliance with
applicable requirements of the Code) of the holders of shares representing 25%
or more of the votes entitled to be cast on each issue proposed to be
considered at the special meeting; provided, however, that at any time the
Corporation has more than 100 beneficial owners (as defined in Section 14-2-
1110 of the Code) of its shares, such written request must be made by the
holders of a majority of such votes. The business that may be transacted at
any special meeting of shareholders shall be limited to that proposed in the
notice of the special meeting given in accordance with Section 2.4 (including
related or incidental matters that may be necessary or appropriate to
effectuate the proposed business).
2.4 NOTICE OF MEETINGS. In accordance with Section 9.5 and subject to
waiver by a shareholder pursuant to Section 2.5, the Corporation shall give
written notice of the date, time, and place of each annual and special
shareholders' meeting no fewer than 10 days nor more than 60 days before the
meeting date to each shareholder of record entitled to vote at the meeting.
The notice of an annual meeting need not state the purpose of the meeting
unless these Bylaws require otherwise. The notice of a special meeting shall
state the purpose for which the meeting is called. If an annual or special
shareholders' meeting is adjourned to a different date, time, or location, the
Corporation shall give shareholders notice of the new date, time, or location
of the adjourned meeting, unless a quorum of shareholders was present at the
meeting and information regarding the adjournment was announced before the
meeting was adjourned; provided, however, that if a new record date is or must
be fixed in accordance with Section 7.6, the Corporation must give notice of
the adjourned meeting to all shareholders of record as of the new record date
who are entitled to vote at the adjourned meeting.
2.5 WAIVER OF NOTICE. A shareholder may waive any notice required by the
Code, the Articles of Incorporation, or these Bylaws, before or after the date
and time of the matter to which the notice relates, by delivering to the
Corporation a written waiver of notice signed by the shareholder entitled to
the notice. In addition, a shareholder's attendance at a meeting shall be
(a) a waiver of objection to lack of notice or defective notice of the meeting
unless the shareholder at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting, and (b) a waiver of objection
to consideration of a particular matter at the meeting that is not within the
purpose stated in the meeting notice, unless the shareholder objects to
considering the matter when it is presented. Except as otherwise required by
the Code, neither the purpose of nor the business transacted at the meeting
need be specified in any waiver.
2.6 VOTING GROUP; QUORUM; VOTE REQUIRED TO ACT. (a) Unless otherwise
required by the Code or the Articles of Incorporation, all classes or series of
the Corporation's shares entitled to vote generally on a matter shall for that
purpose be considered a single voting group (a "Voting Group"). If either the
Articles of Incorporation or the Code requires separate voting by two or more
Voting Groups on a matter, action on that matter is taken only when voted upon
by each such Voting Group separately. At all meetings of shareholders, any
Voting Group entitled to vote on a matter may take action on the matter only if
a quorum of that Voting Group exists at the meeting, and if a quorum exists,
the Voting Group may take action on the matter notwithstanding the absence of a
quorum of any other Voting Group that may be entitled to vote separately on the
matter. Unless the Articles of Incorporation, these Bylaws, or the Code
provides otherwise, the presence (in person or by proxy) of shares representing
a majority of votes entitled to be cast on a matter by a Voting Group shall
constitute a quorum of that Voting Group with regard to that matter. Once a
shareholder is present at any meeting other than solely to object to holding
the meeting or transacting business at the meeting, the shareholder shall be
deemed present for quorum purposes for the remainder of the meeting and for any
adjournments of that meeting, unless a new record date for the adjourned
meeting is or must be set pursuant to Section 7.6 of these Bylaws.
(b) Except as provided in Section 3.4, if a quorum exists, action on a
matter by a Voting Group is approved by that Voting Group if the votes cast
within the Voting Group favoring the action exceed the votes cast opposing the
action, unless the Articles of Incorporation, a provision of these Bylaws that
has been adopted pursuant to Section 14-2-1021 of the Code (or any successor
provision), or the Code requires a greater number of affirmative votes.
2.7 VOTING OF SHARES. Unless otherwise required by the Code or the
Articles of Incorporation, each outstanding share of any class or series having
voting rights shall be entitled to one vote on each matter that is submitted to
a vote of shareholders.
2.8 PROXIES. A shareholder entitled to vote on a matter may vote in
person or by proxy pursuant to an appointment executed in writing by the
shareholder or by his or her attorney-in-fact. An appointment of a proxy shall
be valid for 11 months from the date of its execution, unless a longer or
shorter period is expressly stated in the proxy.
2.9 PRESIDING OFFICER. Except as otherwise provided in this Section 2.9,
the Chairman of the Board, and in his or her absence or disability the
President, shall preside at every shareholders' meeting (and any adjournment
thereof) as its chairman, if either of them is present and willing to serve.
If neither the Chairman of the Board nor the President is present and willing
to serve as chairman of the meeting, and if the Chairman of the Board has not
designated another person who is present and willing to serve, then a majority
of the Corporation's directors present at the meeting shall be entitled to
designate a person to serve as chairman. If no director of the Corporation is
present at the meeting or if a majority of the directors who are present cannot
be established, then a chairman of the meeting shall be selected by a majority
vote of (a) the shares present at the meeting that would be entitled to vote in
an election of directors, or (b) if no such shares are present at the meeting,
then the shares present at the meeting comprising the Voting Group with the
largest number of shares present at the meeting and entitled to vote on a
matter properly proposed to be considered at the meeting. The chairman of the
meeting may designate other persons to assist with the meeting.
2.10 ADJOURNMENTS. At any meeting of shareholders (including an
adjourned meeting), a majority of shares of any Voting Group present and
entitled to vote at the meeting (whether or not those shares constitute a
quorum) may adjourn the meeting, but only with respect to that Voting Group, to
reconvene at a specific time and place. If more than one Voting Group is
present and entitled to vote on a matter at the meeting, then the meeting may
be continued with respect to any such Voting Group that does not vote to
adjourn as provided above, and such Voting Group may proceed to vote on any
matter to which it is otherwise entitled to do so; provided, however, that if
(a) more than one Voting Group is required to take action on a matter at the
meeting and (b) any one of those Voting Groups votes to adjourn the meeting (in
accordance with the preceding sentence), then the action shall not be deemed to
have been taken until the requisite vote of any adjourned Voting Group is
obtained at its reconvened meeting. The only business that may be transacted
at any reconvened meeting is business that could have been transacted at the
meeting that was adjourned, unless further notice of the adjourned meeting has
been given in compliance with the requirements for a special meeting that
specifies the additional purpose or purposes for which the meeting is called.
Nothing contained in this Section 2.10 shall be deemed or otherwise construed
to limit any lawful authority of the chairman of a meeting to adjourn the
meeting.
2.11 CONDUCT OF THE MEETING. At any meeting of shareholders, the
chairman of the meeting shall be entitled to establish the rules of order
governing the conduct of business at the meeting.
2.12 ACTION OF SHAREHOLDERS WITHOUT A MEETING. Action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if permitted by the Articles of Incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast the
requisite number of votes (or numbers, in the case of voting by groups) that
would be necessary to authorize or take the action at a meeting at which all
shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed
by shareholders entitled to take action without a meeting, and delivered to the
Corporation for inclusion in the minutes or filing with the corporate records.
Where required by Section 14-2-704 or other applicable provision of the Code,
the Corporation shall provide shareholders with written notice of actions taken
without a meeting.
2.13 MATTERS CONSIDERED AT ANNUAL MEETINGS. Notwithstanding anything to
the contrary in these Bylaws, the only business that may be conducted at an
annual meeting of shareholders shall be business brought before the meeting (a)
by or at the direction of the Board of Directors prior to the meeting, (b) by
or at the direction of the Chairman of the Board or the President, or (c) by a
shareholder of the Corporation who is entitled to vote with respect to the
business and who complies with the notice procedures set forth in this Section
2.13. For business to be brought properly before an annual meeting by a
shareholder, the shareholder must have given timely notice of the business in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered or mailed to and received at the principal offices of
the Corporation not less than sixty (60) nor more than ninety (90) days prior
to the first anniversary of the previous year's annual meeting. A
shareholder's notice to the Secretary shall set forth a brief description of
each matter of business the shareholder proposes to bring before the meeting
and the reasons for conducting that business at the meeting; the name, as it
appears on the Corporation's books, and address of the shareholder proposing
the business; the series or class and number of shares of the Corporation's
capital stock that are beneficially owned by the shareholder; and any material
interest of the shareholder in the proposed business. The chairman of the
meeting shall have the discretion to declare to the meeting that any business
proposed by a shareholder to be considered at the meeting is out of order and
that such business shall not be transacted at the meeting if (i) the chairman
concludes that the matter has been proposed in a manner inconsistent with this
Section 2.13 or (ii) the chairman concludes that the subject matter of the
proposed business is inappropriate for consideration by the shareholders at the
meeting.
ARTICLE THREE
BOARD OF DIRECTORS
3.1 GENERAL POWERS. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
managed by, the Board of Directors, subject to any limitation set forth in the
Articles of Incorporation, in bylaws approved by the shareholders, or in
agreements among all the shareholders that are otherwise lawful.
3.2 NUMBER, ELECTION AND TERM OF OFFICE. The number of directors of the
Corporation shall be fixed by resolution of the Board of Directors or of the
shareholders from time to time and, until otherwise determined, shall initially
be one; provided, however, that no decrease in the number of directors shall
have the effect of shortening the term of an incumbent director. Except as
provided elsewhere in this Section 3.2 and in Section 3.4, the directors shall
be elected at each annual meeting of shareholders, or at a special meeting of
shareholders called for purposes that include the election of directors, by a
plurality of the votes cast by the shares entitled to vote and present at the
meeting. Except in case of death, resignation, disqualification, or removal,
the term of each director shall expire at the next succeeding annual meeting of
shareholders. Despite the expiration of a director's term, he or she shall
continue to serve until his or her successor, if there is to be any, has been
elected and has qualified.
3.3 REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed with cause by the shareholders, provided
that directors elected by a particular Voting Group may be removed only by the
shareholders in that Voting Group. Removal action may be taken only at a
shareholders' meeting for which notice of the removal action has been given. A
removed director's successor, if any, may be elected at the same meeting to
serve the unexpired term. Directors may not be removed without cause.
3.4 VACANCIES. A vacancy occurring in the Board of Directors may be
filled for the unexpired term, unless the shareholders have elected a
successor, by the affirmative vote of a majority of the remaining directors,
whether or not the remaining directors constitute a quorum; provided, however,
that if the vacant office was held by a director elected by a particular Voting
Group, only the holders of shares of that Voting Group or the remaining
directors elected by that Voting Group shall be entitled to fill the vacancy;
provided further, however, that if the vacant office was held by a director
elected by a particular Voting Group and there is no remaining director elected
by that Voting Group, the other remaining directors or director (elected by
another Voting Group or Groups) may fill the vacancy during an interim period
before the shareholders of the vacated director's Voting Group act to fill the
vacancy. A vacancy or vacancies in the Board of Directors may result from the
death, resignation, disqualification, or removal of any director, or from an
increase in the number of directors.
3.5 COMPENSATION. Directors may receive such compensation for their
services as directors as may be fixed by the Board of Directors from time to
time. A director may also serve the Corporation in one or more capacities
other than that of director and receive compensation for services rendered in
those other capacities.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors may
designate from among its members an executive committee or one or more other
standing or ad hoc committees, each consisting of one or more directors, who
serve at the pleasure of the Board of Directors. Subject to the limitations
imposed by the Code, each committee shall have the authority set forth in the
resolution establishing the committee or in any other resolution of the Board
of Directors specifying, enlarging, or limiting the authority of the committee.
Any such committee, to the extent provided in the resolution, shall have and
may exercise all of the authority of the Board of Directors in the management
of the business and affairs of the Corporation, except that it shall have no
authority with respect to (1) amending the articles of incorporation or these
bylaws; (2) adopting a plan of merger or consolidation; (3) the sale, lease,
exchange or other disposition of all or substantially all the property and
assets of the Corporation; and (4) a voluntary dissolution of the Corporation
or a revocation thereof. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors. A majority of each committee may determine its action and may
fix the time and places of its meetings, unless otherwise provided by the Board
of Directors. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
3.7 QUALIFICATION OF DIRECTORS. No person elected to serve as a director
of the Corporation shall assume office and begin serving unless and until duly
qualified to serve, as determined by reference to the Code, the Articles of
Incorporation, and any further eligibility requirements established in these
Bylaws.
3.8 CERTAIN NOMINATION REQUIREMENTS. No person may be nominated for
election as a director at any annual or special meeting of shareholders unless
(a) the nomination has been or is being made pursuant to a recommendation or
approval of the Board of Directors of the Corporation or a properly constituted
committee of the Board of Directors previously delegated authority to recommend
or approve nominees for director; (b) the person is nominated by a shareholder
of the Corporation who is entitled to vote for the election of the nominee at
the subject meeting, and the nominating shareholder has furnished written
notice to the Secretary of the Corporation, at the Corporation's principal
office, provided, however, that if at any time the number of beneficial owners
(as defined in Section 14-2-1110 of the Code) of the shares of the Corporation
exceeds 100, then such notice shall be delivered to the Secretary of the
Corporation at the Corporation's principal office not less than sixty (60) nor
more than ninety (90) days prior to the first anniversary of the previous
year's annual meeting, and such notice shall (i) set forth with respect to the
person to be nominated his or her name, age, business and residence addresses,
principal business or occupation during the past five years, any affiliation
with or material interest in the Corporation or any transaction involving the
Corporation, and any affiliation with or material interest in any person or
entity having an interest materially adverse to the Corporation, and (ii) shall
be accompanied by the sworn or certified statement of the shareholder that the
nominee has consented to being nominated and that the shareholder believes the
nominee will stand for election and will serve if elected; or (c) (i) the
person is nominated to replace a person previously identified as a proposed
nominee (in accordance with the provisions of subpart (b) of this Section 3.8)
who has since become unable or unwilling to be nominated or to serve if
elected, (ii) the shareholder who furnished such previous identification makes
the replacement nomination and delivers to the Secretary of the Corporation (at
the time of or prior to making the replacement nomination) an affidavit or
other sworn statement affirming that the shareholder had no reason to believe
the original nominee would be so unable or unwilling, and (iii) such
shareholder also furnishes in writing to the Secretary of the Corporation (at
the time of or prior to making the replacement nomination) the same type of
information about the replacement nominee as required by subpart (b) of this
Section 3.8 to have been furnished about the original nominee. The chairman of
any meeting of shareholders at which one or more directors are to be elected,
for good cause shown and with proper regard for the orderly conduct of business
at the meeting, may waive in whole or in part the operation of this Section
3.8.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS. A regular meeting of the Board of Directors shall
be held in conjunction with each annual meeting of shareholders. In addition,
the Board of Directors may, by prior resolution, hold regular meetings at other
times.
4.2 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President, or any
director in office at that time.
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place in
or outside the State of Georgia that the Board of Directors may establish from
time to time.
4.4 NOTICE OF MEETINGS. Directors need not be provided with notice of
any regular meeting of the Board of Directors. Unless waived in accordance
with Section 4.10, the Corporation shall give at least two days notice to each
director of the date, time, and place of each special meeting. Notice may be
provided in writing, personally, by telephone or by fax. Notice of a meeting
shall be deemed to have been given to any director in attendance at any prior
meeting at which the date, time, and place of the subsequent meeting was
announced.
4.5 QUORUM. At meetings of the Board of Directors, the greater of (a) a
majority of the directors then in office, or (b) one-third of the number of
directors fixed in accordance with these Bylaws shall constitute a quorum for
the transaction of business.
4.6 VOTE REQUIRED FOR ACTION. If a quorum is present when a vote is
taken, the vote of a majority of the directors present at the time of the vote
will be the act of the Board of Directors, unless the vote of a greater number
is required by the Code, the Articles of Incorporation, or these Bylaws. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless (a) he or
she objects at the beginning of the meeting (or promptly upon his or her
arrival) to holding the meeting or transacting business at it; (b) his or her
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) he or she delivers written notice of dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
Corporation immediately after adjournment of the meeting. The right of dissent
or abstention is not available to a director who votes in favor of the action
taken.
4.7 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting of the Board by means of conference
telephone or similar communications equipment through which all persons
participating may hear and speak to each other. Participation in a meeting
pursuant to this Section 4.7 shall constitute presence in person at the
meeting.
4.8 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if a written consent, describing the action taken, is signed
by each director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. The consent may be executed in
counterpart, and shall have the same force and effect as a unanimous vote of
the Board of Directors at a duly convened meeting.
4.9 ADJOURNMENTS. A meeting of the Board of Directors, whether or not a
quorum is present, may be adjourned by a majority of the directors present to
reconvene at a specific time and place. It shall not be necessary to give
notice to the directors of the reconvened meeting or of the business to be
transacted, other than by announcement at the meeting that was adjourned,
unless a quorum was not present at the meeting that was adjourned, in which
case notice shall be given to directors in the same manner as for a special
meeting. At any such reconvened meeting at which a quorum is present, any
business may be transacted that could have been transacted at the meeting that
was adjourned.
4.10 WAIVER OF NOTICE. A director may waive any notice required by the
Code, the Articles of Incorporation, or these Bylaws before or after the date
and time of the matter to which the notice relates, by a written waiver signed
by the director and delivered to the Corporation for inclusion in the minutes
or filing with the corporate records. Attendance by a director at a meeting
shall constitute waiver of notice of the meeting, except where a director at
the beginning of the meeting (or promptly upon his or her arrival) objects to
holding the meeting or to transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE FIVE
OFFICERS
5.1 OFFICES. The officers of the Corporation shall consist of a
President, a Secretary, and a Treasurer, each of whom shall be elected or
appointed by the Board of Directors. The Board of Directors may also elect a
Chairman of the Board from among its members. The Board of Directors from time
to time may create and establish the duties of other offices and may elect or
appoint, or authorize specific senior officers to appoint, the persons who
shall hold such other offices, including one or more Vice Presidents (including
Executive Vice Presidents, Senior Vice Presidents, Assistant Vice Presidents,
and the like), one or more Assistant Secretaries, and one or more Assistant
Treasurers. Whether or not so provided by the Board of Directors, the Chairman
of the Board may appoint one or more Assistant Secretaries and one or more
Assistant Treasurers. Any two or more offices may be held by the same person.
5.2 TERM. Each officer shall serve at the pleasure of the Board of
Directors (or, if appointed by a senior officer pursuant to this Article Five,
at the pleasure of the Board of Directors or any senior officer authorized to
have appointed the officer) until his or her death, resignation, or removal, or
until his or her replacement is elected or appointed in accordance with this
Article Five.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors or by a committee or officer appointed
by the Board of Directors. Officers may serve without compensation.
5.4 REMOVAL. All officers (regardless of how elected or appointed) may
be removed, with or without cause, by the Board of Directors, and any officer
appointed by another officer may also be removed, with or without cause, by any
senior officer authorized to have appointed the officer to be removed. Removal
will be without prejudice to the contract rights, if any, of the person
removed, but shall be effective notwithstanding any damage claim that may
result from infringement of such contract rights.
5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board (if there be one)
shall preside at and serve as chairman of meetings of the shareholders and of
the Board of Directors (unless another person is selected under Section 2.9 to
act as chairman). The Chairman of the Board shall perform other duties and
have other authority as may from time to time be delegated by the Board of
Directors.
5.6 PRESIDENT. Unless otherwise provided in these Bylaws or by
resolution of the Board of Directors, the President shall be the chief
executive officer of the Corporation, shall be charged with the general and
active management of the business of the Corporation, shall see that all orders
and resolutions of the Board of Directors are carried into effect, shall have
the authority to select and appoint employees and agents of the Corporation,
and shall, in the absence or disability of the Chairman of the Board, perform
the duties and exercise the powers of the Chairman of the Board. The President
shall perform any other duties and have any other authority as may be delegated
from time to time by the Board of Directors, and shall be subject to the
limitations fixed from time to time by the Board of Directors.
5.7 VICE PRESIDENTS. The Vice President (if there be one) shall, in the
absence or disability of the President, or at the direction of the President,
perform the duties and exercise the powers of the President, whether the duties
and powers are specified in these Bylaws or otherwise. If the Corporation has
more than one Vice President, the one designated by the Board of Directors or
the President (in that order of precedence) shall act in the event of the
absence or disability of the President. Vice Presidents shall perform any
other duties and have any other authority as from time to time may be delegated
by the Board of Directors or the President.
5.8 SECRETARY. The Secretary shall be responsible for preparing minutes
of the meetings of shareholders, directors, and committees of directors and for
authenticating records of the Corporation. The Secretary or any Assistant
Secretary shall have authority to give all notices required by law or these
Bylaws. The Secretary shall be responsible for the custody of the corporate
books, records, contracts, and other documents. The Secretary or any Assistant
Secretary may affix the corporate seal to any lawfully executed documents
requiring it, may attest to the signature of any officer of the Corporation,
and shall sign any instrument that requires the Secretary's signature. The
Secretary or any Assistant Secretary shall perform any other duties and have
any other authority as from time to time may be delegated by the Board of
Directors or the President.
5.9 TREASURER. Unless otherwise provided by the Board of Directors, the
Treasurer shall be responsible for the custody of all funds and securities
belonging to the Corporation and for the receipt, deposit, or disbursement of
these funds and securities under the direction of the Board of Directors. The
Treasurer shall cause full and true accounts of all receipts and disbursements
to be maintained and shall make reports of these receipts and disbursements to
the Board of Directors and President upon request. The Treasurer or Assistant
Treasurer shall perform any other duties and have any other authority as from
time to time may be delegated by the Board of Directors or the President.
ARTICLE SIX
DISTRIBUTIONS AND DIVIDENDS
Unless the Articles of Incorporation provide otherwise, the Board of
Directors, from time to time in its discretion, may authorize or declare
distributions or share dividends in accordance with the Code.
ARTICLE SEVEN
SHARES
7.1 SHARE CERTIFICATES. The interest of each shareholder in the
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation, which shall be in such form as the Board of
Directors from time to time may adopt in accordance with the Code. Share
certificates shall be in registered form and shall indicate the date of issue,
the name of the Corporation, that the Corporation is organized under the laws
of the State of Georgia, the name of the shareholder, and the number and class
of shares and designation of the series, if any, represented by the
certificate. Each certificate shall be signed by the President or a Vice
President (or in lieu thereof, by the Chairman of the Board or Chief Executive
Officer, if there be one) and may be signed by the Secretary or an Assistant
Secretary; provided, however, that where the certificate is signed (either
manually or by facsimile) by a transfer agent, or registered by a registrar,
the signatures of those officers may be facsimiles.
7.2 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to
due presentation for transfer of registration of its shares, the Corporation
may treat the registered owner of the shares (or the beneficial owner of the
shares to the extent of any rights granted by a nominee certificate on file
with the Corporation pursuant to any procedure that may be established by the
Corporation in accordance with the Code) as the person exclusively entitled to
vote the shares, to receive any dividend or other distribution with respect to
the shares, and for all other purposes; and the Corporation shall not be bound
to recognize any equitable or other claim to or interest in the shares on the
part of any other person, whether or not it has express or other notice of such
a claim or interest, except as otherwise provided by law.
7.3 TRANSFERS OF SHARES. Transfers of shares shall be made upon the
books of the Corporation kept by the Corporation or by the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate or by an attorney lawfully constituted in writing. Before a
new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost,
stolen, or destroyed, the provisions of Section 7.5 of these Bylaws shall have
been complied with.
7.4 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of the
provisions of Section 7.3 of these Bylaws, the Corporation is under a duty to
register the transfer of its shares only if: (a) the share certificate is
endorsed by the appropriate person or persons; (b) reasonable assurance is
given that each required endorsement is genuine and effective; (c) the
Corporation has no duty to inquire into adverse claims or has discharged any
such duty; (d) any applicable law relating to the collection of taxes has been
complied with; (e) the transfer is in fact rightful or is to a bona fide
purchaser; and (f) the transfer is in compliance with applicable provisions of
any transfer restrictions of which the Corporation shall have notice.
7.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a share
certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of this claim in such a manner as the Corporation may require and
shall, if the Corporation requires, give the Corporation a bond of indemnity in
form and amount, and with one or more sureties satisfactory to the Corporation,
as the Corporation may require, whereupon an appropriate new certificate may be
issued in lieu of the one alleged to have been lost, stolen or destroyed.
7.6 FIXING OF RECORD DATE. For the purpose of determining shareholders
(a) entitled to notice of or to vote at any meeting of shareholders or, if
necessary, any adjournment thereof, (b) entitled to receive payment of any
distribution or dividend, or (c) for any other proper purpose, the Board of
Directors may fix in advance a date as the record date. The record date may
not be more than 70 days (and, in the case of a notice to shareholders of a
shareholders' meeting, not less than 10 days) prior to the date on which the
particular action, requiring the determination of shareholders, is to be taken.
A separate record date may be established for each Voting Group entitled to
vote separately on a matter at a meeting. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall
apply to any adjournment of the meeting, unless the Board of Directors shall
fix a new record date for the reconvened meeting, which it must do if the
meeting is adjourned to a date more than 120 days after the date fixed for the
original meeting.
7.7 RECORD DATE IF NONE FIXED. If no record date is fixed as provided in
Section 7.6, then the record date for any determination of shareholders that
may be proper or required by law shall be, as appropriate, the date on which
notice of a shareholders' meeting is mailed, the date on which the Board of
Directors adopts a resolution declaring a dividend or authorizing a
distribution, or the date on which any other action is taken that requires a
determination of shareholders.
7.8 FAIR PRICE REQUIREMENTS. In accordance with Official Code of Georgia
Annotated Section 14-2-1113, this Corporation has elected that all of the
requirements of Part 2 of Article 11 of the Georgia Business Corporation Code
shall be applicable to this Corporation.
ARTICLE EIGHT
INDEMNIFICATION
8.1 INDEMNIFICATION OF DIRECTORS. The Corporation shall indemnify and
hold harmless any officer or director of the Corporation ("Indemnified Person")
who was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, whether formal or informal, including any
action or suit by or in the right of the Corporation (for purposes of this
Article Eight, collectively, a "Proceeding") because he or she is or was
serving as a director, officer, employee, or agent of the Corporation, against
any judgment, settlement, penalty, fine, or reasonable expenses (including, but
not limited to, attorneys' fees and disbursements, court costs, and expert
witness fees) incurred with respect to the Proceeding (for purposes of this
Article Eight, a "Liability"), provided, however, that no indemnification shall
be made for: (a) any appropriation by a director or officer, in violation of
such person's duties, of any business opportunity of the Corporation; (b) any
acts or omissions of a director or officer that involve intentional misconduct
or a knowing violation of law; (c) the types of liability set forth in Code
Section 14-2-832; or (d) any transaction from which the director or officer
received an improper personal benefit.
8.2 INDEMNIFICATION OF OTHERS. The Board of Directors shall have the
power to cause the Corporation to provide to employees and agents of the
Corporation all or any part of the right to indemnification permitted for such
persons by appropriate provisions of the Code. Persons to be indemnified may
be identified by position or name, and the right of indemnification may be
different for each of the persons identified. Each employee or agent of the
Corporation so identified shall be an "Indemnified Person" for purposes of the
provisions of this Article Eight.
8.3 OTHER ORGANIZATIONS. The Corporation shall provide to each director
and officer of the Corporation, and the Board of Directors shall have the power
to cause the Corporation to provide to any employee or agent of the
Corporation, who is or was serving at the Corporation's request as a director,
officer, partner, trustee, employee, or agent of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise
all or any part of the right to indemnification and other rights of the type
provided under Sections 8.1, 8.2, 8.4, and 8.10 of this Article Eight (subject
to the conditions, limitations, and obligations specified in those Sections)
permitted for such persons by appropriate provisions of the Code. Persons to
be indemnified may be identified by position or name, and the right of
indemnification may be different for each of the persons identified. Each
person so identified shall be an "Indemnified Person" for purposes of the
provisions of this Article Eight.
8.4 ADVANCES. Expenses (including, but not limited to, attorneys' fees
and disbursements, court costs, and expert witness fees) incurred by an
Indemnified Person in defending any Proceeding of the kind described in
Sections 8.1 or 8.3, as to an Indemnified Person who is a director of the
Corporation, or in Sections 8.2 or 8.3, as to other Indemnified Persons, if the
Board of Directors has specified that advancement of expenses be made available
to any such Indemnified Person, shall be paid by the Corporation in advance of
the final disposition of such Proceeding as set forth herein; provided,
however, that the Indemnified Person shall furnish the Corporation a written
affirmation of his or her good faith belief that he or she has met the
applicable standard of conduct and a written undertaking and agreement to repay
to the Corporation any advances made pursuant to this Section 8.4 if it shall
be determined that the Indemnified Person is not entitled to be indemnified by
the Corporation for such amounts. The Corporation may make the advances
contemplated by this Section 8.4 regardless of the Indemnified Person's
financial ability to make repayment. Any advances and undertakings to repay
pursuant to this Section 8.4 may be unsecured and interest-free.
8.5 NON-EXCLUSIVITY. Subject to any applicable limitation imposed by the
Code or the Articles of Incorporation, the indemnification and advancement of
expenses provided by or granted pursuant to this Article Eight shall not be
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any provision of the Articles of
Incorporation, or any Bylaw, resolution, or agreement specifically or in
general terms approved or ratified by the affirmative vote of holders of a
majority of the shares entitled to be voted thereon.
8.6 INSURANCE. The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation, or who, while serving in such a
capacity, is also or was also serving at the request of the Corporation as a
director, officer, trustee, partner, employee, or agent of any corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
against any Liability that may be asserted against or incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or her against such
liability under the provisions of this Article Eight.
8.7 NOTICE. If the Corporation indemnifies or advances expenses to a
director under any of Sections 14-2-851 through 14-2-854 of the Code in
connection with a Proceeding by or in the right of the Corporation, the
Corporation shall, to the extent required by Section 14-2-1621 or any other
applicable provision of the Code, report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting.
8.8 SECURITY. The Corporation may designate certain of its assets as
collateral, provide self-insurance, establish one or more indemnification
trusts, or otherwise secure or facilitate its ability to meet its obligations
under this Article Eight, or under any indemnification agreement or plan of
indemnification adopted and entered into in accordance with the provisions of
this Article Eight, as the Board of Directors deems appropriate.
8.9 AMENDMENT. Any amendment to this Article Eight that limits or
otherwise adversely affects the right of indemnification, advancement of
expenses, or other rights of any Indemnified Person hereunder shall, as to such
Indemnified Person, apply only to Proceedings based on actions, events, or
omissions (collectively, "Post Amendment Events") occurring after such
amendment and after delivery of notice of such amendment to the Indemnified
Person so affected. Any Indemnified Person shall, as to any Proceeding based
on actions, events, or omissions occurring prior to the date of receipt of such
notice, be entitled to the right of indemnification, advancement of expenses,
and other rights under this Article Eight to the same extent as if such
provisions had continued as part of the Bylaws of the Corporation without such
amendment. This Section 8.9 cannot be altered, amended, or repealed in a
manner effective as to any Indemnified Person (except as to Post Amendment
Events) without the prior written consent of such Indemnified Person.
8.10 AGREEMENTS. The provisions of this Article Eight shall be deemed to
constitute an agreement between the Corporation and each Indemnified Person
hereunder. In addition to the rights provided in this Article Eight, the
Corporation shall have the power, upon authorization by the Board of Directors,
to enter into an agreement or agreements providing to any Indemnified Person
indemnification rights substantially similar to those provided in this Article
Eight.
8.11 CONTINUING BENEFITS. The rights of indemnification and advancement
of expenses permitted or authorized by this Article Eight shall, unless
otherwise provided when such rights are granted or conferred, continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors, and administrators of such
person.
8.12 SUCCESSORS. For purposes of this Article Eight, the term
"Corporation" shall include any corporation, joint venture, trust, partnership,
or unincorporated business association that is the successor to all or
substantially all of the business or assets of this Corporation, as a result of
merger, consolidation, sale, liquidation, or otherwise, and any such successor
shall be liable to the persons indemnified under this Article Eight on the same
terms and conditions and to the same extent as this Corporation.
8.13 SEVERABILITY. Each of the Sections of this Article Eight, and each
of the clauses set forth herein, shall be deemed separate and independent, and
should any part of any such Section or clause be declared invalid or
unenforceable by any court of competent jurisdiction, such invalidity or
unenforceability shall in no way render invalid or unenforceable any other part
thereof or any separate Section or clause of this Article Eight that is not
declared invalid or unenforceable.
8.14 ADDITIONAL INDEMNIFICATION. In addition to the specific
indemnification rights set forth herein, the Corporation shall indemnify each
of its directors and such of its officers as have been designated by the Board
of Directors to the full extent permitted by action of the Board of Directors
without shareholder approval under the Code or other laws of the State of
Georgia as in effect from time to time.
<PAGE>
ARTICLE NINE
MISCELLANEOUS
9.1 INSPECTION OF BOOKS AND RECORDS. The Board of Directors shall have
the power to determine which accounts, books, and records of the Corporation
shall be available for shareholders to inspect or copy, except for those books
and records required by the Code to be made available upon compliance by a
shareholder with applicable requirements, and shall have the power to fix
reasonable rules and regulations (including confidentiality restrictions and
procedures) not in conflict with applicable law for the inspection and copying
of accounts, books, and records that by law or by determination of the Board of
Directors are made available. If at any time the number of beneficial owners
(as defined in Section 14-2-1110 of the Code) of the shares of the Corporation
exceeds 100, unless required by the Code or otherwise provided by the Board of
Directors, a shareholder of the Corporation holding less than two percent of
the total shares of the Corporation then outstanding shall have no right to
inspect the books and records of the Corporation.
9.2 FISCAL YEAR. The Board of Directors is authorized to fix the fiscal
year of the Corporation and to change the fiscal year from time to time as it
deems appropriate.
9.3 CORPORATE SEAL. The corporate seal will be in such form as the Board
of Directors may from time to time determine. The Board of Directors may
authorize the use of one or more facsimile forms of the corporate seal. The
corporate seal need not be used unless its use is required by law, by these
Bylaws, or by the Articles of Incorporation.
9.4 ANNUAL STATEMENTS. Not later than four months after the close of
each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement, in such form and with
such information as the Code may require.
9.5 NOTICE. (a) Whenever these Bylaws require notice to be given to any
shareholder or to any director, the notice may be given by mail, in person, by
courier delivery, by telephone, or by telecopier, telegraph, or similar
electronic means. Whenever notice is given to a shareholder or director by
mail, the notice shall be sent by depositing the notice in a post office or
letter box in a postage-prepaid, sealed envelope addressed to the shareholder
or director at his or her address as it appears on the books of the
Corporation. Any such written notice given by mail shall be effective: (i) if
given to shareholders, at the time the same is deposited in the United States
mail; and (ii) in all other cases, at the earliest of (x) when received or when
delivered, properly addressed, to the addressee's last known principal place of
business or residence, (y) five days after its deposit in the mail, as
evidenced by the postmark, if mailed with first-class postage prepaid and
correctly addressed, or (z) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee. Whenever notice is given to a
shareholder or director by any means other than mail, the notice shall be
deemed given when received.
(b) In calculating time periods for notice, when a period of time
measured in days, weeks, months, years, or other measurement of time is
prescribed for the exercise of any privilege or the discharge of any duty, the
first day shall not be counted but the last day shall be counted.
ARTICLE TEN
AMENDMENTS
Except as otherwise provided under the Code, the Board of Directors shall
have the power to alter, amend, or repeal these Bylaws or adopt new Bylaws.
Any Bylaws adopted by the Board of Directors may be altered, amended, or
repealed, and new Bylaws adopted, by the shareholders. The shareholders may
prescribe in adopting any Bylaw or Bylaws that the Bylaw or Bylaws so adopted
shall not be altered, amended, or repealed by the Board of Directors.
* * * * * *
ICCE, INC.
1997 STOCK OPTION PLAN
<PAGE>
ICCE, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 1
ARTICLE II
THE PLAN 5
2.1 Name 5
2.2 Purpose 5
2.3 Effective Date 5
ARTICLE III
PARTICIPANTS 5
ARTICLE IV
ADMINISTRATION 5
4.1 Duties and Powers of the Committee 5
4.2 Interpretation; Rules 6
4.3 No Liability 6
4.4 Majority Rule 6
4.5 Company Assistance 6
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN 6
5.1 Limitations 6
5.2 Antidilution 7
ARTICLE VI
OPTIONS 8
6.1 Types of Options Granted 8
6.2 Option Grant and Agreement 9
6.3 Optionee Limitations 9
6.4 $100,000 Limitation 9
6.5 Exercise Price 10
6.6 Exercise Period 10
6.7 Option Exercise 10
6.8 Nontransferability of Option 11
6.9 Termination of Employment or Service 12
6.10 Employment Rights. 12
6.11 Certain Successor Options 12
6.12 Effect of Change in Control 12
ARTICLE VII
STOCK CERTIFICATES 15
ARTICLE VIII
TERMINATION AND AMENDMENT 16
8.1 Termination and Amendment 16
8.2 Effect on Grantee's Rights 16
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS 16
ARTICLE X
MISCELLANEOUS 16
10.1 Replacement or Amended Grants 16
10.2 Forfeiture for Competition 16
10.3 Plan Binding on Successors 17
10.4 Singular, Plural; Gender 17
10.5 Headings, etc., No Part of Plan 17
10.6 Interpretation 17
EXHIBIT A i
SCHEDULE A vi
SCHEDULE B vii
<PAGE>
ICCE, INC.
1997 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the following meanings unless the
context clearly indicates to the contrary:
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean theft or destruction of property of the Company, a
Parent, or a Subsidiary, disregard of Company rules or policies, or conduct
evincing willful or wanton disregard of the interests of the Company. Such
determination shall be made by the Committee based on information presented by
the Company and the Employee and shall be final and binding on all parties
hereto.
"Change in Control" shall mean the occurrence of either of the following
events:
(i) A change in the composition of the Board of Directors as a
result of which fewer than one-half of the incumbent directors are directors
who either:
(A) Had been directors of the Company 24 months prior to such
change; or
(B) Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the directors
who had been directors of the Company 24 months prior to such change and who
were still in office at the time of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d)
of the Exchange Act), other than any person who is a shareholder of the Company
on or before the effective date of the Plan, by the acquisition or aggregation
of securities is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 50 percent or more of the combined
voting power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to vote at
elections of directors (the "Base Capital Stock"); except that any change in
the relative beneficial ownership of the Company's securities by any person
resulting solely from a reduction in the aggregate number of outstanding shares
of Base Capital Stock, and any decrease thereafter in such person's ownership
of securities, shall be disregarded until such person increases in any manner,
directly or indirectly, such person's beneficial ownership of any securities of
the Company.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, including effective date and transition rules (whether or not
codified). Any reference herein to a specific section of the Code shall be
deemed to include a reference to any corresponding provision of future law.
"Committee" shall mean a committee of at least two Directors
appointed from time to time by the Board, having the duties and authority set
forth herein in addition to any other authority granted by the Board. In
selecting the Committee, the Board shall consider (i) the benefits under
Section 162(m) of the Code of having a Committee composed of "outside
directors" (as that term is defined in the Code) for certain grants of Options
to highly compensated executives, and (ii) the benefits under Rule 16b-3 of
having a Committee composed of either the entire Board or a Committee of at
least two Directors who are Non-Employee Directors for Options granted to or
held by any Section 16 Insider. At any time that the Board shall not have
appointed a committee as described above, any reference herein to the Committee
shall mean the Board.
"Company" shall mean ICCE, Inc., a Georgia corporation.
"Director" shall mean a member of the Board and any person who is an
advisory or honorary director of the Company if such person is considered a
director for purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Employee" shall mean an employee of the Employer.
"Employer" shall mean the corporation that employs an Optionee.
"Exchange Act" shall mean the Securities Exchange Act of 1934. Any
reference herein to a specific section of the Exchange Act shall be deemed to
include a reference to any corresponding provision of future law.
"Exercise Price" shall mean the price at which an Optionee may
purchase a share of Stock under a Stock Option Agreement.
"Fair Market Value" on any date shall mean (i) the closing sales
price of the Stock, regular way, on such date on the national securities
exchange having the greatest volume of trading in the Stock during the
thirty-day period preceding the day the value is to be determined or, if such
exchange was not open for trading on such date, the next preceding date on
which it was open; (ii) if the Stock is not traded on any national securities
exchange, the average of the closing high bid and low asked prices of the Stock
on the over-the-counter market on the day such value is to be determined, or in
the absence of closing bids on such day, the closing bids on the next preceding
day on which there were bids; or (iii) if the Stock also is not traded on the
over-the-counter market, the fair market value as determined in good faith by
the Board or the Committee based on such relevant facts as may be available to
the Board, which may include opinions of independent experts, the price at
which recent sales have been made, the book value of the Stock, and the
Company's current and future earnings.
"Incentive Stock Option" shall mean an option to purchase any stock
of the Company, which complies with and is subject to the terms, limitations
and conditions of Section 422 of the Code and any regulations promulgated with
respect thereto.
"Non-Employee Director" shall have the meaning set forth in Rule 16b-
3 under the Exchange Act, as the same may be in effect from time to time, or in
any successor rule thereto, and shall be determined for all purposes under the
Plan according to interpretative or "no-action" positions with respect thereto
issued by the Securities and Exchange Commission.
"Officer" shall mean a person who constitutes an officer of the
Company for the purposes of Section 16 of the Exchange Act, as determined by
reference to such Section 16 and to the rules, regulations, judicial decisions,
and interpretative or "no-action" positions with respect thereto of the
Securities and Exchange Commission, as the same may be in effect or set forth
from time to time.
"Option" shall mean an option, whether or not an Incentive Stock
Option, to purchase Stock granted pursuant to the provisions of Article VI
hereof.
"Optionee" shall mean a person to whom an Option has been granted
hereunder.
"Parent" shall mean any corporation (other than the Employer) in an
unbroken chain of corporations ending with the Employer if, at the time of the
grant (or modification) of the Option, each of the corporations other than the
Employer owns stock possessing 50 percent or more of the total combined voting
power of the classes of stock in one of the other corporations in such chain.
"Permanent and Total Disability" shall have the same meaning as given
to that term by Code Section 22(e)(3) and any regulations or rulings
promulgated thereunder.
"Plan" shall mean the ICCE, Inc. 1997 Stock Option Plan, the terms of
which are set forth herein.
"Purchasable" shall refer to Stock which may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
"Qualified Domestic Relations Order" shall have the meaning set forth
in the Code or in the Employee Retirement Income Security Act of 1974, or the
rules and regulations promulgated under the Code or such Act.
"Section 16 Insider" shall mean any person who is subject to the
provisions of Section 16 of the Exchange Act, as provided in Rule 16a-2
promulgated pursuant to the Exchange Act.
"Stock" shall mean the Common Stock of the Company or, in the event
that the outstanding shares of Stock are hereafter changed into or exchanged
for shares of a different stock or securities of the Company or some other
entity, such other stock or securities.
"Stock Option Agreement" shall mean an agreement between the Company
and an Optionee under which the Optionee may purchase Stock hereunder, a sample
form of which is attached hereto as Exhibit A (which form may be varied by the
Committee in granting an Option).
"Subsidiary" shall mean any corporation (other than the Employer) in
an unbroken chain of corporations beginning with the Employer if, at the time
of the grant (or modification) of the Option, each of the corporations other
than the last corporation in the unbroken chain owns stock possessing 50
percent or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as the "ICCE, Inc. 1997 Stock Option
Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company, its Subsidiaries and its shareholders by affording certain employees
and Directors of the Company and its Subsidiaries, as well as key consultants
and advisors to the Company or any Subsidiary, an opportunity to acquire or
increase their proprietary interests in the Company. The objective of the
issuance of Options is to promote the growth and profitability of the Company
and its Subsidiaries because the Optionees will be provided with an additional
incentive to achieve the Company's objectives through participation in its
success and growth and by encouraging their continued association with or
service to the Company.
2.3 Effective Date. The Plan shall become effective on May 22, 1997;
provided, however, that if the shareholders of the Company have not approved
the Plan on or prior to the first anniversary of such effective date, then all
options granted under the Plan shall be non-Incentive Stock Options.
ARTICLE III
PARTICIPANTS
The class of persons eligible to participate in the Plan shall consist of
all persons whose participation in the Plan the Committee determines to be in
the best interests of the Company which shall include, but not be limited to,
all Directors and employees, including but not limited to executive personnel,
of the Company or any Subsidiary, as well as key consultants and advisors to
the Company or any Subsidiary.
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered
by the Committee. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it may
determine. The Committee shall keep minutes of its meetings and shall make
such rules and regulations for the conduct of its business as it may deem
necessary. The Committee shall have the power to act by unanimous written
consent in lieu of a meeting, and to meet telephonically. In administering the
Plan, the Committee's actions and determinations shall be binding on all
interested parties. The Committee shall have the power to grant Options in
accordance with the provisions of the Plan and may grant Options singly, in
combination, or in tandem. Subject to the provisions of the Plan, the
Committee shall have the discretion and authority to determine those
individuals to whom Options will be granted, the number of shares of Stock
subject to each Option, such other matters as are specified herein, and any
other terms and conditions of a Stock Option Agreement. The Committee shall
also have the discretion and authority to delegate to any Officer its powers to
grant Options under the Plan to any person who is an employee of the Company
but not an Officer or Director. To the extent not inconsistent with the
provisions of the Plan, the Committee may give an Optionee an election to
surrender an Option in exchange for the grant of a new Option, and shall have
the authority to amend or modify an outstanding Stock Option Agreement, or to
waive any provision thereof, provided that the Optionee consents to such
action.
4.2 Interpretation; Rules. Subject to the express provisions of the
Plan, the Committee also shall have complete authority to interpret the Plan,
to prescribe, amend, and rescind rules and regulations relating to it, to
determine the details and provisions of each Stock Option Agreement, and to
make all other determinations necessary or advisable for the administration of
the Plan, including, without limitation, the amending or altering of the Plan
and any Options granted hereunder as may be required to comply with or to
conform to any federal, state, or local laws or regulations.
4.3 No Liability. Neither any member of the Board nor any member of the
Committee shall be liable to any person for any act or determination made in
good faith with respect to the Plan or any Option granted hereunder.
4.4 Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present, or any action taken without a meeting evidenced by a writing
executed by all the members of the Committee, shall constitute the action of
the Committee.
4.5 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible persons, their
employment, death, retirement, disability, or other termination of employment,
and such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary
in the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to any antidilution adjustment pursuant to the
provisions of Section 5.2 hereof, the maximum number of shares of Stock that
may be issued hereunder shall be 1,200,000, and not more than 500,000 shares of
Stock may be made subject to Options to any individual in the aggregate in any
one fiscal year of the Company, except that the Company may make additional
one-time grants of up to _____ shares to newly hired individuals, such
limitation to be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.
Any or all shares of Stock subject to the Plan may be issued in any combination
of Incentive Stock Options or non-Incentive Stock Options, and the amount of
Stock subject to the Plan may be increased from time to time in accordance with
Article VIII, provided that the total number of shares of Stock issuable
pursuant to Incentive Stock Options may not be increased to more than 1,200,000
(other than pursuant to anti-dilution adjustments) without shareholder
approval. Shares subject to an Option may be either authorized and unissued
shares or shares issued and later acquired by the Company. The shares covered
by any unexercised portion of an Option that has terminated for any reason
(except as set forth in the following paragraph) may again be optioned under
the Plan, and such shares shall not be considered as having been optioned or
issued in computing the number of shares of Stock remaining available for
option hereunder.
If Options are issued in respect of options to acquire stock of any entity
acquired, by merger or otherwise, by the Company (or any Subsidiary of the
Company), to the extent that such issuance shall not be inconsistent with the
terms, limitations and conditions of Code Section 422 or Rule 16b-3 under the
Exchange Act, the aggregate number of shares of Stock for which Options may be
granted hereunder shall automatically be increased by the number of shares
subject to the Options so issued; provided, however, that the aggregate number
of shares of Stock for which Options may be granted hereunder shall
automatically be decreased by the number of shares covered by any unexercised
portion of an Option so issued that has terminated for any reason, and the
shares subject to any such unexercised portion may not be optioned to any other
person.
5.2 Antidilution.
(a) If (x) the outstanding shares of Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of merger, consolidation, reorganization, recapitalization,
reclassification, combination or exchange of shares, or stock split or stock
dividend, (y) any spin-off, split-off or other distribution of assets
materially affects the price of the Company's stock, or (z) there is any
assumption and conversion to the Plan by the Company of an acquired company's
outstanding option grants, then:
(i) the aggregate number and kind of shares of Stock for which
Options may be granted hereunder shall be adjusted proportionately by the
Committee; and
(ii) the rights of Optionees (concerning the number of shares
subject to Options and the Exercise Price) under outstanding Options shall be
adjusted proportionately by the Committee.
(b) If the Company shall be a party to any reorganization in which
it does not survive, involving merger, consolidation, or acquisition of the
stock or substantially all the assets of the Company, the Committee, in its
discretion, may:
(i) notwithstanding other provisions hereof, declare that all
Options granted under the Plan shall become exercisable immediately
notwithstanding the provisions of the respective Stock Option Agreements
regarding exercisability, that all such Options shall terminate 30 days after
the Committee gives written notice of the immediate right to exercise all such
Options and of the decision to terminate all Options not exercised within such
30-day period, and that all then-remaining restrictions pertaining to Options
shall immediately lapse; and/or
(ii) notify all Optionees that all Options granted under the
Plan shall be assumed by the successor corporation or substituted on an
equitable basis with options issued by such successor corporation.
(c) If the Company is to be liquidated or dissolved in connection
with a reorganization described in Section 5.2(b), the provisions of such
Section shall apply. In all other instances, the adoption of a plan of
dissolution or liquidation of the Company shall, notwithstanding other
provisions hereof, cause every Option outstanding under the Plan to terminate
to the extent not exercised prior to the adoption of the plan of dissolution or
liquidation by the shareholders, provided that, notwithstanding other
provisions hereof, the Committee may declare all Options granted under the Plan
to be exercisable at any time on or before the fifth business day following
such adoption notwithstanding the provisions of the respective Stock Option
Agreements regarding exercisability.
(d) The adjustments described in paragraphs (a) through (c) of this
Section 5.2, and the manner of their application, shall be determined solely by
the Committee, and any such adjustment may provide for the elimination of
fractional share interests; provided, however, that any adjustment made by the
Board or the Committee shall be made in a manner that will not cause an
Incentive Stock Option to be other than an Incentive Stock Option under
applicable statutory and regulatory provisions. The adjustments required under
this Article V shall apply to any successors of the Company and shall be made
regardless of the number or type of successive events requiring such
adjustments.
ARTICLE VI
OPTIONS
6.1 Types of Options Granted. The Committee may, under this Plan, grant
either Incentive Stock Options or Options which do not qualify as Incentive
Stock Options. Within the limitations provided in this Plan, both types of
Options may be granted to the same person at the same time, or at different
times, under different terms and conditions, as long as the terms and
conditions of each Option are consistent with the provisions of the Plan.
Without limitation of the foregoing, Options may be granted subject to
conditions based on the financial performance of the Company or any other
factor the Committee deems relevant.
6.2 Option Grant and Agreement. Each Option granted hereunder shall be
evidenced by minutes of a meeting or the written consent of the Committee and
by a written Stock Option Agreement executed by the Company and the Optionee.
The terms of the Option, including the Option's duration, time or times of
exercise, exercise price, whether the Option is intended to be an Incentive
Stock Option, and whether the Option is to be accompanied by the right to
receive a Reload Option, shall be stated in the Stock Option Agreement. No
Incentive Stock Option may be granted more than ten years after the earlier to
occur of the effective date of the Plan or the date the Plan is approved by the
Company's shareholders.
Separate Stock Option Agreements may be used for Options intended to be
Incentive Stock Options and those not so intended, but any failure to use such
separate agreements shall not invalidate, or otherwise adversely affect the
Optionee's interest in, the Options evidenced thereby.
6.3 Optionee Limitations. The Committee shall not grant an Incentive
Stock Option to any person who, at the time the Incentive Stock Option is
granted:
(a) is not an employee of the Company or any of its Subsidiaries; or
(b) owns or is considered to own stock possessing at least 10% of
the total combined voting power of all classes of stock of the Company or any
of its Parent or Subsidiary corporations; provided, however, that this
limitation shall not apply if at the time an Incentive Stock Option is granted
the Exercise Price is at least 110% of the Fair Market Value of the Stock
subject to such Option and such Option by its terms would not be exercisable
after five years from the date on which the Option is granted. For the purpose
of this subsection (b), a person shall be considered to own: (i) the stock
owned, directly or indirectly, by or for his or her brothers and sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants;
(ii) the stock owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust in proportion to such person's stock interest,
partnership interest or beneficial interest therein; and (iii) the stock which
such person may purchase under any outstanding options of the Employer or of
any Parent or Subsidiary of the Employer.
6.4 $100,000 Limitation. Except as provided below, the Committee shall
not grant an Incentive Stock Option to, or modify the exercise provisions of
outstanding Incentive Stock Options held by, any person who, at the time the
Incentive Stock Option is granted (or modified), would thereby receive or hold
any Incentive Stock Options of the Employer and any Parent or Subsidiary of the
Employer, such that the aggregate Fair Market Value (determined as of the
respective dates of grant or modification of each option) of the stock with
respect to which such Incentive Stock Options are exercisable for the first
time during any calendar year is in excess of $100,000 (or such other limit as
may be prescribed by the Code from time to time); provided that the foregoing
restriction on modification of outstanding Incentive Stock Options shall not
preclude the Committee from modifying an outstanding Incentive Stock Option if,
as a result of such modification and with the consent of the Optionee, such
Option no longer constitutes an Incentive Stock Option; and provided that, if
the $100,000 limitation (or such other limitation prescribed by the Code)
described in this Section 6.4 is exceeded, the Incentive Stock Option, the
granting or modification of which resulted in the exceeding of such limit,
shall be treated as an Incentive Stock Option up to the limitation and the
excess shall be treated as an Option not qualifying as an Incentive Stock
Option.
6.5 Exercise Price. The Exercise Price of the Stock subject to each
Option shall be determined by the Committee. Subject to the provisions of
Section 6.3(b) hereof, the Exercise Price of an Incentive Stock Option shall
not be less than the Fair Market Value of the Stock as of the date the Option
is granted (or in the case of an Incentive Stock Option that is subsequently
modified, on the date of such modification).
6.6 Exercise Period. The period for the exercise of each Option granted
hereunder shall be determined by the Committee, but the Stock Option Agreement
with respect to each Option intended to be an Incentive Stock Option shall
provide that such Option shall not be exercisable after the expiration of ten
years from the date of grant (or modification) of the Option.
6.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option Agreement or
Section 6.6 hereof, an Option may be exercised at any time or from time to time
during the term of the Option as to any or all full shares which have become
Purchasable under the provisions of the Option, but not at any time as to fewer
than 100 shares unless the remaining shares that have become so Purchasable are
fewer than 100 shares. The Committee shall have the authority to prescribe in
any Stock Option Agreement that the Option may be exercised only in accordance
with a vesting schedule during the term of the Option.
(b) An Option shall be exercised by (i) delivery to the Company at
its principal office a written notice of exercise with respect to a specified
number of shares of Stock and (ii) payment to the Company at that office of the
full amount of the Exercise Price for such number of shares in accordance with
Section 6.7(c). If requested by an Optionee, an Option may be exercised with
the involvement of a stockbroker in accordance with the federal margin rules
set forth in Regulation T (in which case the certificates representing the
underlying shares will be delivered by the Company directly to the
stockbroker).
(c) The Exercise Price is to be paid in full in cash upon the
exercise of the Option and the Company shall not be required to deliver
certificates for the shares purchased until such payment has been made;
provided, however, that in lieu of cash, all or any portion of the Exercise
Price may be paid by tendering to the Company shares of Stock duly endorsed for
transfer and owned by the Optionee, or by authorization to the Company to
withhold shares of Stock otherwise issuable upon exercise of the Option, in
each case to be credited against the Exercise Price at the Fair Market Value of
such shares on the date of exercise (however, no fractional shares may be so
transferred, and the Company shall not be obligated to make any cash payments
in consideration of any excess of the aggregate Fair Market Value of shares
transferred over the aggregate Exercise Price); provided further, that the
Board may provide in a Stock Option Agreement (or may otherwise determine in
its sole discretion at the time of exercise) that, in lieu of cash or shares,
all or a portion of the Exercise Price may be paid by the Optionee's execution
of a recourse note equal to the Exercise Price or relevant portion thereof,
subject to compliance with applicable state and federal laws, rules and
regulations.
(d) In addition to and at the time of payment of the Exercise Price,
the Optionee shall pay to the Company in cash the full amount of any federal,
state, and local income, employment, or other withholding taxes applicable to
the taxable income of such Optionee resulting from such exercise; provided,
however, that in the discretion of the Committee any Stock Option Agreement may
provide that all or any portion of such tax obligations, together with
additional taxes not exceeding the actual additional taxes to be owed by the
Optionee as a result of such exercise, may, upon the irrevocable election of
the Optionee, be paid by tendering to the Company whole shares of Stock duly
endorsed for transfer and owned by the Optionee, or by authorization to the
Company to withhold shares of Stock otherwise issuable upon exercise of the
Option, in either case in that number of shares having a Fair Market Value on
the date of exercise equal to the amount of such taxes thereby being paid, and
subject to such restrictions as to the approval and timing of any such election
as the Committee may from time to time determine to be necessary or appropriate
to satisfy the conditions of the exemption set forth in Rule 16b-3 under the
Exchange Act, if such rule is applicable.
(e) The holder of an Option shall not have any of the rights of a
shareholder with respect to the shares of Stock subject to the Option until
such shares have been issued and transferred to the Optionee upon the exercise
of the Option.
6.8 Nontransferability of Option. No Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or, in the
case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations
Order, and no Option shall be transferable by an Optionee who is a Section 16
Insider prior to shareholder approval of the Plan. During the lifetime of an
Optionee, Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6.9 Termination of Employment or Service. The Committee shall have the
power to specify, with respect to the Options granted to a particular Optionee,
the effect upon such Optionee's right to exercise an Option of termination of
such Optionee's employment or service under various circumstances, which effect
may include immediate or deferred termination of such Optionee's rights under
an Option, or acceleration of the date at which an Option may be exercised in
full; provided, however, that in no event may an Incentive Stock Option be
exercised after the expiration of ten years from the date of grant thereof.
6.10 Employment Rights. Nothing in the Plan or in any Stock Option
Agreement shall confer on any person any right to continue in the employ of the
Company or any of its Subsidiaries, or shall interfere in any way with the
right of the Company or any of its Subsidiaries to terminate such person's
employment at any time.
6.11 Certain Successor Options. To the extent not inconsistent with the
terms, limitations and conditions of Code Section 422 and any regulations
promulgated with respect thereto, an Option issued in respect of an option held
by an employee to acquire stock of any entity acquired, by merger or otherwise,
by the Company (or any Subsidiary of the Company) may contain terms that differ
from those stated in this Article VI, but solely to the extent necessary to
preserve for any such employee the rights and benefits contained in such
predecessor option, or to satisfy the requirements of Code Section 424(a).
6.12 Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable on an accelerated basis in the event that a Change in Control
occurs with respect to the Company (and the Committee shall have the discretion
to modify the definition of a Change in Control in a particular Option
Agreement). If the Committee finds that there is a reasonable possibility
that, within the succeeding six months, a Change in Control will occur with
respect to the Company, then the Committee may determine that all outstanding
Options shall be exercisable on an accelerated basis.
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares which the Committee shall deem necessary or advisable under any federal
or state law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body;
(c) The obtaining of any approval or other clearance from any federal or
state governmental agency or body which the Committee shall determine to be
necessary or advisable; and
(d) The lapse of such reasonable period of time following the exercise of
the Option as the Board from time to time may establish for reasons of
administrative convenience.
Stock certificates issued and delivered to the Optionees shall bear such
restrictive legends as the Company shall deem necessary or advisable pursuant
to applicable federal and state securities laws.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination and Amendment. The Board may at any time terminate the
Plan; provided, however, that the Board (unless its actions are approved or
ratified by the shareholders of the Company within twelve months of the date
that the Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of Stock issuable pursuant
to Incentive Stock Options under the Plan, except as contemplated in Section
5.2 hereof; or
(b) Change the class of employees eligible to receive Incentive
Stock Options that may participate in the Plan.
8.2 Effect on Optionee's Rights. No termination, amendment, or
modification of the Plan shall affect adversely an Optionee's rights under a
Stock Option Agreement without the consent of the Optionee or his legal
representative.
ARTICLE IX
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive, or other compensation plans in effect for the Company or any of its
Subsidiaries; nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from establishing any other form of incentive or other
compensation plan for employees or Directors of the Company or any of its
Subsidiaries.
ARTICLE X
MISCELLANEOUS
10.1 Replacement or Amended Grants. At the sole discretion of the
Committee, and subject to the terms of the Plan, the Committee may modify
outstanding Options or accept the surrender of outstanding Options and grant
new Options in substitution for them. No modification of an Option shall
adversely affect an Optionee's rights under a Stock Option Agreement, however,
without the consent of the Optionee or his legal representative.
10.2 Forfeiture for Competition. If an Optionee provides services to a
competitor of the Company or any of its Subsidiaries, whether as an employee,
officer, director, independent contractor, consultant, agent, or otherwise,
such services being of a nature that can reasonably be expected to involve the
skills and experience used or developed by the Optionee while an Employee, then
that Optionee's rights under any Options outstanding hereunder shall be
forfeited and terminated, subject in each case to a determination to the
contrary by the Committee.
10.3 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
10.4 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
10.5 Headings, etc., No Part of Plan. Headings of Articles and Sections
hereof are inserted for convenience and reference; they do not constitute part
of the Plan.
10.6 Interpretation. With respect to Section 16 Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Plan administrators fails to so comply, it shall be
deemed void to the extent permitted by law and deemed advisable by the Plan
administrators.
* * * * *<PAGE>
Exhibit A to
ICCE, Inc.
1997 Stock Option Plan -
Form of Stock Option Agreement
ICCE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
_____ day of ____________, _______, is by and between ICCE, Inc., a Georgia
corporation (the "Company"), and
__________________________________________________ (the "Optionee").
WHEREAS, on May ____, 1997, the Board of Directors of the Company adopted
a stock option plan known as the "ICCE, Inc. 1997 Stock Option Plan" (the
"Plan"), and recommended that the Plan be approved by the Company's
shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan
has been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock (the "Stock"), set forth on Schedule A attached hereto
and incorporated herein by reference. The Option shall be exercisable in the
amounts and at the time specified on Schedule A. The Option shall expire and
shall not be exercisable on and after the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10 hereof.
Schedule A states whether the Option is intended to be an Incentive Stock
Option.
3. Purchase Price. The price per share to be paid by the Optionee for
the shares subject to this Option (the "Exercise Price") shall be as specified
on Schedule A, which price shall be an amount not less than the Fair Market
Value of a share of Stock as of the Date of Grant (as defined in Section 11
below) if the Option is an Incentive Stock Option.
4. Exercise Terms. The Optionee must exercise the Option for at least
the lesser of 100 shares or the number of shares of Purchasable Stock as to
which the Option remains unexercised. If this Option is not exercised with
respect to all or any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
5. Option Non-Transferable. No Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or, in the
case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations
Order, and no Option shall be transferable by an Optionee who is a Section 16
Insider prior to shareholder approval of the Plan. During the lifetime of an
Optionee, Options shall be exercisable only by such Optionee (or by such
Optionee's guardian or legal representative, should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice
of Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of Stock owned by the Optionee, and duly endorsed or accompanied by stock
transfer powers, having a Fair Market Value equal to the total Exercise Price
applicable to the shares then being purchased hereunder, or (iii) a certified
or cashier's check accompanied by the number of shares of Stock whose Fair
Market Value when added to the amount of the check equals the total Exercise
Price applicable to the shares then being purchased hereunder. Upon receipt of
any such notice and accompanying payment, and subject to the terms hereof, the
Company agrees to issue to the Optionee or the Optionee's administrators,
executors or personal representatives, as the case may be, stock certificates
for the number of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of Shares subject to this Option,
the Exercise Price and other matters are subject to adjustment during the term
of this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
(a) Except as otherwise specified in Schedule A hereto, in the event of
the termination of the Optionee's employment with the Company or any of its
Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the
Optionee may exercise this Option at any time within 30 days after such
termination to the extent of the number of shares which were Purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event of a
termination of the Optionee's employment that is either (i) for cause or (ii)
voluntary on the part of the Optionee and without the written consent of the
Company, this Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto, in
the event of the retirement of the Optionee at the normal retirement date as
prescribed from time to time by the Company or any Subsidiary, the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee's retirement provided that, on the date
which is three months after the date of retirement, the Options will become
void and unexercisable unless on the date of retirement the Optionee enters
into a noncompete agreement with the Company and continues to comply with such
noncompete agreement. This Option does not confer upon the Optionee any right
with respect to continuance of employment by the Company or by any of its
Subsidiaries. This Option shall not be affected by any change of employment so
long as the Optionee continues to be an employee of the Company or one of its
Subsidiaries.
9. Disabled Optionee. In the event of termination of employment because
of the Optionee's becoming a Disabled Optionee, the Optionee (or his or her
personal representative) may exercise this Option, within a period ending on
the earlier of (a) the last day of the one year period following the Optionee's
death or (b) the expiration date of this Option, to the extent of the number of
shares which were Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A with
respect to the rights of the Optionee upon termination of employment under
Section 8(a) above, in the event of the Optionee's death while employed by the
Company or any of its Subsidiaries or within three months after a termination
of such employment (if such termination was neither (i) for cause nor (ii)
voluntary on the part of the Optionee and without the written consent of the
Company), the appropriate persons described in Section 6 hereof or persons to
whom all or a portion of this Option is transferred in accordance with Section
5 hereof may exercise this Option at any time within a period ending on the
earlier of (a) the last day of the one year period following the Optionee's
death or (b) the expiration date of this Option. If the Optionee was an
employee of the Company or any of its Subsidiaries at the time of death, this
Option may be so exercised to the extent of the number of shares that were
Purchasable hereunder at the date of death. If the Optionee's employment
terminated prior to his or her death, this Option may be exercised only to the
extent of the number of shares covered by this Option which were Purchasable
hereunder at the date of such termination.
11. Date of Grant. This Option was granted by the Board of Directors of
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate law or any rule, regulation, order or
consent decree of any regulatory authority (including without limitation the
Securities and Exchange Commission) having jurisdiction over the affairs of the
Company. The Optionee agrees that the Optionee will provide the Company with
such information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section 12.
13. Disposition of Shares. In order to obtain certain tax benefits
afforded to Incentive Stock Options under Section 422 of the Code, the shares
purchased pursuant to the exercise of an Incentive Stock Option must not be
transferred by the Optionee except pursuant to the Optionee's will, or the laws
of descent and distribution, until the later of two years after the grant of
such Incentive Stock Option or one year after the transfer of the shares to the
Optionee exercise of such Incentive Stock Option.
14. Confidential Information and Trade Secrets. During the Optionee's
employment with the Company, the Optionee has had and will have access to
Proprietary Information of the Company and/or its Parents and Subsidiaries.
During the Optionee's employment with the Company or any of its Parents or
Subsidiaries, and for a period of two years thereafter, Optionee (i) shall hold
all Proprietary Information in confidence, (ii) shall use the Proprietary
Information solely in furtherance of the business of the Company as required by
the Optionee's employment, and (iii) shall not disclose, publish or make use of
such knowledge or information for any other reason without the express written
consent of the Company. Upon the termination of the Optionee's employment with
the Company for any reason, the Optionee shall immediately return to the
Company any and all copies of all Proprietary Information, and shall not retain
or remove any secret or confidential information of any type or description
without the express written consent of the Company. "Proprietary Information"
as used herein means all of the temporary help lists, customer lists, supplier
lists, price lists, financial information, operating manual and forms, plans,
notes, computer programs, systems and software (including, without limitation,
documentation and related source and object codes), and other knowledge and
information of a confidential or proprietary nature regarding the business of
the Company and its Parents and Subsidiaries. Proprietary Information shall
not include any information which enters the public domain in the absence of a
breach by any party of any confidentiality obligations to the Company or its
Subsidiaries.
15. Noncompetition. The Company is engaged in providing short-term and
long-term outsourcing, technical and professional staffing services, and
professional placement services. In consideration of the rights granted to the
Optionee hereunder, the Optionee agrees that, during the Optionee's employment
with the Company or any of its Parents or Subsidiaries and for a period of two
years thereafter, the Optionee shall not (without the prior written consent of
the Company), for his own benefit or for the benefit of others, directly or
indirectly, engage in, have any equity or profit interest in, or render
services of any executive, marketing, sales, administrative, supervisory, or
consulting nature within the Territory to any business which competes with the
business activities being directly engaged in by the Company in the Territory
as of the date on which the Optionee's employment is terminated. As used
herein, the "Territory" shall mean the twenty-five mile radius surrounding any
office of the Company or any of its Parents or Subsidiaries to which the
Optionee is assigned or for which the Optionee does a substantial amount of
work during his employment with the Company or any of its Parents or
Subsidiaries. Notwithstanding anything contained herein to the contrary, the
Optionee shall not be prohibited from owning, directly or indirectly, up to 5%
of the outstanding equity interests of any company whose stock is publicly
traded.
16. Non-Solicitation of Customers. The Company's list of its customers
and the nature of its relationship with such customers are among the most
valuable assets of the Company. During the Optionee's employment with the
Company and for a period of two years thereafter, the Optionee shall not
contact or solicit business from any active or prospective customer of the
Company or its Parents or Subsidiaries with whom the Optionee had personal
contact during his employment with the Company or any of its Parents or
Subsidiaries.
17. Non-Solicitation of Employees. The Optionee shall not solicit to
employ, on his own behalf or on behalf of any other person, firm or
corporation, any person who was employed during the Optionee's employment with
the Company or any Parent or Subsidiary and who has not thereafter ceased to be
employed by the Company or a Parent or Subsidiary for a period of at least one
year.
18. Severability. The provisions of this Agreement are intended to be
reasonable and not to violate the public policies of the jurisdictions in which
it is to be enforced. If a judicial determination is made that any of the
provisions of this Agreement constitutes an unreasonable or otherwise
unenforceable restriction against the Optionee, such provision shall be
modified to the extent necessary to render such provision reasonable and
enforceable, including reducing the terms or geographic extent of such
provision, if necessary.
19. Miscellaneous.
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be governed by
the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed given,
and any elections or exercises to be made or accomplished shall be deemed made
or accomplished, upon actual delivery thereof to the designated recipient, or
three days after deposit thereof in the United States mail, registered, return
receipt requested and postage prepaid, addressed, if to the Optionee, at the
address set forth below and, if to the Company, to the executive offices of the
Company at [insert the then current address].
(d) This Agreement may not be modified except in a writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the
Company's seal to be affixed hereto and attested by the Secretary or an
Assistant Secretary of the Company, and the Optionee has executed this Stock
Option Agreement under seal, all as of the day and year first above written.
ICCE, Inc. OPTIONEE
By:_____________________________ ______________________________
Name: __________________________ Name: ________________________
Title: _________________________ Address: _____________________
ATTEST: ________________________
________________________________
________________________________
Secretary/Assistant Secretary
[SEAL]<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
ICCE, INC.
AND
______________________
Dated: _______________
1. Number of Shares Subject to Option: ___________ Shares.
2. This Option (Check one) [ ] is [ ] is not an Incentive Stock Option.
3. Option Exercise Price: $____________ per Share.
4. Date of Grant: _______________
5. Option Vesting Schedule:
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof
( ) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the number of shares:
No. of Shares Vesting Date
6. Option Exercise Period:
Check One:
( ) All options expire and are void unless exercised on or before
________________ ____, ______.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
7. Effect of Termination of Employment of Optionee (if different from that
set forth in Sections 8 and 10 of the Stock Option Agreement): <PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies ICCE, Inc. (the "Company") of this
election to exercise the undersigned's stock option to purchase _________
shares of the Company's common stock (the "Common Stock"), pursuant to the
Stock Option Agreement (the "Agreement") between the undersigned and the
Company dated _____________, _____. Accompanying this Notice is (1) a certified
or a cashier's check in the amount of $ _______ payable to the Company, and/or
(2) _________ shares of the Company's Common Stock presently owned by the
undersigned and duly endorsed or accompanied by stock transfer powers, having
an aggregate Fair Market Value (as defined in the ICCE, Inc. 1997 Stock Option
Plan) as of the date hereof of $___________, such amounts being equal, in the
aggregate, to the purchase price per share set forth in Section 3 of the
Agreement multiplied by the number of shares being purchased hereby (in each
instance subject to appropriate adjustment pursuant to Section 5.2 of the
Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
____ day of _____________, _____.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
____________________________
Signature
____________________________
Name and Position (if other than Optionee)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 12th day of
March, 1997 (the "Effective Date"), by and between ICCE, Inc., a Georgia
corporation, (the "Company"), CAMA of Tampa, Inc. d/b/a Don Richard Associates
of Tampa, EKT, Inc. d/b/a Don Richard Associates of Charlotte, Infinity
Enterprises, Inc. d/b/a Don Richard Associates of Washington D.C., David C.
Cooper & Associates, Inc. ("Cooper"), and DCCA Professional Temporaries, Inc.
("DCCA")(the "Constituent Companies") on the one hand, and TIMOTHY MANN, JR.,
an individual resident of Georgia (the "Executive") on the other hand.
WHEREAS, the Company has been formed to be the holding company in a merger
of the Constituent Companies, each of which will become a wholly owned
subsidiary of the Company (except for DCCA which will merge into the same
subsidiary as Cooper); and
WHEREAS, the Company will ratify and sign this Agreement as soon as stock
is issued and officers are elected;
WHEREAS, the Company anticipates a public offering of the Company's common
stock ("Common Stock") pursuant to a registration statement to be filed under
the Securities Act of 1933 (the "1933 Act") (the "IPO"); and
WHEREAS, Executive is expected to make a significant contribution to the
success and development of the Company as the General Counsel and Chief
Financial Officer of the Company; and
WHEREAS, Executive is willing to render services to the Company on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
hereunder shall commence on the Effective Date hereof and continue for a period
of three (3) years, unless earlier terminated as provided in this Agreement.
At the end of the initial three year term, this Agreement shall automatically
renew for consecutive one year terms unless either party hereto gives written
notice to the other of its intent to terminate sixty (60) days prior to the end
of any term.
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed full time as the General Counsel and Chief Financial Officer
(the "CFO") of the Company. Executive shall devote his full time, energy, and
skill to such office and shall do and perform all services and acts necessary
or advisable to fulfill the duties of such office. In his capacity as an
officer of the Company, Executive shall report to the Board of Directors and
the Chief Executive Officer ("CEO") of the Company, and shall conduct and
perform such additional services and activities as may be determined from time
to time by any of them. Executive's authority and responsibility in the
Company shall at all times be subject to the review and discretion of the Board
of Directors, who shall have the final authority to make decisions regarding
the business of the Company. Executive acknowledges that he has a duty of
loyalty to the Company and shall not engage in, directly and indirectly, any
other business or activity that could materially and adversely affect the
Company's business or the Executive's ability to perform his duties under this
Agreement, provided, however, that the Executive shall be free to participate
in board, civic and charitable activities so long as such activities do not
interfere with his duties and responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by Executive
under this Agreement, Company shall pay Executive as follows:
(a) Base Salary. Executive shall be paid a minimum annual gross
salary of one hundred forty thousand dollars ($140,000), payable bi-weekly. At
the sole discretion of the Board of Directors of the Company, Executive's
annual gross salary may be increased from time to time throughout the term of
this Agreement. At no time during the term hereof shall the Executive's base
salary be decreased from the amount of the base salary then in effect.
(b) Annual Bonus. Executive shall be paid an annual bonus in an
amount as set forth in Exhibit A attached hereto.
Section 1.4 Benefits.
(a) Vacation. Executive shall be entitled to three weeks paid
vacation annually during the first two calendar years of his employment by the
Company and four weeks paid vacation during each calendar year thereafter. Any
vacation not used during any calendar year shall be forfeited, except that one
week's unused vacation may be carried forward to the year following the year in
which such vacation entitlement accrued.
(b) Life, Disability and Retirement Programs. Executive shall be
entitled to participate in any life, disability and retirement programs that
are generally offered to or provided for the senior management personnel of the
Company and its subsidiaries.
(c) Group Insurance. Executive shall be entitled to participate in
such group health and dental insurance programs (including spouse coverage) as
may from time to time be offered generally to all of the other members of the
senior management personnel of the Company and its subsidiaries.
Section 1.5 Stock Options.
(a) Initial Grant. Upon the completion of the Merger, the Company
shall grant Executive options to purchase a number of shares of Common Stock
(or such other type of stock as the shareholders of the merged companies shall
have received pursuant to the Merger) equal to 3% of the shares of Common Stock
outstanding immediately after the completion of the Merger and the issuance of
the options provided for in this Section 1.5(a). Such options shall be granted
at an exercise price equal to the Fair Market Value (as defined in Section
1.5(e) below) of such shares on the date of grant.
(b) Additional Grant. Upon the Effective Date of the IPO, the
Company shall grant to Executive options to purchase a number of additional
shares of Common Stock equal to 1% of the Common Stock (or such other type of
stock of the Company as is registered in the IPO) outstanding on the effective
date of the IPO, assuming that any overallotment option granted to the
Underwriters in connection with the IPO is exercised in full. Such options
shall be granted at an exercise price equal to the IPO offering price for such
shares.
To the extent possible, all of the Options shall qualify as incentive stock
options under the Internal Revenue Code of 1986. All of the options to be
granted pursuant to this Section are referred to herein collectively as the
"Options" and shall be subject to the terms and conditions set forth below.
(c) Vesting and Exercise. One-third of the original amount of the
Options granted pursuant to Section 1.5(a) above shall vest on each of the
first three annual anniversaries of the Effective Date, provided, however, that
two-thirds of the Options granted pursuant to Section 1.5(a) above (or such
smaller amount of the Options which may remain unvested if a portion of the
Options shall have vested prior to the IPO) shall vest immediately upon the
completion of the IPO. One-half of the Options granted pursuant to Section
1.5(b) shall vest on each of the first two annual anniversaries of the date of
grant. In addition, all unvested Options shall vest and be immediately
exercisable upon a Change in Control (as defined below). All Options shall
remain exercisable through the tenth anniversary of the date of grant of such
Option, at which time such Options shall expire unless earlier terminated in
accordance with the provisions hereof.
(d) Return of Options and Repurchase of Shares.
(i) If the Executive voluntarily resigns his employment with
the Company for any reason other than Good Reason (as defined below), or is
terminated by the Company for Cause, all unvested options shall be canceled and
all then outstanding and exercisable options shall remain exercisable in full
for a period of 120 days after the date of such written notice of voluntary
resignation or termination. At the Company's sole discretion, the Company may
purchase any unexercised Options from the Executive at a price per share equal
to the difference between the exercise price of such Options and the per share
Fair Market Value of the shares of Common Stock underlying such Options
determined as of or before the thirtieth (30th) day following the date such
written notice of voluntary resignation or termination was given with the Fair
Market Value of such shares of Common Stock to be determined in the manner set
forth in Subsection 1.5(e) below. Furthermore, if a registration statement for
the IPO has not yet been declared effective at such time, then the Company in
its sole discretion may repurchase any shares of Common Stock previously
obtained by Executive upon his exercise of any Options for an amount equal to
the Fair Market Value of such shares of Common Stock. Any such repurchase of
shares by the Company shall be accomplished within 30 days after such receipt
of such notice of resignation or termination.
(ii) In the event that Executive's employment with the Company
shall be terminated by the Company at any time without Cause or the Executive
shall resign for Good Reason, all then outstanding and unexercised Options
shall vest and become exercisable in full as of the date such notice of
termination and shall remain exercisable in full for a period of 120 days after
the date such notice to termination was given. At the Company's sole
discretion the Company may purchase any unexercised Options from the Executive
at a price per share equal to the difference between the exercise price of such
Options and the per share Fair Market Value of the shares of Common Stock
underlying such Options determined as of the date such written notice of
voluntary resignation or termination was given by the Company with the Fair
Market Value of such shares of Common Stock to be determined in the manner set
forth in Subsection 1.5(e) below. Furthermore, if a registration statement for
the IPO has not yet been declared effective, then the Company in its sole
discretion may repurchase any shares of Common Stock previously obtained by
Executive upon the exercise of any Options for an amount equal to the Fair
Market Value of such shares. Any such repurchase of the shares of Common Stock
shall be accomplished within 30 days after the date such notice of termination
was given by the Company.
(e) The Fair Market Value of a share of Common Stock, on the date
specified by the Company shall mean (i) the closing sales price of the Common
Stock on that on the national securities exchange on which it is listed; (ii)
if the Common Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Common Stock on the
over-the-counter market on the day such value is to be determined, or in the
absence of closing bids on such day, the closing bids on the next preceding day
on which there were bids; (iii) if the Common Stock also is not traded on the
over-the-counter market, the fair market value as determined by an independent
financial appraiser acceptable to both the Company and Executive (or
Executive's personal representative) taking into account all relevant factors
including securities law or other transfer restrictions, minority discounts,
and other relevant factors.
(f) The Options granted hereunder shall be evidenced by a separate
Option Agreement to be entered into upon the date of the grant.
Section 1.6 Member of Board. Executive shall be a member of the Board
of Directors of the Company at all times during the term of this Agreement,
prior to the IPO. Upon completion of the IPO, Executive shall be nominated for
election to the Company's Board of Directors at each annual meeting of the
Company's shareholders.
Section 1.7 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred for business travel, communications (including cell phone and pager),
entertainment and meals in connection with the performance of Executive's
duties under this Agreement in accordance with the Company's established
policies for reimbursement of business expenses. The Company expects Executive
to attend and participate in continuing education seminars and courses with
respect to the staffing industry and business management related to his duties,
and as may be required to maintain the Executive's license to practice law, and
the Company will reimburse all ordinary and necessary expenses of such
attendance and participation. Such continuing education courses and seminars
will be scheduled in conjunction with the President and/or CEO of the Company
to assure coordination of schedules.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidentiality. Executive recognizes the interest of the
Company in maintaining the confidential nature of its proprietary and other
business and commercial information. In connection therewith, Executive
covenants that during the term of his employment with Company under this
Agreement, and for a period of one (1) year thereafter, Executive shall not,
directly or indirectly, except as authorized by the Board of Directors,
publish, disclose or use for his own benefit or for the benefit of a business
or entity other than the Company or otherwise, any secret or confidential
matter, or proprietary or other information not in the public domain that was
acquired by Executive during his employment, relating to the Company's, the
Company's or any of its subsidiaries' businesses, operations, customers,
suppliers, products, employees, financial affairs or industrial practices,
technology, know-how or intellectual property or other similar information (the
"Proprietary Information").
Executive will abide by the Company's policies and regulations, as
established from time to time, for the protection of its Proprietary
Information. Executive acknowledges that all records, files, data, documents
and the like relating to suppliers, customers, costs, prices, systems, methods,
personnel, technology and other materials relating to the Company or its
affiliated entities shall be and remain the sole property of the Company and/or
such affiliated entity and shall, upon the request of the Company, turn over
all copies of such Proprietary Information to the Company (together with a
written statement certifying as to his compliance with the foregoing).
Section 2.2 Non-Solicitation of Customers and Non-Competition. During
the term of his employment with the Company, and for a period of one (1) year
after any termination of the Executive's employment for Cause or the
resignation of the Executive for any reason other than Good Reason (as defined
below), Executive shall not directly or indirectly, through one or more
intermediaries or otherwise, solicit, direct or appropriate, or attempt to
solicit, direct or appropriate any individual or entity which was, at the time
of termination of Executive's employment, a customer or client of the Company
for the purpose of providing a service or product to such customer or client
which is the same type of service or product offered or provided by the Company
at the time of termination of Executive's employment, with the Company.
During the Executive's employment with the Company, and for the two (2)
years period following the termination of Executive's employment with the
Company for Cause or the resignation of the Executive for any reason other than
Good Reason (as defined below), Executive shall not, without the prior written
consent of the Board of Directors, which consent may be withheld at the sole
discretion of the Board of Directors, engage or participate in, as a business
executive or equity owner, the management or conduct of any business or
enterprise that directly competes in any geographical area with any line of
business in which the Company was engaged in at the time of termination of
Executive's employment with the Company; provided, however, that nothing in
this Section 2.2 shall prohibit Executive from acquiring or holding, for
investment purposes only, less than five percent (5%) of the outstanding
publicly traded securities of any corporation which may compete directly or
indirectly with the Company or from engaging in the private price of law.
Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company, and for a period of one (1) year
following the termination of Executive's employment with the Company for Cause
or the resignation of the Executive for any reason other than Good Reason (as
defined below) (the "Non-solicitation Period"), Executive shall not, directly
or indirectly, through one or more intermediaries or otherwise, employ, induce,
solicit for employment, or assist others in employing, inducing or soliciting
for employment any individual who is at any time during the Non-solicitation
Period an employee of the Company for the purpose of providing services that
are the same or similar to the types of services offered or engaged in by the
Company at the time of termination of Executive's employment with the Company.
Section 2.4 Trade Secrets. The Executive shall not, at any time,
either during the term of his employment or after any termination of
employment, use or disclose any Trade Secrets (as defined under applicable law)
of the Company or its subsidiaries, except in fulfillment of his duties as the
Executive during his employment, for so long as the pertinent information or
data remain Trade Secrets, whether or not the Trade Secrets are in written or
tangible form.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. Executive's employment may be
terminated by the Company by giving notice during the term of this Agreement
upon the occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive
incapable of performing his duties for more than one hundred twenty (120)
calendar days (termination under this Section 3.1(a) shall be deemed
termination without Cause);
(b) for any reason following a determination by the Board of
Directors to terminate Executive's employment (termination under this Section
3.1(b) shall be deemed termination without Cause); or
(c) "for Cause", which for purposes of this Agreement shall mean
that the Executive shall have:
(i) committed an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment with the
Company which has a material adverse effect upon the Company;
(ii) inflicted intentional wrongful material damage to any
material asset of the Company or the Company;
(iii) intentionally and wrongfully violates Article II of
this Agreement, which violation has a material adverse effect upon the Company;
(iv) been convicted of a felony or any similar crime carrying a
prison term of at least one year (regardless of whether imprisonment is
actually imposed); or
(v) a habitual and debilitating use of alcohol or drugs.
(vi) failed to meet performance expectations, as determined and
articulated by the Company's Board of Directors; provided, however, that in the
event of this subsection (vi) being the sole reason for a termination for
Cause, Executive shall have the cure provisions and rights provided for in
Section 3.1(d) hereof.
(d) In the event of a determination by the Company's Board of Directors
that the Executive has failed to meet performance expectations, the Company
shall furnish to Executive in writing a notice of proposed termination setting
forth a specific statement of the deficiencies in his performance. Executive
shall then have a period of ninety (90) days after the giving of such written
notice of proposed termination by the Company in which to attempt to effect a
cure of the specified deficiencies. If at the end of such ninety (90) day
period no such cure has been effected to the reasonable satisfaction of the
Board of Directors of the Company, in their sole discretion, then Executive's
employment shall be terminated as of the end of such ninety (90) day period.
The Company shall be obligated to provide to Executive only one such notice of
proposed termination, and if subsequent to effecting a cure of specified
deficiencies the Executive is determined by the Board of Directors to have
again failed to meet performance expectations, then his employment may be
terminated immediately upon the Company's giving of notice of termination to
Executive which specifies his deficiencies in performance.
Section 3.2 Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without the express written consent of Executive, the occurrence of
any of the following events unless such events are fully corrected within 30
days following written notification by Executive to the Company that he intends
to terminate his employment hereunder for one of the reasons set forth below:
(a) a material breach by the Company of any material provision of
this Agreement, including, but not limited to, the assignment to Executive
of any duties inconsistent with Executive's position in the Company or a
material adverse alteration in the nature or status of Executive's
responsibilities;
(b) the Company's requiring the Executive to be based anywhere other
than the Atlanta metropolitan area or following the IPO the Washington,
D.C. metropolitan area; and
(c) the occurrence of a "Change in Control" as defined below.
For purposes of this Agreement a "Change in Control" shall mean an event
as a result of which: (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange At")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than 30% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date of the
Merger constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66-2/3% of the directors
then still in office who are either directors at the date of the Merger or
whose election or nomination for election was previously so approved) ceased
for any reason to constitute a majority of the Board of the Company then in
office; or (iv) the Company is liquidated or dissolved or adopts a plan of
liquidation, provided, however, that a Change in Control shall not include the
Merger.
Section 3.3 Severance. For purposes of this Agreement, Executive's
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause.
(i) If Executive is terminated without Cause prior to the IPO,
Executive shall be entitled to severance pay of $75,000, payable in a lump sum
on the date of such termination;
(ii) If Executive is terminated without Cause or resigns for
Good Reason after the IPO or if the Executive resigns for Good Reason at any
time due to a Change in Control, Executive shall be entitled to severance pay
of a lump sum equal to three times the sum of (i) his annual salary then in
effect plus (ii) the amount of his bonus as calculated based on the results of
operations for the twelve months prior to such termination.
(b) Voluntary Termination. Executive shall not receive any
severance pay if he voluntarily resigns his employment with the Company for any
reason other than Good Reason unless such severance pay is approved by the
Board of Directors of the Company in its sole discretion. Executive shall
provide a minimum of thirty (30) days prior notice to the CEO of his
resignation. In the event Executive shall provide thirty (30) days prior
written notice of his intent to resign, the Company may accept such resignation
effective as of any date during such thirty (30) day period as the Company
deems appropriate, provided that Executive shall receive from the Company his
salary and be entitled to participate at the Company's expense in any Company
sponsored benefit programs in which he was a participant as of the effective
date of his resignation for the duration of such thirty (30) day period.
(c) For Cause. Executive shall not be entitled to any severance pay
whatsoever if his employment is terminated "for Cause" pursuant to Section
3.1(c) of this Agreement, unless severance pay is approved by the Board of
Directors of the Company in its sole discretion, provided, however, that the
Executive shall receive such annual salary that is accrued but unpaid up to the
date of such termination for Cause. If termination is for Cause pursuant to
Section 3.1(b)(vi), and is other than pursuant to a Change in Control, then
Executive shall be entitled to severance equal to pay for the remainder of the
then current term of this Agreement, or equal to one year's salary at his then
current rate, whichever is greater.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes
and withholdings as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
Section 4.3 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Georgia, without giving effect to the principles of conflict of
laws of such State.
Section 4.4 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances shall not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal shall
be reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement
to a party's execution and delivery of this Agreement, such provision shall not
be reformed unless prior to any reformation that party agrees to be bound by
the reformation.
Section 4.5 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between
the parties with respect to the employment of Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.6 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any Successor of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor" shall mean any successor
in interest, including, without limitation, any entity, individual or group of
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company, as the case may be, whether by sale, merger,
consolidation, reorganization or otherwise.
(b) The Company shall require any Successor to agree at the time of
becoming a Successor to perform this Agreement to the same extent as the
original parties would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
heirs, distributee and legatees.
(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
in this Section 4.6.
Section 4.7 Captions. The captions in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.8 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive, the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at
the same or at any prior or subsequent time.
Section 4.9 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company":
ICCE, Inc. "Executive"
By:__________________________ /s/ Tim Mann
Signature Timothy Mann, Jr.
_____________________________
Print Name
_____________________________
Print Title
"Constituent Companies":
CAMA of Tampa, Inc. EKT, Inc.
d/b/a Don Richard Associates of Tampa d/b/a Don Richard
Associates of Charlotte
By:/s/ Stephen S. Tutwiler By: /s/ Edward K. Turner
Stephen S. Tutwiler, President Edward K. Turner, President
Infinity Enterprises, Inc. David C. Cooper & Associates,Inc.
d/b/a Don Richard Associates
of Washington D.C.
By:/s/ Mark E. Strassman By:/s/ David C. Cooper
Mark E. Strassman, David C. Cooper, President
Chief Executive Officer
DCCA Professional Temporaries, Inc.
By:/s/ David C. Cooper
David C. Cooper, President<PAGE>
Exhibit A
Bonus
Within 10 days following the issuance of audited financial statements for
each year, Executive shall be paid a bonus for that year equal to 2.0% of the
increase in the earnings of the Company before interest, taxes, depreciation
and amortization over the prior year, as shown on the audited financial
statements of the Company for such years. In the first year, such bonus shall
be based on a comparison of such earnings with those shown on the pro-forma
financial statements of the combined companies as prepared by the Company.
AMENDMENT NO.1 TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT (the "Amendment") is made as
of September 3, 1997 (the "Effective Date"), by and between ICCE, Inc., a
Georgia corporation, (the "Company"), and Timothy Mann, Jr., an individual
resident of Georgia ("Executive").
WHEREAS, Executive is an executive officer and shareholder of the Company;
and
WHEREAS, Executive and the Company entered into that certain Employment
Agreement dated as of March 12, 1997 (the "Agreement"); and
NOW, THEREFORE, for $10.00 in hand paid by the Company to Executive and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by Executive and the Company including, without
limitation, the promises and covenants of the parties set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
AMENDMENT TO
EMPLOYMENT AGREEMENT
Title. The Executive's title is hereby changed from Chief Financial
Officer and General Counsel to Executive Vice President. All other provisions
of the Employment Agreement shall remain the same.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company" "Executive"
ICCE, Inc.
By:/s/ Mark E. Strassman /s/ Timothy Mann, Jr.
Signature Timothy Mann, Jr.
Mark Strassman
Print Name
President
Title
AMENDMENT NO.2 TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO.2 TO EMPLOYMENT AGREEMENT (the "Amendment") is made as
of October 14, 1997 (the "Effective Date"), by and between ACSYS, Inc., a
Georgia corporation, (the "Company"), and Timothy Mann, Jr., an individual
resident of Georgia ("Executive").
WHEREAS, Executive is an executive officer and shareholder of the Company;
and
WHEREAS, Executive and the Company entered into that certain Employment
Agreement dated as of March 12, 1997, as amended by Amendment No. 1 dated
September 3, 1997 (the "Agreement");
NOW, THEREFORE, for $10.00 in hand paid by the Company to Executive and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by Executive and the Company including, without
limitation, the promises and covenants of the parties set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Section 1.2 of Article I of the Agreement is hereby deleted in its entirety
and replaced with the following:
"1.2 Duties and Responsibilities of Executive. Executive is hereby
employed as the Chief Executive Officer (the "CEO") of the Company. Executive
shall devote his full time, energy and skill to such office and shall do and
perform all services and acts necessary or advisable to fulfill the duties of
such office. In his capacity as the CEO, the Executive shall report to the
Board of Directors of the Company, and shall conduct and perform such
additional services and activities as may be determined from time to time by
any of them. Executive's authority and responsibility in the Company shall at
all times be subject to the review and discretion of the Board of Directors,
who shall have the final authority to make decisions regarding the business of
the Company. Executive acknowledges that he has a duty of loyalty to the
Company and shall not engage in, directly or indirectly, any other business or
activity that could materially and adversely affect the Company's business or
the Executive's ability to perform his duties under this Agreement, provided,
however, that the Executive shall be free to participate in board, civic, and
charitable activities so long as such activities do not interfere with his
duties and responsibilities hereunder."
2. The first sentence of Section 1.3(a) of Article I is hereby deleted in its
entirety and replaced with the following:
"Executive shall be paid a minimum annual gross salary of two hundred
thousand dollars ($200,000.00), payable bi-weekly."
3. The last sentence of Section 1.7 of Article I is hereby deleted in its
entirety.
4. The second sentence of Section 3.3 of Article 3 is hereby deleted in its
entirety and replaced with the following:
"Executive shall provide a minimum of thirty (30) days prior notice to the
Board of Directors of his resignation."
5. All other provisions of the Agreement shall remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
duly executed and delivered as of the date first above written.
"Company" "Executive"
ACSYS, Inc.
By:/s/ David C. Cooper /s/ Timothy Mann, Jr.
Signature Timothy Mann, Jr.
David C. Cooper
Print Name
Chairman
Title
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of August, 1997
(the "Effective Date"), by and between ICCE, Inc. (the "Company"), a Georgia
corporation, ACSYS Resources, Inc. ("ACSYS"), a Pennsylvania corporation and a
wholly owned subsidiary of the Company, and Edward S. Baumstein, an individual
resident of Pennsylvania (the "Executive").
WHEREAS, Executive was an executive officer and shareholder of ACSYS prior
to its merger with a subsidiary of the Company (the "Merger");
WHEREAS, the Company recognizes the contributions of the Executive in such
capacity;
WHEREAS, Executive is expected to make a significant contribution to the
success and development of the Company; and
WHEREAS, Executive is willing to render services to the Company and/or one
or more of its subsidiaries on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
hereunder shall commence on the Effective Date hereof and continue for a period
of three (3) years, unless earlier terminated as provided in this Agreement.
At the end of the initial three-year term, this Agreement shall automatically
renew for consecutive one-year terms unless either party hereto gives written
notice to the other of its intent to terminate sixty (60) days prior to the end
of any term.
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed full time as the Chief Operating Officer of the Company.
Executive shall devote his full time, energy, and skill to such office and
shall do and perform all services and acts necessary or advisable to fulfill
the duties of such office. In his capacity as an officer of the Company,
Executive shall report to the Board of Directors of the Company, and shall
conduct and perform such additional services and activities as may be
determined from time to time by the Board of Directors which are normal and
customary for a similar executive of a similarly situated company. Executive's
authority and responsibility in the Company shall at all times be subject to
the review and discretion of the Board of Directors, who shall have the final
authority to make decisions regarding the business of the Company. Executive
acknowledges that he has a duty of loyalty to the Company and shall not engage
in, directly and indirectly, any other business or activity that could
materially and adversely affect the Company's business or the Executive's
ability to perform his duties under this Agreement, provided, however, that the
Executive shall be free to participate in board, civic and charitable
activities so long as such activities do not interfere with his duties and
responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by Executive
under this Agreement, Company shall pay Executive a base salary of $200,000 per
annum payable in bi-weekly installments. The Executive shall also be paid a
bonus as determined by the Board of Directors of the Company from time to time
such bonus compensation shall be determined based on the performance of AcSys
Resources, Inc. and the Company as a whole and the success of the integration
of such businesses as the Company may acquire. At the sole discretion of the
Board of Directors of the Company, Executive's annual gross salary may be
increased from time to time throughout the term of this Agreement. At no time
during the term hereof shall the Executive's base salary be decreased from the
amount of the base salary then in effect.
Section 1.4 Benefits.
(a) Vacation. Executive shall be entitled to six (6) weeks paid
vacation annually during his employment by the Company hereunder. Any vacation
not used during any calendar year shall be forfeited, except that one week's
unused vacation may be carried forward to the year following the year in which
such vacation entitlement accrued.
(b) Life, Disability and Retirement Programs. Executive shall be
entitled to participate in any life, disability and retirement programs that
are generally offered to or provided for the senior management personnel of the
Company and its subsidiaries.
(c) Group Insurance. Executive shall be entitled to participate in
such group health and dental insurance programs (including spouse coverage) as
may from time to time be offered generally to all of the other members of the
senior management personnel of the Company and its subsidiaries.
Section 1.5 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred for business travel, communications (including cell phones and pager),
entertainment and meals in connection with the performance of Executive's
duties under this Agreement in accordance with the Company's established
policies for reimbursement of business expenses. The Company expects Executive
to attend and participate in continuing education seminars and courses with
respect to the staffing industry and business management related to his duties,
and the Company will reimburse all ordinary and necessary expenses of such
attendance and participation. Such continuing education courses and seminars
will be scheduled in conjunction with the other officers of the Company to
assure coordination of schedules.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidentiality. Executive recognizes the interest of the
Company in maintaining the confidential nature of its proprietary and other
business and commercial information. In connection therewith, Executive
covenants that during the term of his employment with Company under this
Agreement, and for a period of one (1) year thereafter, Executive shall not,
directly or indirectly, except as authorized by the Board of Directors,
publish, disclose or use for his own benefit or for the benefit of a business
or entity (other than the Company or its subsidiaries) or otherwise, any secret
or confidential matter, or proprietary or other information not in the public
domain that was acquired by Executive during his employment, relating to the
Company's, ACSYS's or any of their respective subsidiaries' businesses,
operations, customers, suppliers, products, employees, financial affairs or
industry practices, technology, know-how or intellectual property or other
similar information (the "Proprietary Information"). If and to the extent that
Proprietary Information also is a Trade Secret (as defined under applicable
law), the time limit provided in Section 2.5 shall apply to the disclosure of
such Proprietary Information.
Executive will abide by the Company's policies and regulations, as
established from time to time, for the protection of its Proprietary
Information. Executive acknowledges that all records, files, data, documents
and the like relating to suppliers, customers, costs, prices, systems, methods,
personnel, technology and other materials relating to the Company or its
affiliated entities shall be and remain the sole property of the Company and/or
such affiliated entity and shall, upon the request of the Company, turn over
all copies of such Proprietary Information to the Company (together with a
written statement certifying as to his compliance with the foregoing).
Section 2.2 Non-Solicitation of Customers. During the term of
Executive's employment with the Company, and for a period of one (1) year
thereafter, unless Executive is terminated other than for Cause (as defined
below) or Executive resigns for Good Reason (as defined below), Executive shall
not directly or indirectly, through one or more intermediaries or otherwise,
solicit or attempt to solicit Customers, in the Restricted Territory, to induce
or encourage them to acquire or obtain from anyone other than the Company,
service competitive with or substitute for any Company Service. For purposes
of this Section, a "Customer" refers to any person or group of persons with
whom Employee has direct material contact with regard to selling, delivery or
support of Company Services, including servicing such person's or group's
account, during the period of two (2) years preceding termination of Employee's
employment; and "Company Services" refers to the services that the Company
offered or sold within six (6) months prior to the date of termination of
Employee's employment. For purposes of this Article II, the "Restricted
Territory" shall be the area that is within a thirty (30) mile radius of the
city of Philadelphia, or such other city in which the Company maintains an
office at which Executive is located on the date of termination of Executive's
employment with the Company and such other cities in which the Company
maintains offices at which Executive had material customer contacts within the
year preceding the termination of Executive's employment with the Company.
Section 2.3 Non-Compete. During the term of Executive's employment
with the Company, and for a period of two (2) years thereafter, unless
Executive is terminated other than for Cause (as defined below) or Executive
resigns for Good Reason (as defined below), Executive shall not, without the
prior written consent of the Board of Directors, which consent may be withheld
at the sole discretion of the Board of Directors, engage or participate in, as
a business executive or equity owner of any business or enterprise that
directly competes in the Restricted Area with any line of business in which (i)
the Company was engaged at the time of termination of Executive's employment
with the Company and (ii) Executive was materially involved with regard to the
selling, delivery or support of services within such line of business;
provided, however, that nothing in this Section 2.3 shall prohibit Executive
from acquiring or holding, for investment purposes only, less than five percent
(5%) of the outstanding publicly traded securities of any corporation which may
compete directly or indirectly with the Company or any of its subsidiaries.
Section 2.4 Non-Solicitation of Employees. During the term of his
employment with the Company, and for a period of one (1) year thereafter,
unless Executive is terminated other than for Cause (as defined below) or
Executive resigns for Good Reason (as defined below), Executive shall not,
directly or indirectly, through one or more intermediaries or otherwise,
employ, induce, solicit for employment, or assist others in employing, inducing
or soliciting for employment any individual who is at any time during such
period an employee of the Company for the purpose of providing services that
are the same or similar to the types of services offered or engaged in by the
Company, ACSYS or any of their respective subsidiaries with the Executive
providing services at the time of termination of Executive's employment with
the Company.
Section 2.5 Trade Secrets. The Executive shall not, at any time,
either during the term of his employment or after any termination of
employment, use or disclose any Trade Secrets (as defined under applicable law)
of the Company, ACSYS, or any of their respective subsidiaries, except in
fulfillment of his duties as the Executive during his employment, for so long
as the pertinent information or data remain Trade Secrets, whether or not the
Trade Secrets are in written or tangible form.
Section 2.6 Consideration. Executive acknowledges that his agreement
to the covenants provided in this Article II constitutes a major portion of the
consideration for the entry by the Company into this Agreement, and that the
Company's covenants under this Agreement is of direct and material benefit to
Executive and is good and adequate consideration for the covenants given
herein. Executive also acknowledges that the Company has a present and future
expectation of business within the geographic areas served by the Company and
from the present and proposed customers of the Company. Executive acknowledges
the reasonableness of the term, geographic area and scope of the covenants set
forth in this Agreement, and agrees that he will not, in any action, suit or
other proceeding, deny the reasonableness of, or assert the unreasonableness
of, the premises, consideration or scope of the covenants set forth herein.
Executive further acknowledges that complying with the provisions contained in
this Agreement will not preclude him from engaging in a lawful profession,
trade or business, or from becoming gainfully employed.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. Executive's employment may be
terminated by the Company by giving notice during the term of this Agreement
upon the occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive
incapable of performing his duties for more than one hundred twenty (120)
calendar days (termination under this Section 3.1(a) shall be deemed
termination without Cause);
(b) for any reason following a determination by the Board of
Directors to terminate Executive's employment (termination under this Section
3.1(b) shall be deemed termination without Cause); or
(c) "for Cause", which for purposes of this Agreement shall mean
that the Executive shall have:
(i) committed an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment with the
Company which has a material adverse effect upon the Company;
(ii) inflicted intentional wrongful material damage to any
material asset of the Company or the Company;
(iii) intentionally and wrongfully violates Article II of
this Agreement, which violation has a material adverse effect upon the Company;
(iv) been convicted of a felony or any similar crime carrying a
prison term of at least one year (regardless of whether imprisonment is
actually imposed);
(v) a habitual and debilitating use of alcohol or drugs; or
(vi) failed to meet performance expectations, as determined by
the Company's Board of Directors, provided, however, that in the event of this
subsection (vi) being the sole reason for termination for Cause, Executive
shall have the cure provisions and rights provided for in Section 3.1(d)
hereof.
(d) In the event of a determination by the Company's Board of
Directors that the Executive has failed to meet performance expectations, the
Company shall furnish to Executive in writing a notice of proposed termination
setting forth a specific statement of the deficiencies in his performance.
Executive shall then have a period of ninety (90) days after the giving of such
written notice of proposed termination by the Company in which to attempt to
effect a cure of the specified deficiencies. If at the end of such ninety (90)
day period no such cure has been effected to the reasonable satisfaction of the
Board of Directors of the Company, then Executive's employment shall be
terminated as of the end of such ninety (90) day period. The Company shall be
obligated to provide to Executive only one such notice of proposed termination,
and if subsequent to effecting a cure of specified deficiencies the Executive
is determined by the Board of Directors to have again failed to meet
performance expectations, then his employment may be terminated immediately
upon the Company's giving of notice of termination to Executive which specifies
his deficiencies in performance.
Section 3.2 Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without the express written consent of Executive, the occurrence of
any of the following events unless such events are fully corrected within
thirty (30) days following written notification by Executive to the Company
that he intends to terminate his employment hereunder for one of the reasons
set forth below:
(a) a material breach by the Company of any material provision of
this Agreement or the Registration Rights Agreement, dated as of May 16,
1997, to which Executive is a party, including, but not limited to, the
assignment to Executive of any duties inconsistent with Executive's
position in the Company or a material adverse alteration in the nature or
status of Executive's responsibilities;
(b) relocation of Executive out of the metropolitan Philadelphia
area provided, however, that the Executive shall from time to time, as may
be necessary to facilitate the Company's business, be required to render a
portion of his services hereunder at the Company's corporate headquarters
in Washington D.C.; or
(c) the occurrence of a "Change in Control" as defined below.
For purposes of this Agreement a "Change in Control" shall mean an event as a
result of which: (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets (or substantially all of the assets
of, or of the Company's interest in, ACSYS) to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than 30% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date of the
Merger constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66-2/3% of the directors
then still in office who were directors at the date of the Merger or whose
election or nomination for election was previously so approved) ceased for any
reason to constitute a majority of the Board of the Company then in office; or
(iv) the Company is liquidated or dissolved or adopts a plan of liquidation.
Section 3.3 Severance. For purposes of this Agreement, Executive's
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause.
(i) Executive may not be terminated prior to a firm commitment
underwritten public offering of the Company's equity
securities;
(ii) If Executive is terminated without Cause or resigns for
Good Reason at any time, Executive shall be entitled to
severance pay of a lump sum equal to three times the sum of
(i) his annual salary then in effect plus (ii) the amount
of his bonus as calculated based on the results of
operations for the twelve months prior to such termination.
(b) Voluntary Termination. If Executive voluntarily resigns for
reason other than Good Cause, Executive shall receive a lump sum severance
payment equal to his then current annual salary. Executive shall provide a
minimum of thirty (30) days prior notice to the President of his resignation.
In the event Executive shall provide thirty (30) days prior written notice of
his intent to resign, the Company may accept such resignation effective as of
any date during such thirty (30) day period as the Company deems appropriate,
provided that Executive shall receive from the Company his salary and be
entitled to participate at the Company's expense in any Company sponsored
benefit programs in which he was a participant as of the effective date of his
resignation for the duration of such thirty (30) day period.
(c) For Cause. Executive shall not be entitled to any severance pay
whatsoever if his employment is terminated "for Cause" pursuant to Section
3.1(c) of this Agreement, unless severance pay is approved by the Board of
Directors of the Company in its sole discretion, provided, however, that the
Executive shall receive such annual salary that is accrued but unpaid up to the
date of such termination for Cause. If termination is for Cause pursuant to
Section 3.1(c)(vi), then Executive shall be entitled to severance equal to pay
for the remainder of the then current term of this Agreement, or equal to one
year's salary at his then current rate, whichever is greater.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes
and withholdings as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
Section 4.3 Validity; Severability. The covenants set forth in this
Agreement are and shall be deemed and construed as separate and independent
covenants. It is not the intent of any party hereto to violate any public
policy of any jurisdiction in which this Agreement may be enforced. If any
term, covenant, condition or provision of this Agreement, or the application
thereof to any person or circumstance, shall to any extent be held invalid or
unenforceable by a court of competent jurisdiction because its duration, the
territory and/or the restricted activities are invalid or unreasonable in
scope, (i) each such term, covenant or provision of this Agreement shall be
valid and be enforced to the fullest extent permitted by law, shall be reformed
to the extent (and only to the extent) necessary to make it valid, enforceable
and legal taking into consideration the reasonable concerns and needs of the
Company's business interests such that the intent of the Company, in
consummating the transactions contemplated by the Agreement, will not be
impaired, provided that such invalid or unenforceable term, covenant, condition
or provision shall be curtailed, limited or eliminated only to the extent
necessary to remove such invalidity or unenforceability with respect to the
applicable law as it shall then be applied, and (ii) the remainder of this
Agreement or the application of such term, covenant, condition or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby.
Section 4.4 Remedies. The restrictions contained in Article II of this
Agreement are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company. It is recognized that damages in the event of breach of the
provisions of this Agreement by Executive would be difficult, if not
impossible, to ascertain, and it is therefore agreed that the Company, in
addition to and without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach. The existence of this right
shall not preclude any other rights and remedies at law or in equity which the
Company may have. Any violation of the restrictions contained in Article II of
this Agreement shall automatically toll and suspend the period of restraint for
the amount of time that the violation continues, provided that the Company
seeks enforcement of such restraint promptly after discovery of the violation.
Executive agrees to indemnify and hold harmless the Company from and against
any loss, damage, liability, cost or expense, including but not limited to
reasonable attorneys fees, suffered or incurred by the Company as and when
incurred, by reason of, or arising out of, any breach of the covenants
contained in this Agreement.
Section 4.5 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between
the parties with respect to the employment of Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by both parties hereto.
Section 4.6 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any Successor of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor" shall mean any successor
in interest, including, without limitation, any entity, individual or group of
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company, as the case may be, whether by sale, merger,
consolidation, reorganization or otherwise.
(b) The Company shall require any Successor to agree at the time of
becoming a Successor to perform this Agreement to the same extent as the
original parties would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
heirs, distributes and legatees.
(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
in this Section 4.6.
Section 4.7 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the choice of law rules utilized in that
jurisdiction.
Section 4.8 Captions. The captions in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.9 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a
party hereto at any time of any breach by another party hereto or compliance
with any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provision or conditions
at the same or at any prior or subsequent time. Failure by the Company to
insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed to be a waiver of such term, covenant or condition,
nor shall any relinquishment of any right of power hereunder by the Company any
one or more times be deemed a waiver or relinquishment of such right or power
by the Company at any other time or times.
Section 4.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company":
ICCE, Inc. "Executive"
By:/s/ Mark Strassman /s/ Edward S. Baumstein
Signature Edward S. Baumstein
Mark Strassman Print Residence Address:
Print Name
811 Firethorn Circle
President Dresher, PA 19025
Print Title
AMENDMENT NO.1 TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT (the "Amendment") is made as
of October 14, 1997 (the "Effective Date"), by and between ACSYS, Inc., a
Georgia corporation, (the "Company"), and Edward S. Baumstein, an individual
resident of Pennsylvania ("Executive").
WHEREAS, Executive is an executive officer and shareholder of the Company;
and
WHEREAS, Executive and the Company entered into that certain Employment
Agreement dated as of August, 1997 (the "Agreement");
NOW, THEREFORE, for $10.00 in hand paid by the Company to Executive and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by Executive and the Company including, without
limitation, the promises and covenants of the parties set forth herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Section 1.2 of Article I of the Agreement is hereby deleted in its entirety
and replaced with the following:
"1.2 Duties and Responsibilities of Executive. Executive is hereby
employed full time as the President and Chief Operating Officer of the Company.
Executive shall devote his full time, energy and skill to such office and shall
do and perform all services and acts necessary or advisable to fulfill the
duties of such office. In his capacity as an officer of the Company, Executive
shall report to the Chief Executive Officer of the Company, and shall conduct
and perform such additional services and activities as may be determined from
time to time by the Board of Directors which are normal and customary for a
similar executive of a similarly situated company. Executive's authority and
responsibility in the Company shall at all times be subject to the review and
discretion of the Chief Executive Officer and the Board of Directors, who shall
have the final authority to make decisions regarding the business of the
Company. Executive acknowledges that he has a duty of loyalty to the Company
and shall not engage in, directly or indirectly, any other business or activity
that could materially and adversely affect the Company's business or the
Executive's ability to perform his duties under this Agreement, provided,
however, that the Executive shall be free to participate in board, civic, and
charitable activities so long as such activities do not interfere with his
duties and responsibilities hereunder."
2. The second sentence of Section 3.3 of Article 3 is hereby deleted in its
entirety and replaced with the following:
"Executive shall provide a minimum of thirty (30) days prior notice to the
Chief Executive Officer and the Board of Directors of his resignation."
3. All other provisions of the Agreement shall remain unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be
duly executed and delivered as of the date first above written.
"Company" "Executive"
ACSYS, Inc.
By:/s/ Timothy Mann, Jr. /s/ Edward S. Baumstein
Timothy Mann, Jr. Edward S. Baumstein
Timothy Mann, Jr.
Print Name
Chief Executive Officer
Title
ICCE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
19th day of May, 1997, is by and between ICCE, Inc., a Georgia corporation (the
"Company"), and Timothy Mann, Jr. (the "Optionee").
WHEREAS, the Board of Directors of the Company adopted a stock option plan
known as the "ICCE, Inc. 1997 Stock Option Plan" (the "Plan").
WHEREAS, the Company has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan
has been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock (the "Stock"), set forth on Schedule A attached hereto
and incorporated herein by reference. The Option shall be exercisable in the
amounts and at the times specified on Schedule A or its attachments
(collectively referred to hereafter as "Schedule A"). The Option shall expire
and shall not be exercisable on or after the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10 hereof.
Schedule A states whether the Option is intended to be an Incentive Stock
Option.
3. Purchase Price. The price per share to be paid by the Optionee for
the shares subject to this Option (the "Exercise Price") shall be as specified
on Schedule A.
4. Exercise Terms. The Optionee must exercise the Option for at least
the lesser of 100 shares or the number of shares of Purchasable Stock as to
which the Option remains unexercised. If this Option is not exercised with
respect to all or any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
5. Option Non-Transferable. No Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or, in the
case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations
Order. During the lifetime of an Optionee, Options shall be exercisable only
by such Optionee (or by such Optionee's guardian or legal representative,
should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice
of Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of Stock owned by the Optionee, and duly endorsed or accompanied by stock
transfer powers, having a Fair Market Value equal to the total Exercise Price
applicable to the shares then being purchased hereunder, or (iii) a certified
or cashier's check accompanied by the number of shares of Stock whose Fair
Market Value when added to the amount of the check equals the total Exercise
Price applicable to the shares then being purchased hereunder. Upon receipt of
any such notice and accompanying payment, and subject to the terms hereof, the
Company agrees to issue to the Optionee or the Optionee's administrators,
executors or personal representatives, as the case may be, stock certificates
for the number of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of Shares subject to this Option,
the Exercise Price and other matters are subject to adjustment during the term
of this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
(a) Except as otherwise specified in Schedule A hereto, in the event of
the termination of the Optionee's employment with the Company or any of its
Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the
Optionee may exercise this Option at any time within 30 days after such
termination to the extent of the number of shares which were purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event of a
termination of the Optionee's employment that is either (i) for cause or (ii)
voluntary on the part of the Optionee and without the written consent of the
Company, this Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto, in
the event of the retirement of the Optionee at the normal retirement date as
prescribed from time to time by the Company or any Subsidiary, the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee's retirement provided that, on the date
which is three months after the date of retirement, the Options will become
void and unexercisable unless on the date of retirement the Optionee enters
into a noncompete agreement with the Company and continues to comply with such
noncompete agreement. This Option does not confer upon the Optionee any right
with respect to continuance of employment by the Company or by any of its
Subsidiaries. This Option shall not be affected by any change of employment so
long as the Optionee continues to be an employee of the Company or one of its
Subsidiaries.
9. Disabled Optionee. Except as otherwise set forth in Schedule A, in
the event of termination of employment because of the Optionee's becoming a
Disabled Optionee, the Optionee (or his or her personal representative) may
exercise this Option, within a period ending on the earlier of (a) the last day
of the one year period following the Optionee's death or (b) the expiration
date of this Option, to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A with
respect to the rights of the Optionee upon termination of employment under
Section 8(a) above, in the event of the Optionee's death while employed by the
Company or any of its Subsidiaries or within three months after a termination
of such employment (if such termination was neither (i) for cause nor (ii)
voluntary on the part of the Optionee and without the written consent of the
Company), the appropriate persons described in Section 6 hereof or persons to
whom all or a portion of this Option is transferred in accordance with Section
5 hereof may exercise this Option at any time within a period ending on the
earlier of (a) the last day of the one year period following the Optionee's
death or (b) the expiration date of this Option. If the Optionee was an
employee of the Company or any of its Subsidiaries at the time of death, this
Option may be so exercised to the extent of the number of shares that were
Purchasable hereunder at the date of death. If the Optionee's employment
terminated prior to his or her death, this Option may be exercised only to the
extent of the number of shares covered by this Option which were Purchasable
hereunder at the date of such termination.
11. Date of Grant. This Option was granted by the Board of Directors of
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate law or any rule, regulation, order or
consent decree of any regulatory authority (including without limitation the
Securities and Exchange Commission) having jurisdiction over the affairs of the
Company. The Optionee agrees that the Optionee will provide the Company with
such information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section 12.
13. Restriction on Disposition of Shares. The Optionee hereby
acknowledges that the shares purchased pursuant to the exercise of an Incentive
Stock Option may lose their intended federal income tax benefits to the
Optionee in the event that the shares are transferred before the later to occur
of: (i) the date two years after the grant of the Incentive Stock Option, or
(ii) one year after the transfer of the shares to the Optionee pursuant to the
exercise of an Incentive Stock Option. The Optionee further acknowledges that
he or she is solely responsible for obtaining his or her own tax advice
relating to the exercise of an Incentive Stock Option and the disposition of
shares acquired through the exercise of an Incentive Stock Option.
14. Miscellaneous.
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be governed by
the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed given,
and any elections or exercises to be made or accomplished shall be deemed made
or accomplished, upon actual delivery thereof to the designated recipient, or
three days after deposit thereof in the United States mail, registered, return
receipt requested and postage prepaid, addressed, if to the Optionee, at the
address set forth below and, if to the Company, to the executive offices of the
Company at Five Concourse Parkway, Suite 2700, Atlanta, Georgia 30328.
(d) This Agreement may not be modified except in a writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the
Company's seal to be affixed hereto and attested by the Secretary or an
Assistant Secretary of the Company, and the Optionee has executed this Stock
Option Agreement under seal, all as of the day and year first above written.
ICCE, Inc. OPTIONEE
By: /s/ Mark Strassman /s/ Timothy Mann, Jr.
Name: Mark Strassman Name: Timothy Mann, Jr.
Title: President Address:
4633 Club Circle
Atlanta, Georgia 30319
<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
ICCE, INC.
AND
TIMOTHY MANN, JR.
Dated: May 19, 1997
1. Number of Shares Subject to Option: 97,698 Shares.
2. This Option (Check one) [ ] is [X] is not an Incentive Stock Option.
3. Option Exercise Price: $8.00 per Share.
4. Date of Grant: May 19, 1997
5. Option Vesting Schedule:
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof.
(X) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the
number of shares:*
No. of Shares Vesting Date
32,566 March 10, 1998
32,566 March 10, 1999
32,566 March 10, 2000
* 90,132 Options shall vest and become exercisable upon the completion of an
"IPO" as defined in the Employment Agreement between the Company and the
Optionee dated March 10, 1997 (the "Employment Agreement"). All unvested
Options shall vest immediately and become exercisable upon a "Change in
Control" as defined in the Employment Agreement.
6. Option Exercise Period:
Check One:
(X) All options expire and are void unless exercised on or before
May 19, 2007.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
7. Effect of Termination of Employment of Optionee (if different from that
set forth in Sections 8 and 10 of the Stock Option Agreement): All
provisions governing this option in connection with termination of the
Optionee's employment with the Company shall be governed by the Employment
Agreement.
<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies ICCE, Inc. (the "Company") of this
election to exercise the undersigned's stock option to purchase _________
shares of the Company's common stock (the "Common Stock"), pursuant to the
Stock Option Agreement (the "Agreement") between the undersigned and the
Company dated May ___, 1997. Accompanying this Notice is (1) a certified or a
cashier's check in the amount of $__________ payable to the Company, and/or (2)
_______________ shares of the Company's Common Stock presently owned by the
undersigned, and duly endorsed or accompanied by stock transfer powers, having
an aggregate Fair Market Value (as defined in the ICCE, Inc. 1997 Stock Option
Plan) as of the date hereof of $__________, such amounts being equal, in the
aggregate, to the purchase price per share set forth in Section 3 of the
Agreement multiplied by the number of shares being purchased hereby (in each
instance subject to appropriate adjustment pursuant to Section 5.2 of the
Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
____ day of ____________, _____.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
______________________________________________
Signature
______________________________________________
Name and Position (if other than Optionee)
ICCE, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), entered into as of this
19th day of May, 1997, is by and between ICCE, Inc., a Georgia corporation (the
"Company"), and Timothy Mann, Jr. (the "Optionee").
WHEREAS, on May 22, 1997, the Board of Directors of the Company adopted a
stock option plan known as the "ICCE, Inc. 1997 Stock Option Plan" (the
"Plan"), and recommended that the Plan be approved by the Company's
shareholders; and
WHEREAS, the Committee has granted the Optionee a stock option to purchase
the number of shares of the Company's common stock as set forth below, and in
consideration of the granting of that stock option the Optionee intends to
remain in the employ of the Company; and
WHEREAS, the Company and the Optionee desire to enter into a written
agreement with respect to such option in accordance with the Plan.
NOW, THEREFORE, as an employment incentive and to encourage stock
ownership, and also in consideration of the mutual covenants contained herein,
the parties hereto agree as follows.
1. Incorporation of Plan. This option is granted pursuant to the
provisions of the Plan and the terms and definitions of the Plan are
incorporated herein by reference and made a part hereof. A copy of the Plan
has been delivered to, and receipt is hereby acknowledged by, the Optionee.
2. Grant of Option. Subject to the terms, restrictions, limitations and
conditions stated herein, the Company hereby evidences its grant to the
Optionee, not in lieu of salary or other compensation, of the right and option
(the "Option") to purchase all or any part of the number of shares of the
Company's Common Stock (the "Stock"), set forth on Schedule A attached hereto
and incorporated herein by reference. The Option shall be exercisable in the
amounts and at the times specified on Schedule A or its attachments
(collectively referred to hereafter as "Schedule A"). The Option shall expire
and shall not be exercisable on or after the date specified on Schedule A or on
such earlier date as determined pursuant to Section 8, 9, or 10 hereof.
Schedule A states whether the Option is intended to be an Incentive Stock
Option.
3. Purchase Price. The price per share to be paid by the Optionee for
the shares subject to this Option (the "Exercise Price") shall be as specified
on Schedule A.
4. Exercise Terms. The Optionee must exercise the Option for at least
the lesser of 100 shares or the number of shares of Purchasable Stock as to
which the Option remains unexercised. If this Option is not exercised with
respect to all or any part of the shares subject to this Option prior to its
expiration, the shares with respect to which this Option was not exercised
shall no longer be subject to this Option.
5. Option Non-Transferable. No Option shall be transferable by an
Optionee other than by will or the laws of descent and distribution or, in the
case of non-Incentive Stock Options, pursuant to a Qualified Domestic Relations
Order. During the lifetime of an Optionee, Options shall be exercisable only
by such Optionee (or by such Optionee's guardian or legal representative,
should one be appointed).
6. Notice of Exercise of Option. This Option may be exercised by the
Optionee, or by the Optionee's administrators, executors or personal
representatives, by a written notice (in substantially the form of the Notice
of Exercise attached hereto as Schedule B) signed by the Optionee, or by such
administrators, executors or personal representatives, and delivered or mailed
to the Company as specified in Section 14 hereof to the attention of the
President or such other officer as the Company may designate. Any such notice
shall (a) specify the number of shares of Stock which the Optionee or the
Optionee's administrators, executors or personal representatives, as the case
may be, then elects to purchase hereunder, (b) contain such information as may
be reasonably required pursuant to Section 12 hereof, and (c) be accompanied by
(i) a certified or cashier's check payable to the Company in payment of the
total Exercise Price applicable to such shares as provided herein, (ii) shares
of Stock owned by the Optionee, and duly endorsed or accompanied by stock
transfer powers, having a Fair Market Value equal to the total Exercise Price
applicable to the shares then being purchased hereunder, or (iii) a certified
or cashier's check accompanied by the number of shares of Stock whose Fair
Market Value when added to the amount of the check equals the total Exercise
Price applicable to the shares then being purchased hereunder. Upon receipt of
any such notice and accompanying payment, and subject to the terms hereof, the
Company agrees to issue to the Optionee or the Optionee's administrators,
executors or personal representatives, as the case may be, stock certificates
for the number of shares specified in such notice registered in the name of the
person exercising this Option.
7. Adjustment in Option. The number of Shares subject to this Option,
the Exercise Price and other matters are subject to adjustment during the term
of this Option in accordance with Section 5.2 of the Plan.
8. Termination of Employment.
(a) Except as otherwise specified in Schedule A hereto, in the event of
the termination of the Optionee's employment with the Company or any of its
Subsidiaries, other than a termination that is either (i) for cause, (ii)
voluntary on the part of the Optionee and without written consent of the
Company, or (iii) for reasons of death or disability or retirement, the
Optionee may exercise this Option at any time within 30 days after such
termination to the extent of the number of shares which were purchasable
hereunder at the date of such termination.
(b) Except as specified in Schedule A attached hereto, in the event of a
termination of the Optionee's employment that is either (i) for cause or (ii)
voluntary on the part of the Optionee and without the written consent of the
Company, this Option, to the extent not previously exercised, shall terminate
immediately and shall not thereafter be or become exercisable.
(c) Unless and to the extent otherwise provided in Exhibit A hereto, in
the event of the retirement of the Optionee at the normal retirement date as
prescribed from time to time by the Company or any Subsidiary, the Optionee
shall continue to have the right to exercise any Options for shares which were
Purchasable at the date of the Optionee's retirement provided that, on the date
which is three months after the date of retirement, the Options will become
void and unexercisable unless on the date of retirement the Optionee enters
into a noncompete agreement with the Company and continues to comply with such
noncompete agreement. This Option does not confer upon the Optionee any right
with respect to continuance of employment by the Company or by any of its
Subsidiaries. This Option shall not be affected by any change of employment so
long as the Optionee continues to be an employee of the Company or one of its
Subsidiaries.
9. Disabled Optionee. Except as otherwise set forth in Schedule A, in
the event of termination of employment because of the Optionee's becoming a
Disabled Optionee, the Optionee (or his or her personal representative) may
exercise this Option, within a period ending on the earlier of (a) the last day
of the one year period following the Optionee's death or (b) the expiration
date of this Option, to the extent of the number of shares which were
Purchasable hereunder at the date of such termination.
10. Death of Optionee. Except as otherwise set forth in Schedule A with
respect to the rights of the Optionee upon termination of employment under
Section 8(a) above, in the event of the Optionee's death while employed by the
Company or any of its Subsidiaries or within three months after a termination
of such employment (if such termination was neither (i) for cause nor (ii)
voluntary on the part of the Optionee and without the written consent of the
Company), the appropriate persons described in Section 6 hereof or persons to
whom all or a portion of this Option is transferred in accordance with Section
5 hereof may exercise this Option at any time within a period ending on the
earlier of (a) the last day of the one year period following the Optionee's
death or (b) the expiration date of this Option. If the Optionee was an
employee of the Company or any of its Subsidiaries at the time of death, this
Option may be so exercised to the extent of the number of shares that were
Purchasable hereunder at the date of death. If the Optionee's employment
terminated prior to his or her death, this Option may be exercised only to the
extent of the number of shares covered by this Option which were Purchasable
hereunder at the date of such termination.
11. Date of Grant. This Option was granted by the Board of Directors of
the Company on the date set forth in Schedule A (the "Date of Grant").
12. Compliance with Regulatory Matters. The Optionee acknowledges that
the issuance of capital stock of the Company is subject to limitations imposed
by federal and state law and the Optionee hereby agrees that the Company shall
not be obligated to issue any shares of Stock upon exercise of this Option that
would cause the Company to violate law or any rule, regulation, order or
consent decree of any regulatory authority (including without limitation the
Securities and Exchange Commission) having jurisdiction over the affairs of the
Company. The Optionee agrees that the Optionee will provide the Company with
such information as is reasonably requested by the Company or its counsel to
determine whether the issuance of Stock complies with the provisions described
by this Section 12.
13. Restriction on Disposition of Shares. The Optionee hereby
acknowledges that the shares purchased pursuant to the exercise of an Incentive
Stock Option may lose their intended federal income tax benefits to the
Optionee in the event that the shares are transferred before the later to occur
of: (i) the date two years after the grant of the Incentive Stock Option, or
(ii) one year after the transfer of the shares to the Optionee pursuant to the
exercise of an Incentive Stock Option. The Optionee further acknowledges that
he or she is solely responsible for obtaining his or her own tax advice
relating to the exercise of an Incentive Stock Option and the disposition of
shares acquired through the exercise of an Incentive Stock Option.
14. Miscellaneous.
(a) This Agreement shall be binding upon the parties hereto and their
representatives, successors and assigns.
(b) This Agreement is executed and delivered in, and shall be governed by
the laws of, the State of Georgia.
(c) Any requests or notices to be given hereunder shall be deemed given,
and any elections or exercises to be made or accomplished shall be deemed made
or accomplished, upon actual delivery thereof to the designated recipient, or
three days after deposit thereof in the United States mail, registered, return
receipt requested and postage prepaid, addressed, if to the Optionee, at the
address set forth below and, if to the Company, to the executive offices of the
Company at Five Concourse Parkway, Suite 2700, Atlanta, Georgia 30328.
(d) This Agreement may not be modified except in a writing executed by
each of the parties hereto.
IN WITNESS WHEREOF, the Board of Directors of the Company has caused this
Stock Option Agreement to be executed on behalf of the Company and the
Company's seal to be affixed hereto and attested by the Secretary or an
Assistant Secretary of the Company, and the Optionee has executed this Stock
Option Agreement under seal, all as of the day and year first above written.
ICCE, Inc. OPTIONEE
By: /s/ Mark Strassman /s/ Timothy Mann, Jr.
Name: Mark Strassman Name: Timothy Mann, Jr.
Title: President Address:
ATTEST: 4633 Club Circle
Atlanta, Georgia 30319
_______________________________
Secretary/Assistant Secretary
[SEAL]<PAGE>
SCHEDULE A
TO
STOCK OPTION AGREEMENT
BETWEEN
ICCE, INC.
AND
TIMOTHY MANN, JR.
Dated: May 19, 1997
1. Number of Shares Subject to Option: 37,500 Shares.
2. This Option (Check one) [X] is [ ] is not an Incentive Stock Option.
3. Option Exercise Price: $8.00 per Share.
4. Date of Grant: May 19, 1997
5. Option Vesting Schedule:
Check one:
( ) Options are exercisable with respect to all shares on or after
the date hereof.
(X) Options are exercisable with respect to the number of shares
indicated below on or after the date indicated next to the
number of shares:*
No. of Shares Vesting Date
12,500 March 10, 1998
12,500 March 10, 1999
12,500 March 10, 2000
* All unvested Options shall vest and become exercisable upon a "Change in
Control" as defined in the Employment Agreement between Optionee and the
Company dated March 10, 1997 (the "Employment Agreement").
6. Option Exercise Period:
Check One:
(X) All options expire and are void unless exercised on or before
May 19, 2007.
( ) Options expire and are void unless exercised on or before the
date indicated next to the number of shares:
No. of Shares Expiration Date
7. Effect of Termination of Employment of Optionee (if different from that
set forth in Sections 8 and 10 of the Stock Option Agreement):
See the Employment Agreement.<PAGE>
SCHEDULE B
NOTICE OF EXERCISE
The undersigned hereby notifies ICCE, Inc. (the "Company") of this
election to exercise the undersigned's stock option to purchase _________
shares of the Company's common stock (the "Common Stock"), pursuant to the
Stock Option Agreement (the "Agreement") between the undersigned and the
Company dated May ___, 1997. Accompanying this Notice is (1) a certified or a
cashier's check in the amount of $__________ payable to the Company, and/or (2)
_______________ shares of the Company's Common Stock presently owned by the
undersigned, and duly endorsed or accompanied by stock transfer powers, having
an aggregate Fair Market Value (as defined in the ICCE, Inc. 1997 Stock Option
Plan) as of the date hereof of $__________, such amounts being equal, in the
aggregate, to the purchase price per share set forth in Section 3 of the
Agreement multiplied by the number of shares being purchased hereby (in each
instance subject to appropriate adjustment pursuant to Section 5.2 of the
Agreement).
IN WITNESS WHEREOF, the undersigned has set his hand and seal, this
____ day of ____________, _____.
OPTIONEE [OR OPTIONEE'S
ADMINISTRATOR,
EXECUTOR OR PERSONAL
REPRESENTATIVE]
______________________________________________
Signature
______________________________________________
Name and Position (if other than Optionee)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 3rd day of
September, 1997 (the "Effective Date"), by and between ICCE, INC., a Georgia
corporation, (the "Company") and LESTER E. GALLAGHER, an individual resident of
Pennsylvania (the "Executive") on the other hand.
WHEREAS, the Company has acquired all of the outstanding capital stock of
Executive's former employer, ACSYS Resources, Inc., a Pennsylvania corporation
("ACSYS"), pursuant to a merger effected in accordance with that certain
Agreement and Plan of Merger, dated September 3, 1997, by and among the
Company, certain shareholders of the Company, ASRI Merger Subsidiary, Inc.,
ACSYS and certain shareholders of ACSYS (the "Merger Agreement" and the
"Merger," respectively); and
WHEREAS, the Company anticipates a public offering of the Company's common
stock ("Common Stock") pursuant to a registration statement to be filed under
the Securities Act of 1933 (the "1933 Act") (the "IPO"); and
WHEREAS, Executive is expected to make a significant contribution to the
success of the Merger and the future success and development of the Company as
the Chief Financial Officer of the Company; and
WHEREAS, Executive is willing to render services to the Company on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE 1
EMPLOYMENT
Section 1.1 Term of employment. The term of Executive's employment
hereunder shall commence on the Effective Date hereof and continue for a period
of three (3) years, unless earlier terminated as provided in this Agreement.
At the end of the initial three year term, this Agreement shall automatically
renew for consecutive one year terms unless either party hereto gives written
notice to the other of its intent to terminate sixty (60) days prior to the end
of any term.
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed full time as the Chief Financial Officer (the "CFO") of the
Company. Executive shall devote his full time, energy, and skill to such
office and shall do and perform all services and acts necessary or advisable to
fulfill the duties of such office. In his capacity as an officer of the
Company, Executive shall report to the President ("President") of the Company,
and shall conduct and perform such additional services and activities as may be
determined from time to time by any of them. Executive's authority and
responsibility in the Company shall at all times be subject to the review and
discretion of the Board of Directors, who shall have the final authority to
make decisions regarding the business of the Company. Executive acknowledges
that he has a duty of loyalty to the Company and shall not engage in, directly
and indirectly, any other business or activity that could materially and
adversely affect the Company's business or the Executive's ability to perform
his duties under this Agreement, provided, however, that the Executive shall be
free to participate in board, civic and charitable activities so long as such
activities do not interfere with his duties and responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by Executive under
this Agreement, Company shall pay Executive as follows. Executive shall be
paid a minimum annual gross salary of one hundred twenty five thousand dollars
($125,000), payable bi-weekly. At the sole discretion of the Board of
Directors of the Company, Executive's annual gross salary may be increased from
time to time throughout the term of this Agreement. At no time during the term
hereof shall the Executive's base salary be decreased from the amount of the
base salary then in effect. Executive shall also be entitled to receive such
bonus as the Board of Directors may determine, up to a maximum amount equal to
15% of the Executive's then-current base salary.
Section 1.4 Benefits.
(a) Vacation. Executive shall be entitled to three weeks paid vacation
annually during the first two calendar years of his employment by the Company
and four weeks paid vacation during each calendar year thereafter. Any
vacation not used during any calendar year shall be forfeited, except that one
week's unused vacation may be carried forward to the year following the year in
which such vacation entitlement accrued.
(b) Life, Disability and Retirement Programs. Executive shall be
entitled to participate in any life, disability and retirement programs that
are generally offered to or provided for the senior management personnel of the
Company and its subsidiaries.
(c) Group Insurance. Executive shall be entitled to participate in such
group health and dental insurance programs (including spouse coverage) as may
from time to time be offered generally to all of the other members of the
senior management personnel of the Company and its subsidiaries.
Section 1.5 Stock Options.
(a) Option Grant. Upon the Effective Date of the IPO, the Company shall
grant to Executive options to purchase 66,229 shares of Common Stock (or such
other type of stock of the Company as is registered in the IPO). Such options
shall be granted at an exercise price equal to the IPO offering price for such
shares.
To the extent possible, all of the Options shall qualify as incentive stock
options under the Internal Revenue Code of 1986. All of the options to be
granted pursuant to this Section are referred to herein collectively as the
"Options" and shall be subject to the terms and conditions set forth below.
(b) Vesting and Exercise. One-third of the original amount of the
Options granted pursuant to Section 1.5(a) above shall vest on each of the
first three annual anniversaries of the date of grant. In addition, all
unvested Options shall vest and be immediately exercisable upon a Change in
Control (as defined below). All Options shall remain exercisable through the
tenth anniversary of the date of grant of such Option, at which time such
Options shall expire unless earlier terminated in accordance with the
provisions hereof.
(c) Return of Options and Repurchase of Shares.
(i) If the Executive voluntarily resigns his employment with the
Company for any reason other than Good Reason (as defined below), or is
terminated by the Company for Cause, all unvested options shall be canceled and
all then outstanding and exercisable Options shall remain exercisable in full
for a period of 120 days after the date of such written notice of voluntary
resignation or termination. At the Company's sole discretion, the Company may
purchase any unexercised Options from the Executive at a price per share equal
to the difference between the exercise price of such Options and the per share
Fair Market Value of the shares of Common Stock underlying such Options
determined as of or before the thirtieth (30th) day following the date such
written notice of voluntary resignation or termination was given with the Fair
Market Value of such shares of Common Stock to be determined in the manner set
forth in Subsection 1.5(d) below. Any such repurchase of shares by the Company
shall be accomplished within 30 days after such receipt of such notice of
resignation or termination.
(ii) In the event that Executive's employment with the Company shall
be terminated by the Company at any time without Cause or the Executive shall
resign for Good Reason, all then outstanding and unexercised Options shall vest
and become exercisable in full as of the date such notice of termination and
shall remain exercisable in full for a period of 120 days after the date such
notice to termination was given. At the Company's sole discretion the Company
may purchase any unexercised Options from the Executive at a price per share
equal to the difference between the exercise price of such Options and the per
share Fair Market Value of the shares of Common Stork underlying such Options
determined as of the date such written notice of voluntary resignation or
termination was given by the Company with the Fair Market Value of such shares
of Common Stock to be determined in the manner set forth in Subsection 1.5(e)
below. Any such repurchase of the shares of Common Stock shall be accomplished
within 30 days after the date such notice of termination was given by the
Company.
(d) The Fair Market Value of a share of Common Stock, on the date
specified by the Company shall mean (i) the closing sales price of the Common
Stock on that on the national securities exchange on which it is listed; (ii)
if the Common Stock is not traded on any national securities exchange, the
average of the closing high bid and low asked prices of the Common Stock on the
over-the-counter market on the day such value is to be determined, or in the
absence of closing bids on such day, the closing bids on the next preceding day
on which there were bids; (iii) if the Common Stock also is not traded on the
over-the-counter market, the fair market value as determined by an independent
financial appraiser acceptable to both the Company and Executive (or
Executive's personal representative) taking into account all relevant factors
including securities law or other transfer restrictions, minority discounts,
and other relevant factors.
(e) The Options granted hereunder shall be evidenced by a separate Option
Agreement to be entered into upon the date of the grant.
Section 1.6 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred for business travel, communications (including cell phone and pager),
entertainment and meals in connection with the performance of Executive's
duties under this Agreement in accordance with the Company's established
policies for reimbursement of business expenses. The Company expects Executive
to attend and participate in continuing education seminars and courses with
respect to the staffing industry and business management related to his duties
and the Company will reimburse all ordinary and necessary expenses of such
attendance and participation. Such continuing education courses and seminars
will be scheduled in conjunction with the President of the Company to assure
coordination of schedules.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidentiality. Executive recognizes the interest of the
Company in maintaining the confidential nature of its proprietary and other
business and commercial information. In connection therewith, Executive
covenants that during the term of his employment with Company under this
Agreement, and for a period of one (1) year thereafter, Executive shall not,
directly or indirectly, except as authorized by the Board of Directors,
publish, disclose or use for his own benefit or for the benefit of a business
or entity other than the Company or otherwise, any secret or confidential
matter, or proprietary or other information not in the public domain that was
acquired by Executive during his employment, relating to the Company's, the
Company's or any of its subsidiaries' businesses, operations, customers,
suppliers, products, employees, financial affairs or industrial practices,
technology, know-how or intellectual property or other similar information (the
"Proprietary Information").
Executive will abide by the Company's policies and regulations, as
established from time to time, for the protection of its Proprietary
Information. Executive acknowledges that all records, files, data, documents
and the like relating to suppliers, customers, costs, prices, systems, methods,
personnel, technology and other materials relating to the Company or its
affiliated entities shall be and remain the sole property of the Company and/or
such affiliated entity and shall, upon the request of the Company, turn over
all copies of such Proprietary Information to the Company (together with a
written statement certifying as to his compliance with the foregoing).
Section 2.2 Non-Solicitation of Customers and Non-Competition. During
the term of his employment with the Company, and for a period of one (1) year
after any termination of the Executive's employment for Cause or the
resignation of the Executive for any reason other than Good Reason (as defined
below), Executive shall not directly or indirectly, through one or more
intermediaries or otherwise, solicit, direct or appropriate, or attempt to
solicit, direct or appropriate any individual or entity which was, at the time
of termination of Executive's employment, a customer or client of the Company
for the purpose of providing a service or product to such customer or client
which is the same type of service or product offered or provided by the Company
at the time of termination of Executive's employment, with the Company.
During the Executive's employment with the Company, and for the two (2)
year period following the termination of Executive's employment with the
Company for Cause or the resignation of the Executive for any reason other than
Good Reason (as defined below), Executive shall not, without the prior written
consent of the Board of Directors, which consent may be withheld at the sole
discretion of the Board of Directors, engage or participate in, as a business
executive or equity owner, the management or conduct of any business or
enterprise that directly competes in any geographical area with any line of
business in which the Company was engaged in at the time of termination of
Executive's employment with the Company; provided, however, that nothing in
this Section 2.2 shall prohibit Executive from acquiring or holding, for
investment purposes only, less than five percent (5%) of the outstanding
publicly traded securities of any corporation which may compete directly or
indirectly with the Company.
Section 2.3 Non-Solicitation of Employees. During the term of
Executive's employment with the Company, and for a period of one (1) year
following the termination of Executive's employment with the Company for Cause
or the resignation of the Executive for any reason other than Good Reason (as
defined below) (the "Nonsolicitation Period"), Executive shall not, directly or
indirectly, through one or more intermediaries or otherwise, employ, induce,
solicit for employment, or assist others in employing, inducing or soliciting
for employment any individual who is at any time during the Nonsolicitation
Period an employee of the Company for the purpose of providing services that
are the same or similar to the types of services offered or engaged in by the
Company at the time of termination of Executive's employment with the Company.
Section 2.4 Trade Secrets. The Executive shall not, at any time, either
during the term of his employment or after any termination of employment, use
or disclose any Trade Secrets (as defined under applicable law) of the Company
or its subsidiaries, except in fulfillment of his duties as the Executive
during his employment, for so long as the pertinent information or data remain
Trade Secrets, whether or not the Trade Secrets are in written or tangible
form.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. Executive's employment may be
terminated by the Company by giving notice during the term of this Agreement
upon the occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive
incapable of performing his duties for more than one hundred twenty (120)
calendar days (termination under this Section 3.1(a) shall be deemed
termination without Cause);
(b) for any reason following a determination by the Board of
Directors to terminate Executive's employment (termination under this Section
3.1(b) shall be deemed termination without Cause); or
(c) "for Cause", which for purposes of this Agreement shall mean
that the Executive shall have:
(i) committed an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment with the
Company which has a material adverse effect upon the Company;
(ii) inflicted intentional wrongful material damage to any
material asset of the Company or the Company;
(iii) intentionally and wrongfully violates Article II of this
Agreement, which violation has a material adverse effect upon the Company;
(iv) been convicted of a felony or any similar crime carrying
a prison term of at least one year (regardless of whether imprisonment is
actually imposed); or
(v) a habitual and debilitating use of alcohol or drugs.
(vi) failed to meet performance expectations, as determined
and articulated by the Company's Board of Directors; provided, however, that in
the event of this subsection (vi) being the sole reason for a termination for
Cause, Executive shall have the cure provisions and rights provided for in
Section 3.1(d) hereof.
(d) In the event of a determination by the Company's Board of
Directors that the Executive has failed to meet performance expectations, the
Company shall furnish to Executive in writing a notice of proposed termination
setting forth a specific statement of the deficiencies in his performance.
Executive shall then have a period of ninety (90) days after the giving of such
written notice of proposed termination by the Company in which to attempt to
effect a cure of the specified deficiencies. If at the end of such ninety (90)
day period no such cure has been effected to the reasonable satisfaction of the
Board of Directors of the Company, in their sole discretion, then Executive's
employment shall be terminated as of the end of such ninety (90) day period.
The Company shall be obligated to provide to Executive only one such notice of
proposed termination, and if subsequent to effecting a cure of specified
deficiencies the Executive is determined by the Board of Directors to have
again failed to meet performance expectations, then his employment may be
terminated immediately upon the Company's giving of notice of termination to
Executive which specifies his deficiencies in performance.
Section 3.2 Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without the express written consent of Executive, the occurrence of
any of the following events unless such events are fully corrected within 30
days following written notification by Executive to the Company that he intends
to terminate his employment hereunder for one of the reasons set forth below:
(a) a material breach by the Company of any material provision of
this Agreement, including, but not limited to, the assignment to Executive of
any duties inconsistent with Executive's position in the Company or a material
adverse alteration in the nature or status of Executive's responsibilities;
(b) the Company's requiring the Executive to be based anywhere other
than the Philadelphia metropolitan area; or
(c) the occurrence of a "Change in Control" as defined below.
For purposes of this Agreement a "Change in Control" shall mean an event
as a result of which: (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (A) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (B) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than 30% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date of the
Merger constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66-2/3% of the directors
then still in office who are either directors at the date of the Merger or
whose election or nomination for election was previously so approved) ceased
for any reason to constitute a majority of the Board of the Company then in
office; or (iv) the Company is liquidated or dissolved or adopts a plan of
liquidation, provided, however, that a Change in Control shall not include the
Merger.
Section 3.3 Severance. For purposes of this Agreement, Executive's
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause.
(i) If Executive is terminated without Cause prior to the IPO,
Executive shall be entitled to severance pay of $50,000, payable in a lump sum
on the date of such termination;
(ii) If Executive is terminated without Cause or resigns for
Good Reason after the IPO or if the Executive resigns for Good Reason at any
time due to a Change in Control, Executive shall be entitled to severance pay
of a lump sum equal to three times his annual salary then in effect.
(b) Voluntary Termination. Executive shall not receive any
severance pay if he voluntarily resigns his employment with the Company for any
reason other than Good Reason unless such severance pay is approved by the
Board of Directors of the Company in its sole discretion. Executive shall
provide a minimum of thirty (30) days prior notice to the President of his
resignation. In the event Executive shall provide thirty (30) days prior
written notice of his intent to resign, the Company may accept such resignation
effective as of any date during such thirty (30) day period as the Company
deems appropriate, provided that Executive shall receive from the Company his
salary and be entitled to participate at the Company's expense in any Company
sponsored benefit programs in which he was a participant as of the effective
date of his resignation for the duration of such thirty (30) day period.
(c) For Cause. Executive shall not be entitled to any severance pay
whatsoever if his employment is terminated "for Cause" pursuant to Section
3.1(c) of this Agreement, unless severance pay is approved by the Board of
Directors of the Company in its sole discretion, provided, however, that the
Executive shall receive such annual salary that is accrued but unpaid up to the
date of such termination for Cause. If termination is for Cause pursuant to
Section 3.1(b)(vi), and is other than pursuant to a Change in Control, then
Executive shall be entitled to severance equal to pay for the remainder of the
then current term of this Agreement, or equal to one year's salary at his then
current rate, whichever is greater.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes
and withholdings as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
Section 4.3 Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the Commonwealth of Pennsylvania, without giving effect to the principles of
conflict of laws of such Commonwealth.
Section 4.4 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances shall not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal shall
be reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement
to a party's execution and delivery of this Agreement, such provision shall not
be reformed unless prior to any reformation that party agrees to be bound by
the reformation.
Section 4.5 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between
the parties with respect to the employment of Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by all parties hereto.
Section 4.6 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any Successor of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor" shall mean any successor
in interest, including, without limitation, any entity, individual or group of
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company, as the case may be, whether by sale, merger,
consolidation, reorganization or otherwise.
(b) The Company shall require any Successor to agree at the time of
becoming a Successor to perform this Agreement to the same extent as the
original parties would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
heirs, distributes and legatees.
(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
in this Section 4.6.
Section 4.7 Captions. The captions in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.8 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive, the Company. No waiver by a party
hereto at any time of any breach by another party hereto or compliance with any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provision or conditions at
the same or at any prior or subsequent time.
Section 4.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be in original but all of which
together will constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company":
ICCE, Inc. "Executive"
By:/s/ Mark Strassman /s/ Lester E. Gallagher
Signature Lester E. Gallagher
Mark Strassman
Print Name
President
Print Title
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of May 16, 1997
(the "Effective Date"), by and between ICCE, Inc., a Georgia corporation, (the
"Company"), and (A), an individual resident of (B) (the "Executive").
WHEREAS, Executive was an executive officer and shareholder of (C), which
was merged to form a subsidiary of the Company;
WHEREAS, the Company recognizes the contributions of Executive in such
capacity;
WHEREAS, Executive is expected to make a significant contribution to the
success and development of the Company; and
WHEREAS, Executive is willing to render services to the Company and/or one
or more of its subsidiaries on the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by Executive and the Company
including, without limitation, the promises and covenants of the parties set
forth herein, the parties hereto, intending to be legally bound, hereby agree
as follows:
ARTICLE I
EMPLOYMENT
Section 1.1 Term of Employment. The term of Executive's employment
hereunder shall commence on the Effective Date hereof and continue for a period
of three (3) years, unless earlier terminated as provided in this Agreement.
At the end of the initial three year term, this Agreement shall automatically
renew for consecutive one year terms unless either party hereto gives written
notice to the other of its intent to terminate sixty (60) days prior to the end
of any term.
Section 1.2 Duties and Responsibilities of Executive. Executive is
hereby employed full time as the (D) of the Company. Executive shall devote
his full time, energy, and skill to such office and shall do and perform all
services and acts necessary or advisable to fulfill the duties of such office.
In his capacity as an officer of the Company, Executive shall report to the
Board of Directors of the Company, and shall conduct and perform such
additional services and activities as may be determined from time to time by
such superior officer which are normal and customary for a similar officer of a
similarly situated company. Executive's authority and responsibility in the
Company shall at all times be subject to the review and discretion of the Board
of Directors, who shall have the final authority to make decisions regarding
the business of the Company. Executive acknowledges that she has a duty of
loyalty to the Company and shall not engage in, directly and indirectly, any
other business or activity that could materially and adversely affect the
Company's business or the Executive's ability to perform his duties under this
Agreement, provided, however, that the Executive shall be free to participate
in board, civic and charitable activities so long as such activities do not
interfere with his duties and responsibilities hereunder.
Section 1.3 Compensation. For services to be rendered by Executive
under this Agreement, Company shall pay Executive as follows:
Executive shall be paid an annual base salary of $200,000, plus bonus
compensation in an amount to be agreed upon by Company and Executive. At the
sole discretion of the Board of Directors of the Company, Executive's annual
salary may be increased from time to time.
Section 1.4 Benefits.
(a) Vacation. Executive shall be entitled to six weeks paid
vacation annually during his employment by the Company hereunder. Any vacation
not used during any calendar year shall be forfeited, except that one week's
unused vacation may be carried forward to the year following the year in which
such vacation entitlement accrued.
(b) Life, Disability and Retirement Programs. Executive shall be
entitled to participate in any life, disability and retirement programs that
are generally offered to or provided for the senior management personnel of the
Company and its subsidiaries.
(c) Group Insurance. Executive shall be entitled to participate in
such group health and dental insurance programs (including spouse coverage) as
may from time to time be offered generally to all of the other members of the
senior management personnel of the Company and its subsidiaries.
Section 1.5 Business Expenses. Executive shall be entitled to
reimbursement of all ordinary and necessary business expenses reasonably
incurred for business travel, communications (including cell phones and pager),
entertainment and meals in connection with the performance of Executive's
duties under this Agreement in accordance with the Company's established
policies for reimbursement of business expenses. The Company expects Executive
to attend and participate in continuing education seminars and courses with
respect to the staffing industry and business management related to his duties,
and the Company will reimburse all ordinary and necessary expenses of such
attendance and participation. Such continuing education courses and seminars
will be scheduled in conjunction with the other officers of the Company to
assure coordination of schedules.
ARTICLE II
COVENANTS OF EXECUTIVE
Section 2.1 Confidentiality. Executive recognizes the interest of the
Company in maintaining the confidential nature of its proprietary and other
confidential business and commercial information. In connection therewith,
Executive covenants that during the term of Executive's employment with Company
under this Agreement, and for a period of two (2) years thereafter, Executive
shall not, directly or indirectly, except as authorized by the Board, publish,
disclose or use for Executive's own benefit or for the benefit of a business or
entity (other than the Company) or otherwise, any secret or confidential
matter, or proprietary or other information not in the public domain that was
acquired by Executive during Executive's employment, relating to the Company's
or any of its subsidiaries' businesses, operations, customers, suppliers,
products, employees, financial affairs or industry practices, technology,
know-how or intellectual property or other similar information (the
"Proprietary Information").
Notwithstanding the foregoing, to the extent Proprietary Information
constitutes a Trade Secret (as that term is defined below, or otherwise defined
under applicable law), then Executive shall not, at any time, either during the
term of Executive's employment or after any termination of employment, use or
disclose any Trade Secrets of the Company or any of its subsidiaries, except in
fulfillment of Executive's duties as the Executive during Executive's
employment, for so long as the pertinent information or data remain Trade
Secrets, whether or not the Trade Secrets are in written or tangible form. As
used herein, "Trade Secret" means information which derives economic value,
actual or potential, from not being generally known to, or readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use, and which is subject to reasonable efforts by the
Company to maintain the secrecy thereof.
Executive will abide by the Company's policies and regulations, as
established from time to time, for the protection of its Proprietary
Information. Executive acknowledges that all records, files, data, documents
and the like relating to suppliers, customers, costs, prices, systems, methods,
personnel, technology and other materials relating to the Company or its
affiliated entities shall be and remain the sole property of the Company and/or
such affiliated entity and shall, upon the request of the Company, turn over
all copies of such Proprietary Information to the Company (together with a
written statement certifying as to Executive's compliance with the foregoing).
Section 2.2 Non-Solicitation of Customers. During the term of
Executive's employment with the Company, and for a period of two (2) years
thereafter, unless Executive is terminated other than for Cause (as defined
below) or Executive resigns for Good Reason (as defined below), Executive shall
not directly or indirectly, through one or more intermediaries or otherwise,
solicit or attempt to solicit Customers to induce or encourage them to acquire
or obtain from anyone other than the Company, service competitive with or
substitute for any Company Service. For purposes of this Section, a "Customer"
refers to any person or group of persons with whom Employee had direct material
contact with regard to the selling, delivery or support of Company Services,
including servicing such person's or group's account, during the two (2) year
period preceding termination of Executive's employment; and "Company Services"
refers to the services that the Company or any of its subsidiaries offered or
sold within six (6) months prior to the date of termination of Executive's
employment. For purposes of this Article II, the "Restricted Territory" shall
be the area that is within thirty (30) miles of the city limits of (E). In the
event Executive manages additional offices for the Company, the Executive and
the Company agree to amend this Agreement, by execution of an amendment
pursuant to Section 4.5 hereof, to change the Restricted Territory accordingly.
Section 2.3 Non-Compete. During the term of Executive's employment
with the Company, and for a period of two (2) years thereafter, unless
Executive is terminated other than for Cause (as defined below) or Executive
resigns for Good Reason (as defined below), Executive shall not, without the
prior written consent of the Board of Directors, which consent may be withheld
at the sole discretion of the Board of Directors, engage or participate within
the Restricted Territory, as a business executive, employee, consultant, or
equity owner of any business or enterprise that directly competes with any line
of business (i) in which the Company or any of its subsidiaries was engaged at
the time of termination of Executive's employment with the Company and (ii) in
which Executive was materially involved or responsible for; provided, however,
that nothing in this Section 2.3 shall prohibit Executive from acquiring or
holding, for investment purposes only, five percent (5%) or less of the
outstanding publicly traded securities of any corporation.
Section 2.4 Non-Solicitation of Employees. During the term of
Executive's employment with the Company, and for a period of two (2) years
thereafter, unless Executive is terminated other than for Cause (as defined
below) or Executive resigns for Good Reason (as defined below), Executive shall
not, directly or indirectly, through one or more intermediaries or otherwise,
employ, induce, solicit for employment, or assist others in employing, inducing
or soliciting for employment any individual who is at any time during such
period an employee of the Company or any of its subsidiaries for the purpose of
providing services within the Restricted Area that are the same or similar to
the types of services offered or engaged in by the Company or any of its
subsidiaries at the time of termination of Executive's employment with the
Company.
ARTICLE III
TERMINATION OF EMPLOYMENT
Section 3.1 Termination by Company. Executive's employment may be
terminated by the Company by giving notice during the term of this Agreement
upon the occurrence of one or more of the following events:
(a) Executive's death or disability which renders Executive
incapable of performing his duties for more than one hundred twenty (120)
calendar days (termination under this Section 3.1(a) shall be deemed
termination without Cause);
(b) for any reason following a determination by the Board of
Directors to terminate Executive's employment (termination under this Section
3.1(b) shall be deemed termination without Cause); or
(c) "for Cause", which for purposes of this Agreement shall mean
that the Executive shall have:
(i) committed an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his employment with the
Company which has a material adverse effect upon the Company;
(ii) inflicted intentional wrongful material damage to any
material asset of the Company or the Company;
(iii) intentionally and wrongfully violates Article II of this
Agreement, which violation has a material adverse effect upon the Company;
(iv) been convicted of a felony or any similar crime carrying a
prison term of at least one year (regardless of whether imprisonment is
actually imposed);
(v) a habitual and debilitating use of alcohol or drugs; or
(vi) failed to meet performance expectations, as determined and
articulated by the Company's Board of Directors; provided, however, that in the
event of this subsection (vi) being the sole reason for a termination for
Cause, Executive shall have the cure provisions and rights provided for in
Section 3.1(d) hereof.
(d) In the event of a determination by the Company's Board of Directors
that the Executive has failed to meet performance expectations, the Company
shall furnish to Executive in writing a notice of proposed termination setting
forth a specific statement of the deficiencies in his performance. Executive
shall then have a period of ninety (90) days after the giving of such written
notice of proposed termination by the Company in which to attempt to effect a
cure of the specified deficiencies. If at the end of such ninety (90) day
period no such cure has been effected to the reasonable satisfaction of the
Board of Directors of the Company, then Executive's employment shall be
terminated as of the end of such ninety (90) day period. The Company shall be
obligated to provide to Executive only one such notice of proposed termination,
and if subsequent to effecting a cure of specified deficiencies the Executive
is determined by the Board of Directors to have again failed to meet
performance expectations, then his employment may be terminated immediately
upon the Company's giving of notice of termination to Executive which specifies
his deficiencies in performance.
Section 3.2 Good Reason. For purposes of this Agreement, "Good Reason"
shall mean, without the express written consent of Executive, the occurrence of
any of the following events unless such events are fully corrected within 30
days following written notification by Executive to the Company that she
intends to terminate his employment hereunder for one of the reasons set forth
below:
(a) a material breach by the Company of any material provision of
this Agreement, the Registration Rights Agreement to which Executive is a
party of even date herewith, or the Shareholders Agreement to which
Executive is a party of even date herewith, including, but not limited to,
the assignment to Executive of any duties inconsistent with Executive's
position in the Company or a material adverse alteration in the nature or
status of Executive's responsibilities;
(b) the relocation of Executive out of the (E) area; or
(c) the occurrence of a "Change in Control" as defined below.
For purposes of this Agreement a "Change in Control" shall mean an event
as a result of which: (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange At")), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 30% of the total voting power of the voting stock of
the Company; (ii) the Company consolidates with, or merges with or into another
corporation or sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of its assets, or substantially all of the assets
of or all of the Company's interest in (C), to any person or any corporation
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting stock of the Company
is changed into or exchanged for cash, securities or other property, other than
any such transaction where (a) the outstanding voting stock of the Company is
changed into or exchanged for (x) voting stock of the surviving or transferee
corporation or (y) cash, securities (whether or not including voting stock) or
other property, and (b) the holders of the voting stock of the Company
immediately prior to such transaction own, directly or indirectly, not less
than 30% of the voting power of the voting stock of the surviving corporation
immediately after such transaction; or (iii) individuals who at the date of the
Merger constitute the Board of the Company (together with any new directors
whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of 66-2/3% of the directors
then still in office who were directors at the date of the Merger or whose
election or nomination for election was previously so approved) ceased for any
reason to constitute a majority of the Board of the Company then in office; or
(iv) the Company is liquidated or dissolved or adopts a plan of liquidation;
provided, however, that a Change in Control shall not include the Merger.
Section 3.3 Severance. For purposes of this Agreement, Executive's
entitlement to any severance payments upon termination of his employment shall
be as set forth below:
(a) Termination Without Cause.
(i) Executive may not be terminated prior to the IPO;
(ii) If Executive is terminated without Cause or resigns for
Good Reason at any time, Executive shall be entitled to severance pay of a lump
sum equal to three times the sum of (i) his annual salary then in effect plus
(ii) the amount of his bonus as calculated based on the results of operations
for the twelve months prior to such termination.
(b) Voluntary Termination. If Executive voluntarily resigns for
reason other than Good Cause, Executive shall receive a lump sum severance
payment equal to his then current annual salary. Executive shall provide a
minimum of thirty (30) days prior notice to the Chief Executive Officer of his
resignation. In the event Executive shall provide thirty (30) days prior
written notice of his intent to resign, the Company may accept such resignation
effective as of any date during such thirty (30) day period as the Company
deems appropriate, provided that Executive shall receive from the Company his
salary and be entitled to participate at the Company's expense in any Company
sponsored benefit programs in which she was a participant as of the effective
date of his resignation for the duration of such thirty (30) day period.
(c) For Cause. Executive shall not be entitled to any severance pay
whatsoever if his employment is terminated "for Cause" pursuant to Section
3.1(c) of this Agreement, unless severance pay is approved by the Board of
Directors of the Company in its sole discretion, provided, however, that the
Executive shall receive such annual salary that is accrued but unpaid up to the
date of such termination for Cause. If termination is for Cause pursuant to
Section 3.1(c)(vi), then Executive shall be entitled to severance equal to pay
for the remainder of the then current term of this Agreement, or equal to one
year's salary at his then current rate, whichever is greater.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes
and withholdings as shall be required pursuant to any applicable law, rule or
regulation.
Section 4.2 Notice. For purposes of this Agreement, all communications
including, without limitation, notices, consents, requests or approvals,
provided for herein shall be in writing and shall be deemed to have been duly
given when personally delivered or five (5) business days after having been
mailed by United States registered mail or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office or to Executive at
his principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except the
notices of change of address shall be effective only upon receipt.
Section 4.3 Validity. It is not the intent of any party hereto to
violate any public policy of any jurisdiction in which this Agreement may be
enforced. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances shall not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal shall
be reformed to the extent (and only to the extent) necessary to make it valid,
enforceable and legal; provided, however, if the provision so held to be
invalid, unenforceable or otherwise illegal constituted a material inducement
to a party's execution and delivery of this Agreement, then such provision
shall not be reformed unless prior to any reformation that party agrees to be
bound by the reformation.
Section 4.4 Entire Agreement. This Agreement supersedes any other
agreements, oral or written, between the parties with respect to the subject
matter hereof, and contains all of the agreements and understandings between
the parties with respect to the employment of Executive by the Company. Any
waiver or modification of any term of this Agreement shall be effective only if
it is set forth in a writing signed by both parties hereto.
Section 4.5 Successors and Binding Agreement.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any Successor of or to the Company, but shall not otherwise be
assignable or delegable by the Company. "Successor" shall mean any successor
in interest, including, without limitation, any entity, individual or group of
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Company, as the case may be, whether by sale, merger,
consolidation, reorganization or otherwise.
(b) The Company shall require any Successor to agree at the time of
becoming a Successor to perform this Agreement to the same extent as the
original parties would be required if no succession had occurred.
(c) This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
heirs, distributee and legatees.
(d) This Agreement is personal in nature and neither of the parties
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided
in this Section 4.5.
Section 4.6 Captions. The captions in this Agreement are solely for
convenience of reference and shall not be given any effect in the construction
or interpretation of this Agreement.
Section 4.7 Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in a writing signed by Executive and the Company. No waiver by a
party hereto at any time of any breach by another party hereto or compliance
with any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provision or conditions
at the same or at any prior or subsequent time.
Section 4.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
"Company":
ICCE, Inc. "Executive"
By:__________________ _______________________
Signature
Print Residence Address:
Print Name
________________________________
Print Title ________________________________
<PAGE>
SCHEDULE TO FORM OF EMPLOYMENT AGREEMENT
(A) (i) David C. Cooper
(ii) Mary Beth Chase
(B) (i) Georgia
(ii) Maryland
(C) (i) David C. Cooper & Associates, Inc. and DCCA
Professional Temporaries, Inc.
(ii) Infinity Enterprises, Inc.
(D) (i) Chairman of the Board
(ii) Chief Development Officer
(E) (i) Atlanta, Georgia
(ii) Washington, D.C.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT ("Agreement")
dated as of September 3, 1997, is made by and among ICCE, Inc., a Georgia
corporation (the "Company"), and the holders of the capital stock of the
Company listed in Schedule I attached hereto (the "Shareholders").
W I T N E S S E T H:
WHEREAS, the Shareholders are the owners of the shares of capital stock of
the Company as listed on Schedule I hereto (the "Merger Shares"); and
WHEREAS, certain of the Shareholders received the Merger Shares in a
merger pursuant to the terms of that certain Agreement and Plan of
Reorganization, dated as of April 16, 1997 (the "Reorganization Agreement"), by
and among David C. Cooper & Associates, Inc., DCCA Professional Temporaries,
Inc., EKT, Inc., Infinity Enterprises, Inc., Cooper Acquisition, Inc., DCCA
Acquisition, Inc., EKT Acquisitions, Inc., and Infinity Acquisition, Inc. (the
"Original Merger Agreement" and the "Original Merger," respectively);
WHEREAS, certain of the Shareholders received the Merger Shares in a
merger pursuant to the terms of that certain Agreement and Plan of
Reorganization, dated as of April 1997, by and among the Company, Cama of
Tampa, Inc., Cama Acquisition, Inc. and Stephen S. Tutwiler (the "Cama Merger
Agreement" and the "Cama Merger," respectively);
WHEREAS, certain of the Shareholders received the Merger Shares in a
merger pursuant to the terms of that certain Agreement and Plan of Merger,
dated as of July 25, 1997, by and among the Company, RFCG Merger Subsidiary,
Inc., Rylan Forbes Consulting Group, Inc. and the shareholders of Rylan Forbes
Consulting Group, Inc. (the "Rylan Merger Agreement" and the "Rylan Merger,"
respectively);
WHEREAS, certain of the Shareholders received the Merger Shares in a
merger pursuant to the terms of that certain Agreement and Plan of Merger,
dated as of September 3, 1997, by and among the Company, ASRI Merger
Subsidiary, Inc., ACSYS Resources, Inc. and the Shareholders of ACSYS
Resources, Inc. (the "ACSYS Merger Agreement" and the "ACSYS Merger,"
respectively. The ACSYS Merger Agreement, together with the Original Merger
Agreement, the Cama Merger Agreement and the Rylan Merger Agreement shall
hereinafter be referred to as the "Merger Agreements" and the ACSYS Merger,
together with the Original Merger, the Cama Merger and the Rylan Merger, shall
hereinafter be referred to as the "Mergers")
WHEREAS, in connection with the Original Merger, certain of the
Shareholders entered into a Registration Rights Agreement, dated as of May 16,
1997, by and among the Company and the shareholders listed on Schedule I
thereto (the "Original Registration Rights Agreement");
WHEREAS, in connection with the Cama Merger and the Rylan Merger, certain
additional shareholders joined in and became parties to the Original
Registration Rights Agreement;
<PAGE>
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the ACSYS Merger Agreement that this Agreement be executed by
the parties hereto, and the parties are willing to execute this Agreement and
to be bound by the provisions hereof;
WHEREAS, in consideration of the transactions contemplated by the ACSYS
Merger Agreement, the parties to the Original Registration Rights Agreement
desire to amend and restate the Original Registration Rights Agreement as set
forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and promises
contained herein, in the Merger Agreements and in the other agreements
contemplated thereby, and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Shareholders and the Company,
each with the other, do hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
respective meanings:
"Common Stock" means the common stock, no par value per share, of the
Company, as authorized by the Company's Articles of Incorporation.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Merger Shares" means the shares of Common Stock issued by the Company in
connection with the Mergers to the Shareholders listed on Schedule I hereto.
If the Company declares a stock split, stock dividend or other distribution of
capital stock in respect of, or issues capital stock in replacement of or
exchange for, the Merger Shares, such shares shall also be Merger Shares
subject to this Agreement.
"Immediate Family" means, with respect to any natural person, each of such
person's spouse, father, mother, siblings, and children.
"Permitted Transferee" means a person who receives shares in the Company
from a Shareholder pursuant to any of the following transactions: (i) any
transfer by gift to a trust in respect of which such Shareholder serves as
trustee; provided however, that the trust instrument governing such trust shall
provide that such Shareholder, as trustee, shall retain sole and exclusive
control over the voting and disposition of such shares until the termination of
this Agreement; (ii) any sale or transfer to the Company or to one or more of
the Shareholders; (iii) any transfer to a member of such Shareholder's
Immediate Family; or (iv) any transfer approved by all members of the Company's
Board of Directors comprising at least seven members.
"Person" means any natural person or any corporation, partnership, trust
or other legal entity.
"Primary Offering" means an Underwritten Public Offering by the Company
pursuant to which the Company receives gross proceeds for its own account of
not less than $10,000,000.
"Registrable Securities" means the Merger Shares held by the Shareholders.
The term "Registrable Securities" does not include shares of capital stock of
the Company which have been registered, as defined below, and sold pursuant to
such registration or which have been sold pursuant to Rule 144 under the
Securities Act.
The terms "register," "registered", and "registration" refer to a
registration of a transaction effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or order
by the Commission of the effectiveness of such registration statement.
"Secondary Offering" means an Underwritten Public Offering by the Company,
but not including a Primary Offering or an offering effected pursuant to
Section 2.1 or 2.3.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Underwritten Public Offering" means a public offering of Common Stock for
cash which is offered and sold in a registered transaction on a firm commitment
underwritten basis through one or more broker-dealers registered with the
Commission, all pursuant to an underwriting agreement between the Company and
any selling shareholders on the one hand and such underwriters on the other
hand.
ARTICLE II
REGISTRATION RIGHTS
2.1 Demand Registration Rights.
(a) Company's Obligation. From and after 90 days after the date hereof,
upon receiving a notice from the Shareholders holding at least twenty-five
percent (25%) of the Merger Shares setting forth a request for registration of
a portion of the Registrable Securities of such holders, accompanied by either
(i) the written consent of (a) David C. Cooper, (b) either Mark E. Strassman or
Beth Monroe-Chase and (c) either Edward S. Baumstein or Harold Sauer to a
registration pursuant to such request, or (ii) a written valuation from either
J.C. Bradford & Co., Robert W. Baird & Co. Incorporated, or other reputable
investment banking firm that is a member of the New York Stock Exchange which
opines that the value of the Company in an offering made pursuant to such
request (before accounting for any proceeds received by the Company in any such
offering and without regard to the value of any shares issued by the Company as
consideration in any acquisition completed after the date hereof) would be
$100,000,000 or higher, the Company shall:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all Shareholders who did not join in such notice
to the Company; and
(ii) shall, as soon as practicable, file the necessary registration
statements with the appropriate state and federal securities agencies, and
shall use its best efforts to effect, as soon as practicable, but in any event
within ninety (90) days of receipt of such notice, all such registrations,
qualifications and compliances (including, without limitation, the execution of
an undertaking to file post-effective amendments, appropriate qualifications
under the applicable blue sky or other state securities laws and appropriate
compliance with exemptive regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such requesting Shareholders' Registrable Securities as is specified in such
request, together with all or such portion of the Registrable Securities of any
other Shareholders joining in such request as is specified in a written request
received by the Company within ten (10) business days after such written notice
is given.
(b) Underwriting. The requesting Shareholders shall include in their
request made pursuant to Section 2.1 the name of the managing underwriter or
underwriters, if any, that the majority in interest of such requesting
Shareholders would propose to employ in connection with the public offering
proposed to be made pursuant to the registration requested; provided that if
the Board of Directors reasonably objects to any managing underwriter or
underwriters proposed by the requesting Shareholders, the requesting
Shareholders shall propose another managing underwriter or underwriters that is
or are reasonably acceptable to the Board of Directors. The Company shall
include in the written notice to be given by the Company to the other
Shareholders pursuant to Section 2.1 the name or names of such underwriter or
underwriters to be employed. If the sale proposed by the requesting
Shareholders is to be effected pursuant to an Underwritten Public Offering, the
right of any Shareholder to registration pursuant to Section 2.1 shall be
conditioned upon such Shareholder's participation in such underwriting and the
inclusion of such Shareholder's Registrable Securities in the underwriting to
the extent requested (unless otherwise mutually agreed by a majority in
interest of the requesting Shareholders and such Shareholder) as provided
herein. The Company shall (together with all Shareholders proposing to
distribute their securities through such underwriting) use its best efforts to
enter into an underwriting agreement containing terms of the underwriting as
agreed upon between the Company and such underwriters selected for such
underwriting in the manner set forth above. The Company and the requesting
Shareholders will take such actions as are necessary to comply with the terms
and obligations of such underwriting agreement and will offer such underwriters
and their respective representatives full access to all information reasonably
requested in connection with their "due diligence" review of the Company and
its operations. Notwithstanding any other provisions of Section 2.1, if, in
connection with an Underwritten Public Offering, the managing underwriter
advises the Company or the requesting Shareholders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the requesting Shareholders shall so advise the Company (or vice versa) and all
Shareholders whose shares would otherwise be registered and underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated as follows:
(i) first to the Shareholders that demanded the registration pursuant to
Section 2.1(a) (the "Demand Shareholders") in proportion, as nearly as
practicable, to the number of shares requested to be registered, (ii) second to
any Shareholders who have elected to participate in the registration (other
than the Demand Shareholders) in proportion, as nearly as practicable, to the
number of shares requested to be registered; and (iii) to shares to be offered
by the Company. No Registrable Securities excluded from the underwriting by
reason of the underwriter's marketing limitation shall be included in such
registration. If any Shareholder disapproves of the terms of an Underwritten
Public Offering, he may elect to withdraw therefrom by written notice to the
Company, the managing underwriter and the requesting Shareholders. The
Registrable Securities so withdrawn shall also be withdrawn from registration;
provided, however, that, if by the withdrawal of such Registrable Securities a
greater number of Registrable Securities held by other Shareholders may be
included in such Underwritten Public Offering (subject to any limitation
imposed by the underwriters), then the requesting Shareholders shall offer to
all Shareholders who have included Registrable Securities in the registration
the right to include additional shares in the same proportion used in effecting
the limitation referred to above in this Section 2.1(b).
(c) Postponement of Registration on Request. The Company shall be
entitled to postpone for a reasonable period of time but not exceeding sixty
(60) days the filing of any registration statement otherwise required to be
prepared and filed by it pursuant to this Section 2.1 if the Company
determines, in good faith and in the exercise of its reasonable judgment, that
such action would materially interfere with any material financing,
acquisition, corporate reorganization or other material transaction involving
the Company.
(d) Additional Shares to be Registered. The Company shall be entitled to
include in any registration statement referred to in this Section 2.1, for sale
in accordance with the method of disposition specified by the requesting
Shareholders, shares of Common Stock to be sold by the Company for its own
account, or other shareholders for their own account, except as and to the
extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an Underwritten Public Offering), such inclusion would
result in more than 33% of the Registrable Securities requested to be sold
being excluded from the offering or would materially adversely affect the
marketing of such Registrable Securities to be sold.
(e) Exceptions to Demand Registration Rights. Anything in this Section
2.1 to the contrary notwithstanding, (i) the Company shall not be required to
register Registrable Securities pursuant to this Section 2.1 unless the
aggregate estimated public offering price of all shares of Registrable
Securities, including, without limitation, any for the account of the Company
or any existing shareholders of the Company (based upon the proposed public
offering price estimated in good faith by the Company), shall be $5,000,000 or
more; and (ii) no request for registration under Section 2.1(a) may be made
after the second (2d) anniversary of the Effective Time of the ACSYS Merger.
(f) Limitations on Demand Registration Rights. If a registration
statement requested pursuant to this Section shall not have become effective
within twelve (12) months after the initial filing thereof as a result of any
reason other than (i) a material adverse development in the business or
condition (financial or other) of the Company or (ii) any other act or matter
not within the control of the Company, or if such registration statement shall
be abandoned or withdrawn at the request of the requesting Shareholders, then,
unless the requesting Shareholders shall, promptly upon receipt of a request
therefor, supported by an invoice setting forth the expenses in reasonable
detail, reimburse the Company for the aggregate share of the registration
expenses in respect of such registration statement attributable to the
requesting Shareholders, the Company shall be deemed to have satisfied its
obligation to register the Registrable Securities pursuant to this Section.
Notwithstanding anything to the contrary contained herein, the only securities
that the Company shall be required to register pursuant to this Agreement shall
be Registrable Securities.
2.2 Piggyback Registration.
(a) Company's Obligation. If (but without any obligation to do so) at
any time or from time to time after the date hereof, the Company shall
determine to register any of its Common Stock in any Primary Offering for sale
for cash for its own account (other than a registration (A) relating to the
sale of securities to participants in an employee benefit plan, (B) on Form S-4
or S-8, or (C) on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), then the Company shall:
(i) promptly give to each Shareholder written notice thereof (which
shall include, to the extent then available, a list of the jurisdictions in
which the Company intends to attempt to qualify the offer and sale of such
securities under the applicable blue sky or other state securities laws); and
(ii) use its best efforts to include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
Underwritten Public Offering involved therein, all the Registrable Securities
specified in any written request by any Shareholder received by the Company
within ten (10) business days after such written notice is given.
(b) Underwriting. The right of any Shareholder to registration pursuant
to this Section 2.2 shall be conditioned upon such Shareholder's participation
in the Underwritten Public Offering and the inclusion of such Shareholder's
Registrable Securities in the Underwritten Public Offering to the extent
provided herein. All Shareholders proposing to distribute their securities
through such Underwritten Public Offering (together with the Company and any
other shareholders distributing their securities through such underwriting)
shall enter into an underwriting agreement containing terms of the underwriting
as agreed upon between the Company and underwriters selected by it.
(c) Termination of Registration by Company. Notwithstanding any other
provision of this Section 2.2, at any time before or after the filing of a
registration statement that is subject to Section 2.2 hereof, the Company may,
in its sole discretion, abandon or terminate such registration without the
consent of any Shareholder.
(d) Limits on Registration Rights, Notwithstanding any other provision of
this Section 2.2, no request for registration pursuant to Section 2.2(a)(ii)
may be made after the second anniversary of the Effective Time of the ACSYS
Merger.
(e) Registrations. The Company shall not be required to include
Registrable Securities in the securities covered by a registration statement on
any form which limits the amount of securities which may be registered by the
issuer and/or selling security holders if, and to the extent that, such
inclusion would make the use of such form unavailable, so long as no other
shares are to be included in such securities for the account of any person
other than the Company.
(f) Certain Underwriter Limitations. Notwithstanding any other
provisions of this Section 2.2, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the Registrable Securities to be
included in any registration and Underwritten Public Offering. In such event,
the underwriter shall so advise all Shareholders whose shares would otherwise
be registered and underwritten pursuant thereto, and the number of shares that
may be included in the registration and Underwritten Public Offering shall be
allocated: (i) first to the Shareholders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities that were
proposed to be sold by such Shareholders; and then (ii) to the Company; and
(iii) to the extent that such securities do not exhaust the number of shares
determined by such underwriter, among all remaining shareholders of the Company
(other than the Shareholders) to whom the Company desires to extend
registration rights, in proportion, as nearly as practicable, to the respective
amounts of shares of common stock that are proposed to be sold by such
shareholders.
(f) No Registrable Securities excluded from the Underwritten Public
Offering by reason of the managing underwriter's marketing limitation shall be
included in such registration. If any Shareholder disapproves of the terms of
the Underwritten Public Offering, he may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. The Registrable Securities
so withdrawn shall also be withdrawn from registration; provided, however, that
if by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other Shareholders may, in the opinion of the
managing underwriter, be included in such registration (subject to any
limitation imposed by the underwriters), then the Company shall offer to all
Shareholders who have included Registrable Securities in the registration the
right to include additional shares in the amount derived from the formula used
in effecting the limitation referred to above in this Section 2.2.
(g) If Registrable Securities held by a Shareholder are included in the
offering, the selling Shareholder shall agree in writing, if requested by the
Company or an underwriter of such registered public offering, not to sell or
otherwise transfer or dispose of any Common Stock (or other securities) of the
Company held by such Shareholder during a period of up to one hundred eighty
(180) days following the effective date of such registration statement of the
Company. Such agreement shall be in form satisfactory to the Company and such
underwriter, and may be included in the underwriting agreement. The Company
may impose stop-transfer instructions with respect to the securities subject to
the foregoing restriction until the end of the required stand-off period.
2.3 Expenses. All expenses of any registrations permitted pursuant to
this Agreement (including, but not limited to, any qualifications under the
blue-sky or other state securities laws, compliance with governmental
requirements of preparing and filing any post-effective amendments required for
the lawful distribution of any securities to the public in connection with
registration, of supplying prospectuses, offering circulars or other documents,
and all other registration and filing fees, printing expenses, fees and
disbursements of independent public accountants of the Company, fees of the
Company's counsel, fees of the National Association of Securities Dealers,
Inc., transfer taxes, fees of transfer agents and registrars, and the
reasonable fees and disbursements of a single special counsel retained by a
majority in interest of the Shareholders, but excluding Selling Expenses, as
defined), shall be paid by the Company. All Selling Expenses in connection
with any registration statement filed pursuant to Article II hereof shall be
borne by participating sellers in proportion to the number of shares sold by
each.
2.4 Registration Procedures. In the case of such registration,
qualification or compliance effected by the Company pursuant to this Article II
in which any Shareholder's Registrable Securities are included, the Company
shall, at its expense:
(a) prepare, provide counsel for the selling Shareholders reasonable
opportunity to comment on, and file with the Commission a registration
statement with respect to the Registrable Securities, and use its best efforts
to cause such registration statement to become effective;
(b) prepare, provide counsel for the selling Shareholders reasonable
opportunity to comment on, and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such Registrable
Securities, not to exceed one hundred eighty (180) days;
(c) furnish to the Shareholders participating in such registration and to
the underwriters of Registrable Securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters and shareholders may
reasonably request in order to facilitate the public offering of such
Registrable Securities;
(d) use its diligent good faith efforts to register or qualify the
Registrable Securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
Shareholders may reasonably request in writing within twenty (20) days
following the original filing of such registration statement; provided,
however, that in the case of an Underwritten Public Offering, the managing
underwriter shall (to the exclusion of the participation of the Shareholders)
advise the Company with respect to blue sky qualification and related matters;
(e) notify counsel for the Shareholders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify counsel for such Shareholders promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the request of
any Shareholders, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel for such Shareholders (and
concurred in by counsel for the Company), is required under the Securities Act
or the rules and regulations thereunder in connection with the distribution of
the Registrable Securities other than an amendment or supplement required
solely as a result of a change by such Shareholder in the method of
distribution of the Registrable Securities;
(h) prepare and promptly file with the Commission and promptly notify
counsel for such Shareholders of the filing of such amendment or supplement to
such registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
Registrable Securities is required to be delivered under the Securities Act,
any event other than a change in the method of distribution of the Registrable
Securities selected by a Shareholder shall have occurred as the result of which
any such prospectus or any other prospectus as then in effect would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading;
(i) not file any amendment or supplement to such registration statement
or prospectus if, in the opinion of counsel for such Shareholders (concurred in
by counsel for the Company), such amendment or supplement does not comply in
all material respects with the requirements of the Securities Act or the rules
and regulations thereunder, after having been furnished with a copy
substantially in the form thereof at least two (2) business days prior to the
filing thereof; provided, however, that if in the opinion of counsel for the
Company, the filing of such amendment or supplement is reasonably necessary to
protect the Company from any liabilities under any applicable federal or state
law and such filing will not violate applicable law, the Company may make such
filing;
(j) use its reasonable business efforts (if the offering is an
Underwritten Public Offering) to furnish, at the request of any seller, on the
date that Registrable Securities are delivered to the underwriters for sale
pursuant to such registration, and subject to the receipt of appropriate
representations from such sellers: (i) an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to
the underwriters and to such seller, stating that such registration statement
has become effective under the Securities Act and that (A) to the best
knowledge of such counsel, no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, and (B) the registration
statement, the related prospectus, and each amendment or supplement thereof,
comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations of the Commission
thereunder (except that such counsel need express no opinion as to financial
statements, the notes thereto, and the financial schedules and other financial
and statistical data contained therein), and (ii) a letter dated such date from
the independent public accountants retained by the Company, addressed to the
underwriters, stating that they are independent public accountants within the
meaning of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act, and such letter shall additionally cover such other financial
matters (including information as to the period ending no more than five (5)
business days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as such
underwriters may reasonably request; and
(k) make available for inspection by each seller, any underwriter
participating in any distribution pursuant to such registration statement, and
any attorney, accountant or other agent retained by such seller or underwriter,
all financial and other records, pertinent corporate documents and properties
of the Company, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement
and permit such seller, attorney, accountant or agent to participate in the
preparation of such registration statement; provided, however, that the
Company's furnishing of such records, documents and information and the
Company's granting of access to properties may be conditioned upon any proposed
recipient's execution and delivery to the Company of a confidentiality
agreement prepared by counsel to the Company.
2.5 Indemnification and Contribution.
(a) In the case of each registration effected by the Company pursuant to
this Agreement in which any Shareholder's Registrable Securities are included,
the Company agrees to indemnify and hold harmless such Shareholder, each
underwriter of the shares of Registrable Securities so registered and each
person who controls any such underwriter within the meaning of Section 15 of
the Securities Act, against any and all losses, claims, damages or liabilities
to which they or any of them may become subject under the Securities Act or
otherwise, including any amount paid in settlement of any litigation, commenced
or threatened; if such settlement is effected with the written consent of the
Company, and to reimburse them for any reasonable legal or other reasonable
expenses incurred by them in connection with the investigation of any claims
and defenses of any actions (subject to subsection (c) of this Section 2.5),
insofar as any such losses, claims, damages, liabilities or actions arise out
of or are based upon: any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that, notwithstanding the foregoing,
the Company may agree to indemnify each such underwriter and person who so
controls such underwriter to such other extent as the Company and such
underwriter shall agree; and provided further, however, that the
indemnification agreement contained in this subsection (a) shall not (i) apply
to such losses, claims, damages, liabilities or actions arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in
reliance upon and in conformity with information furnished to the Company in
writing by a Shareholder or such underwriter claiming rights of indemnification
pursuant to this Section 2.5 for use in connection with the preparation of the
registration statement or any preliminary prospectus or final prospectus
contained in the registration statement or any such amendment thereof or
supplement thereto or (ii) inure to the benefit of any person to the extent
such person's claim for indemnification hereunder arises out of or is based on
any violation by such person of applicable law.
(b) In the case of each registration effected by the Company pursuant to
this Agreement in which any Shareholder's Registrable Securities are included,
such Shareholder shall be obligated, and shall cause each underwriter of the
shares of Registrable Securities to be registered on behalf of such person
(each Shareholder and such underwriters being referred to severally in this
subsection (b) as the "indemnifying person") to be obligated, in the same
manner and to the same extent as set forth in subsection (a) of this Section
2.5, to indemnify and hold harmless the Company and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
its directors and officers, with respect to any statement or alleged untrue
statement in, or omission or alleged omission from, such registration statement
or any post-effective amendment thereof or any preliminary prospectus or final
prospectus (as amended or supplemented, if amended or supplemented as
aforesaid) contained in such registration statement, if such statement or
omission was made in reliance upon and in conformity with information furnished
in writing to the Company by such indemnifying person for use in connection
with the preparation of such registration statement or any preliminary
prospectus or final prospectus contained in such registration statement or any
such amendment thereof or supplement thereto.
(c) Each person to be indemnified pursuant to this Section 2.5 (an
"Indemnitee") shall, within five (5) days after the discovery by the Indemnitee
of any matters giving arise to a claim for indemnification hereunder, give
written notice to the person or persons responsible for indemnifying such
Indemnitee (an "Indemnifying Party") setting forth any claim with respect to
which the Indemnitee seeks indemnification, provided that the failure of any
Indemnitee to give notice as provided herein shall not relieve the Indemnifying
Party of its obligations under this Section except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice. In
case any such action, proceeding or claim is brought against any Indemnitee,
the Indemnifying Party shall be entitled to participate in and, unless in the
reasonable good faith judgment of the Indemnitee a conflict of interest between
such Indemnitee and the Indemnifying Party may exist in respect of such action,
proceeding or claim, assume the defense thereof, with counsel reasonably
satisfactory to the Indemnitee. After notice from the Indemnifying Party to
the Indemnitee of its election so to assume such defense, the Indemnifying
Party shall not be liable to such Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with such defense other
than reasonable costs of investigation. In any event, unless and until the
Indemnifying Party elects in writing to assume and does so assume the defense
of any such claim, proceeding or action, the Indemnitee's costs and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be considered losses subject to indemnification hereunder.
If the Indemnifying Party elects to defend any such action or claim, then the
Indemnitee shall be entitled to participate in such defense with counsel of
Indemnitee's choice at Indemnitee's sole cost and expense. The Indemnifying
Party shall not be liable for any settlement of any action, claim or proceeding
effected without its written consent, provided, however, that the Indemnifying
Party shall not unreasonably withhold, delay or condition its consent.
Anything in this Section 2.5(c) to the contrary notwithstanding, the
Indemnifying Party shall not, without the Indemnitee's prior written consent
(which consent shall not be unreasonably withheld), settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the Indemnitee or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
Indemnitee, a release from all liability in respect of such claim.
If the indemnification provided for in Sections 2.5(a) and (b) hereof is
unavailable or insufficient to hold harmless an Indemnitee under such
paragraphs in respect of any losses, claims, damages or liabilities or actions
in respect thereof referred to therein, then each Indemnifying Party shall in
lieu of indemnifying such Indemnitee contribute to the amount paid or payable
by such Indemnitee as a result of such losses, claims, damages, liabilities or
actions in such proportion as appropriate to reflect the relative fault of the
Company, on the one hand, and the underwriters and the sellers of such
Registrable Securities, on the other, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
actions as well as any other relevant equitable considerations, including the
failure to give any notice under Section 2.5(c). The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the underwriters and the sellers of such
Registrable Securities, on the other, and to the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by an Indemnitee as a result
of the losses, claims, damages, liabilities or action in respect thereof,
referred to above in this paragraph, shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnitee in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act), shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. This indemnification of
underwriters provided for in this Section 2.5 shall be on such other terms and
conditions as are at the time customary and reasonably required by such
underwriters.
2.6 Information by Shareholders. Each Shareholder requesting Registrable
Securities to be included in any registration shall furnish to the Company such
information regarding such Shareholder and the distribution proposed by such
Shareholder as the Company may request and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Article II.
2.7 Rule 144 Reporting. With a view to making available to the
Shareholders the benefits of certain rules and regulations of the Commission
which may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) Commission Reports. File with the Commission all reports and other
documents thereafter required of the Company if the Company is or becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and
(b) Other Information. Furnish to each Shareholder forthwith upon its
request (i) a copy of the most recent annual or quarterly report of the
Company, and (ii) such other reports and documents as may be reasonably
requested in availing any Shareholder of any rule or regulation of the
Commission permitting the sale of any such securities without registration.
2.8 Transfer of Registration Rights. If a Shareholder transfers Common
Stock to a Permitted Transferee, the Shareholder may assign the Permitted
Transferee the rights to cause the Company to register such Common Stock under
this Article II provided the assignment of such registration rights occurs
simultaneously with the transaction by which the Permitted Transferee receives
shares of Common Stock. Except as set forth in the preceding sentence, the
rights to cause the Company to register securities under this Article II are
personal to each Shareholder and may not be assigned except upon the consent of
the Company (which may be granted or withheld in its discretion) following
receipt by the Company of notice of proposed transfer by any Shareholder to any
assignee or transferee of any Merger Shares and receipt of the agreement of
such assignee or transferee to be bound by the provisions of this Agreement
applicable to holders of Registrable Securities. Furthermore, should any
Shareholder specifically named in Section 2.1(a) cease to be a Shareholder or
transfer more than fifty percent (50%) of the Merger Shares held by such
Shareholder, such Shareholder's name shall be deemed deleted from Section
2.1(a) hereof.
2.9 Notice of Sale Information. Any notice from a holder of Registrable
Securities requesting registration of some or all of such Registrable
Securities pursuant to Sections 2.1 or 2.2 or 2.3 shall (i) specify the number
of shares of Registrable Securities intended to be included in such
registration; (ii) describe the nature and method of the proposed offering and
sale, and (iii) include an undertaking to provide all information and materials
concerning such holder and the method of distribution and to take any other
actions reasonably requested by the Company to enable the Company to comply
with the Securities Act, any state securities law and/or the applicable
requirements of the Commission or any state securities commissioner or similar
agency or official.
2.10 Additional Shareholders. With the approval of the Board of Directors
of the Company, the Company may allow persons acquiring shares of Common Stock
from the Company to agree in writing to become party to this Agreement and to
be bound by all the terms and conditions hereof prior to acquiring such shares.
Such shareholders shall become party to this Agreement by executing a joinder
agreement substantially in the form of Exhibit 1, and enjoy the rights and be
bound by the obligations of Shareholders under this Agreement.
ARTICLE III
TRANSFERABILITY
3.1 Transferability. Transfer of the Merger Shares shall be made only on
the books of the Company by the holders of record thereof or by their legal
representatives who shall furnish proper evidence of authority to transfer, or
by their attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Company. The holder(s) in whose name the
Merger Shares stand on the books of the Company shall be deemed by the Company
to be owner(s) thereof for all purposes.
3.2 Restrictive Legends. Unless and until otherwise permitted by this
Section, each instrument evidencing Merger Shares shall contain or otherwise be
imprinted with a suitable legend in substantially the following form:
"This security has not been registered under the Securities Act of
1933 (the "1933 Act") or any state securities act. The shares
evidenced by this certificate have been issued or sold in reliance on
exemptions available under the 1933 Act and applicable state
securities laws and may not be sold or transferred except in a
transaction that is exempt under such act or pursuant to an effective
registration under such act.
The Company is hereby authorized to place "stop transfer" instructions on its
records or to instruct any transfer agent to prevent the transfer of such
shares except in conformity with this Article.
3.3 Restriction on Transfer. No holder shall transfer any of the Merger
Shares until it has first given written notice to the Company describing
briefly the manner of any such proposed transfer and until (i) the Company has
received from the holder's counsel an opinion (reasonably satisfactory in form
and substance to the Company's counsel) that such transfer can be made without
compliance with the registration provisions of the Securities Act or any state
Securities Act and without the necessity of perfection of an exemption pursuant
to Regulation A adopted pursuant to said Securities Act, or (ii) such transfer
complies with Rule 144 (or comparable successor provisions) promulgated under
the said Securities Act and applicable state securities act requirements, or
(iii) a registration statement filed by the Company is declared effective by
the Commission and governing state securities act authorities or steps
necessary to perfect exemptions from such registration are completed.
Notwithstanding anything to the contrary herein, in the event that there
is an Underwritten Public Offering of securities of the Company pursuant to a
registration covering Registrable Securities and a Shareholder of Registrable
Securities does not elect to sell his Registrable Securities to the
underwriters of the Company's securities in connection with such offering, such
Shareholder shall refrain from selling such Registrable Securities during the
period of distribution of the Company's securities by such underwriters and the
period in which the underwriting syndicate participates in the after market;
provided however, that such Shareholder shall, in any event, be entitled to
sell its Registrable Securities commencing on the one hundred eightieth (180th)
day after the effective date of such registration statement.
ARTICLE IV
MISCELLANEOUS
4.1 Notices. Any notice, request, reply instruction or other
communication (herein severally and collectively called "notice") in this
Agreement provided or permitted to be given to the Company or to any
Shareholder must be given in writing and may be given or served by overnight
delivery service, depositing the same in the United States mail, in certified
or registered form with return receipt requested and postage fully prepaid,
addressed to the party or parties to be notified, or by delivering the same in
person to such party or parties. Notice deposited in the United States mail,
mailed in the manner hereinabove described, shall be effective on the date
indicated on the return receipt. Notice given in any other manner shall be
effective only if and when received by the party to be notified. Unless
appropriate notice of a change of address is otherwise provided to the Company,
any notice to Shareholders shall be addressed in accordance with the address
specified in the stock records of the Company. In any event, until notice is
given of a change of address, notice to the Company, ICCE, Inc., shall be
addressed and provided as follows:
If to Company: ICCE, Inc.
1020 19th Street, N.W.
Suite 650
Washington, DC 20036
Attention: Mark E. Strassman
<PAGE>
and to: ICCE, Inc.
Five Concourse Parkway
Suite 2700
Atlanta, GA 30328
Attention: Timothy Mann, Jr.
with a copy to: Nelson Mullins Riley & Scarborough, L.L.P
400 Colony Square, Suite 2200
1201 Peachtree Street
Atlanta. GA 30361
Attention: Glenn W. Sturm, Esq.
4.2 Remedies. Each party hereto acknowledges that a remedy at law for
any breach or attempted breach of this Agreement will be inadequate, agrees
that each other party hereto shall be entitled to specific performance and
injunctive and other equitable relief in case of any such breach or attempted
breach, and further agrees to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such injunctive or any
other equitable relief.
4.3 Effect of Sale. Any Shareholder who sells all of his Registrable
Securities pursuant to the terms of this Agreement shall cease to be a party to
this Agreement and shall have no further rights or obligations hereunder.
4.4 Amendment. This Agreement may not be modified or amended except in a
writing signed by the Company and the holders of 66-2/3% of the total
Registrable Securities outstanding at such time (with any shares of Registrable
Securities issuable upon conversion of other securities deemed to be
outstanding for these purposes).
4.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the parties contained in this Agreement and their respective heirs,
executors, distributees, successors (including successors by merger) and
permitted assigns.
4.6 Invalid Provisions. Should any portion of this Agreement be adjudged
or held to be invalid, unenforceable, or void, such holding shall not have the
effect of invalidating or voiding the remainder of this Agreement and the
parties hereby agree that the portion so held invalid, unenforceable or void
shall, if possible, be deemed amended or reduced in scope, or to otherwise be
stricken from this Agreement to the extent required for the purposes of
validity and enforcement thereof.
4.7 Section Headings. The section and paragraph headings contained
herein are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.
4.8 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute only one
instrument.
4.9 Entire Agreement. This Agreement constitutes the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf and its corporate seal to be hereunto affixed by its duly
authorized officers and the Shareholders have caused this Agreement to he
executed by the appropriate authorized person, as of the day and year first
above written.
ICCE, INC.
By: /s/ David C. Cooper
David C. Cooper
_____________________________________
_____________________________________
SHAREHOLDERS
/s/ David C. Cooper
David C. Cooper
/s/ Mark E. Strassman
Mark E. Strassman
/s/ Mary Beth Chase
Mary Beth Chase
/s/ D. Perry Brown
D. Perry Brown
/s/ Kevin W. Cole
Kevin W. Cole
/s/ Rosemarie Mahoney
Rosemarie Mahoney
/s/ Stephen S.Tutwiler
Stephen S. Tutwiler
/s/ Edward K. Turner
Edward K. Turner
/s/ Teresa Gordon
Teresa Gordon
/s/ Joseph Stauffer
Joseph Stauffer
/s/ Robert Criscuolo
Robert Criscuolo
ACSYS RESOURCES, INC. SHAREHOLDERS
/s/ Edward S. Baumstein
Edward S. Baumstein
/s/ Harold Sauer
Harold Sauer
/s/ Domenic L. Vacca
Domenic L. Vacca
Albert Dettore
/s/ Louis J. Boohaker
Louis J. Boohaker
/s/ John R. Ficquette
John R. Ficquette
ACSYS, INC.
DIRECTOR'S AND OFFICER'S
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of ________________ 1997, between ACSYS, Inc., a
Georgia corporation (the "Corporation"), and _____________________________ (the
"Executive").
WHEREAS, the Executive is a member of the Board of Directors and/or an
executive officer of the Corporation and in such capacity is performing a
valuable service to the Corporation; and
WHEREAS, the Corporation's Bylaws (the "Bylaws") provide for the
indemnification of the directors and executive officers of the Corporation
pursuant to Sections 14-2-850 through 14-2-856 of the Georgia Business
Corporation Code, as amended to date (the "State Statute"); and
WHEREAS, the Bylaws and the State Statute specifically contemplate that
contracts may be entered into between the Corporation and its executive
officers and members of its Board of Directors with respect to indemnification
of such individuals; and
WHEREAS, in order to provide to the Executive assurances with respect to
the protection provided against liabilities that he may incur in the
performance of his duties to the Corporation, and to thereby induce the
Executive to serve as a member of the Board of Directors or as an executive
officer, the Corporation has determined and agreed to enter into this contract
with the Executive.
NOW, THEREFORE, in consideration of the premises and the Executive's
continued service as a director and/or an executive officer after the date
hereof, the parties agree as follows:
1. BOARD-AUTHORIZED INDEMNIFICATION. The Corporation hereby agrees to hold
harmless and indemnify the Executive to the full extent that the State Statute,
or any amendment thereof or other statutory provision adopted after the date
hereof, authorizes such indemnification by action of the Board of Directors
without shareholder approval. Such indemnification, and the conditions and
limitations thereon set forth in the State Statute, shall not in any respect
limit, condition or otherwise restrict the indemnification set forth in
Section 2 hereof.
2. SHAREHOLDER-AUTHORIZED INDEMNIFICATION. Subject only to the exclusions
set forth in Section 3 hereof, and in addition to the indemnity specified in
Section 1 hereof (but without duplication of payments with respect to
indemnified amounts), the Corporation hereby further agrees to hold harmless
and indemnify the Executive against any and all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Executive in connection with any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (including an action by or in the right of the Corporation),
to which the Executive is, was, or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that the Executive is,
was, or at any time becomes a director, officer, employee or agent of the
Corporation, or is or was serving or at any time serves at the request of the
Corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise.
3. LIMITATIONS ON SHAREHOLDER-AUTHORIZED INDEMNITY. No indemnity pursuant to
Section 2 hereof shall be paid by the Corporation:
(a) With respect to any proceeding in which the Executive is adjudged, by
final judgment not subject to further appeal, liable to the Corporation or
is subjected to injunctive relief in favor of the Corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
(ii) for acts or omissions which involve intentional misconduct
or a knowing violation of law;
(iii) for the types of liabilities set forth in Section 14-2-832
of the Georgia Business Corporation Code; or
(iv) for any transaction from which the Executive received an
improper personal benefit;
(b) With respect to any suit in which final judgment is rendered against
the Executive for an accounting of profits, made from the purchase or sale
by the Executive of securities of the Corporation, pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934 or
similar provisions of any federal, state, or local statutory law, or on
account of any payment by the Executive to the Corporation in respect of
any claim for such an accounting; or
(c) If a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is not lawful.
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to the Executive for any reason other than
those set forth in paragraph (a) or (b) of Section 3, then in respect of any
threatened, pending, or completed action, suit, or proceeding in which the
Corporation is jointly liable with the Executive (or would be if joined in such
action, suit or proceeding), the Corporation shall contribute, to the extent it
is not lawfully prohibited from doing so, to the amount of expenses, judgments,
fines, and settlements paid or payable by the Executive in such proportion as
is appropriate to reflect (i) the relative benefits received by the Corporation
on the one hand and the Executive on the other hand from the transaction from
which such action, suit, or proceeding arose, and (ii) the relative fault of
the Corporation on the one hand and of the Executive on the other in connection
with the events which resulted in such expenses, judgments, fines, or
settlement amounts, as well as any other relevant equitable considerations.
The relative fault of the Corporation on the one hand and of the Executive on
the other shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information, and opportunity to correct
or prevent the circumstances resulting in such expenses, judgments, fines, or
settlement amounts. The Corporation agrees that it would not be just and
equitable if contribution pursuant to this Section 4 were determined by pro
rata allocation or any other method of allocation that does not take account of
the foregoing equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of the
Corporation contained herein shall continue during the period the Executive is
a director, officer, employee, or agent of the Corporation (or is serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise)
and shall continue thereafter for so long as the Executive shall be subject to
any possible claim or threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, or investigative, by reason of the fact
that the Executive was a director of the Corporation or serving in any other
capacity referred to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the
Executive of notice of the commencement of any action, suit, or proceeding, the
Executive will, if a claim in respect thereof is to be made against the
Corporation under this Agreement (other than under Section 2 hereof), notify
the Corporation of the commencement thereof, but the omission to so notify the
Corporation will not relieve the Corporation from any liability which it may
have to the Executive otherwise than under this Agreement. With respect to any
such action, suit, or proceeding as to which the Executive so notifies the
Corporation:
(a) The Corporation will be entitled to participate therein at its own
expense; and
(b) Subject to Section 7 hereof, and if the Executive shall have provided
his written affirmation of his good faith belief that his conduct did not
constitute behavior of the kind described in paragraph 3(a) hereof and
that he is entitled to indemnification hereunder, the Corporation may
assume the defense thereof.
After notice from the Corporation to the Executive of its election so to
assume such defense, the Corporation will not be liable to the Executive under
this Agreement for any legal or other expenses subsequently incurred by the
Executive in connection with the defense thereof, other than reasonable costs
of investigation or as otherwise provided below. The Executive shall have the
right to employ its separate counsel in such action, suit, or proceeding, but
the fees and expenses of such counsel incurred after notice from the
Corporation of its assumption of the defense thereof shall be at the expense of
the Executive unless (i) the employment of counsel by the Executive has been
authorized by the Corporation, (ii) counsel designated by the Corporation to
conduct such defense shall not be reasonably satisfactory to the Executive, or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of such
counsel shall be at the expense of the Corporation. For the purposes of clause
(ii) above, the Executive shall be entitled to determine that counsel
designated by the Corporation is not reasonably satisfactory if, among other
reasons, the Executive shall have been advised by qualified counsel that,
because of actual or potential conflicts of interest in the matter between the
Executive, other officers or directors similarly indemnified by the
Corporation, and/or the Corporation, representation of the Executive by counsel
designated by the Corporation is likely to materially and adversely affect the
Executive's interest or would not be permissible under applicable canons of
legal ethics.
The Corporation shall not be liable to indemnify the Executive under this
Agreement for any amounts paid in settlement of any action or claim effected
without the Corporation's written consent. The Corporation shall not settle
any action or claim in any manner which would impose any penalty or limitation
on the Executive without the Executive's written consent. Neither the
Corporation nor the Executive will unreasonably withhold consent to any
proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES. Upon request therefor accompanied
by reasonably itemized evidence of expenses incurred, and by the Executive's
written affirmation of his good faith belief that his conduct met the standard
applicable to Board-authorized indemnification pursuant to Section 1 hereof or
did not constitute behavior of the kind described in paragraph 3(a) hereof and
that he is entitled to indemnification hereunder, the Corporation shall advance
to the Executive the reasonable expenses (including attorneys' fees and costs
of investigation and defense (including the fees of expert witnesses, other
professional advisors, and private investigators)) incurred by him in defending
any civil or criminal suit, action, or proceeding for which the Executive is
entitled (assuming an applicable standard of conduct is met) to indemnification
pursuant to this Agreement. The Executive agrees to reimburse the Corporation
for all reasonable expenses paid by the Corporation, whether pursuant to this
Section or Section 6 hereof, in defending any action, suit, or proceeding
against the Executive in the event and to the extent that it shall ultimately
be determined that the Executive is not entitled to be indemnified by the
Corporation for such expenses under either Section 1 or Section 2 of this
Agreement. Any advances and the Executive's agreement to repay shall be
unsecured and interest-free.
8. AGREEMENT TO SERVE. The Executive hereby agrees to continue to serve as a
director and/or an executive officer of the Corporation faithfully and to the
best of his ability so long as he is duly elected and qualified in accordance
with the provisions of the Corporation's bylaws or until such time as he
tenders his resignation in writing.
9. ENFORCEMENT.
(a) The Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in
order to induce the Executive to serve as a director and/or an executive
officer of the Corporation and acknowledges that the Executive will in the
future be relying upon this Agreement in continuing to serve in such
capacity.
(b) In the event the Executive is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in
such action, the Corporation shall reimburse the Executive for all of the
Executive's reasonable fees and expenses in bringing and pursuing such
action.
10. MAINTENANCE OF LIABILITY INSURANCE.
(a) Subject to Section 10(c), the Corporation hereby covenants and agrees
that, so long as Executive shall continue to serve as a director and/or an
officer of the Corporation and thereafter so long as the agreements and
obligations of the Corporation shall continue in accordance with Section
5, the Corporation, in good faith, shall seek to obtain and maintain in
full force and effect a policy of director's and officer's liability
insurance (the "D&O Insurance") in reasonable amounts from established and
reputable insurers.
(b) In all policies of D&O Insurance, Executive shall be named as an
insured in such manner as to provide Executive the same rights and
benefits as are accorded to the most favorably insured of the
Corporation's officers or directors.
(c) Notwithstanding the foregoing, the Corporation shall have no
obligation to obtain or maintain D&O Insurance if the Corporation
determines in good faith that such insurance is not reasonably available,
the premium costs for such insurance are disproportionate to the amount of
coverage provided, or the coverage provided by such insurance is so
limited by exclusions that there is insufficient benefit from such
insurance.
11. SEPARABILITY. Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable in whole or in part for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
12. VESTED RIGHTS, SPECIFIC PERFORMANCE. No amendment to the articles of
incorporation or bylaws of the Corporation or any other corporate action shall
in any way limit the Executive's rights under this Agreement. In any
proceeding brought by or on behalf of the Executive to specifically enforce the
provisions of this Agreement, the Corporation hereby waives the claim or
defense therein that the plaintiff or claimant has an adequate remedy at law,
and the Corporation shall not urge in any such proceeding the claim or defense
that such remedy at law exists. The provisions of this Section 12, however,
shall not prevent the Executive from seeking a remedy at law in connection with
any breach of this Agreement.
13. LIABILITY INSURANCE. In the event that the Corporation maintains an
insurance policy or policies providing directors' or officers' liability
insurance, the Executive shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
provided under such policy or policies in effect. Copies of all correspondence
between the Corporation and the company or companies providing such insurance
shall be promptly delivered to the Executive by the Corporation.
14. NON-EXCLUSIVITY, ETC. The rights of the Executive hereunder shall be in
addition to any other rights with respect to indemnification, advancement of
expenses or otherwise that the Executive may have under the Corporation's
bylaws or the Georgia Business Corporation Code or otherwise.
15. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the Executive, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
16. NO DUPLICATION OF PAYMENTS. The Corporation shall not be liable under
this Agreement to make any payment to the Executive hereunder to the extent the
Executive has otherwise actually received payment (under insurance policy,
bylaw or otherwise) of the amounts otherwise payable hereunder.
17. APPLICABILITY OF AGREEMENT. This Agreement shall apply only with respect
to acts or omissions of the Executive occurring on or after the effective date
hereof, and this Agreement shall continue in effect regardless of whether the
Executive continues to serve in such capacity, but only in respect of acts or
omissions occurring prior to the termination of the Executive's service in such
capacity.
18. GOVERNING LAW; SUCCESSORS; AMENDMENT AND TERMINATION.
(a) This Agreement shall be interpreted and enforced in accordance with
the laws of the State of Georgia.
(b) This Agreement shall be binding upon the Executive and the
Corporation and its successors and assigns (including any transferee of
all or substantially all of its assets and any successor by merger or
otherwise by operation of law), and shall inure to the benefit of the
Executive, his heirs, personal representatives, and assigns and to the
benefit of the Corporation and its successors and assigns.
(c) No amendment, modification, termination, or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
19. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
EXECUTIVE ACSYS, INC.
_______________________________ By:____________________________________
Name:
S CORPORATION TAX ALLOCATION AND
INDEMNIFICATION AGREEMENT
This Tax Allocation and Indemnification Agreement dated ___________ ___,
1997 (the "Agreement") is made by and between ACSYS, Inc., a Georgia
corporation (the "Company"), the shareholders of the Company listed on the
signature page hereto (each individually, a "Shareholder" and collectively, the
"Shareholders"), and the following wholly-owned subsidiaries of the Company:
David C. Cooper & Associates, Inc., DCCA Professional Temporaries, Inc.,
Infinity Enterprises, Inc., Cama of Tampa, Inc., Rylan Forbes Consulting Group,
Inc., and AcSys Resources, Inc. (each a "Subsidiary" and collectively, the
"Subsidiaries"). The term "ACSYS" shall mean the Company and the Subsidiaries.
WHEREAS, the Company is an S corporation, within the meaning of section
1361 of the Internal Revenue Code of 1986, as amended ("Code");
WHEREAS, each Subsidiary is a qualified subchapter S subsidiary, within
the meaning of section 1363(b)(3) of the Code;
WHEREAS, the Company and certain of the Shareholders intend to enter into
an underwriting agreement to sell common stock of the Company in an initial
public offering (the "Public Offering");
WHEREAS, the Shareholders are currently the only shareholders of the
Company and will continue to be so until immediately before the Closing; and
WHEREAS, in connection with the Public Offering, and in order to induce
the investment by the public in the Company, the Company and the Shareholders
desire to provide for an S corporation termination, tax allocation and
indemnification agreement in connection with tax periods prior to and following
the Termination Date (as defined below), as well as the termination of ACSYS as
an S corporation;
NOW, THEREFORE, for mutual consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Shareholders do hereby
covenant and agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used herein, have the following meanings:
"Closing" shall mean the closing and completion of the offering by the
Company of shares of its stock, as described in the Registration Statement on
Form S-1 initially filed by the Company with the Securities and Exchange
Commission on October ___, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"C Short Year" shall have the meaning set forth in section 1362(e)(1)(B)
of the Code.
"S corporation" shall have the meaning set forth in section 1361 of the
Code.
"S corporation Taxable Income" shall mean, for periods beginning on or
after the date ACSYS became an S corporation and ending with the S Short Year,
the sum of (i) ACSYS's items of separately stated income and gain (within the
meaning of section 1366(a)(1)(A) of the Code) reduced, to the extent
applicable, by ACSYS's separately stated items of deduction and loss (within
the meaning of section 1366(a)(1)(A) of the Code) and (ii) ACSYS's
nonseparately computed net income (within the meaning of section 1366(a)(1)(B)
of the Code).
"S Short Year" shall have the meaning set forth in section 1362(e)(1)(A)
of the Code.
"Termination Date" shall mean the date on which ACSYS's status as an S
corporation is terminated by reason of revocation of the election for ACSYS to
be an S corporation pursuant to section 1362(d)(1) of the Code, which date
shall be not less than two days prior to the date of the Closing.
ARTICLE II
THE TERMINATION; TERMINATION DATE
2.1 Termination of S Corporation Status. The Company represents that it
terminated its status as an S corporation pursuant to an election, as permitted
pursuant to section 1362(d)(1) of the Code, on ______________, 1997 (the
"Termination Date").
2.2 Short Taxable Years. The parties acknowledge that the taxable year
in which the S corporation status of ACSYS is terminated will be an S
Termination Year for tax purposes, as defined in section 1362(e)(4) of the
Code. Pursuant to section 1361(e)(1) of the Code, the S Termination Year of
ACSYS shall be divided into two short taxable years: an "S Short Year" and a
"C Short Year." As defined in section 1362(e)(1)(A) of the Code, the S Short
Year shall be that portion of ACSYS's S Termination Year ending on the day
immediately preceding the Termination Date. Pursuant to section 1362(e)(1)(B)
of the Code, that portion of the S Termination Year beginning on the
Termination Date and ending on the last day of the taxable year shall be the C
Short Year of ACSYS.
ARTICLE III
ALLOCATION OF INCOME
ACSYS and the Shareholders agree that for federal tax purposes (including
for purposes of determining ACSYS's S corporation Taxable Income for its fiscal
year ending _____________, 1997) ACSYS shall allocate its items of income,
gain, loss, deduction and credit for its fiscal year ending _____________, 1997
between the S Short Year and the C Short Year in accordance with normal tax
accounting rules (the "closing of the books method"), as permitted by section
1362(e)(3) of the Code. ACSYS will make the election permitted by section
1362(e)(3) in a timely manner. The Shareholders agree to consent to such
election and to provide ACSYS with the statement of consent of all Shareholders
described in section 1.1362-6(b) of the Treasury Regulations. ACSYS and the
Shareholders agree to make, and to provide such information and obtain such
consents as are necessary to make, any comparable election required under
applicable state and local income tax laws.
ARTICLE IV
TAXES
4.1 Liability for Taxes Incurred During the S Short Year and for Tax
Periods Ending Prior to the Termination Date. The Shareholders, severally and
jointly, represent, covenant and agree that: (i) the Shareholders have duly
included, or will duly include, in their own federal income tax returns (and in
their state and local income tax returns, as permitted by applicable law) all
items of income, gain, loss, deduction, or credit attributable to the S Short
Year of ACSYS or to any prior period (or that portion of any period) during
which ACSYS was an S corporation as required by applicable law; (ii) such
returns have included and shall include their allocable share of S corporation
Taxable Income of ACSYS from all sources through and including the close of
business on the last day of the S Short Year of ACSYS; and (iii) the
Shareholders have timely paid and shall timely pay any and all taxes they are
required to pay, as a result of being a shareholder of ACSYS, for all taxable
periods (or that portion of any period) during which ACSYS was an S
corporation.
4.2 Shareholder Indemnification for Tax Liabilities. The Shareholders,
severally (according to the percentage of the outstanding shares of the
Company's common stock owned by each Shareholder on the last day of any
applicable period to which a liability described below relates) hereby
indemnify and hold ACSYS harmless from, against and in respect of any federal
income tax liabilities of ACSYS, including interest and penalties imposed
thereon (and any state and local income tax liabilities as provided by
applicable law) (i) which are attributable to any taxable period (or portion
thereof) ending on or prior to the Termination Date, or (ii) which are incurred
by ACSYS as a result of a final determination of an adjustment (by reason of an
amended return, claim for refund, audit, judicial decision or otherwise) to the
taxable income of the Shareholders for any period (including, without
limitation, the S Short Year) which (in the case of this clause (ii)) results
in a decrease for any period in the Shareholders' taxable income and a
corresponding increase for any period in the taxable income of ACSYS.
4.3 ACSYS's Indemnification for Tax Liabilities. ACSYS hereby
indemnifies and agrees to hold the Shareholders harmless from, against and in
respect of federal income tax liabilities, including interest and penalties
imposed thereon (and any state and local income tax liabilities as provided by
applicable law), if any, incurred by the Shareholders as a result of a final
determination of an adjustment (by reasons of an amended return, claim for
refund, audit, judicial decision or otherwise) to the taxable income of ACSYS
for any period (including, without limitation, the C Short Year) which results
in a decrease for any period in ACSYS's taxable income and a corresponding
increase for any period in the taxable income of the Shareholders.
4.4 Payments. The Shareholders or ACSYS, as the case may be, shall make
any payment required under Section 4.2 or Section 4.3 of this Agreement within
14 days after receipt of notice from the other party that a final determination
has occurred and a payment is due by such party to the appropriate taxing
authority.
4.5 Refunds. If ACSYS receives a refund of any income tax (including
penalties and interest) for any period prior to the Termination Date, or as to
which it has previously been indemnified by the Shareholders, it shall pay an
amount equal to such refund, within 14 days after receipt thereof, to the
Shareholders in accordance with the percentage of the outstanding shares of
ACSYS common stock owned by each such Shareholder on the last day of any
applicable period to which the refund relates. If the Shareholders receive a
refund of any income tax (including penalties and interest) as to which they
have previously been indemnified by ACSYS, they shall, within 14 days after
receipt thereof, remit an amount equal to such refund to ACSYS.
4.6 Notice and Control of Proceedings. Each of ACSYS and the
Shareholders agree that (i) within 10 days of receiving written notice of any
income tax examinations, claims, settlements, proposed adjustments or related
matters that may affect in any way the income tax liability of a party under
this Agreement, such person shall provide written notice thereof to such other
party, and (ii) the party or parties who would be responsible for the payment
of the applicable taxes if the matter in question were to be resolved adversely
shall be entitled, in his or its reasonable discretion and at his or its sole
expense, to handle, control and compromise or settle the defense thereof, so
long as such party or parties are acting diligently and in good faith. Such
party or parties shall keep the other party(ies) apprised of the status thereof
and shall consult with such other party(ies) concerning the conduct of the
defense thereof. Notwithstanding the foregoing, however, the party handling
such matters shall not compromise or settle any matter which could adversely
affect the tax liability of another party without such other party's prior
written consent, which shall not be unreasonably withheld. The parties hereto
shall execute all instruments required to effectuate the provisions of this
Section 4.6.
4.7 Cooperation. The parties will make available to one another, as
reasonably requested, and to any taxing authority, all information, records or
documents relating to the liability for taxes covered by this Agreement and
will preserve any such information, records or documents until the expiration
of the applicable statute of limitations or extensions thereof. The party
requesting such information shall reimburse the other party for all reasonable
out-of-pocket costs incurred in producing such information.
4.8 Costs. Except as otherwise provided herein, each party shall bear
his or its own costs in administering this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which counterparts
collectively shall constitute an instrument representing the Agreement between
the parties hereto.
5.2 Construction of Terms. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors, any
rights or remedies under or by reason of this Agreement.
5.3 Intent of Parties. It is the parties' intent that the liability for
income taxes arising from the operations of ACSYS will be borne by the
Shareholders for the period through and including the S Short Year and by ACSYS
for periods beginning with the C Short Year, and this Agreement shall be
construed so as most equitably to achieve such intent.
5.4 Governing Law. This Agreement between the parties hereto shall be
governed by and construed in accordance with the substantive laws of the State
of Georgia without regard to its choice of law rules.
5.5 Severability. In the event that any one or more of the provisions of
this Agreement shall be held to be illegal, invalid or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provisions
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
this _____ day of ____________, 1997.
ACSYS, Inc.
By:_________________________________________
Name:
Title:
DAVID C. COOPER & ASSOCIATES, INC. CAMA OF TAMPA, INC.
By:_______________________________ By:____________________________________
Name: Name:
Title: Title:
DCCA PROFESSIONAL TEMPORARIES, INC. RYLAN FORBES CONSULTING GROUP, INC.
By:_______________________________ By:____________________________________
Name: Name:
Title: Title:
INFINITY ENTERPRISES, INC. ACSYS RESOURCES, INC.
By:_______________________________ By:____________________________________
Name: Name:
Title: Title:
THE SHAREHOLDERS
__________________________________________
__________________________________________
__________________________________________
__________________________________________
ACSYS RESOURCES, INC.
1996 EQUITY COMPENSATION PLAN
NONQUALIFIED STOCK OPTION GRANT
This STOCK OPTION GRANT, dated as of January 30, 1997 (the "Date of
Grant"), is delivered by ACSYS Resources, Inc. (the "Company"), to Les
Gallagher, an employee of the Company (the "Grantee").
RECITALS
The ACSYS Resources, Inc. 1996 Equity Compensation Plan (the "Plan")
provides for the grant of options to purchase shares of common stock of the
Company to selected employees of the Company. The Board of Directors (the
"Board") administers the Plan.
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth in this
Agreement and in the Plan, the Company hereby grants to the Grantee a
nonqualified stock option (the "Option") to purchase 50,000 shares of common
stock of the Company ("Shares") at an option price of $1.00 per Share. The
Option shall become vested and exercisable according to Paragraph 2 below.
2. Vesting of Option. The Option may not be exercised until it has become
vested. The Option shall become vested as of the following vesting dates, if
the Grantee is employed by the Company as of the applicable vesting date:
Vesting Date Vested Shares
December 16, 1997 10,000 shares
December 16, 1998 10,000 shares
December 16, 1999 10,000 shares
December 16, 2000 10,000 shares
December 16, 2001 10,000 shares
If a Public Offering of the Company's stock occurs, then the Option shall
become vested as of the following vesting dates, if the Grantee is employed by
the Company as of the applicable vesting date:
Vesting Date Vested Shares
December 16, 1997 16,667 shares
December 16, 1998 16,667 shares
December 16, 1999 16,666 shares
For purposes of Sections 2 and 3 of this Agreement, the term "Company" means
the Company and its subsidiary corporations, and "employed by the Company"
shall have the meaning given that phrase in the Plan.
3. Term of Option.
(a) The Option shall have a term of ten years from the Date of Grant and
shall terminate at the expiration of that period (December 16, 2006), unless it
is terminated at an earlier date pursuant to the provisions of this Agreement
or the Plan.
(b) Except as provided below, the Option may only be exercised while the
Grantee is an employee of the Company. If the Grantee's employment terminates
at a time when the Option is outstanding, the following provisions shall apply:
(i) If the Grantee ceases his or her employment with the Company
for any reason other than "disability" (as defined in the Plan) or death,
the Option shall immediately terminate upon the Grantee's termination of
employment.
(ii) If the Grantee's employment terminates because the Grantee is
"disabled", the Grantee may retain the vested portion of the Option for a
period of one year after the Grantee's termination of employment (but not
beyond the expiration of the Option term). Any portion of the Option that
is not vested as of the date on which the Grantee ceases to be employed by
the Company shall terminate as of such date.
(iii) If the Grantee dies while employed by the Company, or while an
Option is outstanding pursuant to subsection (ii), the Grantee's
distributees or personal representative may retain the vested portion of
the Option for a period of one year after the Grantee's termination of
employment (but not beyond the expiration of the Option term). Any
portion of the Option that is not vested as of the Grantee's death shall
terminate as of such date.
Notwithstanding the foregoing, in no event may the Option be exercised after
the date that is ten years from the Date of Grant.
4. Exercise Procedures.
(a) Subject to the foregoing provisions, the Grantee may exercise part or
all of the vested Option by giving the Committee written notice of intent to
exercise in the manner provided in Paragraph 13 below, specifying the number of
Shares as to which the Option is to be exercised. On the delivery date, the
Grantee shall pay the exercise price (i) in cash, (ii) with the approval of the
Board, by delivering Shares of the Company which shall be valued at their fair
market value on the date of delivery, or (iii) by any combination of the
foregoing. The Board may impose from time to time such limitations as it deems
appropriate on the use of Shares of the Company to exercise the Option.
(b) If a Public Offering of the Company's stock occurs, after a Public
Offering, the Grantee's exercise notice may instruct the Company to deliver
Shares due upon the exercise of the Option to be registered broker or dealer
designated by the Company, in lieu of delivery to the Grantee.
(c) The obligation of the Company to deliver Shares upon exercise of the
Option shall be subject to all applicable laws, rules, and regulations and such
approvals by governmental agencies as may be deemed appropriate by the
Committee, including such actions as Company counsel shall deem necessary or
appropriate to comply with relevant securities laws and regulations. The
Company may require that the Grantee (or other person exercising the Option
after the Grantee's death) represent that the Grantee is purchasing Shares for
the Grantee's own account and not with a view to or for sale in connection with
any distribution of the Shares, or such other representation as the Committee
deems appropriate. All obligations of the Company under this Agreement shall
be subject to the rights of the Company as set forth in the Plan to withhold
amounts required to be withheld for any taxes, if applicable.
5. Change of Control. The provisions of the Plan applicable to a Change of
Control shall apply to the Option, and, in the event of a Change of Control,
the Board may take such actions as it deems appropriate pursuant to the Plan.
6. Right of First Refusal; Repurchase Right; Shareholder's Agreement. As a
condition of receiving this Option, the Grantee hereby agrees that all Shares
issued under the Plan shall be subject to a right of first refusal and
repurchase right as described in Sections 8 and 9 of the Plan, and the Board
may require that the Grantee (or other person exercising the Option after the
Grantee's death) execute a shareholder's agreement, in such form as the Board
determines, with respect to all Shares issued upon the exercise of the Option
before a Public Offering.
7. Restrictions on Exercise. Only the Grantee may exercise the Option during
the Grantee's lifetime. After the Grantee's death, the Option shall be
exercisable (subject to the limitations specified in the Plan) solely by the
legal representatives of the Grantee, or by the person who acquires the right
to exercise the Option by will or by the laws of descent and distribution, to
the extent that the Option is exercisable pursuant to this Agreement.
8. Grant Subject to Plan Provisions. This grant is made pursuant to the
Plan, the terms of which are incorporated herein by reference, and in all
respects shall be interpreted in accordance with the Plan. The grant and
exercise of the Option are subject to the provisions of the Plan and to
interpretations, regulations and determinations concerning the Plan established
from time to time by the Board in accordance with the provisions of the Plan,
including, but not limited to, provisions pertaining to (i) rights and
obligations with respect to withholding taxes, (ii) the registration,
qualification or listing of the Shares, (iii) capital or other changes of the
Company and (iv) other requirements of applicable law. The Board shall have
the authority to interpret and construe the Option pursuant to the terms of the
Plan, and its decisions shall be conclusive as to any questions arising
hereunder.
9. No Employment Rights. The grant of the Option shall not confer upon the
Grantee any right to continue in the employ of the Company and shall not
interfere in any way with the right of the Company to terminate the Grantee's
employment at any time. The right of the Company to terminate at will the
Grantee's employment at any time for any reason is specifically reserved.
10. No Shareholder Rights. Neither the Grantee, nor any person entitled to
exercise the Grantee's rights in the event of the Grantee's death, shall have
any of the rights and privileges of a shareholder with respect to the Shares
subject to the Option, until certificates for Shares have been issued upon the
exercise of the Option.
11. Assignment and Transfers. The rights and interests of the Grantee under
this Agreement may not be sold, assigned, encumbered or otherwise transferred
except, in the event of the death of the Grantee, by will or by the laws of
descent and distribution. In the event of any attempt by the Grantee to
alienate, assign, pledge, hypothecate, or otherwise dispose of the Option or
any right hereunder, except as provided for in this Agreement, or in the event
of the levy or any attachment, execution or similar process upon the rights or
interests hereby conferred, the Company may terminate the Option by notice to
the Grantee, and the Option and all rights hereunder shall thereupon become
null and void. The rights and protections of the Company hereunder shall
extend to any successors or assigns of the Company and to the Company's
parents, subsidiaries, and affiliates. This Agreement may be assigned by the
Company without the Grantee's consent.
12. Applicable Law. The validity, construction, interpretation and effect of
this instrument shall be governed by and determined in accordance with the laws
of the Commonwealth of Pennsylvania.
13. Notice. Any notice to the Company provided for in this instrument shall
be addressed to the Company in care of the President at 530 East Swedesford
Road, Suite 202, Wayne, PA 19087 and any notice to the Grantee shall be
addressed to such Grantee at the current address shown on the payroll of the
Company, or to such other address as the Grantee may designate to the Company
in writing. Any notice shall be delivered by hand, sent by telecopy or
enclosed in a properly sealed envelope addressed as stated above, registered
and deposited, postage prepaid, in a post office regularly maintained by the
United States Postal Service.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers to
execute and attest this Agreement, and the Grantee has executed this Agreement,
effective as of the Date of Grant.
ACSYS RESOURCES, INC.
Attest:
/s/ L.E. Gallagher By: /s/ Edward S. Baumstein
Accepted: /s/ L.E. Gallagher
Grantee
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The Company owns 100% of the outstanding shares of the following companies:
<TABLE>
<CAPTION>
STATE OF
COMPANY INCORPORATION TRADE NAMES
- ------- ------------- -----------
<S> <C> <C>
Infinity Enterprises, Inc. Maryland Don Richard Associates of Washington
Signature Staffing
David C. Cooper & Georgia David C. Cooper & Associates
Associates, Inc. DCCA
DCCA Professional Georgia DCCA Professional Temporaries
Temporaries, Inc.
EKT, Inc. North Carolina Don Richard Associates of Charlotte
Cama of Tampa, Inc. Florida Don Richard Associates of Tampa
Rylan Forbes Consulting New Jersey Rylan Forbes Consulting Group
Group, Inc.
AcSys Resources, Inc. Pennsylvania AcSys Resources
AcSys IT
AcSys Resources, Inc. owns 100% of the outstanding shares of the following
company:
<CAPTION>
STATE OF
COMPANY INCORPORATION TRADE NAMES
- ------- ------------- -----------
<S> <C> <C>
C.P.A. Staffing, Inc. Georgia C.P.A. Staffing
C.P.A. Search
Career Placement Associates
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this S-
1 Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
October 21, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ACSYS, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 1,178,096 958,685
<SECURITIES> 0 0
<RECEIVABLES> 6,499,952 7,177,330
<ALLOWANCES> 280,825 324,069
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,643,099 8,164,298
<PP&E> 1,647,449 1,816,884
<DEPRECIATION> 794,665 896,095
<TOTAL-ASSETS> 15,855,142 16,495,934
<CURRENT-LIABILITIES> 4,088,337 5,826,435
<BONDS> 0 0
0 0
0 0
<COMMON> 210,604 210,604
<OTHER-SE> 3,102,405 872,859
<TOTAL-LIABILITY-AND-EQUITY> 15,855,142 16,495,934
<SALES> 45,908,264 26,354,724
<TOTAL-REVENUES> 45,908,264 26,354,724
<CGS> 22,873,091 12,742,527
<TOTAL-COSTS> 20,004,333 13,493,391
<OTHER-EXPENSES> (69,630) (45,913)
<LOSS-PROVISION> 286,212 66,180
<INTEREST-EXPENSE> 872,958 425,539
<INCOME-PRETAX> 2,227,512 (260,820)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 2,227,512 (260,820)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,227,512 (260,820)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
