<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WORK INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
TEXAS 7363 76-0547157
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
700 LOUISIANA, SUITE 3900
HOUSTON, TEXAS 77002
PHONE: (713) 228-9675
FAX: (713) 225-6104
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
B. GARFIELD FRENCH
WORK INTERNATIONAL CORPORATION
700 LOUISIANA, SUITE 3900
HOUSTON, TEXAS 77002
PHONE: (713) 228-9675
FAX: (713) 225-6104
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
With copies to:
ROBERT G. REEDY JOHN J. KELLEY III
PORTER & HEDGES, L.L.P. KING & SPALDING
700 LOUISIANA, 35TH FLOOR 191 PEACHTREE STREET, N.E.
HOUSTON, TEXAS 77002-2764 ATLANTA, GEORGIA 30303-1763
PHONE: (713) 226-0674 PHONE: (404) 572-4600
FAX: (713) 226-0274 FAX: (404) 572-5100
APPROXIMATE DATE 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 an 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. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
- -------------------------------------------------------------------------------
Common Stock, $.001 par value per
share................................. $96,552,092 $28,483
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) In accordance with Rule 457(o) under the Securities Act of 1933, the
number of shares being registered and the proposed maximum offering price
per share are not included in this table.
(2) Estimated solely for the purpose of calculating the registration fee.
----------------
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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 JULY 10, 1998
6,458,334 SHARES
[LOGO TO COME]
WORK INTERNATIONAL CORPORATION
COMMON STOCK
-----------
All of the 6,458,334 shares of common stock, par value $.001 per share (the
"Common Stock"), offered hereby (the "Offering") are being offered by WORK
International Corporation (the "Company" or "WORK").
Prior to the Offering, there has been no public market for the Common Stock.
The Company and the Underwriters currently estimate that the initial public
offering price will be between $11.00 and $13.00 per share. See "Underwriting"
for a discussion of the factors they will consider in determining the initial
public offering price. The Company has applied to have the Common Stock
approved for listing on the New York Stock Exchange under the symbol "WOR."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN INFORMATION 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share..................................... $ $ $
- --------------------------------------------------------------------------------
Total(3)...................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company, estimated at
$3,945,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
968,750 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale when, as and if received and accepted by the
Underwriters, subject to their right to reject orders, in whole or in part, and
to certain other conditions. It is expected that delivery of the certificates
will be made against payment therefor at the offices of The Robinson-Humphrey
Company, LLC, Atlanta, Georgia on or about , 1998.
THE ROBINSON-HUMPHREY COMPANY
J.C. BRADFORD & CO.
ABN AMRO INCORPORATED
, 1998
<PAGE>
[MAP OF GEOGRAPHIC COVERAGE TO COME]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING
THE PRICING OF THIS OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON
STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
Simultaneous with and as a condition of the Offering, the Company plans to
acquire, in separate transactions (collectively, the "Acquisitions"), in
exchange for consideration including shares of its Common Stock, 16 staffing
services firms (collectively, the "Founding Companies"). See "The Company."
Unless otherwise indicated by the context, references herein to (i) "WORK" mean
WORK International Corporation, and (ii) the "Company" mean WORK and the
Founding Companies, after giving effect to the Acquisitions.
The following summary is qualified in its entirety by the detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus (i) gives effect to the Acquisitions, (ii) assumes the
Underwriters do not exercise their over-allotment option, (iii) assumes an
initial public offering price of $12.00 per share (the midpoint of the range of
estimated initial public offering prices set forth on the cover page of this
Prospectus) and (iv) gives effect to a 1.995192-for-one reverse split of Common
Stock (the "Reverse Stock Split") effected on July 10, 1998.
COMPANY SUMMARY
The Company was founded in 1997 to become a leading domestic and
international provider of diversified staffing and outsourcing services. Upon
completion of the Offering, WORK will acquire the 16 Founding Companies which
on average have been in business for approximately 16 years. After the
Offering, the Company will operate 49 offices in 13 states and the District of
Columbia in addition to an office in Toronto, Canada. The Company's pro forma
1997 revenues and income from operations were $168.1 million and $13.3 million,
respectively, and the Company's 1997 pro forma gross margin was 32%.
Furthermore, combined historical revenues of the Founding Companies grew at a
compounded annual rate of 32% from 1995 to 1997.
The Company offers a broad range of staffing and outsourcing services to
numerous industries and focuses on high margin, high growth accounts. The
Company's staffing and outsourcing services are divided into two general
operating groups: Specialty Services and Business Support Services. Specialty
Services include Information Technology ("IT") Services and Other Specialty
Services. IT Services include offering computer programming, network support,
personal computer help desk, software engineering and systems analysis and
design personnel. Other Specialty Services include offering legal, financial,
human resources, specialty medical and call center personnel, as well as other
professionals on a project basis to clients. Business Support Services
primarily includes offering high-end office/clerical support personnel. The
Company also provides permanent placement, outsourcing and training services to
its clients. Specialty Services contributed 51% of the Company's 1997 pro forma
revenue, which was comprised of 30% and 70% for IT Services and Other Specialty
Services, respectively. Business Support Services contributed 49% of the
Company's pro forma revenue for 1997.
The Company is targeting IT Services and Other Specialty Services, such as
legal and financial staffing, because the Company believes that these segments
offer among the most attractive growth rates and margins in the staffing
industry. Moreover, the Company is focused on certain specialty niche areas
such as providing human resources specialists and biostatisticians, because the
Company believes that such niche services are subject to less competition and
can be developed into substantial business units for the Company.
While the Company intends to emphasize IT Services and Other Specialty
Services in its growth strategy, the Company believes that there are important
advantages to having certain Business Support Services included in its Founding
Company group. In addition to attractive margins and growth rates, the Founding
Companies in Business Support Services provide the Company with significant
operations in certain key metropolitan markets and, in many cases, a well-
developed management and systems infrastructure. Accordingly, WORK acquired the
companies offering Business Support Services primarily as "platform" companies
for the entry into desirable geographic markets and for cross-selling of IT
Services and Other Specialty Services. The Company intends to
3
<PAGE>
use the infrastructure of its platform companies to support the entry of IT
Services and Other Specialty Services into new markets.
The Company intends to implement its operating and acquisition strategies to
build upon the strong historical growth and strong margins of the Founding
Companies.
KEY ELEMENTS OF THE COMPANY'S OPERATING STRATEGY ARE TO:
. Focus on high margin, high growth service offerings
. Introduce and cross-sell specialty services
. Adopt best practices, policies and procedures
. Maintain decentralized management
. Provide strong incentives to management
KEY ELEMENTS OF THE COMPANY'S ACQUISITION STRATEGY ARE TO:
. Selectively acquire high margin, high growth companies
. Maintain separate acquisition team
. Capitalize on status of Company as attractive acquiror
. Leverage industry reputation and contacts of senior management
The Company recognizes the importance of effectively integrating the
operations of the Founding Companies as well as the operations of companies
acquired in the future. The Company has established a separate integration team
to create and implement corporate policies and procedures established for the
operational and financial reporting systems of the Founding Companies and any
subsequent acquisitions. While the Company is developing its integration
policies and procedures, the Company will rely on the Founding Companies'
existing systems and will standardize these systems as soon as practicable with
minimal interruption to its business operations.
The Company is a Texas corporation with its principal executive offices
located at 700 Louisiana, Suite 3900, Houston, Texas 77002, and its telephone
number is (713) 228-9675.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company........................ 6,458,334 shares
Common Stock to be Outstanding
after the
Offering(1).................... 14,316,327 shares
Use of Proceeds................. To pay the cash portion of the purchase price
for the Founding Companies, to repay
indebtedness of the Founding Companies and for
general corporate purposes including working
capital. See "Use of Proceeds" and "Certain
Transactions."
Proposed New York Stock Exchange
symbol......................... "WOR"
</TABLE>
- --------
(1) The number of shares estimated to be outstanding on completion of this
Offering consists of (i) 905,718 shares issued by WORK prior to the
Offering, (ii) 6,438,540 shares to be issued as consideration in the
Acquisitions; (iii) 513,735 shares issued on the automatic conversion of
WORK's Series A Preferred Stock and Series B Preferred Stock (collectively,
the "Preferred Stock") on completion of this Offering; and (iv) the
6,458,334 shares being offered hereby. Such share number does not include
an aggregate of 1,318,000 shares subject to options to be granted upon
completion of the Offering under the Company's 1998 Incentive Plan (the
"Incentive Plan"), which will have an exercise price equal to the initial
public offering price per share. See "Management--Incentive Plan" and
"Certain Transactions--Organization of WORK."
RISK FACTORS
An investment in the shares of Common Stock involves significant risks that a
potential investor should consider carefully. See "Risk Factors" beginning on
page 9 for certain information that should be considered by prospective
purchasers of the Common Stock offered hereby.
5
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
WORK will acquire the Founding Companies simultaneously with and as a
condition to the consummation of this Offering. For financial statement
presentation purposes, Sparks Personnel Services, Inc., and its affiliated
companies, Sparks Associates, Inc. and Customer Care Solutions, L.L.C.
(collectively, "Sparks") has been identified as the accounting acquirer. The
following summary unaudited pro forma financial information presents certain
data for the Company, as adjusted for (i) the effects of the Acquisitions on a
historical basis, (ii) the effects of certain pro forma adjustments to the
historical financial statements, (iii) the consummation of this Offering and
the application of the net proceeds therefrom, and (iv) the Reverse Stock
Split. The pro forma financial data of the Company do not purport to represent
what the Company's results of operations or financial position actually would
have been had these events, in fact, occurred on the date or at the beginning
of the period indicated, nor are they intended to project the Company's results
of operations or financial position for any future date or period. See
"Selected Historical and Pro Forma Combined Financial Data" and the Unaudited
Pro Forma Combined Financial Statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA COMBINED
----------------------------------------
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- ------------------
($ IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues.............................. $ 168,147 $ 45,345
Cost of services...................... 113,794 30,690
---------- ----------
Gross profit.......................... 54,353 14,655
Selling, general and administrative
expenses(2).......................... 38,070 10,373
Amortization of goodwill(3)........... 2,941 735
---------- ----------
Income from operations................ 13,342 3,547
Other income (expense), net........... 268 72
Interest expense(4)................... 7 2
---------- ----------
Income before provision for income
taxes................................ 13,603 3,617
Provision for income taxes(5)......... 6,734 1,741
---------- ----------
Net income............................ $ 6,869 $ 1,876
---------- ----------
Net income per share--basic and
diluted.............................. $ .48 $ .13
========== ==========
Shares used in computing pro forma net
income per share(6).................. 14,316,327 14,316,327
========== ==========
OTHER DATA:
EBITDA(7)............................. $ 17,335 $ 4,540
EBITDA margin......................... 10.3% 10.0%
Gross margin.......................... 32.3% 32.3%
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1998
---------------------
PRO FORMA AS
COMBINED ADJUSTED(9)
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA(8):
Working capital.......................................... $(66,231) $ 2,327
Total assets............................................. 134,702 135,381
Total debt, including current portion.................... 67,585 134
Stockholders' equity..................................... 54,854 122,984
</TABLE>
- --------
(1) Assumes the Acquisitions and the Offering were completed on January 1,
1997.
(2) The pro forma combined statements of operations data include the effect (i)
of a reduction of approximately $7.4 million and $0.8 million in
compensation and benefits for the periods ended December 31, 1997 and March
31, 1998, respectively, as agreed to as part of the purchase agreements by
the owners of the Founding Companies on a prospective basis; and (ii) the
elimination of a non-cash, non-recurring compensation charge of
approximately $7.4 million by the Company for the year ended December 31,
1997 offset by a charge of $0.8 million for incremental salary and
administration expenses.
(3) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions amortized over a 40-year period and computed on the basis
described in Note 3 of Notes to Unaudited Pro Forma Combined Financial
Statements.
(4) Reflects the effect of the elimination of the assumed debt of the Founding
Companies resulting from the repayment of such debt with a portion of the
proceeds from the Offering.
(5) Assumes all income is subject to an effective corporate tax rate of 40% and
the non-deductibility of goodwill.
(6) Computed on a basis described in the Unaudited Pro Forma Combined Financial
Statements.
6
<PAGE>
(7) Represents earnings before interest, income taxes, depreciation and
amortization ("EBITDA"). Based on its experience in the industry, the
Company believes that EBITDA is an important tool for measuring the
performance of companies in the industry (including potential acquisition
targets) in several areas such as liquidity, operating performance and
leverage. In addition, lenders use EBITDA as a criterion in evaluating
companies in the industry. The EBITDA measure for the Company may not be
consistent with similarly titled measures for other companies. EBITDA
should not be considered as an alternative to operating or net income (as
determined in accordance with generally accepted accounting principles) as
an indicator of the Company's performance or to cash flow from operations
(as determined in accordance with generally accepted accounting principles)
as a measure of liquidity. See the historical statements of cash flows
included herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Combined and Selected Founding
Companies" for discussion of other measures of performance determined in
accordance with generally accepted accounting principles and the Company's
sources and applications of cash flow.
(8) The pro forma combined balance sheet data (i) assume the Acquisitions
occurred on March 31, 1998; (ii) include the effect of assets distributed
to owners of certain of the Founding Companies; and (iii) gives effect to a
liability for the cash consideration of $66,850,000 to be paid in
connection with the Acquisitions.
(9) Adjusted for the sale of 6,458,334 shares of Common Stock offered hereby
and the application of the net proceeds therefrom. See "Use of Proceeds."
7
<PAGE>
SUMMARY HISTORICAL INDIVIDUAL FOUNDING COMPANY FINANCIAL DATA
The following table presents certain summary historical statement of
operations data of the Founding Companies for the fiscal years 1995, 1996 and
1997, and the three months ended March 31, 1997 and 1998. The statements of
operations data presented below have been derived for certain of the Founding
Companies and certain of the periods from the historical financial statements
of such Founding Companies, included elsewhere in this Prospectus. Also, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Combined and Selected Founding Companies."
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED MARCH 31,
----------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SPECIALTY SERVICES COMPANIES:
IT SERVICES COMPANIES:
PCN:
Revenue............................ $ 9,236 $ 9,902 $11,286 $ 2,602 $ 3,391
Gross Profit....................... 2,331 3,031 3,901 885 1,110
ABSOLUTELY/BOTAL:
Revenue............................ 5,390 5,988 10,409 2,069 3,091
Gross Profit....................... 2,096 2,216 3,489 734 1,042
TASK:
Revenue............................ 4,364 5,239 6,267 1,802 1,911
Gross Profit....................... 1,523 1,808 2,148 627 691
OTHER SPECIALTY SERVICES COMPANIES:
SMITH HANLEY:
Revenue............................ $ 7,315 $11,943 $16,321 $ 4,042 $ 4,044
Gross Profit....................... 6,598 9,397 11,770 3,060 2,687
WSI:
Revenue............................ 2,150 4,000 5,728 1,210 1,551
Gross Profit....................... 616 1,186 1,856 376 491
BENETEMPS:
Revenue............................ 2,839 3,712 4,115 916 1,093
Gross Profit....................... 1,047 1,054 1,047 240 282
LAW PROS:
Revenue............................ 740 1,438 3,931 663 673
Gross Profit....................... 214 435 1,228 215 250
LAW RESOURCES:
Revenue............................ 4,367 3,593 3,492 724 984
Gross Profit....................... 1,876 1,697 1,436 299 444
AIM:
Revenue............................ 2,339 2,264 2,781 639 760
Gross Profit....................... 761 795 918 202 247
CONTRACT HEALTH:
Revenue............................ 755 1,163 2,100 435 560
Gross Profit....................... 197 318 588 122 141
BUSINESS SUPPORT SERVICES COMPANIES:
BURNETT:
Revenue............................ $23,871 $30,377 $41,201 $ 9,513 $ 10,995
Gross Profit....................... 6,466 8,225 10,529 2,306 2,962
SPARKS:
Revenue............................ 15,777 22,644 27,124 6,896 7,168
Gross Profit....................... 4,528 6,046 7,520 1,871 2,052
CORELINK:
Revenue............................ 5,375 6,148 11,167 2,136 2,961
Gross Profit....................... 1,536 1,509 2,407 460 709
TOSI:
Revenue............................ 4,893 6,868 9,484 2,344 3,147
Gross Profit....................... 1,052 1,439 2,195 525 721
ACCESS:
Revenue............................ 5,173 8,867 8,558 2,233 1,915
Gross Profit....................... 1,287 2,122 2,132 506 511
CORE:
Revenue............................ 2,050 2,802 4,185 955 1,100
Gross Profit....................... 641 925 1,190 274 317
</TABLE>
8
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
purchasers of the Common Stock offered hereby should consider carefully the
following factors before deciding to invest in the Common Stock. To the extent
this Prospectus contains certain forward-looking statements, actual results
could differ materially from those projected in the forward-looking statements
as a result of any number of factors, including the risk factors set forth
below and elsewhere in this Prospectus.
ABSENCE OF COMBINED OPERATING HISTORY; RISKS OF INTEGRATING FOUNDING COMPANIES
AND ACQUIRED BUSINESSES
WORK has conducted no operations to date other than in connection with this
Offering and its pending acquisitions of the Founding Companies in separate
transactions. The Founding Companies have operated, and will continue to
operate prior to the closing of the Acquisitions, as separate, independent
businesses and there can be no assurance that the Company will be able to
integrate the operations of these businesses successfully or to institute the
necessary systems and procedures, including accounting and financial reporting
systems, to manage the combined enterprise on a profitable basis and to report
the results of operations of the combined entities on a timely basis. The
management group has been assembled only recently and there can be no
assurance that the management group will be able to oversee the combined
companies and effectively implement the Company's operating and internal
growth, acquisition or integration strategies. The pro forma combined
financial statements of the Company cover periods when the Founding Companies
and WORK were not under common control or management and may not be indicative
of the Company's future financial or operating results. The Company will
initially rely on the separate systems of each of the Founding Companies, but
the success of the Company will depend, in part, on the extent to which the
Company is able to centralize and integrate necessary systems and functions,
including operational and financial reporting systems, among the Founding
Companies and such additional businesses as the Company may acquire. The
inability of the Company to successfully centralize and integrate such systems
and functions could have a material adverse effect on the Company's business,
financial condition and results of operations and adversely affect the
Company's implementation of its operating and internal growth, acquisition and
integration strategies. See "The Company" and "Business--Operating and
Internal Growth Strategy," "--Acquisition Strategy," and "--Integration
Strategy."
ACQUISITION RISKS
One element of the Company's growth strategy is to acquire staffing services
firms that complement its existing operations, including firms that are in
geographic regions not currently served by the Company. This acquisition
strategy presents risks that, singly or in any combination, could materially
adversely affect the Company's business and financial performance. These risks
include those inherent in assessing the value, strengths, weaknesses,
integratability, contingent or other liabilities and potential profitability
of the acquisition candidate, the possibility of the adverse effect on
existing operations of the Company from the diversion of management attention
and resources to acquisitions and the possible loss of acquired customers and
key personnel, including sales representatives. The success of the Company's
acquisition strategy will depend on the extent to which acquisition candidates
continue to be available at attractive valuations and whether the Company will
be able to acquire, successfully integrate and profitably manage additional
businesses. The Company believes the staffing services industry is subject to
rapid consolidation on an international, national and regional scale, and
competition for acquisition candidates could materially increase the cost of
acquiring businesses. The Company has identified certain possible acquisition
candidates, but has no binding agreement or letter of intent in effect with
respect to any acquisition (other than the Acquisitions), and the timing, size
and success of the Company's acquisition efforts and the associated capital
commitments cannot be readily predicted. Accordingly, no assurance can be
given that the Company's strategy will succeed. See "Business--Acquisition
Strategy."
9
<PAGE>
MANAGEMENT OF GROWTH
The Company has experienced rapid growth through the acquisition of the
Founding Companies, and this rapid growth has placed, and is expected to
continue to place significant demands on the Company's managerial, operational
and financial resources. To manage its growth, the Company must continue to
implement and improve its operational and financial systems and to expand,
train and manage its employee base. There can be no assurance that the Company
has made adequate allowances for the costs and risks associated with this
expansion, that the Company's systems, procedures or controls will be adequate
to support the Company's operations or that the Company's management will be
able to successfully offer the Company's services and implement its business
plan. The Company's future operating results will also depend on its ability
to expand its support organization commensurate with the growth of its
business and to integrate newly acquired operations. Any failure by the
Company's management to effectively anticipate, implement and manage the
changes required to sustain the Company's growth could have a material adverse
effect on the Company's business, financial condition and results of
operations. There can be no assurance that the Company will be able to
effectively manage such change. See "Business--Operating and Internal Growth
Strategy" and "--Acquisition Strategy."
EFFECT OF ECONOMIC FLUCTUATIONS
Demand for the Company's staffing services is significantly affected by the
general level of economic activity and unemployment in the United States and
Canada. When economic activity increases, temporary employees are often added
before full-time employees are hired. However, as economic activity slows,
many companies reduce their use of temporary employees before laying off full-
time employees. In addition, the Company may experience increased 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. During periods of increased economic activity and
generally higher levels of employment, the competition among staffing firms
for qualified personnel is intense. As the labor market tightens, there is
greater demand and competition for skilled workers needed to fill client
orders and wages generally increase. There can be no assurance that during
these periods the Company will be able to recruit candidates necessary to fill
its clients' staffing needs or that increased wage costs can be passed on to
clients through increased billings.
DEPENDENCE ON KEY PERSONNEL
The Company's operations depend, in part, on the continuing efforts of B.
Garfield French, its President and Chief Executive Officer, Samuel R. Sacco,
its Chairman of the Board, and other key executive officers and the senior
management of the Founding Companies. The Company likely will also depend on
the senior management of any significant businesses it acquires in the future.
Although the Company has entered into employment agreements with Messrs.
French and Sacco and other executive officers of WORK and senior management of
the Founding Companies, there can be no assurance that the Company will be
able to retain their services. In addition, the Company has a $1,000,000 key
person life insurance policy on the life of Mr. French; however, the proceeds
of that policy may not be sufficient to compensate the Company for the loss of
Mr. French's services. The Company does not have such policies in place on any
of its other employees. The business or prospects of the Company could be
affected adversely if any of these persons does not continue his employment
with the Company and the Company is unable to attract and retain qualified
replacements. The success of the Company's growth strategy, as well as the
Company's current operations, will depend on the extent to which the Company
is able to retain, recruit and train qualified employees who meet the
Company's standards of professionalism and service to its customers. See
"Business--Corporate Level Support--Employee Training."
DEPENDENCE ON AVAILABILITY OF CANDIDATES
The Company depends on its ability to attract, train and retain personnel
who possess the skills and experience necessary to meet the staffing
requirements of its clients. Competition for individuals with proven skills in
certain areas, particularly technical and professional is intense. In
addition, the number of candidates
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decreases during periods of low unemployment. The Company must continually
evaluate, train and upgrade its base of available personnel to keep pace with
clients' needs. Competition for individuals with proven technical or
professional skills is intense and demand for such individuals is expected to
remain strong for the foreseeable future. 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. See "Business--
Corporate Level Support--National Recruiting and Retention Program for
Candidates."
INCREASED EMPLOYEE COSTS
The Company is responsible for and pays unemployment insurance premiums and
workers' compensation for its temporary employees. Unemployment insurance
premiums may increase as a result of, among other things, increased levels of
unemployment and the lengthening of periods for which unemployment benefits
are available. Workers' compensation costs may increase as a result of changes
in the Company's experience rating or applicable laws. Furthermore, annual
workers' compensation expenses and the related liability accrual are based on
various estimates, including the cost of estimated future benefits. Any
material variation from the estimate of future benefits could have a material
adverse effect on the Company. There can be no assurance that the Company will
be able to increase the fees charged to its clients in a timely manner and
sufficient amount to cover increased costs related to workers' compensation
and unemployment insurance or health benefits if such health benefits are
extended to temporary employees as proposed in certain recent federal and
state legislative proposals. See "Business--Government Regulation."
EMPLOYMENT LIABILITY RISKS
Temporary staffing services providers employ and place people generally in
the workplaces of other businesses. An inherent risk of such activity includes
possible claims of discrimination and harassment, employment of illegal
aliens, violations of wage and hour requirements, errors and omissions of its
temporary employees, particularly for the actions of professionals (e.g.,
information technology specialists, attorneys, accountants and engineers),
misuse of client proprietary information, misappropriation of funds, other
criminal activity or torts, claims under health and safety regulations and
other similar claims. In some instances, the Company has agreed to indemnify
clients against some or all of the foregoing matters, pursuant to a written
contract. The failure of any Company employee or personnel to observe the
Company's policies and guidelines intended to reduce exposure to these risks,
relevant client policies and guidelines or applicable federal, state or local
laws, rules or regulations could result in negative publicity and payment by
the Company of monetary damages or fines or have other material adverse
effects on the Company. 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. To reduce its exposure, the
Company maintains and, in certain cases, may be required to maintain,
insurance and fidelity bonds covering general liability, workers' compensation
claims, errors and omissions, and employee theft. There can be no assurance
that such insurance or fidelity bond coverage will continue to be available at
reasonable costs or that it will be sufficient in amount or scope to cover any
such liability. Temporary staffing providers also are 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, can adversely affect the Company's revenues. See
"Business--Litigation and Insurance."
COMPETITIVE MARKET
The temporary staffing industry is highly competitive and extremely
fragmented with limited barriers to entry. The Company competes in local,
regional, national and international markets with full-service and specialized
temporary staffing agencies. The Company faces significant competition in the
markets it serves and is likely to face significant competition in any new
market it enters. 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. The Company competes for potential
clients with providers of outsourcing services,
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systems integrators, computer system consultants, other providers of staffing
services, temporary personnel agencies and search firms. Price competition in
the staffing industry is intense, particularly for the provision of
office/clerical and production, assembly and distribution personnel, and
pricing pressures from competitors and customers are increasing. For example,
many large customers are demanding significantly discounted prices for service
offerings. In addition, to the extent that the Company offers fixed price
contracts to clients in the future, the Company may be responsible for cost
overruns which would have an adverse impact on earnings. The Company expects
that the level of competition will remain high in the future. Competition,
particularly from companies with greater financial resources than the Company,
could have a material adverse effect on the Company's operations and
profitability. See "Business--Competition."
VALUATION OF ACQUISITIONS
WORK has negotiated acquisitions on an individual, company-by-company basis,
using valuations based on prior and anticipated operating results of the
Founding Companies. No third party appraisals of the Founding Companies were
obtained by the Company for purposes of the Offering nor has a fairness
opinion been obtained in connection with the Acquisitions. Assuming an initial
public offering price of $12.00 per share, the aggregate consideration related
to the Acquisitions will be approximately $144.1 million, which will consist
of 6,438,540 shares of Common Stock (calculated solely for purposes of the
Acquisitions at $12.00 per share) and approximately $66.9 million in cash.
There can be no assurance that the consideration to be paid by WORK for the
Founding Companies accurately reflects the value of these companies or that
the percentage of Common Stock of WORK owned by the former owners of the
Founding Companies after consummation of the Offering will reflect the value
of these companies. If the fair market values of the Founding Companies, or
companies to be acquired in the future, at the time of acquisition by the
Company are materially different from the amounts paid by the Company, the
Company may have overpaid for such companies, which could result in a material
and adverse effect on the financial performance of the Company and the value
of Common Stock.
NEED FOR ADDITIONAL FINANCING
Substantially all of the net proceeds of this Offering will be used in
connection with the Acquisitions. At March 31, 1998, on a pro forma combined
basis as adjusted, the Company would have an aggregate of $2.5 million of cash
and cash equivalents, $2.3 million of working capital and $0.1 million of
capital lease obligations. The Company's acquisition strategy will require
substantial additional capital. The Company currently intends to use cash,
debt and shares of Common Stock to make future acquisitions. Using internally
generated cash or debt to complete acquisitions could substantially limit the
Company's operational and financial flexibility. The extent to which the
Company will be able or willing to use Common Stock for this purpose will
depend on its market value from time to time and the willingness of potential
sellers to accept it as full or partial payment. Using Common Stock for this
purpose may result in a significant dilution to then existing stockholders. To
the extent the Company is unable to use Common Stock to make future
acquisitions, its ability to grow may be limited by the extent to which it is
able to raise capital for this purpose, as well as to expand existing
operations, through debt or additional equity financings. There can be no
assurance that the Company will be able to obtain the necessary capital to
finance a successful acquisition program and its other cash needs. If the
Company is unable to obtain additional capital on acceptable terms, it may be
required to reduce the scope of its presently anticipated expansion. See "Use
of Proceeds" and "Management's Discussion and Analysis of Pro Forma Financial
Condition and Pro Forma Results of Operations--Pro Forma Liquidity and Capital
Resources."
The Company has recently received a commitment letter from to
provide the Company with a $ million credit facility (the "Credit
Facility") which may be used for acquisitions, working capital and other
general corporate purposes. The Credit Facility will be secured by all
accounts receivable, inventory, equipment, and stock of subsidiaries of the
Company. The Company expects that the Credit Facility will require compliance
with various affirmative and negative covenants (including maintenance of
certain financial ratios) which could limit the Company's operational and
financial flexibility. The Credit Facility is subject to negotiation of
definitive documentation and certain other customary conditions, and there can
be no assurance that the Company will be able to obtain the Credit Facility on
terms acceptable to the Company. See "Management's
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Discussion and Analysis of Pro Forma Financial Condition and Pro Forma Results
of Operations--Pro Forma Liquidity and Capital Resources."
The Company may substantially increase its level of indebtedness in the
future to finance its acquisition program. The degree to which the Company is
financially leveraged following such borrowings and the terms of the Company's
indebtedness could have important consequences to shareholders, including that
(i) the Company's ability to obtain additional financing in the future for
working capital and general corporate purposes, to make acquisitions, to fund
capital expenditures and to pay dividends may be impaired, (ii) a substantial
portion of the Company's cash flow from operations may have to be dedicated to
the payment of the principal of and interest on its indebtedness, (iii)
certain of the Company's borrowings may be at variable rates of interest,
which will expose the Company to the risk of increased rates, (iv) the Credit
Facility is expected to contain certain financial and restrictive covenants
which could limit the ability of the Company to effect future debt or equity
financings and may otherwise restrict corporate activities, and (v) the
Company may be more highly leveraged than many of its competitors, which may
place the Company at a competitive disadvantage. See "Management's Discussion
and Analysis of Pro Forma Financial Condition and Pro Forma Results of
Operations--Pro Forma Liquidity and Capital Resources."
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES AND ASSOCIATES
The Company will use its net proceeds from this Offering to pay the cash
portions of the purchase prices it will pay for the Founding Companies
(approximately $66.9 million) and to repay certain outstanding indebtedness of
the Founding Companies (approximately $0.6 million). The cash payable to
stockholders of the Founding Companies will include approximately $29.3
million payable to persons who or which will become directors or executive
officers of the Company or beneficial owners of 5% or more of the outstanding
Common Stock. In addition, the Offering will enable WORK to pay (i) the
$775,000 fee due and payable to Bollard Group, L.L.C., a Texas limited
liability company ("Bollard"), as compensation for Bollard's assistance in
completing the Offering, and (ii) non-interest bearing advances of up to
$500,000 that may be made by Bollard to fund the operating expenses of WORK
prior to the completion of this Offering. Certain of the principals of Bollard
were directors of WORK prior to the Offering. For a more detailed discussion
of the use of proceeds of this Offering and the benefits to be received by
persons who or which are or will become directors or executive officers of
WORK or beneficial holders of 5% or more of the Common Stock on consummation
of this Offering and the Acquisitions, see "Use of Proceeds" and "Certain
Transactions--Organization of WORK," "--Acquisitions Involving Certain
Officers, Directors and Stockholders," and "--Real Estate and Other
Transactions."
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, among others, for its employees and personnel.
Unemployment taxes are a significant expense to the Company. Because the
Company employs a large number of personnel for relatively short durations,
and because it could experience significant turnover in its personnel, it
could be taxed at the highest statutory rates for unemployment taxes.
Significant increases in the effective rates of any payroll related costs
likely would have a material adverse effect upon the Company. In addition, the
Company could incur costs related to workers' compensation claims at a higher
rate in the future because of such factors as higher than expected losses from
known claims or an increase in the number and severity of new claims. 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. Recent 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 as a result of any
of the foregoing. There is also no assurance that the Company will be able to
adapt to future regulatory changes made by the Internal Revenue Service, the
U.S. Department of Labor or other state and federal regulatory agencies. In
Canada, substantially similar risks associated with payroll burdens and
government regulations exist on both a federal and provincial level.
Additionally, the Company will become subject to similar governmental
regulation
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in any other countries in which it expands its operations through acquisition
or otherwise. See "Business--Government Regulation."
The Company and its customers and suppliers are subject to extensive federal
and state regulation in the United States, and the Company cannot predict the
extent to which future legislative and regulatory developments concerning
their practices and products or the staffing services industry may affect the
Company. The Company currently recruits information technology specialists and
other temporary staffing employees internationally for domestic placement. The
entry of these employees into the United States is regulated by the U.S.
Department of Labor and U.S. Department of Justice--Immigration and
Naturalization Services. The regulations governing the hiring of foreign
nationals are complex and change often. If either of these authorities or any
other regulatory or judicial body should determine that the Company is not in
compliance with these regulations, the Company could be subject to fines
and/or suspension of this part of the Company's business. Further, these
regulations could change in a manner which would limit the Company's ability
to employ foreign nationals. Any of the foregoing could have a material
adverse effect on the Company business, financial condition and results of
operation. See "Business--Government Regulation."
YEAR 2000 RISKS
Many computer software programs, as well as certain hardware and equipment
containing date sensitive data, were structured to utilize a two-digit date
field meaning that they may not be able to properly recognize dates in the
Year 2000 and thereafter. This could result in significant system and
equipment failures. The Company recognizes that it must take action to ensure
that its operations and the operations of each of the operating companies will
not be adversely impacted by Year 2000 software failures and is currently
developing detailed assessments and action plans to address Year 2000 issues.
The Company currently does not have an overall estimate of the cost associated
with a solution to the Year 2000 issue.
SIGNIFICANT INTANGIBLE ASSETS
As a result of the Acquisitions, goodwill accounts for a material portion of
the Company's total assets. On a pro forma combined basis, goodwill of
approximately $117.7 million was recorded at March 31, 1998, representing
approximately 87% of the Company's total assets. The Company's goodwill will
be amortized over a 40-year period resulting in annual noncash amortization
charges against income of approximately $2.9 million. The Company may record
additional goodwill related to (i) any additional consideration payable to
three of the Founding Companies pursuant to earn out provisions included in
the definitive agreements regarding the Acquisitions, and (ii) amortization
charges associated with the implementation of its acquisition strategy. The
Company will evaluate the carrying amount of its goodwill whenever adverse
facts and circumstances occur indicating an impairment in value. If upon such
evaluation, it is determined that a write-down of goodwill is necessary, such
a write-down could have a material adverse effect on the Company's financial
condition and results of operations. See "--Absence of Combined Operating
History; Risks of Integrating Founding Companies and Acquired Businesses," and
"Management's Discussion and Analysis of Pro Forma Financial Condition and Pro
Forma Results of Operations."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS
On closing of the Acquisitions and this Offering, the former owners of the
Founding Companies, the principals of Bollard, other founders and the
executive officers and directors of WORK will beneficially own in the
aggregate approximately 50.7% of the outstanding Common Stock. If these
persons were to act in concert, they would be able to exercise control over
the Company's affairs, including the election of the entire Board of Directors
and any matter submitted to a vote of stockholders. See "Principal
Stockholders."
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT
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. The Company will conduct its operations
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through subsidiaries, including substantially all of the Founding Companies,
and is therefore dependent upon the cash flow of and the transfer of funds by
those subsidiaries to the Company in the form of loans, dividends or otherwise
to meet its financial obligations. Each operating subsidiary of the Company
will be a distinct legal entity and will have no obligation, contingent or
otherwise, to transfer funds to the Company. The Company's ability to pay
dividends on the Common Stock will be restricted by the terms of the proposed
Credit Facility and could be restricted by the terms of subsequent financings
and subsequent series of Preferred Stock that may be issued in future
transactions. Additionally, the ability of the Founding Companies to pay
dividends to the Company will be limited by the terms of the Credit Facility.
See "Description of Capital Stock," "--Common Stock," "Description of Credit
Facility," and "Dividend Policy."
POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK
On closing of the Acquisitions and this Offering, 14,316,327 shares of
Common Stock will be outstanding. The 6,458,334 shares sold in this Offering
(other than shares purchased by affiliates of the Company) will be freely
tradeable. The remaining shares outstanding may be resold publicly only
following their effective registration under the Securities Act of 1933, as
amended (the "Securities Act"), or pursuant to an available exemption from the
registration requirements of that Act, such as provided by Securities Act Rule
144 promulgated by the Securities and Exchange Commission (the "SEC"). Under
Rule 144, the 6,438,540 shares issued to the former owners of the Founding
Companies will be eligible for Rule 144 sales, subject to certain volume
limitations and other requirements, on the day following the first anniversary
of the date this Offering closes. The stockholders of the Founding Companies
will have certain demand registration rights. See "Shares Eligible For Future
Sale."
On closing of this Offering, the Company will have options outstanding to
purchase up to a total of 1,318,000 shares of Common Stock, of which 322,500
will be exercisable immediately after the closing of this Offering. The
balance of the stock options will vest in varying increments over the three
year period following the Offering. The Company intends to register all the
shares subject to options granted under the Company's 1998 Incentive Plan (the
"Incentive Plan") under the Securities Act for public resale.
In connection with the Offering, the Company's officers and directors have
agreed that, during a period of one year from the date of this Prospectus, and
all of the Company's shareholders (other than the holders of Common Stock
issued on conversion of the Preferred Stock) have agreed that, during a period
of 180 days from the date of this Prospectus, such holders will not, without
the prior written consent of The Robinson-Humphrey Company, LLC, directly or
indirectly, offer, sell, contract to sell, grant any option with respect to,
pledge, hypothecate or otherwise dispose of, any shares of Common Stock except
for a cashless exercise of stock options or a bona fide gift provided that the
donee agrees to be bound by the terms of the donor's lockup agreement. In
addition, the Company has agreed that, during a period of 180 days from the
date of this Prospectus, the Company will not, without the prior written
consent of The Robinson-Humphrey Company, LLC, directly or indirectly, offer,
sell, contract to sell, grant any option with respect to, pledge, hypothecate
or otherwise dispose of any shares of Common Stock except for shares of Common
Stock to be issued in the Offering, in connection with acquisitions generally,
and upon the exercise of stock options which are either (i) outstanding on the
date of this Prospectus or (ii) issued under the Incentive Plan (see
"Management--Incentive Plan"). Further, all persons who acquire shares in
connection with the Acquisitions have agreed that they generally will not
offer, sell or otherwise dispose of any of their shares of Common Stock
(subject to certain limited exceptions generally involving transfers to family
members and trusts or pursuant to an effective registration statement) during
the one-year period following the date of this Prospectus.
The Company intends to register up to 5,000,000 additional shares of Common
Stock under the Securities Act in the future for its use in connection with
future acquisitions. Pursuant to Securities Act Rule 145, the volume
limitations and certain other requirements of Rule 144 would apply to resales
of these shares by affiliates of the businesses the Company acquires for a
period of one year from the date of their acquisition, but otherwise these
shares would be freely tradable by persons not affiliated with the Company
unless the Company contractually restricts their resale.
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Availability for sale, or sale, of the shares of Common Stock eligible for
future sale could adversely affect the market price of the Common Stock
prevailing from time to time. See "Shares Eligible for Future Sale."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, no public market for the Common Stock has existed,
and the initial public offering price, which the Company and the
representatives of the Underwriters will negotiate, may not be indicative of
the price at which the Common Stock will trade after this Offering. See
"Underwriting" for the factors they will consider in determining the initial
public offering price. The Company has applied for listing the Common Stock on
the New York Stock Exchange, but no assurance can be given that an active
trading market for the Common Stock will develop or, if developed, will
continue after this Offering. The market price of the Common Stock after this
Offering may be subject to significant fluctuations from time to time in
response to numerous factors, including variations in the reported financial
results of the Company and changing conditions in the economy in general or in
the Company's industry in particular. In addition, the stock markets
experience significant price and volume volatility from time to time which may
affect the market price of the Common Stock for reasons unrelated to the
Company's performance.
IMMEDIATE, SUBSTANTIAL DILUTION
Purchasers of Common Stock in this Offering will experience immediate,
substantial dilution in the net tangible book value of their stock of $11.63
per share and may experience further dilution from issuances of shares of
Common Stock in the future. See "Dilution."
POTENTIAL ANTI-TAKEOVER EFFECTS
The Company's Articles of Incorporation, as amended (the "Charter"),
authorize the issuance, without stockholder approval, of one or more series of
preferred stock having such preferences, powers and relative, participating,
optional and other rights (including preferences over the Common Stock
respecting dividends and distributions and voting rights) as the Company's
board of directors (the "Board of Directors") may determine. See "Description
of Capital Stock--Preferred Stock."
Certain provisions of the Charter, the Company's Bylaws and the Texas
Business Corporation Act (the "TBCA") may delay, discourage, inhibit, prevent
or render more difficult an attempt to obtain control of the Company, whether
by means of a tender offer, business combination, proxy contest or otherwise.
These provisions include the charter authorization of "blank check" preferred
stock, classification of the board of directors, a limitation on the removal
of directors only for cause, and then only on approval of holders of two-
thirds of the outstanding voting stock and a restriction on the ability of
stockholders to take actions by written consent. See "Description of Capital
Stock."
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THE COMPANY
GENERAL
WORK International Corporation was founded to become a leading domestic and
international provider of diversified staffing and outsourcing services. Upon
completion of the Offering, WORK will acquire the 16 Founding Companies which
on average have been in business for approximately 16 years. The Company's
staffing services are divided into two general operating groups: Specialty
Services and Business Support Services. Specialty Services include Information
Technology ("IT") Services and Other Specialty Services. IT Services include
offering computer programming, network support, personal computer help desk,
software engineering and systems analysis and design personnel. Other
Specialty Services include offering legal, financial, human resources,
specialty medical and call center personnel, as well as other professionals on
a project basis to clients. Business Support Services primarily includes
offering high-end office/clerical support personnel. The Company also provides
permanent placement, outsourcing and training services to its clients.
Specialty Services contributed 51% of the Company's 1997 pro forma revenue,
which was comprised of 30% and 70% for IT Services and Other Specialty
Services, respectively. Business Support Services contributed 49% of the
Company's pro forma revenue for 1997.
The Company, headquartered in Houston, Texas, operates 49 offices in 13
states and the District of Columbia in addition to an office in Toronto,
Canada. The Company's pro forma 1997 revenue and income from operations were
$168.1 million and $13.3 million, respectively, and the Company's 1997 pro
forma gross margin was 32%. Furthermore, historical combined revenue of the
Founding Companies grew at a compounded annual rate of approximately 32% from
1995 through 1997.
WORK is a Texas corporation. Its executive offices are located at 700
Louisiana, Suite 3900, Houston, Texas 77002, and its telephone number at that
address is (713) 228-9675.
ORGANIZATION
Simultaneously with the closing of this Offering, WORK will acquire the 16
Founding Companies for an aggregate consideration of approximately $144.1
million, assuming an initial public offering price of $12.00 per share, which
consists of: (i) approximately $66.9 million in cash, and (ii) 6,438,540
shares of Common Stock (calculated solely for purposes of the Acquisitions at
$12.00 per share). The estimated purchase price for the Founding Companies is
subject to certain adjustments at closing and, in the case of three of the
Founding Companies, earn-out arrangements. The closing of the Acquisitions is
also subject to certain customary conditions, including the accuracy of the
representations and warranties made by the Founding Companies, the performance
of their respective covenants in the agreements and the nonexistence of a
material adverse change in the results of operations, financial condition or
business of each Founding Company. See "Certain Transactions--The
Acquisitions."
FOUNDING COMPANY ACQUISITION STRATEGY
The Company's management team developed a stringent set of criteria for the
acquisition of the Founding Companies in an effort to create a cohesive
company with a national and international presence and a complementary service
mix. The goal of the Founding Company acquisition strategy was to acquire high
margin and high growth companies in two general categories: (i) IT and Other
Specialty Services and (ii) Business Support Services. The Company targeted IT
and Other Specialty Services, such as legal and financial staffing, because
the Company believes that these segments offer among the most attractive
growth rates and margins in the staffing industry. Moreover, the Company
focused on certain specialty niche areas such as providing human resources
specialists and biostatisticians, because the Company believes that such niche
services are subject to less competition and can be developed into substantial
business units for the Company.
While the Company intends to emphasize IT and Other Specialty Services in
its growth strategy, the Company believes that there are important advantages
to having certain Business Support Services included in its Founding Company
group. In addition to attractive margins and growth rates, the Founding
Companies in Business Support Services provide the Company with significant
operations in certain key metropolitan markets and, in many cases, a well-
developed management and systems infrastructure. Accordingly, WORK acquired
the
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companies offering Business Support Services primarily as "platform" companies
for the entry into desirable geographic markets and for cross selling of IT
and Other Specialty Services. The Company intends to use the infrastructure of
its platform companies to support the entry of IT and Other Specialty Services
into new markets.
SPECIALTY SERVICES
Information Technology Service Companies:
PCN: Professional Consulting Network, Inc. ("PCN") has been in business
since 1988 and, from its headquarters in San Francisco, California,
provides staffing services in information technology, management
information systems, software engineering and design services to companies
in Northern California. For the year ended December 31, 1997, PCN had
revenue of approximately $11.3 million.
ABSOLUTELY/BOTAL: Absolutely Professional Staffing, Inc. ("Absolutely")
and its affiliate, Botal Associates, Inc. ("Botal") have been in business
since 1986 and 1969, respectively. Botal offers staffing solutions for
companies with computer software and information technology needs.
Absolutely provides staffing and permanent placement services with an
emphasis on higher-end word processing, database, spreadsheet and office
automation skills. Absolutely and Botal provide their services to
investment banking, financial services, accounting, legal and publishing
corporations in the New York City area, where they are headquartered. For
the year ended December 31, 1997, Absolutely and Botal had combined revenue
of approximately $10.4 million.
TASK MANAGEMENT: Task Management, Inc. ("Task") has been in business
since 1990 and, from its headquarters in Ridgefield, Connecticut, provides
staffing solutions for companies with computer software and information
technology needs in the Northeastern United States. For the year ended
December 31, 1997, Task had revenue of approximately $6.3 million.
Other Specialty Service Companies:
SMITH HANLEY: Smith Hanley Associates, Inc., and its affiliated company,
Smith Hanley Consulting Group, Inc., (collectively "Smith Hanley") have
been in business since 1980, and provide temporary personnel and permanent
placement services in the biostatisticians, SAS programming, quantitative
marketing, data warehousing, investment banking, and commercial insurance
specialties through its offices located in New York, New York; Chicago,
Illinois; Athens, Georgia; Philadelphia, Pennsylvania; Orlando, Florida;
and Southport, Connecticut. Headquartered in New York City, Smith Hanley
had revenue of approximately $16.3 million for the year ended December 31,
1997.
WSI: WSi Personnel Services, Inc. ("WSI") has been in business since 1988
and operates from two offices in Denver and Colorado Springs, Colorado. WSI
provides temporary staffing with an emphasis on medical technicians and
skilled health care specialists. WSI had revenue of approximately $5.7
million during the year ended December 31, 1997.
BENETEMPS: Benetemps, Inc. ("BeneTemps") has been in business since 1991
and provides human resource benefit specialists to companies in the
Northeastern United States. For the year ended December 31, 1997, BeneTemps
had revenue of approximately $4.1 million.
LAW PROS: Law Pros Legal Placement Services, Inc. ("Law Pros") has been
in business since 1994 and maintains its headquarters in Short Hills, New
Jersey. Law Pros provides attorneys and paralegals to corporate legal
departments and law firms primarily in New Jersey and the surrounding areas
on a temporary assignment or permanent placement basis. For the year ended
December 31, 1997, Law Pros had revenue of approximately $3.9 million.
LAW RESOURCES: Law Resources, Inc. ("Law Resources") has been in business
since 1984 and provides attorneys, paralegals and legal secretaries to law
firms and corporate legal departments through its two branch offices
located in Washington, DC and Chicago, Illinois. Law Resources had revenue
of
18
<PAGE>
approximately $3.5 million for the year ended December 31, 1997. Law
Resources is headquartered in Washington, DC.
AIM: AIM Staffing, Inc. ("AIM"), doing business as "Advanced Information
Management", has been providing information management specialists to
entities in Northern California since 1984. Headquartered in Mountain View,
California, and with an office in Los Angeles, California; AIM had revenue
of approximately $2.8 million for the fiscal year ended December 26, 1997.
CHP: Contract Health Professionals, Inc. ("CHP") has been in business
since 1994 and provides temporary and permanent pharmacists and
pharmaceutical technicians to entities primarily in Florida. For the year
ended December 31, 1997, CHP had revenue of approximately $2.1 million. CHP
is headquartered in Palm Beach Gardens, Florida.
BUSINESS SUPPORT SERVICES COMPANIES:
BURNETT: The Burnett Companies Consolidated, Inc. ("Burnett") is
headquartered in Houston, Texas, with branch offices located in Austin,
Texas and El Paso, Texas. Burnett generated approximately $41.2 million in
revenue during the fiscal year ended December 27, 1997, primarily in Texas.
Burnett has been in business since 1974 and provides higher-end office
automation and accounting clerical personnel; engineering; telemarketing
specialists; information technology specialists; accounting, finance and
other specialists; and production, assembly and distribution personnel.
SPARKS: Sparks Personnel Services, Inc., and its affiliated companies,
Sparks Associates, Inc. and Customer Care Solutions, LLC, (collectively
"Sparks"), have been in business since 1970. Sparks provides staffing
services with a particular emphasis on higher-end office automation and
accounting clerical staffing; together with customer service, help desk and
telemarketing positions in the communications, computer and insurance
industries. With 11 offices in the Washington, DC area, Sparks had revenue
of approximately $27.1 million for the year ended December 31, 1997.
CORELINK: Corelink Staffing Services, Inc. ("CoreLink") has been in
business since 1983 and provides temporary office clerical and permanent
placement services, with an emphasis on higher-end office automation
personnel, human resource specialists, and graphic specialists, to numerous
business enterprises primarily in California. For the year ended December
31, 1997, CoreLink had revenue of approximately $11.2 million. CoreLink is
headquartered in Irvine, California and operates from three offices located
in Southern California.
TOSI: TOSI Placement Services, Inc. ("TOSI") and its predecessors have
been in business since 1967. TOSI is a provider of higher-end office
automation and accounting clerical staffing, information technology
staffing, traditional temporary staffing and permanent placement services
in the Toronto, Ontario area. TOSI had revenue of approximately $9.5
million during the fiscal year ended December 27, 1997.
ACCESS: Access Staffing, Inc. ("Access") has been in business since 1971
and provides temporary clerical and permanent placement services, with an
emphasis on higher-end word processing and office automation skills,
together with information technology staffing, to a wide variety of
companies in Northern California. Access had revenue of approximately $8.6
million for the year ended December 31, 1997. Access is headquartered in
San Francisco, California, and has a branch office in San Jose, California.
CORE: Core Personnel, Inc., and its affiliated company, Core Personnel of
Arlington, Inc., (collectively "Core"), have been in business since 1971
and 1986, respectively, and provide staffing services with a particular
emphasis on higher-end office automation and accounting clerical positions,
to a variety of businesses in the Washington, DC area. Headquartered in
Alexandria, Virginia, Core had revenue of approximately $4.2 million for
the year ended December 31, 1997.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting underwriting discounts and offering expenses
payable by the Company, are estimated to be approximately $68.1 million
(approximately $78.9 million if the Underwriters exercise their over-allotment
option in full), assuming an initial public offering price of $12.00 per share
(the midpoint of the estimated initial public offering price range). Of those
net proceeds, (i) approximately $66.9 million will be used to pay the cash
portion of the purchase prices for the Acquisitions, (ii) approximately $0.6
million will be used concurrently for the repayment of remaining outstanding
indebtedness of the Founding Companies, and (iii) the balance of approximately
$0.7 million (approximately $11.5 million if the Underwriters exercise their
over-allotment option in full) will be used for general corporate purposes
including working capital. See "The Company--Summary of Terms of the
Acquisitions," "Management's Discussion and Analysis of Pro Forma Financial
Condition and Pro Forma Results of Operations--Pro Forma Liquidity and Capital
Resources," "Certain Transactions--Organization of WORK" and the Unaudited Pro
Forma Combined Financial Statements included elsewhere in this Prospectus.
The indebtedness to be repaid from the proceeds of this Offering (some of
which has been guaranteed by stockholders of the Founding Companies) bears
interest at rates ranging from 7.0% to 14.5% per annum. Such indebtedness
would otherwise mature at various dates through May 12, 2002.
DIVIDEND POLICY
It is the Company's current intention to retain earnings to finance the
expansion of its business. Any future dividends will be at the discretion of
the board of directors after taking into account various factors, including,
among others, the Company's financial condition, results of operations, cash
flows from operations, current and anticipated cash needs and expansion plans,
the income tax laws then in effect, the requirements of Texas law, the
restrictions imposed by the Credit Facility and any restrictions that may be
imposed by the Company's future credit facilities. The Company expects that
the Credit Facility will require compliance with various loan covenants,
including restrictions on the payment of dividends. Additionally, the ability
of the Company's subsidiaries to pay dividends to the Company are expected to
be limited by the terms of the Credit Facility. See "Management's Discussion
and Analysis of Pro Forma Financial Condition and Pro Forma Results of
Operations--Pro Forma Liquidity and Capital Resources."
20
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and current maturities of
long-term obligations and capitalization as of March 31, 1998: (i) of the
Company on a pro forma combined basis to give effect to the Acquisitions; and
(ii) of the Company, on a pro forma combined basis as adjusted to give effect
to this Offering and the application of the estimated net proceeds therefrom.
See "Use of Proceeds" and Unaudited Pro Forma Combined Financial Statements
and the related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------
PRO
FORMA AS
COMBINED ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................... $ 1,421 $ 2,538
======== ========
Short-term debt and current maturities of long-term
obligations(1).............................................. 67,478 37
Long-term obligations, less current maturities............... 107 97
Shareholders' equity:
Preferred stock: $.001 par value, 5,000,000 shares
authorized; none issued and outstanding, as adjusted...... -- --
Common stock: $.001 par value, 50,000,000 shares
authorized; 7,344,258 shares issued and outstanding pro
forma; and 14,316,327 shares issued and outstanding, as
adjusted(2)............................................... 8 14
Additional paid-in capital................................. 54,719 122,843
Unrealized gains in value of securities.................... 127 127
-------- --------
Total shareholders' equity............................... 54,854 122,984
-------- --------
Total capitalization................................... $122,439 $123,118
======== ========
</TABLE>
- --------
(1) The pro forma combined balance includes $66.9 million of cash
consideration payable for the Founding Companies.
(2) The number of shares estimated to be outstanding on completion of this
Offering consists of: (i) 905,718 shares issued by WORK prior to the
Offering; (ii) 6,438,540 shares to be issued as consideration in the
Acquisitions; (iii) 513,735 shares issued on the automatic conversion of
the Preferred Stock on completion of this Offering; and (iv) the 6,458,334
shares being offered hereby. Such share number does not include an
aggregate of 1,318,000 shares subject to options to be granted upon
completion of the Offering under the Company's Incentive Plan which will
have an exercise price equal to the initial public offering price per
share. See "Management--Option Grants" and "Certain Transactions--
Organization of the Company."
21
<PAGE>
DILUTION
The deficit in pro forma combined net tangible book value of the Company as
of March 31, 1998 was approximately $(62.8) million, or approximately $(7.99)
per share, after giving effect to the Acquisitions and related financings and
the conversion of the Preferred Stock, but before giving effect to the
Offering. The deficit in pro forma net tangible book value per share
represents the amount by which the Company's pro forma total liabilities
exceed the Company's pro forma net tangible assets as of March 31, 1998,
divided by the number of shares to be outstanding after giving effect to the
Acquisitions and the conversion of Preferred Stock. After giving effect to the
sale of the 6,458,334 shares offered hereby and deducting the estimated
underwriting discount and estimated offering expenses payable by the Company,
the Company's pro forma net tangible book value as of March 31, 1998 would
have been approximately $5.3 million, or approximately $0.37 per share, based
on an assumed initial public offering price of $12.00 per share (the midpoint
of the estimated initial public offering price range). This represents an
immediate increase in pro forma net tangible book value of approximately $8.36
per share to existing shareholders and an immediate dilution of approximately
$11.63 per share to new investors purchasing shares in this Offering. The
following table illustrates this per share pro forma dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share.......................... $12.00
Pro forma net tangible book value (deficit) per share before
this Offering................................................. $(7.99)
Increase in pro forma tangible value attributable to new
investors..................................................... 8.36
Pro forma net tangible book value per share after this Offering.. .37
------
Dilution per share to new investors.............................. $11.63
======
</TABLE>
The following table sets forth, on a pro forma basis to give effect to the
Acquisitions and the closing of this Offering and the application of the
estimated net proceeds therefrom as of March 31, 1998, the number of shares of
Common Stock purchased from the Company, the net tangible total consideration
paid to the Company and the average price per share paid to the Company by
existing shareholders (including persons acquiring Common Stock in the
Acquisitions) and the new investors purchasing shares from the Company in this
Offering (before deducting the underwriting discount and estimated offering
expenses):
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION(1) AVERAGE
------------------ ---------------- PRICE PER
NUMBER PERCENT AMOUNT SHARE
---------- ------- ---------------- ---------
<S> <C> <C> <C> <C>
Existing shareholders............. 7,857,993 54.9% $(62,804,000) $(7.99)
New investors..................... 6,458,334 45.1% $ 77,500,008 $12.00
---------- ------ ------------
Total........................... 14,316,327 100.0% $ 15,356,008
========== ====== ============
</TABLE>
- --------
(1) Total consideration paid by existing shareholders (including existing
shareholders who received shares of Common Stock as a result of the
conversion of Preferred Stock) represents the pro forma shareholders'
equity of the Company less pro forma goodwill before giving effect to the
Offering adjustments set forth on the Unaudited Pro Forma Combined Balance
Sheet of the Company included herein.
22
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
WORK will acquire the Founding Companies simultaneously with and as a
condition to the consummation of this Offering. For financial statement
presentation purposes, Sparks has been identified as the accounting acquirer.
The following selected historical financial data of Sparks for fiscal years
1995, 1996 and 1997, and as of December 31, 1996 and 1997, have been derived
from the Audited Combined Financial Statements of Sparks included elsewhere in
this Prospectus. The following selected historical financial data for Sparks
for the years ended December 31, 1993 and 1994 and the three months ended
March 31, 1997 and 1998, and as of December 31, 1993, 1994 and 1995 and March
31, 1998, have been derived from unaudited consolidated financial statements
of Sparks which have been prepared on the same basis as the audited financial
statements and, in the opinion of Sparks, reflect all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of such
data. The following summary unaudited pro forma financial information presents
certain data for the Company, as adjusted for (i) the effects of the
Acquisitions on a historical basis, (ii) the effects of certain pro forma
adjustments to the historical financial statements, (iii) the consummation of
this Offering and the application of the net proceeds therefrom, and (iv) the
Reverse Stock Split. The pro forma financial data of the Company do not
purport to represent what the Company's results of operations or financial
position actually would have been had these events, in fact, occurred on the
date or at the beginning of the period indicated, nor are they intended to
project the Company's results of operations or financial position for any
future date or period. See the Unaudited Pro Forma Combined Financial
Statements and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SPARKS
-------------------------------------------------------
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------- --------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $10,501 $10,696 $15,777 $22,644 $27,124 $6,896 $7,168
Cost of services........ 7,513 7,853 11,249 16,598 19,604 5,025 5,116
------- ------- ------- ------- ------- ------ ------
Gross profit............ 2,988 2,843 4,528 6,046 7,520 1,871 2,052
Selling, general and
administrative
expenses............... 3,049 2,317 2,831 3,802 4,634 1,070 1,210
------- ------- ------- ------- ------- ------ ------
Income (loss) from
operations............. (61) 526 1,697 2,244 2,886 801 842
Other income (expense),
net.................... 15 25 43 55 58 (7) 2
Interest expense........ -- -- -- 3 14 2 --
------- ------- ------- ------- ------- ------ ------
Net income (loss)....... $ (46) $ 551 $ 1,740 $ 2,296 $ 2,930 $ 792 $ 844
======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
THE COMPANY
---------------------------
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1997 MARCH 31, 1998
------------ --------------
($ IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
DATA(1):
Revenues......................................... $ 168,147 $ 45,345
Cost of services................................. 113,794 30,690
---------- ----------
Gross profit..................................... 54,353 14,655
Selling, general and administrative expenses(2).. 38,070 10,373
Amortization of goodwill(3)...................... 2,941 735
---------- ----------
Income from operations........................... 13,342 3,547
Other income (expense), net...................... 268 72
Interest expense(4).............................. 7 2
---------- ----------
Income before provision for income taxes......... 13,603 3,617
Provision for income taxes(5).................... 6,734 1,741
---------- ----------
Net income....................................... $ 6,869 $ 1,876
========== ==========
Net income per share--basic and diluted.......... $ .48 $ .13
========== ==========
Shares used in computing pro forma net income per
share(6)......................................... 14,316,327 14,316,327
========== ==========
OTHER DATA:
EBITDA(7)........................................ $ 17,335 $ 4,540
EBITDA margin.................................... 10.3% 10.0%
Gross margin..................................... 32.3% 32.3%
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SPARKS AT MARCH 31, 1998
---------------------------------- --------------------------------
AT DECEMBER 31,
---------------------------------- SPARKS PRO FORMA AS
1993 1994 1995 1996 1997 ACTUAL COMBINED (8) ADJUSTED (9)
------ ------ ------ ------ ------ ------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit).............. $1,071 $1,370 $2,592 $3,094 $3,844 $4,221 $(66,231) $ 2,327
Total assets............ 1,690 2,005 3,022 4,622 5,154 5,549 134,702 135,381
Total debt, including
current portion........ 219 219 -- 200 -- -- 67,585 134
Stockholders' equity.... 1,244 1,525 2,711 3,369 3,964 4,326 54,854 122,984
</TABLE>
- --------
(1) Assumes the Acquisitions and the Offering were completed on January 1,
1997.
(2) The pro forma combined statements of operations data include the effect of
(i) a reduction of approximately $7.4 million and $0.8 million in
compensation and benefits for the periods ended December 31, 1997 and
March 31, 1998, respectively, as agreed to as part of the purchase
agreements by the owners of the Founding Companies on a prospective basis;
and (ii) the elimination of a non-cash, non-recurring compensation charge
of approximately $7.4 million by the Company for the year ended December
31, 1997 offset by a charge of $0.8 million for incremental salary and
administration expenses.
(3) Reflects amortization of the goodwill to be recorded as a result of the
Acquisitions amortized over a 40-year period and computed on the basis
described in Note 3 of Notes to the Unaudited Pro Forma Combined Financial
Statements.
(4) Reflects the effect of the elimination of the assumed debt of the Founding
Companies resulting from the repayment of such debt with a portion of the
proceeds from the Offering.
(5) Assumes all income is subject to an effective corporate tax rate of 40%
and the non-deductibility of goodwill.
(6) The number of outstanding shares used in computing net income per share
includes (i) 905,718 shares issued by WORK prior to the Offering, (ii)
6,438,540 shares to be issued as consideration in the Acquisitions; (iii)
513,735 shares issued on the automatic conversion of the Preferred Stock
on completion of this Offering; and (iv) the 6,458,334 shares being
offered hereby.
(7) Represents earnings before interest, income taxes, depreciation and
amortization. Based on its experience in the industry, the Company
believes that EBITDA is an important tool for measuring the performance of
companies in the industry (including potential acquisition targets) in
several areas such as liquidity, operating performance and leverage. In
addition, lenders use EBITDA as a criterion in evaluating companies in the
industry. The EBITDA measure for the Company may not be consistent with
similarly titled measures for other companies. EBITDA should not be
considered as an alternative to operating or net income (as determined in
accordance with generally accepted accounting principles) as an indicator
of the Company's performance or to cash flow from operations (as
determined in accordance with generally accepted accounting principles) as
a measure of liquidity. See the historical statements of cash flows
included herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Combined and Selected Founding
Companies" for discussion of other measures of performance determined in
accordance with generally accepted accounting principles and the Company's
sources and applications of cash flow.
(8) The pro forma combined balance sheet data (i) assume the Acquisitions
occurred on March 31, 1998; (ii) include the effect of assets distributed
to owners of certain of the Founding Companies; and (iii) gives effect to
a liability for the cash consideration of $66,850,000 to be paid in
connection with the Acquisitions.
(9) Adjusted for the sale of 6,458,334 shares of Common Stock offered hereby
and the application of the net proceeds therefrom. See "Use of Proceeds."
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL
CONDITION AND PRO FORMA RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Unaudited
Pro Forma Combined Financial Statements and related notes thereto and "Summary
Pro Forma Combined Financial Information" appearing elsewhere in this
Prospectus.
SUMMARY
The Company has been formed to become a leading domestic and international
provider of diversified staffing and outsourcing solutions and services.
Simultaneously with the closing and as a condition to this Offering, the
Company will acquire the 16 Founding Companies, which have been in business an
average of approximately 16 years and have 49 offices in 13 states, the
District of Columbia and one office in Toronto, Canada. On a pro forma basis,
the Company had revenues of $168.1 million and $45.3 million for the year
ended December 31, 1997 and the three months ended March 31, 1998,
respectively.
WORK, which has conducted no operations to date other than in connection
with this Offering and the Acquisitions, intends to integrate these businesses
and their operations and administrative functions. This integration process
may present opportunities to reduce costs through the elimination of
duplicative functions and through economies of scale, but will necessitate
additional costs and expenditures for corporate management and administration.
The Founding Companies have been managed throughout the periods discussed
below as independent private companies, and their results of operations
reflect different tax structures (S corporations and C corporations), which
have influenced, among other things, their historical levels of owners'
compensation. The owners of the Founding Companies and certain key employees
have prospectively agreed to certain reductions in their compensation and
benefits in connection with the Acquisitions. Except for the compensation and
benefits reductions aggregating $7.4 million and $0.8 million for the periods
ended December 31, 1997 and March 31, 1998, respectively, as provided for in
the agreements entered into in connection with certain of the Acquisitions, no
such cost savings were reflected in the pro forma results of operations data.
The Company will also incur corporate expenses related to being a public
company, implementation of an acquisition program and systems integration.
These various costs and possible cost-savings may make comparison of pro forma
operating results not comparable to, nor indicative of, future performance.
ORGANIZATION
Simultaneously with the closing of this Offering, WORK will acquire the 16
Founding Companies for an aggregate consideration of approximately $144.1
million, assuming an initial public offering price of $12.00 per share, which
consists of: (i) $66.9 million in cash, and (ii) 6,438,540 shares (or $77.2
million calculated solely for purposes of the Acquisitions at $12.00 per
share) of Common Stock. The estimated purchase price for the Founding
Companies is subject to certain adjustments at closing and, in the case of
three of the Founding Companies, earn-out arrangements. The closing of the
Acquisitions is also subject to certain customary conditions, including the
accuracy of the representations and warranties made by the Founding Companies,
the performance of their respective covenants in the agreements and the
nonexistence of a material adverse change in the results of operations,
financial condition or business of each Founding Company. See "Certain
Transactions--The Acquisitions."
OPERATIONS
Revenue and Cost of Services
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the direct costs associated with the worksite
employees. The Company accounts for service fees and the related direct
payroll costs using the accrual method of accounting. Under the accrual
method, service fees relating to worksite employees with earned but unpaid
wages at the end of each period are recognized as unbilled revenues and the
related direct payroll costs for such wages are accrued as a liability during
the period in which wages are earned
25
<PAGE>
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statement of operations
net of estimated adjustments due to placed candidates that terminate
employment within the Company's guarantee period (generally 30-90 days). The
net adjustment in the period presented is immaterial.
Cost of services consists primarily of wages paid to temporary employees and
related payroll taxes and workers' compensation expenses. Selling, general and
administrative expenses consist primarily of sales commissions, salaries,
travel and entertainment expenses, executive compensation and related
benefits, administrative salaries and benefits, marketing expenses, rent,
utilities, insurance and professional fees.
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
generally increase in proportion with service revenue from permanent
placements. Consistent with industry practice, these costs are included in
selling, general and administrative expenses.
Goodwill
In July 1996, the SEC issued Staff Accounting Bulletin No. 97 ("SAB 97")
relating to business combinations immediately prior to an initial public
offering. SAB 97 requires that these combinations be accounted for using the
purchase method of accounting. Under the purchase method, the Founding Company
whose owners receive the largest portion of voting rights in the combined
enterprise is presumed to be the accounting acquirer. Accordingly, Sparks has
been designated as the accounting acquirer. For the remaining Founding
Companies and WORK, $117.7 million, representing the estimated excess of the
fair value of the acquisition consideration to be paid over the estimated fair
value of the net assets to be acquired, would be recorded as goodwill as
calculated on a proforma basis as of March 31, 1998. This goodwill will be
amortized as a non-cash charge to the Company's statements of operations over
a 40-year period. The pro forma impact of this amortization expense, which is
non-deductible for federal income tax purposes, is $2.9 million per year on an
after-tax basis. See "Risk Factors--Significant Intangible Assets."
S Corporation Elections
Prior to consummation of the Acquisitions, Absolutely, AIM, BeneTemps,
Burnett, CHP, CoreLink, Law Pros, Law Resources, PCN, Smith Hanley, Sparks,
Task and WSI (the "S Corporations") had elected to be treated as S
Corporations under the Internal Revenue Code of 1986, as amended (the "Code").
Following the Acquisitions, the Company will be subject to federal and state
income taxes. In general, an S Corporation is not treated as a separate
taxable entity, and an S Corporation's gains, income, losses and separately
stated tax items are taxed to its shareholders on a pro rata basis. Certain of
the Founding Companies have made periodic distributions to their shareholders.
The balance of taxed or taxable accumulated earnings which have not been
distributed is reflected in the accumulated adjustment accounts ("AAA
Account") for each such Founding Company. In connection with the Acquisitions,
the S Corporation status of the S Corporations will terminate and, therefore,
the S Corporations will make a distribution to their existing shareholders of
the AAA Account in an aggregate principal amount estimated to equal
approximately $8.2 million at the time of the Offering. The Company expects
that certain of the S Corporations will borrow approximately $3.3 million to
fund their AAA Account distributions, which indebtedness will be repaid from
the aggregate cash and cash equivalents of the Founding Companies. See
"Certain Transactions--The Acquisitions."
Income Taxes
The Company has adopted the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Deferred income taxes are
26
<PAGE>
recognized for temporary differences between financial statement and income
tax bases of assets and liabilities and net operating loss carryforwards, and
is measured using enacted tax rates expected to apply to taxable income in the
years in which these temporary differences are expected to be recovered or
settled.
Management Shares
In 1997 WORK sold shares of Common Stock to its management, directors,
founders and consultants. As a result, WORK recorded a non-recurring, non-cash
compensation charge of approximately $7.4 million in 1997, representing the
difference between the amount paid for the shares and the estimated fair value
of the shares at such time. The fair value of such Common Stock was based on
the value of other WORK equity offerings at approximately the same time.
PRO FORMA RESULTS OF OPERATIONS
WORK will acquire the Founding Companies concurrently with and as a
condition to the consummation of this Offering. For financial statement
presentation purposes, Sparks has been identified as the accounting acquirer.
The following summary of unaudited pro forma financial data presents certain
data for the Company, as adjusted for (i) the effects of the Acquisitions on a
historical basis, (ii) the effects of certain pro forma adjustments to the
historical financial statements and (iii) the consummation of this Offering
and the application of the estimated net proceeds therefrom. See "Selected
Historical and Pro Forma Combined Financial Data" and the Unaudited Pro Forma
Combined Financial Statements and the notes thereto included in this
Prospectus.
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
----------------
AMOUNT %
---------- -----
(DOLLARS IN
THOUSANDS,
EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenues...................................................... $ 168,147 100.0%
Cost of revenues.............................................. 113,794 67.7%
Gross profit.................................................. 54,353 32.3%
Selling, general and administrative expenses.................. 38,070 22.6%
Amortization of goodwill...................................... 2,941 1.7%
---------- -----
Operating income.............................................. 13,342 7.9%
Interest expense.............................................. 7 --
Other income, net............................................. 268 0.2%
---------- -----
Income before income taxes.................................... 13,603 8.1%
Income tax expense (benefit).................................. 6,734 4.0%
---------- -----
Net income.................................................... 6,869 4.1%
========== =====
Pro forma net income per share--basic and diluted............. $ .48
==========
Shares used in computing pro forma net income per share....... 14,316,327
==========
</TABLE>
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, on a pro forma combined basis, after giving effect to (i)
distributions by the S Corporations from their AAA Accounts of approximately
$8.2 million, (ii) distributions of approximately $13.1 million of accounts
receivable by the S Corporations regarding the change of tax accounting
methods from the cash to accrual method, (iii) the Acquisitions, (iv) the
repayment of approximately $3.3 million in debt of the Founding Companies
incurred to fund AAA account distributions from aggregate cash and cash
equivalents of
27
<PAGE>
the Founding Companies available after the Acquisitions, and (v) the closing
of this Offering and the Company's application of its net proceeds therefrom
to repay approximately $0.6 million of indebtedness of the Founding Companies
and fund the $66.9 million cash portion of the Acquisitions, the Company would
have had an aggregate of $2.5 million of cash and cash equivalents, $2.3
million of working capital and $0.1 million of capital lease obligations.
The Company has recently received a commitment letter from to
provide the Credit Facility, which would be available upon the closing of this
Offering. According to the proposed terms, the Company would have a line of
credit of up to $ million, which may be used for general corporate
purposes, including acquisitions, capital expenditures and working capital.
The Credit Facility will be secured by all accounts receivable, inventory,
equipment, and stock of subsidiaries of the Company. The Company expects the
Credit Facility will require compliance with various affirmative and negative
covenants, including, but not limited to, (i) maintenance of certain financial
ratios, (ii) a restriction on additional indebtedness and (iii) restrictions
on liens, guarantees, advances, dividends and business activities unrelated to
the Company's existing operations. Failure to comply with such covenants and
restrictions would constitute an event of default under the Credit Facility.
The Credit Facility is subject to negotiation of definitive documentation and
certain other customary conditions, and there can be no assurance that the
Company will be able to obtain the Credit Facility on terms acceptable to the
Company.
The Company intends to pursue acquisition opportunities. The Company expects
to fund future acquisitions through the issuance of additional Common Stock,
borrowings, including amounts available under the Credit Facility, and cash
flow from operations. To the extent the Company funds a significant portion of
the consideration for future acquisitions with cash, it may have to increase
the amount available under the Credit Facility or obtain other sources of
financing. There can be no assurance such financing will be available on terms
acceptable to the Company. The Company expects that its cash flow from
operations, together with borrowings under the Credit Facility, will provide
cash sufficient to meet the Company's normal working capital needs, debt
service requirements and planned capital expenditures for property and
equipment (exclusive of acquisitions of other businesses) for the next several
years.
On a pro forma combined basis, the Company made capital expenditures for
property and equipment of $1.0 million in fiscal 1997. The Company has no
current material commitments for capital expenditures.
Three of the Founding Companies have the ability to receive additional
amounts of purchase price, payable in cash in 1999 and 2000, contingent upon
the occurrence of future events. The Company currently estimates that this
amount will be approximately $12.0 million, if certain target levels are
exceeded, but the amount of the earn out payments could be greater or lesser
than that amount depending upon the performance of those companies.
INFLATION
Due to the relatively low level of inflation experienced in 1997, inflation
did not have a significant effect on the pro forma results of operations of
the Company in 1997. However, there can be no assurances that the Company's
business will not be affected by inflation in the future.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Founding Companies historically have experienced quarterly fluctuations
in revenue, operating income and cash flows. The Company may also have
quarterly fluctuations in operations as a result of the addition or losses of
new clients, the timing and magnitude of acquisitions and capital
expenditures, changes in revenue mix and the selling, general and
administrative costs to support the Company's growth.
The Company's operating results have historically fluctuated from quarter to
quarter. In addition, due to the timing of the assessment of employment
related taxes, the Company's gross profit margin typically improves
28
<PAGE>
from quarter to quarter within each year with the first quarter generally
being the least favorable. Employment related taxes are based on the
cumulative earnings of individual employees up to a specified wage level.
Since the Company's revenues related to an individual employee are generally
earned and collected at a relatively constant rate throughout each year,
payment of such unemployment tax obligations may have a substantial impact on
the Company's financial condition and results of operations during the first
six months of each year. In addition, the Company's operations are also
affected by the seasonal fluctuations in the businesses of the Company's
clients, as well as the fluctuations in the demand for staffing services,
which are typically stronger in the second and third quarters for calendar
year clients.
YEAR 2000 RISKS
Many computer software programs, as well as certain hardware and equipment
containing date sensitive data, were structured to utilize a two-digit date
field meaning that they may not be able to properly recognize dates in the
Year 2000 and thereafter. This could result in significant system and
equipment failures. The Company recognizes that it must take action to ensure
that its operations and the operations of each of the operating companies will
not be adversely impacted by Year 2000 software failures and is currently
developing detailed assessments and action plans to address Year 2000 issues.
The Company currently does not have an overall estimate of the cost associated
with a solution to Year 2000 issues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130") which establishes standards for reporting and display of
comprehensive income and its components. The required interim disclosures for
SFAS 130 will be included in the quarterly reports on Form 10-Q in 1998, and
the annual presentation disclosures will be included in the Company's December
31, 1998 consolidated financial statements. The adoption of SFAS 130 will have
no impact on the Company's results of operations, financial position or cash
flows and any effect will be limited to the presentation of its consolidated
financial statements.
In June 1997, the FASB issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information ("SFAS 131"). SFAS 131 establishes
standards for the manner in which business enterprises are to report
information about operating segments in its annual statements and requires
those enterprises to report selected information regarding operating segments
in interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. SFAS 131 is effective for fiscal years beginning
after December 15, 1997. Financial statements disclosures for prior periods
are required to be restated. The Company is in the process of evaluating the
disclosure requirements. The adoption of SFAS 131 will not have an impact on
the Company's results of operations, financial position or cash flows and any
effect will be limited to the presentation of its disclosures.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--COMBINED AND SELECTED FOUNDING COMPANIES
The following discussions should be read in conjunction with the Financial
Statements of the Founding Companies and related notes appearing elsewhere in
this Prospectus.
COMBINED FOUNDING COMPANIES GROSS PROFIT DATA
The historical combined gross profit data of the Founding Companies for the
periods presented do not represent historical combined gross profit data
presented in accordance with generally accepted accounting principles, but are
only a summation of the revenue and cost of services of the individual
Founding Companies. The historical combined gross profit data may not be
indicative of the Company's post-combination gross profit data for a number of
reasons.
The following table sets forth certain selected combined gross profit data
of the Founding Companies on a historical basis and as a percentage of total
revenues for the periods indicated (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------- ------------------------
1995 1996 1997 1997 1998
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $96,636 100% $126,744 100% $168,147 100% $39,179 100% $45,345 100%
Cost of services........ 64,409 67% 84,536 67% 113,794 68% 26,479 68% 30,690 68%
------- --- -------- --- -------- --- ------- --- ------- ---
Gross profit............ 32,227 33% 42,208 33% 54,353 32% 12,700 32% 14,655 32%
======= === ======== === ======== === ======= === ======= ===
</TABLE>
Comparison of Three Months Ended March 31, 1998 and 1997
REVENUE.--Combined revenue increased $6.2 million, or 16%, from $39.2
million for the three months ended March 31, 1997 to $45.3 million for the
three months ended March 31, 1998. The aggregate net increase was due
primarily to the opening of new branch offices, the addition of new customers
and volume increases with existing customers, offset by a reduction in call
center service volume. Exclusive of the reduction in call center volume,
revenue increased 22% for the three months ended March 31, 1998 as compared to
the three months ended March 31, 1997.
GROSS PROFIT.--Combined gross profit increased $2.0 million, or 15%, from
$12.7 million for the three months ended March 31, 1997 to $14.7 million for
the three months ended March 31, 1998. The overall increase was a result of
the increase in revenues. Gross profit as a percentage of revenues remained
constant at 32% for the three months ended March 31, 1997 and 1998.
Comparison of 1997, 1996 and 1995
Revenue.--Combined revenue increased $41.4 million, or 33%, from $126.7
million for 1996 to $168.1 million for 1997. Combined revenue increased $30.1
million, or 31%, from $96.6 million in 1995 to $126.7 million in 1996. These
increases were due primarily to the opening of new branch offices, the
addition of new customers and volume increases with existing customers.
30
<PAGE>
Gross Profit.--Combined gross profit increased $12.2 million, or 29%, from
$42.2 million for 1996 to $54.4 million for 1997. Combined gross profit
increased $10.0 million, or 31%, from $32.2 million for 1995 to $42.2 million
for 1996. Overall combined gross profit as a percentage of combined revenues
was 32% in 1997, and 33% in 1996 and 1995.
COMBINED LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth selected cash flow information for WORK on a
combined historical basis (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED 31,
DECEMBER 31, ---------------
1997 1997 1998
------------ ------ -------
<S> <C> <C> <C>
Net cash provided by operating activities......... $ 6,773 $3,834 $ 3,830
Net cash used in investing activities............. (1,476) (266) (795)
Net cash used in financing activities............. (2,680) (844) (1,440)
------- ------ -------
Net increase in cash and cash equivalents......... $ 2,617 $2,724 $ 1,595
======= ====== =======
</TABLE>
For the three months ended March 31, 1998, on a combined basis, the Company
generated $3.8 million of net cash from operating activities, primarily from
net income of $3.2 million. Combined net cash used in investing activities
totaled $0.8 million, primarily for the purchase of furniture, fixtures and
equipment. Combined net cash used in financing activities totaled $1.4
million, primarily for net payments of $1.5 million on lines of credit and
dividends and distributions to shareholders of $1.0 million, offset by
proceeds of $1.3 million from the issuance of WORK preferred stock.
During 1997, on a combined basis, the Company generated $6.8 million of net
cash from operating activities. Cash provided by operating activities was
primarily net income of $1.4 million adjusted for $9.3 million of non-cash
expenses and an increase in accounts payable and accrued expenses of $2.3
million, partially offset by a $5.1 million increase in accounts receivable.
Combined net cash used in investing activities was $1.5 million, primarily for
the purchase of furniture, fixtures and equipment. Combined net cash used in
financing activities was $2.7 million, primarily $3.6 million in dividends,
distributions and note payments to Founding Company shareholders, and net
payments of $0.3 million on outstanding debt, offset by proceeds of $0.9
million from the issuance of WORK preferred stock.
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
Sparks has been in business since 1970. Sparks provides staffing services
with emphasis on higher-end office automation and accounting clerical
staffing; together with customer service, help desk and telemarketing
positions in the communications, computer and insurance industries.
Results of Operations
The following table sets forth certain historical financial data of Sparks
and that data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------- ----------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $15,777 100% $22,644 100% $27,124 100% $6,896 100% $7,168 100%
Cost of services........ 11,249 71% 16,598 73% 19,604 72% 5,025 73% 5,116 71%
------- ------- ------- ------ ------
Gross profit............ 4,528 29% 6,046 27% 7,520 28% 1,871 27% 2,052 29%
S G & A................. 2,831 18% 3,802 17% 4,634 17% 1,070 15% 1,210 17%
------- ------- ------- ------ ------
Operating income........ $ 1,697 11% $ 2,244 10% $ 2,886 11% $ 801 12% $ 842 12%
======= ======= ======= ====== ======
</TABLE>
31
<PAGE>
Comparison of Three Months Ended March 31, 1998 and 1997
Revenue.--Revenue increased $0.3 million, or 4%, from $6.9 million for the
three months ended March 31, 1997 to $7.2 million for the three months ended
March 31, 1998. This increase was primarily due to an increase in volume to
existing customers and the addition of new customers.
Gross Profit.--Gross profit increased $0.2 million, or 10%, from $1.9
million for the three months ended March 31, 1997 to $2.1 million for the
three months ended March 31, 1998. The gross profit percentage increased from
27% for the first quarter of 1997 to 29% for the same period in 1998.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.1 million, or 13%, from $1.1 million for
three months ended March 31, 1997 to $1.2 million for the three months ended
March 31, 1998. This increase was primarily due to increased personnel costs
to support revenue growth. Selling, general and administrative expenses
increased as a percent of revenue from 15% for the first quarter of 1997 to
17% for the same period in 1998.
Comparison of 1997, 1996 and 1995
Revenue.--Revenue increased $4.5 million, or 20%, from $22.6 million in 1996
to $27.1 million in 1997. Revenue increased $6.9 million, or 44%, from $15.8
million in 1995 to $22.6 million in 1996. These increases were due primarily
to volume increases with existing and new customers and revenue from new
branch offices.
Gross Profit.--Gross profit increased $1.5 million, or 24%, from $6.0
million in 1996 to $7.5 million in 1997. Gross profit increased $1.5 million,
or 34%, from $4.5 million in 1995 to $6.0 million in 1996. Overall gross
profit as a percentage of revenue was 28% in 1997, 27% in 1996, and 29% in
1995.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.8 million, or 22%, from $3.8 million in
1996 to $4.6 million in 1997. Selling, general and administrative expenses
increased $1.0 million, or 34%, from $2.8 million in 1995 to $3.8 million in
1996. These increases were primarily due to increased personnel costs
associated with revenue growth and costs of new branch offices. Selling,
general and administrative expenses as a percent of revenue remained constant
at 17% for 1997 and 1996 and was 18% in 1995.
Liquidity and Capital Resources
The following table sets forth selected information from Sparks statements
of cash flows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------
1997 1997 1998
------------ ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by operating activities.......... $ 3,077 $1,163 $ 994
Net cash provided by (used in) investing
activities........................................ (168) 11 (13)
Net cash used in financing activities.............. (2,577) (75) (511)
------- ------ -----
Net increase in cash and cash equivalents.......... $ 332 $1,099 $ 470
======= ====== =====
</TABLE>
For the three months ended March 31, 1997, Sparks generated $1.0 million in
net cash from operating activities primarily from net income of $0.8 million.
Net cash used in financing activities was primarily for shareholder
distributions of $0.5 million. Sparks had working capital of $4.2 million with
no debt outstanding at March 31, 1998.
For the year ended December 31, 1998, Sparks generated $3.1 million in net
cash from operating activities primarily from net income of $2.9 million. Net
cash used in financing activities of $2.6 million was primarily for
shareholder distributions of $2.4 million. Sparks had working capital of $3.8
million with no debt outstanding at December 31, 1997.
32
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
Burnett is headquartered in Houston, Texas, with branch offices located in
Austin and El Paso, Texas. Burnett has been in business since 1974 and
provides higher-end office automation and accounting clerical personnel;
engineering; telemarketing specialists; information technology specialists;
accounting, finance and other specialists; and production/assembly and
distribution personnel.
Results of Operations
The following table sets forth certain historical financial data of Burnett
and that data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
------------------------------------- -----------------------
DECEMBER DECEMBER DECEMBER MARCH 29, MARCH 28,
30, 1995 28, 1996 27, 1997 1997 1998
----------- ----------- ----------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $23,871 100% $30,377 100% $41,201 100% $9,513 100% $10,995 100%
Cost of services........ 17,405 73% 22,152 73% 30,672 74% 7,207 76% 8,033 73%
------- ------- ------- ------ -------
Gross profit............ 6,466 27% 8,225 27% 10,529 26% 2,306 24% 2,962 27%
S G & A................. 5,703 24% 6,570 22% 8,130 20% 1,813 19% 2,256 21%
------- ------- ------- ------ -------
Operating income........ $ 763 3% $ 1,655 5% $ 2,399 6% $ 493 5% $ 706 6%
======= ======= ======= ====== =======
</TABLE>
Comparison of Three Months Ended March 28, 1998 and 1997
Revenue.--Revenue increased $1.5 million, or 16%, from $9.5 million for the
three months ended March 29, 1997 to $11.0 million for the three months ended
March 28, 1998. This increase was primarily related to volume from new
customers. Temporary placement revenue increased $1.2 million and permanent
placement revenue increased $0.3 million.
Gross Profit--Gross profit increased $0.7 million or 28%, from $2.3 million
for the three months ended March 29, 1997 to $3.0 million for the three months
ended March 28, 1998. Gross profit as a percentage of revenue increased from
24% to 27% for the three months ended March 29, 1997 and March 28, 1998,
respectively. This margin increase was primarily associated with growth in
permanent placements.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.4 million, or 24%, from $1.8 million for
the three months ended March 29, 1997 to $2.2 million for the three months
ended March 28, 1998. This increase was primarily due to increased salaries
and commissions. Selling, general and administrative expenses as a percentage
of revenue increased from 19% to 21% for the three months ended March 29, 1997
and March 28, 1998, respectively.
Comparison of 1997, 1996 and 1995
Revenue.--Revenue increased $10.8 million, or 36%, from $30.4 million in
1996 to $41.2 million in 1997. Revenue increased $6.5 million, or 27%, from
$23.9 million in 1995 to $30.4 million in 1996. These increases were primarily
due to increased volume with existing customers and the addition of new
customers. Temporary placement revenue increased $10.3 million and $6.3
million from 1996 to 1997, and from 1995 to 1996, respectively. Permanent
placement revenue increased $0.5 million from 1996 to 1997, and $0.2 million
from 1995 to 1996.
Gross Profit.--Gross profit increased $2.3 million, or 28%, from $8.2
million in 1996 to $10.5 million in 1997. Gross profit as a percentage of
revenue decreased from 27% in 1996 to 26% in 1997. Gross profit increased $1.8
million, or 27%, from $6.4 million in 1995 to $8.2 million in 1996. Gross
profit as a percentage of revenue was 27% in 1995.
33
<PAGE>
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $1.5 million, or 24%, from $6.6 million in
1996 to $8.1 million in 1997. This increase was primarily due to increased
salaries and commissions. Selling, general and administrative expenses as a
percentage of revenue decreased from 22% in 1996 to 20% in 1997. Selling,
general and administrative expenses increased $0.9 million or 15%, from $5.7
million in 1995 to $6.6 million in 1996. This increase was primarily due to
increased salaries and commissions, and new facility costs. Selling, general
and administrative expenses as a percentage of revenue decreased from 24% in
1995 to 22% in 1996.
Liquidity and Capital Resources
The following table sets forth selected information from Burnett statements
of cash flows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED -------------------
DECEMBER 27, MARCH 29, MARCH 28,
1997 1997 1998
------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by operating activities..... $2,565 $903 $ 74
Net cash used in investing activities......... (551) (95) (131)
Net cash used in financing activities......... (590) (87) (240)
------ ---- -----
Net increase (decrease) in cash and cash
equivalents.................................. $1,424 $721 $(297)
====== ==== =====
</TABLE>
For the three months ended March 31, 1998, net cash provided by operating
activities was $0.1 million, primarily net income before depreciation of $0.8
million offset by increased accounts receivable of $0.8 million. Net cash used
in investing activities relates primarily to the purchase of furniture,
fixtures and equipment. Net cash used in financing activities of $0.2 million
related primarily to shareholder distributions. Burnett had working capital of
$6.5 million and debt outstanding of $0.1 million at March 28, 1998.
For the fiscal year ended December 27, 1997, net cash provided by operating
activities was $2.6 million, primarily net income before depreciation of $2.9
million and increased accounts payable and accrued payroll expenses of $0.6
million, partially offset by increased accounts receivable of $0.9 million.
Net cash used in investing activities totaled $0.6 million, primarily the
purchase of furniture, fixtures and equipment. Net cash used in financing
activities totaled $0.6 million for debt payments, treasury stock purchases
and shareholder distributions of $0.2 million, $0.1 million and $0.3 million,
respectively. Burnett had working capital of $6.0 million and debt outstanding
of $0.1 million at December 27, 1997.
PROFESSIONAL CONSULTING NETWORK, INC.
PCN has been in business since 1988. From its headquarters in San Francisco,
California, PCN provides staffing services in information technology,
management information systems, software engineering and design services to
companies in Northern California.
Results of Operations
The following table sets forth certain historical financial data of PCN and
that data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........... $9,236 100% $9,902 100% $11,286 100% $2,602 100% $3,392 100%
Cost of services.. 6,905 75% 6,871 69% 7,385 65% 1,717 66% 2,281 67%
------ ------ ------- ------ ------
Gross profit...... 2,331 25% 3,031 31% 3,901 35% 885 34% 1,111 33%
S G & A........... 2,078 22% 2,591 26% 3,002 27% 834 32% 734 22%
------ ------ ------- ------ ------
Operating income.. $ 253 3% $ 440 4% $ 899 8% $ 51 2% $ 377 11%
====== ====== ======= ====== ======
</TABLE>
34
<PAGE>
Comparison of Three Months Ended March 31, 1998 and 1997
Revenue.--Revenue increased $0.8 million, or 30%, from $2.6 million for the
three months ended March 31, 1997 to $3.4 million for the three months ended
March 31, 1998. This increase was primarily due to higher sales volumes.
Gross Profit.--Gross profit increased $0.2 million, or 25%, from $0.9
million for the three months ended March 31, 1997 to $1.1 million for the
three months ended March 31, 1998. Gross profit as a percentage of revenue
decreased from 34% for the three months ended March 31, 1997 to 33% for the
three months ended March 31, 1998. Both the dollar increase and the percentage
decrease was a result of increased temporary staffing service volumes which
has lower profit margins than permanent placements.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses decreased $0.1 million, or 12%, from $0.8 million for
three months ended March 31, 1997 to $0.7 million for the three months ended
March 31, 1998. This decrease was primarily due to lower professional fees.
Comparison of 1997, 1996 and 1995
Revenue.--Revenue increased $1.4 million, or 14%, from $9.9 million in 1996
to $11.3 million in 1997. The increase was due primarily to increased volume
in temporary staffing revenue of $0.7 million, or 8%, and an increase in
permanent placement revenue of $0.7 million, or 62%, from 1996 to 1997.
Revenue increased $0.7 million, or 7%, from $9.2 million in 1995 to $9.9
million in 1996. This increase was primarily due to an increase in permanent
placement revenue of $0.6 million, or 106%, from 1995 to 1996.
Gross Profit.--Gross profit increased $0.9 million, or 29%, from $3.0
million in 1996 to $3.9 million in 1997. Gross profit increased $0.7 million,
or 30%, from $2.3 million in 1995 to $3.0 million in 1996. The increase in
gross profit as a percentage of revenue to 35% in 1997 from 31% in 1996 and
25% in 1995 reflects the change in sales mix with revenue related to permanent
placement increasing to 17% of total revenue in 1997 from 12% in 1996 and 6%
in 1995.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.4 million, or 16%, from $2.6 million in
1996 to $3.0 million in 1997. Selling, general and administrative expenses
increased $0.5 million, or 25%, from $2.1 million in 1995 to $2.6 million in
1996. These increases were primarily due to increased personnel costs to
support revenue growth. Selling, general and administrative expenses as a
percent of revenue increased to 27% in 1997 from 26% in 1996 and 22% in 1995.
Liquidity and Capital Resources
The following table sets forth selected information from PCN's statements of
cash flows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------
1997 1997 1998
------------ ----- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by operating activities.......... $ 498 $ 985 $1,236
Net cash used in investing activities.............. (40) (13) (68)
Net cash used in financing activities.............. (486) (600) (516)
----- ----- ------
Net increase (decrease) in cash and cash
equivalents....................................... $ (28) $ 372 $ 652
===== ===== ======
</TABLE>
For the three months ended March 31, 1998, PCN generated net cash from
operating activities of $1.2 million. Net cash used in financing activities of
$0.5 million primarily represents shareholders distributions and net payments
on line of credit. At March 31, 1998, PCN had working capital of $1.9 million
and no outstanding debt.
35
<PAGE>
For the year ended December 31, 1997, PCN generated net cash from operating
activities of $0.5 million, primarily from net income. Net cash used in
financing activities of $0.5 million, primarily represents shareholders
distributions and officer loan payments. At December 31, 1997, PCN had working
capital of $1.7 million and $0.4 million of outstanding debt.
SMITH HANLEY ASSOCIATES, INC.
Smith Hanley has been in business since 1980, and provides permanent
placement and temporary staffing services. Smith Hanley provides services in
the biostatistician, SAS programming, quantitative marketing, data
warehousing, investment banking, and commercial insurance specialities through
its offices located in New York, New York; Chicago, Illinois; Athens, Georgia;
Philadelphia, Pennsylvania; Orlando, Florida; and Southport, Connecticut.
Results of Operations
The following table sets forth certain historical financial data of Smith
Hanley and that data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ ----------------------
1995 1996 1997 1997 1998
---------- ----------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $7,315 100% $11,943 100% $16,321 100% $4,042 100% $4,044 100%
Cost of services........ 717 10% 2,546 21% 4,551 28% 982 24% 1,357 34%
------ ------- ------- ------ ------
Gross profit............ 6,598 90% 9,397 79% 11,770 72% 3,060 76% 2,687 66%
S G & A................. 6,327 86% 9,092 76% 11,047 68% 2,419 60% 2,261 56%
------ ------- ------- ------ ------
Operating income........ $ 271 4% $ 305 3% $ 723 4% $ 641 16% $ 426 10%
====== ======= ======= ====== ======
</TABLE>
Comparison of Three Months Ended March 31, 1998 and 1997
Revenue.--Smith Hanley had revenues of $4.0 million for the three months
ended March 31, 1997 and for the three months ended March 31, 1998. Permanent
placement revenue decreased 20% for the first quarter of 1998 as compared to
the same period in 1997 primarily relating to the timing of placements.
Temporary staffing revenue increased 43% reflecting Smith Hanley's successful
entry into new specialty services in 1997.
Gross Profit.--Gross profit decreased $0.4 million, or 12%, from $3.1
million for the quarter ended March 31, 1997 to $2.7 million for the quarter
ended March 31, 1998. The decrease in gross profit and in gross profit
percentage from 76% to 66% reflects the change in sales mix with temporary
staffing revenue representing 46% of total revenue in the first quarter 1998
compared to 32% in the first quarter of 1997.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses decreased $0.1 million or 7%, from $2.4 million for
the three months ended March 31, 1997 to $2.3 million for the three months
ended March 31, 1998. Selling, general and administrative expenses as a
percent of revenue decreased from 60% in 1997 to 56% in 1998. The dollar and
percent decreases were primarily due to a decrease in commission expense
corresponding with the decrease in permanent placement fees.
Comparison of 1997, 1996 and 1995
Revenue.--Revenue increased $4.4 million, or 37%, from $11.9 million in 1996
to $16.3 million in 1997. Revenue increased $4.6 million, or 63%, from $7.3
million in 1995 to $11.9 million in 1996. These increases were due primarily
to increased sales volume including growth in temporary staffing services of
$2.7 million, or 80% from 1996 to 1997 and $2.4 million, or 249%, from 1995 to
1996; and permanent placement fees of $1.7 million, or 20%, from 1996 to 1997
and $2.2 million, or 35%, from 1995 to 1996.
36
<PAGE>
Gross Profit.--Gross profit increased $2.4 million, or 25%, from $9.4
million in 1996 to $11.8 million in 1997. Gross profit increased $2.8 million,
or 42%, from $6.6 million in 1995 to $9.4 million in 1996. The decrease in
gross profit as a percent of revenue to 72% in 1997 from 79% in 1996 and 90%
in 1995 reflects the change in sales mix with temporary staffing revenue
representing 37%, 28% and 13% in 1997, 1996 and 1995, respectively.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $1.9 million, or 22%, from $9.1 million in
1996 to $11.0 million in 1997. Selling, general and administrative expenses
increased $2.8 million, or 44%, from $6.3 million in 1995 to $9.1 million in
1996. These increases were primarily due to increased personnel costs and an
increase in commission expense corresponding to the increase in permanent
placement fees.
Liquidity and Capital Resources
The following table sets forth selected information from Smith Hanley's
statements of cash flows:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, ------------
1997 1997 1998
------------ ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash used in operating activities............... $(115) $(386) $ (73)
Net cash used in investing activities............... (251) (82) (100)
Net cash used in financing activities............... (80) (17) --
----- ----- -----
Net decrease in cash and cash equivalents........... $(446) $(485) $(173)
===== ===== =====
</TABLE>
For the three months ended March 31, 1998, Smith Hanley used $0.1 million in
net cash for operating activities, primarily as a result of an increase in
accounts receivable of $0.5 million partially offset by net income of $0.4
million. Net cash used for investing activities, primarily loans to officers
and employees, was $0.1 million. Smith Hanley had working capital of $1.3
million with no debt outstanding at March 31, 1998.
For the year ended December 31, 1997, Smith Hanley used $0.1 million in net
cash for operating activities, primarily as a result of an increase in
accounts receivable of $1.2 million offset by net income of $0.7 million and
an increase in accounts payable and accrued liabilities of $0.4 million. Net
cash used for investing activities, primarily loans to officers and employees,
and the purchase of office equipment, was $0.3 million. Smith Hanley had
working capital of $0.9 million with no debt outstanding at December 31, 1997.
TOSI PLACEMENT SERVICES INC.
TOSI and its predecessors has been in business since 1967 and is a provider
of higher-end office automation and accounting clerical staffing, information
technology staffing, traditional temporary staffing and permanent placement
services in the Toronto, Ontario area.
Results of Operations
The following table sets forth certain historical financial data of TOSI and
that data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
----------------------------------------------------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 29, MARCH 28,
1995 1996 1997 1997 1998
---------------------------------------------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 4,893 100% $ 6,868 100% $ 9,484 100% $2,344 100% $3,147 100%
Cost of services........ 3,841 78% 5,429 79% 7,289 77% 1,819 78% 2,426 77%
------- ------- ------- ------ ------
Gross profit............ 1,052 22% 1,439 21% 2,195 23% 525 22% 721 23%
S G & A................. 912 19% 1,288 19% 1,324 14% 326 14% 378 12%
------- ------- ------- ------ ------
Operating income........ $ 140 3% $ 151 2% $ 871 9% $ 199 8% $ 343 11%
======= ======= ======= ====== ======
</TABLE>
37
<PAGE>
Comparison of Three Months Ended March 28, 1998 and March 29, 1997
Revenue.--Revenue increased $0.8 million, or 34%, from $2.3 million for the
three months ended March 31, 1997 to $3.1 million for the three months ended
March 31, 1998. This increase was primarily due to increased volume.
Gross Profit.--Gross profit increased $0.2 million, or 44%, from $0.5
million for the three months ended March 31, 1997 to $0.7 million for the
three months ended March 31, 1998. Gross profit as a percent of revenue
increased from 22% for the three months ended March 31, 1997 to 23% for the
three months ended March 31, 1998.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.1 million, or 16%, from $0.3 million for
the three months ended March 31, 1997 to $0.4 million for the three months
ended March 31, 1998. This increase was primarily due to increased personnel
and commission expense. Selling, general and administrative expenses as a
percent of revenue were 14% and 12% for the three months ended March 31, 1997
and 1998, respectively.
Comparison of 1997, 1996 and 1995
Revenue.--Revenue increased $2.6 million, or 38%, from $6.9 million in 1996
to $9.5 million in 1997. Revenue increased $2.0 million, or 40%, from $4.9
million in 1995 to $6.9 million in 1996. These increases were primarily due to
increased volume.
Gross Profit.--Gross profit increased $0.8 million, or 53%, from $1.4
million in 1996 to $2.2 million in 1997. Gross profit increased $0.4 million,
or 36%, from $1.0 million in 1995 to $1.4 million in 1996. Gross profit as a
percent of revenue was 23% in 1997, 21% in 1996, and 22% in 1995.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $40,000, or 3%, from $1.3 million in 1996 to
$1.3 million in 1997. This increase was primarily due to an increase in
general expenses offset by a reduction in management bonuses. Selling, general
and administrative expenses increased $0.4 million, or 41%, from $0.9 million
in 1995 to $1.3 million in 1996. This increase was primarily due to increased
personnel and commission expense. Selling, general and administrative expense
as a percent of revenue was 14% in 1997, and 19% in 1996 and 1995.
Liquidity and Capital Resources
The following table sets forth selected information from TOSI's statements
of cash flows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED -------------------
DECEMBER 27, MARCH 29, MARCH 28,
1997 1997 1998
------------ --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in) operating
activities................................... $249 $(73) $230
Net cash used in investing activities......... (34) (10) (3)
Net cash provided by (used in) financing
activities................................... (126) 25 10
---- ---- ----
Net increase (decrease) in cash and cash
equivalents.................................. $ 89 $(58) $237
==== ==== ====
</TABLE>
For the three months ended March 28, 1998, net cash provided by operating
activities was $0.2 million, primarily net income of $0.2 million and an
increase in accounts payable and accrued liabilities of $0.2 million, offset
by an increase in accounts receivable of $0.2 million. At March 28, 1998, TOSI
had $1.0 million of working capital and no debt outstanding.
38
<PAGE>
For the year ended December 27, 1997, net cash provided by operating
activities was $0.2 million, primarily net income of $0.5 million offset by an
increase in accounts receivable of $0.4 million. Net cash used in financing
activities of $0.1 million was primarily the repayment of a shareholder note
payable. At December 27, 1997, TOSI had $0.8 million of working capital and no
debt outstanding.
WSI PERSONNEL SERVICES, INC.
WSI has been in business since 1988 and operates from offices in Denver and
Colorado Springs, Colorado. WSI provides temporary staffing with an emphasis
on medical technicians and skilled health care specialists.
Results of Operations
The following table sets forth certain historical financial data of WSI and
that data as a percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue............ $2,150 100% $4,000 100% $5,728 100% $1,210 100% $1,551 100%
Cost of services... 1,534 71% 2,813 70% 3,872 68% 834 69% 1,060 68%
------ ------ ------ ------ ------
Gross profit....... 616 29% 1,187 30% 1,856 32% 376 31% 491 32%
S G & A............ 549 26% 946 24% 1,623 28% 206 17% 327 21%
------ ------ ------ ------ ------
Operating income... $ 67 3% $ 241 6% $ 233 4% $ 170 14% $ 164 11%
====== ====== ====== ====== ======
</TABLE>
Comparison of Three Months Ended March 31, 1998 and 1997
Revenue.--Revenue increased $0.4 million, or 28%, from $1.2 million for the
three months ended March 31, 1997 to $1.6 million for the three months ended
March 31, 1998. This increase was primarily due to an increase in volume with
existing and new customers and the addition of a new branch office.
Gross Profit.--Gross profit increased $0.1 million, or 31%, from $0.4
million for the three months ended March 31, 1997 to $0.5 million for the
three months ended March 31, 1998. The gross profit percentage increased from
31% for the first three months of 1997 to 32% for the same period in 1998.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.1 million, or 58%, from $0.2 million for
the three months ended March 31, 1997 to $0.3 million for the three months
ended March 31, 1998. This increase was primarily due to increased salaries
and consulting fees.
Comparison of 1997, 1996 and 1995
Revenue.--Revenue increased $1.7 million, or 43%, from $4.0 million in 1996
to $5.7 million in 1997. Revenue increased $1.8 million, or 86%, from $2.2
million in 1995 to $4.0 million in 1996. These increases were due primarily to
increased volume and opening a new branch office in August 1997.
Gross Profit.--Gross profit increased $0.7 million, or 56%, from $1.2
million in 1996 to $1.9 million in 1997. Gross profit increased $0.6 million,
or 92%, from $0.6 million in 1995 to $1.2 million in 1996. Gross profit as a
percentage of revenue was 32% in 1997, 30% in 1996, and 29% in 1995.
Selling, General and Administrative Expenses.--Selling, general and
administrative expenses increased $0.7 million, or 71%, from $0.9 million in
1996 to $1.6 million in 1997 and increased $0.4 million, or 72%, from $0.5
million in 1995 to $0.9 million in 1996. These increases were primarily due to
increases in personnel expenses and costs associated with opening a new branch
office. Selling, general and administrative expense as a percentage of revenue
was 28% in 1997, 24% in 1996, and 26% in 1995.
39
<PAGE>
Liquidity and Capital Resources
The following table sets forth selected information from WSI statements of
cash flows:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -----------
1997 1997 1998
------------ ---- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by (used in) operating
activities....................................... $ (9) $197 $ 169
Net cash used in investing activities............. (19) (4) (7)
Net cash provided by (used in) financing
activities....................................... 91 (94) (185)
---- ---- -----
Net increase (decrease) in cash and cash
equivalents...................................... $ 63 $ 99 $ (23)
==== ==== =====
</TABLE>
WSI generated $0.2 million in net cash from operating activities for the
three months ended March 31, 1998, primarily from net income of $0.2 million.
Net cash used in financing activities of $0.2 million was payments on the line
of credit. WSI had working capital of $0.7 million with no debt outstanding at
March 31, 1998.
WSI used $0.0 million in net cash from operating activities for the year
ended December 31, 1997. Net income of $0.3 million was offset by an increase
in accounts receivable of $0.3 million. Net cash provided by financing
activities of $0.1 million resulted from borrowings under the line of credit.
WSI had working capital of $0.5 million at December 31, 1997.
40
<PAGE>
BUSINESS
GENERAL
WORK International Corporation was founded to become a leading domestic and
international provider of diversified staffing and outsourcing services. Upon
completion of the Offering, WORK will acquire the 16 Founding Companies which
on average have been in business for approximately 16 years. The Company's
staffing services are divided into two general operating groups: Specialty
Services and Business Support Services. Specialty Services include Information
Technology ("IT") Services and Other Specialty Services. IT Services include
offering computer programming, network support, personal computer help desk,
software engineering and systems analysis and design personnel. Other
Specialty Services include offering legal, financial, human resources,
specialty medical and call center personnel, as well as other professionals on
a project basis to clients. Business Support Services primarily includes
offering high-end office/clerical support personnel. The Company also provides
permanent placement, outsourcing and training services to its clients.
Specialty Services contributed 51% of the Company's 1997 pro forma revenue,
which was comprised of 30% and 70% for IT Services and Other Specialty
Services, respectively. Business Support Services contributed 49% of the
Company's pro forma revenue for 1997.
The Company operates 49 offices in 13 states and the District of Columbia in
addition to an office in Toronto, Canada. The Company's pro forma 1997 revenue
and income from operations were $168.1 million and $13.3 million,
respectively, and the Company's 1997 pro forma gross margin was 32%.
Futhermore, historical combined revenue of the Founding Companies grew at an
annual compound growth rate of approximately 32% from 1995 through 1997.
The Company's management team developed a stringent set of criteria for the
acquisition of the Founding Companies in an effort to create a cohesive
company with a national and international presence and a complementary service
mix. The goal of the Founding Company acquisition strategy was to acquire high
margin and high growth companies in two general categories: (i) IT and Other
Specialty Services and (ii) Business Support Services. The Company targeted IT
and Other Specialty Services, such as legal and financial staffing, because
these segments offer among the most attractive growth rates and margins in the
staffing industry. Moreover, the Company focused on certain specialty niche
areas such as providing human resources specialists and biostatisticians,
because the Company believes that such niche services are subject to less
competition and can be developed into substantial business units for the
Company.
While the Company intends to emphasize IT and Other Specialty Services in
its growth strategy, the Company believes that there are important advantages
to having certain Business Support Services included in its Founding Company
group. In addition to attractive margins and growth rates, the Founding
Companies in Business Support Services provide the Company with significant
operations in certain key metropolitan markets and, in many cases, a well-
developed management and systems infrastructure. Accordingly, WORK acquired
the companies offering Business Support Services primarily as "platform"
companies for the entry into desirable geographic markets and for cross-
selling of IT Services and Other Specialty Services. The Company intends to
use the infrastructure of its platform companies to support the entry of IT
Services and Other Specialty Services into new markets.
The Company has an experienced management team, led by B. Garfield French,
President and Chief Executive Officer. Mr. French has over 20 years experience
in the staffing industry, primarily with The Olsten Corporation, a New York
Stock Exchange Company ("Olsten"), where he was Executive Vice President and
Managing Director of Olsten International B.V., Olsten's European operations
("Olsten International"), which was created under Mr. French's direction.
While under his direction, Olsten International's revenues grew to an annual
run rate of in excess of $500 million through a combination of internal growth
and the acquisition of several European staffing companies. Prior to becoming
Managing Director of Olsten International, Mr. French was Senior Vice
President for Olsten with responsibility for Canada and a significant portion
of the U. S. During his career at Olsten, Mr. French completed acquisitions of
professional and traditional staffing companies in the U.S., Canada and Europe
with aggregate revenues in excess of $500 million. Complementing Mr. French,
41
<PAGE>
Samuel R. Sacco serves as the Company's Chairman of the Board of Directors.
From 1984 until 1997, Mr. Sacco served as the Executive Vice President of the
National Association of Temporary and Staffing Services ("NATSS"), the
staffing industry's leading trade association representing 1,600 temporary
help and staffing firms. The Company believes that Mr. Sacco will continue to
have an important role in the Company's acquisition strategy due to his
leadership in the industry and his relationships with a large number of
privately held U.S. staffing companies. He is a long time spokesperson for the
industry having addressed business and government audiences about the
industry's status and future. Furthermore, the operating managers of the
Founding Companies have an average of approximately 16 years of experience in
the staffing industry and were chosen, in part, due to their proven ability to
maintain the Founding Companies' attractive operating margins and growth
rates.
INDUSTRY OVERVIEW
The global staffing industry has experienced significant growth in response
to the changing work environment worldwide. This growth has been driven by
employers who have sought to convert personnel costs from fixed to variable by
reducing their permanent staff and supplementing their workforce with
temporary or contract employees for specific projects, peak work loads and
other needs. The use of flexible staffing services has allowed employers to
improve productivity, to outsource specialized skills and to avoid the
negative effects of layoffs. This trend has accelerated with the pace of
technological change and greater global competitive pressures. Rapidly
changing regulations concerning employee benefits, insurance and retirement
plans as well as the high cost of hiring, laying off and terminating permanent
employees have also prompted many employers to take advantage of the
flexibility offered through temporary and contract staffing arrangements. In
addition to the economic drivers of staffing industry growth, the Company
believes that the changing demographics of the workforces of developed
economies is also contributing to growth in the staffing industry.
The U.S. remains the largest staffing services market in the world.
According to the Staffing Industry Report, the U.S. market for temporary
staffing services grew from approximately $20.4 billion in revenue in 1991 to
approximately $54.5 billion in revenue in 1997, representing a compound annual
growth rate of 18%. NATTS has estimated that more than 90% of all U.S.
businesses utilize temporary staffing services. Two of the fastest growing
sectors within the temporary staffing services and placement segments are
information technology and professional specialty services. According to the
Staffing Industry Report, 1997 revenue for the information technology services
sector in the U.S. is estimated to have been $14.8 billion, a 27% increase
over 1996. Likewise, NATSS estimates that the professional specialty segment
of temporary staffing has been the fastest growing over the past few years.
This segment includes accounting, finance, legal, and other professional and
specialty staffing services. The Company believes that because of the higher
value of professional and skilled personnel, specialty staffing and
information technology segment offer opportunities for accelerated growth and
higher profitability as the staffing industry moves to be a provider of
flexible solutions.
The placement and search sector of the U.S. staffing industry had 1997
revenues of $10.9 billion. This sector is expected to grow 19% in 1998,
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. The Company
believes that companies have become increasingly reliant on placement and
search firms for a number of reasons. Professional employee turnover has
increased as more employees spend their careers with a number of different
organizations. Many companies are outsourcing non-core activities, such as
recruiting, to reduce costs and increase efficiencies. In addition, companies
find it increasingly more difficult to hire permanent workers during periods
of low unemployment.
42
<PAGE>
OPERATING AND INTERNAL GROWTH STRATEGY
The Company intends to build upon the strong historical growth of the
Founding Companies by focusing on the following key strategies:
Focus on High Margin, High Growth Service Offerings. The Company intends to
continue to focus on high margin, high growth service offerings. The Company
believes that it can achieve this by emphasizing Specialty Services and to a
lesser extent Business Support Services. The Company will continue to focus on
services and operations that possess attractive financial characteristics as a
result of certain competitive advantages including a strong and well
established market presence, superior quality of service, excellent reputation
and strong customer relationships. High growth rates and margins were among
the leading criteria in selecting the Founding Companies and will be
emphasized in evaluating future acquisitions. The Founding Companies achieved
a pro forma operating margin of 7.9% in 1997 and generated a compounded annual
revenue growth rate of approximately 32% from 1995 to 1997. The Company will
seek to compete on the basis of service quality rather than price, and will
avoid pursuing lower margin, high volume national accounts.
Introduce and Cross-Sell Specialty Services. One of the primary criteria
used in selecting the Founding Companies was the opportunity to acquire
Specialty Services offerings that could be developed into substantial business
units for the Company. Several of the Founding Companies offer high margin
Specialty Services that the Company believes offer excellent growth potential
including IT, legal, financial, specialty medical and employee benefits
staffing. The Company plans to introduce these Specialty Services into new
geographic markets through its platform companies, which offer numerous client
relationships and, in many cases, well-developed management and systems
infrastructures. The Company intends to appoint managers from among the
Founding Companies to be responsible for developing certain individual
Specialty Service lines throughout the Company's operations. In addition, the
Company will focus on acquiring specialty staffing firms which offer services
not currently provided by the Company, yet are complementary to the Company's
existing operations and can be significantly developed through cross-selling
opportunities.
Adopt Best Practices, Policies and Procedures. Management intends to
integrate its operating units on an ongoing basis. The Company intends to
evaluate the operating policies and procedures of each of its operating
companies in order to identify and implement practices that best serve the
objectives of the Company and its clients ("Best Practices"). Over time, the
Company believes that the incorporation of these Best Practices, including
field operations, marketing, sales, human resources policy, and training,
recruiting and retention programs, will lead the operating units to integrate
synergistically. To foster further integration, the Company has established a
Chairman's Council which is comprised of a representative from each of the
operating companies. Through monthly teleconferences and quarterly meetings,
the Chairman's Council will share Best Practices, discuss business trends and
opportunities and review operating unit and Company-wide financial and
operating measures.
Maintain Decentralized Operational Management. The Company maintains a
decentralized management structure that is responsive to local business
practices and market conditions. The Company's operating units have day-to-day
responsibility for management of professional services and operating
activities at the local level in a manner consistent with their historical
practice and as dictated by local market conditions. Executive management,
finance, planning, legal and administrative support are managed or provided
centrally. Since the Company believes that its clients buy locally on the
basis of brand awareness and specialized expertise, this decentralized
approach enables operating company managers to maintain a high level of client
service and further develop relationships with key decision makers at both
existing and potential clients, while allowing them to draw upon the
collective resources of the Company as a whole. Accordingly, the Company
intends to enhance the visibility of its existing brand names by identifying
each company or service as "a WORK International company."
Provide Strong Incentives to Management. The Company has historically and
will continue to seek acquisitions of successful companies whose managers will
remain as employees of the Company and continue to
43
<PAGE>
operate their respective businesses on a local level. The Company intends to
motivate these managers and align their interests with those of the Company by
utilizing Common Stock as a significant portion of the purchase consideration,
by establishing a stock option plan that will extend throughout the
organization, and by implementing a cash bonus plan that awards managers for
local level profit contribution.
ACQUISITION STRATEGY
The Company intends to implement a strategic acquisition program targeting
leading North American and European staffing companies that fit the Company's
operating and growth strategies. The key elements of the Company's acquisition
strategy are to:
Selectively Acquire High Margin, High Growth Companies. The Company seeks to
acquire companies according to established criteria which include
profitability, potential for revenue growth, reputation, the size and quality
of the customer base, risk characteristics of the service offerings, risk
management policy, the quality and experience levels of operational management
and sales personnel and the nature of the service mix. In general, the Company
will seek to identify and acquire high growth and high margin Specialty
Service companies and high profit margin platform companies in key
metropolitan markets through which the Company's Specialty Service offerings
can be sold. Certain acquisitions will be large enough to warrant their own
operating and management structure while other smaller acquisitions will be
folded into existing operations.
Maintain Separate Acquisition Team. The Company has established a team of
corporate officers responsible for identifying attractive markets, prospective
acquisition targets, performing due diligence and negotiating contracts. The
acquisition team will be led by Monte R. Stephens, the Company's Chief
Acquisitions Officer. By having a separate acquisition team, the Company
believes that other key members of management will be able to remain focused
on existing operations.
Capitalize on the Company's Status as Attractive Acquirer. Management
believes that the same criteria that attracted the Founding Companies to join
the Company will continue to stimulate interest among potential acquisition
candidates. The Company believes that its decentralized structure and its
commitment to building on the strong reputations and brand name recognition
cultivated by its Founding Companies at the local level will further attract
and retain self-motivated, achievement-oriented individuals.
Leverage Industry Reputation and Contacts of Senior Management. Members of
the Company's management and Board of Directors have been active or are
currently holding leadership positions in international and national staffing
trade associations, including NATSS, the Association of Canadian Search,
Employment and Staffing Services ("ACSESS"), Confederation Internationale des
Enterprises de Travail Temporaire ("CIETT") and the National Association of
Computer Consultant Businesses ("NACCB"). The Company's management will
continue to leverage its industry reputation and contacts to stimulate
interest among potential acquisition candidates.
INTEGRATION STRATEGY
The Company recognizes the importance of effectively integrating the
operations of the Founding Companies as well as the operations of the
companies acquired in the future. The key elements of the integration strategy
are as follows:
Maintain Separate Integration Team. The Company has established an
integration team reporting to the Chief Operating Officer, Michael L. Hlinak.
The integration team consists of corporate and Founding Company operations and
finance personnel. The team is focusing on the creation and implementation of
policies and procedures for the operational and financial reporting by the
Founding Companies as well as subsequent acquisitions. The integration team
will also participate in the Company's acquisition and due diligence process
in order to make integration efforts on subsequent acquisitions as seamless as
possible from an operational standpoint.
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Immediately Establish Financial Controls and Operational Reporting
Guidelines. The Founding Companies currently utilize a variety of accounting
and information technology systems. However, three of the Founding Companies,
which represented approximately 29% of the Company's 1997 pro forma revenues,
utilize the same front office information systems. The Company intends to rely
on the Founding Companies' existing systems while it develops and implements
uniform Company systems and procedures. The immediate integration priorities
include the implementation of policies and procedures designed to safeguard
cash and other Company assets as well as the establishment of financial and
operating reporting guidelines for each of the Founding Companies. In
addition, all expense savings available through the consolidation of the
Founding Companies' operations shall be implemented as soon as is practicable
and all human resource policies and procedures shall be standardized.
Implement Technology Integration Plan. The Company has developed an
information technology plan. The objective of the plan is the seamless
integration of all existing systems into a uniform, Company-wide front and
back office, communication and data management system. The Company believes
that the benefits of such a plan will include the following: a shared data
base from which to draw both applicants and client company references;
economic efficiencies that should result from operating a common system; the
ability to operationally incorporate the chosen Best Practices of the Founding
Companies; and the ease by which the operating companies are able to cross-
sell services. The implementation of such a plan should especially benefit the
productivity of the Company's smaller, specialty niche branches heretofore not
enjoying the support that such systems can offer.
STAFFING SERVICES
Temporary and Contract Staffing. Temporary staffing involves the placement
of personnel on a short-term basis. Contract staffing involves longer-term
assignments, such as in the case of information technology consultants who
typically are on an initial assignment from six to twelve months. The Company
believes that its temporary and contract staffing services provide clients
with reliable, cost-effective and flexible solutions to meet fluctuating
demand, acquire specific expertise for special projects, cover staff sickness
and holidays or hedge against business cycle downturns. The Company believes
its reputation and expertise in its geographic markets and industry sectors
help attract qualified candidates to meet its clients' temporary and contract
staffing needs. Most people are attracted to flexible staffing positions
because of their desire to tailor work schedules to personal and family needs,
obtain different and challenging work experiences, acquire new skills and
familiarize themselves with an employer prior to considering permanent
employment. The Company believes that its ability to offer quality temporary
and contract staffing assignments well-matched to candidates' preferences
allows the Company to attract highly qualified candidates. Revenue from
temporary and contract staffing services comprised approximately 90% of the
Company's pro forma revenue for 1997.
Permanent Placement. Permanent placement services involves placement of
candidates in permanent positions with clients. The Company believes that many
businesses, in an effort to manage their cost structures and focus on their
core competencies, have reduced the size and capability of their human
resources functions. Accordingly, many companies rely more heavily on
permanent placement providers for their hiring needs. The Company further
believes that the increasing demand for skilled personnel increases its
clients' dependence on the Company's ability to effectively identify and
screen specialized and technically skilled candidates. Revenue from permanent
placement services comprised approximately 10% of the Company's pro forma
revenue for 1997.
AREAS OF SPECIALIZATION
The Company's Specialty Services include IT, accounting/finance, call
center, education, engineering/technical, human resources, information
management/library, insurance, legal services, pharmaceutical and specialty
medical personnel, as well as other professionals. Business Support Services
include providing office, clerical and production, assembly and distribution
personnel.
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Specialty Services. Specialty Services accounted for approximately 51% of the
Company's sales for 1997. The Company's Specialty Service offerings generally
provide higher operating margins than those of its Business Support Service
offerings. The Company intends to utilize the infrastructure of its platform
companies in order to introduce these services into new markets. The Company
operates in many of the fastest growing disciplines of the specialty staffing
services industry and provides services in the sectors described below:
Information Technology ("IT"). Businesses are increasingly using
specialty staffing services companies to augment their IT operations in
order to implement and operate more complex information systems without
enlarging their corporate staffs. An increasing number of technical
professionals are choosing to operate as IT consultants, motivated by a
desire for more flexible work schedules and an opportunity to work with
emerging and challenging technologies in a variety of industries and work
environments. The projects on which these consultants are placed typically
have an initial duration of six to twelve months. The Company believes that
these factors have caused IT Services to be one of the fastest growing
sectors of the specialty staffing services industry. IT Services accounted
for approximately 15% of the Company's pro forma revenue for 1997.
Positions for which personnel are provided include:
.Systems Auditors, Analysts and Designers .Help Desk Support and Training
.Office Automation Analysts Personnel
.Application Programmers .Operating System and Server
.Database Architects and Administrators Support Personnel
.Software Maintenance Personnel .Software Engineers
.Data Security/Disaster Recovery Personnel .Systems Integration
Specialists
.Network Design and Administration Personnel
.Website Developers
Other Specialty Services. In addition to IT Services, the Company's Other
Specialty Services accounted for approximately 36% of the Company's pro forma
revenue for 1997. This area includes staffing personnel in the sectors
described below:
Legal. The Company's legal staffing services include the provision of
legal services personnel in support of the needs of law firms and corporate
law departments with litigation and other needs. Positions for which
personnel are provided include:
. Attorneys . Contracts Administrators
. Legal Assistants . Litigation Support Personnel
. Document Coding Specialists . Legal Secretarial Personnel
. Paralegals . Trust and Estate Specialists
Pharmaceutical and Specialty Medical. The Company provides pharmaceutical
and specialty medical staffing services to healthcare institutions. The
Company believes this can be a significant growth area for the staffing
services industry. Positions for which personnel are provided include:
. Pharmacists . Registered Nurses
. Nursing Assistants . Pharmacists Assistants
. X-Ray and MRI Technicians . Physician Assistants
. Clinical Trial Specialists
Other. The Company offers a variety of other high margin, high growth
Specialty Services. Positions for which personnel are provided include:
. Library/Information Center Managers . Call Center Specialists
. Records/Archives Managers . Corporate Risk Managers
.Benefits Analysts and Retirement Plan Administrators
.Marketing Directors and Research
. Investment Bankers Analysts
. Senior Biostatisticians . Portfolio Research Strategists
. Advertising and Public
Relations Managers
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Business Support Services. Business Support Services accounted for
approximately 49% of the Company's pro forma revenue for 1997 comprised of 81%
office/clerical and 19% production, assembly and distribution. Positions for
which personnel are provided include:
.Word Processors .Customer Service
.Receptionists Representatives
.Data Entry Personnel .General Business Support
.Technical Assembly Personnel .Bookkeepers
.Administrative Assistants .Production, Assembly and
Distribution Personnel
Training for Candidates in Business Support Services. The Company intends
to establish a training program with a strategy of creating training
partnerships with employers and communities. These partnerships will
facilitate the creation of regional job skill programs designed to address
identifiable basic and advanced skill deficits within specific industries.
Because of their established relationships with area employers, staffing
companies are alerted to and understand employment requirements and trends
in their geographic areas long before those needs are addressed by
institutions of higher learning. Training programs designed to specifically
meet those requirements translate into effective programs that meet
employer needs and produce a pool of job ready applicants. These training
programs will be evaluated not only by the effectiveness of the training,
but more importantly, by the employability of the people completing the
training. The Company believes that the establishment of training programs
designed to address skill deficits within specific industries will allow
the Company to maintain high profit margins by offering highly trained
personnel.
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 will offer corporate level support to lessen the
administrative burden of its office managers and allow them to focus on
servicing clients and growing the business. These support functions will
include accounting, management information systems support, advertising,
marketing, public relations, training, human resources and other back office
functions. In addition, the Company's corporate management has developed
financial, operational and administrative control procedures which are
applicable to each operating company. These procedures include the adherance
to a corporate policies and procedures manual, and the preparation of budgets
and forecasts and the submission of timely operational and financial reports.
The Company offers or is planning to offer the following corporate level
support functions to its branch offices:
Chairman's Council. The Company has formed a Chairman's Council to provide
an opportunity for the Founding Companies and future acquired companies to
explore and develop cross-selling and other opportunities. The Chairman's
Council will also serve as a management board to elevate important operating
company issues to the Board of Directors. The Chairman's Council will be
comprised of representatives from each of the Company's operating companies
and will meet quarterly. Additionally, the quarterly council meetings will be
supplemented by periodic teleconferences to ensure rapid and efficient
communication on a consistent basis throughout the Company. Over time, the
Chairman's Council will create a library of information which will be used to
assist newly acquired companies in their adoption of the Company's Best
Practices.
Accounting. The Company has developed a uniform chart of accounts which the
Founding Companies will adopt upon completion of this Offering. This chart
will standardize their budgeting and forecasting processes so that reports
among the operating companies can be compared and integrated more easily upon
completion of the Offering. The Company has adopted uniform accounting
policies and procedures addressing internal control and financial reporting
requirements of the Company. The Company has implemented regular financial and
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operational "flash reports" and other mechanisms to allow for management
control and oversight. The Company will utilize this information to establish
and monitor performance of individual companies against operating benchmarks
and ratios.
Information Systems. The Company will acquire and implement future system
enhancements and changes, including a corporate "Intranet," with the goal of
enhancing the sharing of front office information among the operating
companies, and, achieving improved efficiency and economies of scale in back-
office systems. All system changes will be designed to accommodate the
Company's internal and external growth strategy, both domestically and
internationally.
Risk Management. A key element of the Company's risk management strategy is
to minimize service offerings with historically higher rates of workers'
compensation claims. 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 as part of its effort to maintain high profit
margins by avoiding high risk service offerings and activities. In addition,
as part of its training effort, the Company will conduct 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.
Employee Training. The Company will offer its employees an orientation and
training program 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.
The Company trains its sales consultants to become the client's partner in
evaluating and meeting its staffing requirements. The Company seeks to enhance
client relationships and to maintain highly qualified candidates by generating
referrals from existing candidates, utilizing in-depth candidate interviews
conducted by Company personnel experienced in the candidate's field,
performing skill evaluations and obtaining client satisfaction reports upon
the completion of projects. In addition, the Company intends to pursue a
strategy of developing training programs with clients and local communities
which will enable the Company to provide highly-trained employees with client-
specific skill sets. The Company believes that its clients' satisfaction is
enhanced by utilizing sales consultants experienced in specific staffing
disciplines or, in certain cases, such sales consultants working in tandem
with candidate recruiters, to match the Company's clients' needs with
appropriately skilled candidates. In addition, the Company is creating a
company-wide database of "best practices" for use in their day-to-day
operations.
National Recruiting and Retention Program for Candidates. Recruiting
qualified candidates is critical to the Company's operating and internal
growth strategies. Recruiting becomes even more important during periods of
increased economic activity due to increased competition for candidates among
competing staffing companies and increased demand for temporary and permanent
employees from clients. The Company intends to focus on recruiting and
retention by hiring a national recruiting and retention manager. The national
recruiting and retention manager will be responsible for establishing a
national recruiting and retention program which will allow the Company to
maintain a competitive advantage in the recruiting and retention process by:
(i) hiring sales associates with experience in the Company's areas of
specialization; (ii) maintaining a database of candidates which will enable
the Company to match clients' needs with candidates' skills; and (iii)
offering candidates both flexible staffing and permanent placement
opportunities with a large and diverse client base.
Advertising, Marketing and Public Relations. The Company is developing 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.
Human Resources. The Company intends to have a human resources team designed
and committed to establishing and maintaining systems that assist and enhance
employee work-life, while helping to ensure the
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growth and health of the organization as a whole. The Human Resources
department will be 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 will also be
responsible for compliance issues in the recruitment process. The Human
Resources department structure will be 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.
Purchasing. The Company believes it will be able to structure volume
purchasing arrangements or otherwise achieve purchasing economies of scale in
the following areas: (i) casualty and liability insurance, (ii) health
insurance and related benefits, (iii) retirement administration, (iv) office
equipment, (v) marketing and advertising, (vi) communications services, and
(vii) a variety of accounting, financial management, marketing and legal
services.
Legal Services. The Company will centralize its legal services function and
will develop detailed policies regarding the retention of legal counsel and
certain guidelines within which branch offices are limited in making decisions
relating to legal issues.
LOCAL SALES AND MARKETING
The Company emphasizes local sales and marketing efforts, which are
generally conducted by each branch office. In addition to the Company's
executive officers, the Company has account representatives 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 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.
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 Internet websites,
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 Founding Companies receive a significant number of
referrals from past candidates due to their professional reputation and
quality service. 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.
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 service are the most significant
competitive factors in the specialty professional staffing sector. The Company
believes it derives a competitive advantage from the experience with and
commitment to the specialty professional staffing market, the strong local
market presence and reputation, and the various marketing activities of the
Founding Companies. 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
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competition from a number of international and national specialty professional
staffing companies. See "Risk Factors--Competitive Market."
FACILITIES
The Company's facilities, all located in the United States and Canada,
consist of leased office facilities. The Company leases 50 office facilities
located throughout the continental United States and Canada. Its current
leases have remaining terms ranging from one to six years on rental and other
terms the Company believes are commercially reasonable. One of these leases is
with an affiliate of WSI. See "Certain Relationships and Related
Transactions." The Company believes its facilities are well-maintained and
adequate for the Company's existing and planned operations at each operating
location.
SERVICE MARKS AND TRADENAMES
The Core logo, which is an image of a half-eaten apple core with
accompanying text, is registered as a federal service mark on the Principal
Register of the United States Patent and Trademark Office ("USPTO"). In
addition, the Company has applications pending before the USPTO for federal
registration of the following service marks: Access Staffing and LAW PROS.
Finally, the Company has common law claims for Absolutely Professional
Staffing, Inc., Botal Associates, Inc., BeneTemps, Inc., The Burnett Companies
Consolidated, Inc., Contract Health Professionals, Inc., CORE Professional,
Inc., CORE Personnel of Arlington, Inc., CoreLink Staffing Services, Inc., Law
Resources, Inc., PCN, Professional Consulting Network, Inc., Smith Hanley
Associates, Inc., Smith Hanley Consulting Group, Inc., Sparks Associates,
Inc., Sparks Personnel Services, Inc., Customer Care Solutions, Inc., Task
Management, TOSI Placement Services, Inc. and WSi Personnel Services, Inc.
EMPLOYEES
The Company had approximately 430 full-time internal staff employees as of
March 31, 1998. Temporary and contract 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 or contract employees are
represented by a collective bargaining agreement. Hourly wages for the
Company's temporary and contract 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 and contract
employees. The Company believes its employee relations are satisfactory.
GOVERNMENT REGULATION
The Company and its customers are subject to federal and state regulation in
the United States, and the Company cannot predict the extent to which future
legislative and regulatory developments concerning their practices and
products or the health care industry may affect the Company. Further, the
Company's facilities and operations are subject to reporting to, and review
and inspection by, federal, state and local governmental entities.
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, among others, for its employees and personnel.
Unemployment taxes are a significant expense to the Company. In addition,
recent federal and state legislative proposals have included provisions
extending health insurance benefits to personnel who currently do not receive
such benefits.
The Company and its customers and suppliers are subject to extensive federal
and state regulation in the United States. The Company currently recruits
information technology specialists and other temporary staffing employees
internationally for domestic placement. The entry of these employees into the
United States is regulated by the U.S. Department of Labor and U.S. Department
of Justice--Immigration and Naturalization Services. The regulations governing
the hiring of foreign nationals are complex and change often. See "Risk
Factors--Government Regulation."
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LITIGATION AND INSURANCE
From time to time, the Company is a party to litigation arising in the
normal course of its business. The Company is not currently involved in any
litigation the Company believes will have a material adverse effect on its
financial condition or results of operations.
The Company maintains a number of insurance policies. Its general liability
policy has aggregate coverage of $2 million, with a $1 million limit per
occurrence. The Company maintains an automobile liability policy with a
combined single coverage limit of $1 million. The Company also carries an
excess liability policy, which covers liabilities that exceed the policy
limits of the above policies, with an aggregate and a per occurrence limit of
$25 million.
The Company also maintains professional liability, crime and errors and
omissions policies, each with aggregate coverage of $3 million, covering
certain liabilities that may arise from the actions or omissions of its
temporary, contract or permanently-placed personnel. The Company currently
maintains key man life insurance on Mr. French in the amount of $1 million.
There can be no assurance that any of the above coverages will be adequate for
the Company's needs. See "Risk Factors--Employment Liability Risks."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information respecting the
individuals who will be the Company's directors and executive officers when
this Offering closes:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR CLASS
---- --- ----------------------------------------------- --------------
<S> <C> <C> <C>
Samuel R. Sacco(1)...... 53 Director and Chairman of the Board Class II
B. Garfield French(1)... 44 Director, President and Chief Executive Officer Class III
Michael L. Hlinak....... 48 Vice President and Chief Operating Officer
Mark F. Walz............ 40 Vice President and Chief Financial Officer
Monte R. Stephens....... 40 Vice President and Chief Acquisitions Officer
*Roger A. Ramsey
(1)(2)(3).............. 60 Director Class III
*John M. Sullivan(2)(3). 62 Director Class II
*J. Patrick Millinor,
Jr.(2)(3).............. 52 Director Class I
+Susan W. Burnett(1).... 52 Director Class III
+Stephen M. Sparks...... 41 Director and Vice President--Integrations Class III
+Gilbert Rosen(2)....... 57 Director Class I
+Morton Fishman(2)...... 49 Director Class I
+John R. Haesler........ 57 Director Class II
+James Schneider........ 51 Director Class II
+Thomas A. Hanley, Jr... 44 Director Class I
</TABLE>
- --------
* Appointment will become effective on closing of this Offering.
+ Appointment will become effective upon consummation of the Acquisitions
pursuant to the Acquisition Agreements.
(1) Member of the Board's Executive Committee.
(2) Member of the Board's Audit Committee.
(3) Member of the Board's Compensation Committee.
Samuel R. Sacco. Mr. Sacco has served as Chairman of the Board of the
Company since October 1997. From January 1984 through September 1997, Mr.
Sacco was the Executive Vice President of the National Association of
Temporary and Staffing Services, a trade association headquartered in
Alexandria, Virginia, representing more than 1,600 temporary help and staffing
firms with more than 13,000 offices nationwide. Mr. Sacco will continue to
have an active role in the Company's acquisition strategy due to his
leadership in the industry and his relationships with a large number of
privately held U.S. staffing companies. He is a long time spokesperson for the
industry having addressed business and government audiences about the
industry's status and future. Mr. Sacco has also authored over a hundred
articles on the industry and has given numerous radio and TV interviews
including CNN, CNBC, PBS and the major networks. Mr. Sacco received a degree
in commerce from the University of Virginia in 1967.
B. Garfield French. Mr. French has served as President and Chief Executive
Officer of the Company since October 1997. From 1994 through October 1997, Mr.
French was Managing Director of Olsten International B.V. and an Executive
Vice-President and officer of the Olsten Corporation. From 1982 through 1994,
Mr. French held several positions with Olsten Corporation including Vice
President, Senior Vice President and Executive Vice President with
responsibilities for Canada and a significant portion of the U.S. Mr. French
is a past President and Director of Canada's temporary help industry trade
association ("ACSESS"), Canada's delegate to CIETT, an international staffing
association, and the Chairman of CIETT's 1998 Conference. In addition, Mr.
French has been a member of the Business Ambassador program for the Government
of Ontario since its inception. Mr. French is a graduate of Upper Canada
College and Victoria University within the University of Toronto.
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Michael L. Hlinak. Mr. Hlinak has served as Chief Operating Officer of the
Company since April 1998. Prior to that time, Mr. Hlinak had served as a
director of EqualNet Holding Corp., a Nasdaq National Market company ("ENET"),
since July 1991, and as ENET's Chief Financial Officer since June 1994,
becoming Senior Vice President for that company in November 1994 and its Chief
Operating Officer in May 1996. Mr. Hlinak, a certified public accountant, is
President and sole owner of Cardinal Interests, Inc., a diversified Houston
investment company which he founded in 1985. Mr. Hlinak graduated from Lamar
University in 1976 with a B.B.A. in accounting.
Mark F. Walz. Mr. Walz has served as Vice President and Chief Financial
Officer of the Company since October 1997. From November 1994 through October
1997, Mr. Walz served Inliner Americas, Inc., a company involved in the
domestic and international licensing, manufacturing and installation of
proprietary pipeline rehabilitation processes, first as Controller and then as
Chief Financial Officer. From November 1990 through September 1994, Mr. Walz
was employed by CRSS, Inc., an engineering and architecture company listed on
the New York Stock Exchange, first as Assistant Director of Internal Audit and
then as Controller of a multi-location subsidiary with international
operations. From November 1989 through October 1990, Mr. Walz was a financial
consultant for Insilco Corporation. From January 1985 through October 1989,
Mr. Walz held various positions at Ernst & Young LLP progressing to senior
manager in the audit division. From 1980 through December 1984, Mr. Walz was
employed by Arthur Andersen LLP. Mr. Walz graduated in 1980 from the
University of Southwestern Louisiana with a B.S.B.A. in accounting and is a
certified public accountant.
Monte R. Stephens. Mr. Stephens has served as Chief Acquisitions Officer for
the Company since October 1997. Prior to joining the Company, Mr. Stephens had
established his own business and financial consulting practice in January 1997
to assist companies in the Houston area with mergers, acquisitions and initial
public offerings, and to provide litigation support services to local
attorneys. From July 1991 through December 1996, Mr. Stephens was employed by
Melton & Melton, LLP, one of the largest local accounting practices in
Houston, where he became a partner in January 1993. From 1980 to June 1991,
Mr. Stephens worked for the accounting firm of KPMG Peat Marwick in Houston.
He has served as Branch Director, Vice President and Treasurer of Crisis
Intervention of Houston, Inc., a United Way agency. Mr. Stephens graduated
with honors from Sam Houston State University in 1980 with a B.B.A. in
accounting and is a certified public accountant.
Roger A. Ramsey. Mr. Ramsey will become a director upon consummation of this
Offering. Mr. Ramsey has served as Chairman of the Board of Allied Waste
Industries, Inc. ("Allied"), a publicly held (Nasdaq symbol "AWIN") company in
the solid waste management industry, since October 1989, and served as
Allied's Chief Executive Officer from October 1989 until July 1997. In 1968,
Mr. Ramsey co-founded Browning-Ferris Industries, Inc. ("BFI") and served as
its Vice President and Chief Financial Officer until 1976. From 1960 to 1968,
Mr. Ramsey was employed by the international accounting firm of Arthur
Andersen LLP, where he was a Manager in the Tax Department. Mr. Ramsey is also
a member of the Board of Trustees for Texas Christian University, and a
director of several privately held companies. Mr. Ramsey graduated cum laude
in 1960 from Texas Christian University where he received a B.S. degree in
commerce, and is a certified public accountant.
John M. Sullivan. Mr. Sullivan will become a director upon consummation of
this Offering. Since 1994, Mr. Sullivan has been a Vice-President of Beta
Consulting, Inc., a private investment management firm. From 1992 through
1994, he was International Tax Director for General Motors Corporation. From
1970 to 1992, Mr. Sullivan was a tax partner with Arthur Andersen LLP, having
been employed by that firm since 1958. He has served as director of Group
Maintenance America Corp. since its initial public offering in 1997, and of
Atlantic Coast Airlines Holdings, Inc. since 1995. Mr. Sullivan earned a BBA
degree in accounting with honors in 1958 at the University of Mississippi.
J. Patrick Millinor, Jr. Mr. Millinor will become a director upon
consummation of this Offering. Mr. Millinor became a Director and Chief
Executive Officer of Group Maintenance America Corp. ("GroupMAC") upon the
completion of its initial public offering in November 1997. From April 1997 to
August 1997, he served as President of GroupMAC. From October 1996 through
April 1997, he served as Chief Executive Officer of the Company's predecessor,
GroupMAC Management Co. From September 1994 to October 1996, Mr. Millinor
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worked directly for Gordon Cain, a major stockholder in GroupMAC, assisting in
the formation and management of Agennix Incorporated and Lexicon Genetics, two
biotechnology companies. From October 1992 to September 1994, he served
UltraAir, Inc., a start-up passenger airline, first as Chief Financial Officer
and then as Chief Executive Officer. From 1991 to 1992, he served as Chief
Financial Officer of Lifeco Travel Services, a travel management company. From
1986 to 1991, Mr. Millinor served as Chief Operating Officer and Senior Vice
President, respectively, of Commonwealth Savings Association and Bank United.
From 1979 to 1986, Mr. Millinor was a partner with KPMG Peat Marwick LLP. He
currently serves as a director of Agennix Incorporated and Haelan Health
Corporation. Mr. Millinor graduated in 1968 from Florida State University with
B.S. and M.B.A. degrees.
Susan W. Burnett. Ms. Burnett will become a director upon consummation of
this Offering. Ms. Burnett has served as President of Burnett since April
1995. Prior to that time, Ms. Burnett had served as that company's Vice
President since she founded the company in 1974. She served as President of
the Houston Association of Personnel Consultants in 1986 and Vice President of
the Texas Assoc. of Personnel Consultants in 1985 and 1987. Ms. Burnett
graduated in 1968 from the University of Arkansas where she received a
Bachelor of Arts degree in journalism.
Stephen M. Sparks. Mr. Sparks will become a director and Vice President--
Integration upon consummation of this Offering. He acquired Sparks Personnel
in 1984 and has served as President of that company since that time. Prior to
that time, he was employed by Sparks in various other capacities. Mr. Sparks
served as a director of MedOne Staffing Service from 1993 to 1995. In
addition, he was a member of the Temporary Independent Professional Society
from 1982 to 1994 and served in several leadership roles. Mr. Sparks graduated
in 1980 from Southwest Missouri State University where he received a Masters
in business.
Gilbert Rosen. Mr. Rosen will become a director upon consummation of this
Offering. Mr. Rosen has served as President of TOSI since 1982. Prior to that
time he practiced as a CPA for 20 years with major accounting firms. He is
currently Treasurer and a director of ACSESS. Mr. Rosen graduated in 1962 from
Temple University where he received a B.S. degree in business.
Morton Fishman. Mr. Fishman will become a director upon consummation of this
Offering. He acquired Contract Health in 1994 and has served as President of
that company since that time. In 1987, he acquired Tarxien International Inc.,
a plastic injection molding company serving the automotive industry and listed
on the Toronto Stock Exchange ("Tarxien") where he served as President and
Chief Executive Officer until 1989. In addition, Mr. Fishman has served on the
Boards of Directors of three other public companies: Windrider Inc., from 1989
to 1990, Tru-Clean Plastics Inc., from 1989 to 1992, and Docu-fax
International Inc., from 1990 to 1993. Prior to that time, Mr. Fishman was the
managing partner of Arthur Gelgoot and Associates, a public accounting firm,
from 1979 until 1987. Mr. Fishman graduated in 1973 from York University with
a degree in political science and is a member of the Canadian Institute of
Chartered Accountants.
John R. Haesler. Mr. Haesler will become a director upon consummation of
this Offering. Mr. Haesler has served as Secretary/Treasurer and Vice
President of CoreLink since he founded that company in 1980. Prior to that
time, Mr. Haesler spent 14 years in human resources management for American
Hospital Corporation and RCA. He has served on the Board of Directors of the
California Association of Staffing Services ("CATSS") for ten years in
addition to holding various state and county offices in that organization
during that period. Mr. Haesler graduated in 1965 from La Salle University
where he received a degree in economics.
James Schneider. Mr. Schneider will become a director upon consummation of
this Offering. Mr. Schneider founded PCN and has served as President of PCN
since 1988. Prior to that time, he was a partner with Sanderson Associates/SA
Consulting, an information technology staffing firm. He has served on the
Executive Board of Directors of the National Association of Computer
Consultant Businesses ("NACCB") and as President of NACCB-Northern California.
Prior to serving with NACCB, he served as President of the Association of Data
Processing Recruiters ("ADPR"). Mr. Schneider graduated from California State
University where he received an M.B.A.
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Thomas A. Hanley, Jr. Mr. Hanley will become a director upon consummation of
this Offering. Mr. Hanley has served as President of Smith/Hanley since 1992.
Prior to that time, Mr. Hanley had served in various other capacities for that
company since he co-founded it in 1980. From 1978 to 1980, he worked as a
recruiter in the Data Processing Department for Halbrecht & Company. Mr.
Hanley received a law degree in 1983 from New York Law School after receiving
a Bachelor of Science degree in biology in 1975 from Rensselaer Polytechnic
Institute.
BOARD OF DIRECTORS CLASSES; DIRECTOR COMPENSATION
The Board of Directors is divided into three classes, each of which,
following a transitional period, will serve for three years, with one class
being elected each year at the annual stockholders' meeting. During the
transitional period, the terms of the Class I directors will expire at the
1999 meeting, while the terms of the Class II directors and the Class III
directors will expire at the 2000 meeting and the 2001 meeting, respectively.
Classification of the Board could have the effect of lengthening the time
necessary to change the composition of a majority of the members comprising
the Board. In general, at least two annual meetings of stockholders will be
necessary for stockholders to effect a change in a majority of the members of
the Board.
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Following the closing of this Offering,
each director who is not an employee of the Company (an "Outside Director")
initially will receive a fee of $2,000 for each board meeting attended and
$1,000 for each board committee meeting attended (or $500 if held on the same
day as a board meeting) and will periodically be granted options to purchase
Common Stock pursuant to the Incentive Plan. See "--Incentive Plan." When this
Offering closes, each of the Company's three Outside Directors will be granted
options to purchase 10,000 shares of Common Stock at an exercise price per
share equal to the initial public offering price. The Company will reimburse
directors for out-of-pocket expenses they incur in attending board of
directors or board committee meetings in their capacity as directors.
EXECUTIVE COMPENSATION; EMPLOYMENT AGREEMENTS
On closing of this Offering, the Company will have employment agreements
with Messrs. Sacco, French, Hlinak, Walz and Stephens, which provide for
annual base salaries of $150,000, $200,000, $175,000, $120,000, and $120,000,
respectively. The following summary of the employment agreements of these
executive officers does not purport to be complete and is qualified by
reference to them, a copy of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Each of these
agreements entitles the executive officer to participate in all the Company
employee benefit plans in which other members of the Company's management
participate. Each employment agreement has a term of three years, and in the
case of Mr. French, will continue thereafter for successive three year terms
on the same terms and conditions existing at the time of renewal. The
employment agreements provide for the granting of stock options to Messrs.
Sacco, French, Hlinak, Walz and Stephens at the initial public offering price
in the amounts of 175,000, 200,000, 175,000, 100,000 and 100,000 shares,
respectively, which vest as to one-third of such shares upon the completion of
the Offering and as to two-thirds upon the first anniversary of this Offering,
except that in the case of Messrs. French and Sacco, one-third of their
options vest on each of the first and second anniversaries of this Offering.
In the event of termination without cause, the employment agreements provide
for severance of one years salary for Messrs. French and Sacco, three months
salary for Messrs. Hlinak and Walz, and six months salary for Mr. Stephens.
The noncompetition provisions in the employment agreements have a term of
three years following termination of employment, except that in the event of
termination without cause (i) the term is one year for Messrs. Sacco and
French, and (ii) the noncompete terminates immediately for Messrs. Hlinak,
Walz and Stephens.
As of the closing of the Acquisitions, the Company will enter into
employment agreements with a total of 27 key officers of the Founding
Companies, including Messrs. Sparks, Rosen, Fishman, Haesler, Schneider and
Hanley, and Ms. Burnett, each of whom is a director nominee of the Company,
which provide for annual base salaries of $150,000, $42,000, $100,000,
$80,000, $120,000, $120,000 and $150,000, respectively. Mr. Sparks
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will also become Vice President--Integration of the Company upon completion of
this Offering. The following summary of the employment agreements of these
executives and key officers does not purport to be complete and is qualified
by reference to them, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Each of these
agreements entitles the employee to participate in all the Company employee
benefit plans in which other members of the Company management participate.
Each of these agreements also has a two-year term subject to the right of the
Company to terminate the employee's employment at any time after one year. If
the employee's employment is terminated by the Company for any reason other
than for cause (as defined), voluntary resignation or death, the employee will
be entitled to the payment of any annual base salary and continuation of
health insurance benefits for twelve months. Each employment agreement
contains a covenant limiting competition with the Company following the
termination of employment for a period of the longer of two years after
commencement of the employment agreement or one year after employment
terminates.
INCENTIVE PLAN
The description set forth below summarizes the principal terms and
conditions of the Incentive Plan, does not purport to be complete and is
qualified in its entirety by reference to the Incentive Plan, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
General. The objectives of the Incentive Plan, which was approved by the
Company's board of directors and stockholders, are to attract and retain
selected key employees, consultants and Outside Directors, encourage their
commitment, motivate their superior performance, facilitate their obtaining
ownership interests in the Company (aligning their personal interests to those
of the Company's stockholders) and enable them to share in the long-term
growth and success of the Company.
Shares Subject to Incentive Plan. Under the Incentive Plan, the Company may
issue Incentive Awards (as defined below) covering at any one time an
aggregate of the greater of (i) 1,700,000 shares of Common Stock and (ii) 11%
of the number of shares of Common Stock issued and outstanding on the last day
of the then preceding calendar quarter. No more than 1,000,000 shares of
Common Stock will be available for ISOs (as defined below). As of the closing
of the Acquisitions, options covering 1,318,000 shares of Common Stock will be
outstanding and 382,000 shares of Common Stock then will be available for
subsequent Incentive Awards. The number of securities available under the
Incentive Plan and outstanding Incentive Awards are subject to adjustments to
prevent enlargement or dilution of rights resulting from stock dividends,
stock splits, recapitalizations or similar transactions or resulting from a
change in applicable laws or other circumstances.
Administration. The Incentive Plan will be administered by the compensation
committee of the Board of Directors (the "Committee"). Following this
Offering, the Committee will consist solely of directors each of whom is (i)
an "outside director" under Section 162(m) of the Code, and (ii) a "non-
employee director" under Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). The Committee may delegate to the chief
executive officer or other senior officers of the Company its duties under the
Incentive Plan, except with respect to any authority to grant Incentive Awards
or take other action with respect to persons who are subject to Section 16 of
the Exchange Act or Section 162(m) of the Code. In the case of an Incentive
Award to an Outside Director, the Board of Directors shall act as the
Committee. Subject to the express provisions of the Incentive Plan, the
Committee is authorized to, among other things, select grantees under the
Incentive Plan and determine the size, duration and type, as well as the other
terms and conditions (which need not be identical), of each Incentive Award.
The Committee also construes and interprets the Incentive Plan and any related
agreements. All determinations and decisions of the Committee are final,
conclusive and binding on all parties. The Company will indemnify members of
the Committee against any damage, loss, liability, cost or expenses arising in
connection with any claim, action, suit or proceeding by reason of any action
taken or failure to act under the Incentive Plan, except for any such act or
omission constituting willful misconduct or gross negligence.
Eligibility. Key employees, including officers (whether or not they are
directors), and consultants of the Company and Outside Directors are eligible
to participate in the Incentive Plan. A key employee generally is
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any employee of the Company who, in the opinion of the Committee, is in a
position to contribute materially to the growth and development and to the
financial success of the Company.
Types of Incentive Awards. Under the Incentive Plan, the Committee may grant
(i) incentive stock options ("ISOs"), as defined in Section 422 of the Code,
(ii) "nonstatutory" stock options ("NSOs"), (iii) shares of restricted stock,
(iv) performance units and performance shares, (v) other stock-based awards,
and (vi) supplemental payments dedicated to the payment of income taxes
(collectively, "Incentive Awards"). ISOs and NSOs are sometimes referred to
collectively herein as "Options." The terms of each Incentive Award will be
reflected in an agreement (the "Incentive Agreement") between the Company and
the participant.
Options. Generally, Options must be exercised within 10 years of the grant
date. ISOs may be granted only to employees, and the exercise price of each
ISO may not be less than 100% of the fair market value of a share of Common
Stock on the date of grant. The Committee will have the discretion to
determine the exercise price of each NSO granted under the Incentive Plan. To
the extent that the aggregate fair market value of shares of Common Stock with
respect to which ISOs are exercisable for the first time by any employee
during any calendar year exceeds $100,000, such options must be treated as
NSOs.
The exercise price of each Option is payable in cash or, in the discretion
of the Committee, by the delivery of shares of Common Stock owned by the
Optionee or the withholding of shares that would otherwise be acquired on the
exercise of the Option or by any combination of the foregoing.
An employee will not recognize any income for federal income tax purposes at
the time an ISO is granted, nor on the qualified exercise of an ISO, and will
recognize capital gain or loss (as applicable) upon the subsequent sale of
shares acquired in a qualified exercise. The exercise of an ISO is qualified
if a participant does not dispose of the shares acquired by such exercise
within two years after the ISO grant date and one year after such exercise.
The Company is not entitled to a tax deduction as a result of the grant or
qualified exercise of an ISO.
An optionee will not recognize any income for federal income tax purposes,
nor will the Company be entitled to a deduction, at the time an NSO is
granted. However, when an NSO is exercised, the optionee will recognize
ordinary income in an amount equal to the difference between the fair market
value of the shares received and the exercise price of the NSO, and WORK will
generally recognize a tax deduction in the same amount at the same time.
The foregoing federal income tax information is a summary only, does not
purport to be a complete statement of the relevant provisions of the Code and
does not address the effect of any state of local taxes.
Restricted Stock. Restricted stock may be subject to substantial risk of
forfeiture, a restriction on transferability or rights of repurchase or first
refusal of the Company, as determined by the Committee. Unless otherwise
determined by the Committee, during the period of restriction, the grantee
will have all other rights of a stockholder, including the right to vote the
shares and receive the dividends paid thereon.
Performance Units and Performance Shares. Performance units and performance
shares may be granted only to employees and consultants. For each performance
period (to be determined by the Committee), the Committee will establish
specific financial or non-financial performance objectives, the number of
performance units or performance shares and their contingent values, which
values may vary depending on the degree to which such objectives are met.
Other Stock-Based Awards. Other stock-based awards are awards denominated or
payable in, valued in whole or in part by reference to or otherwise related to
shares of Common Stock. Subject to the terms of the Incentive Plan, the
Committee may determine any terms and conditions of other stock-based awards,
provided that, in general, the amount of consideration to be received by the
Company shall be either (i) no consideration other than services actually
rendered or to be rendered (in the case of the issuance of shares) or (ii) in
the case of
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<PAGE>
an award in the nature of a purchase right, consideration (other than services
rendered) at least equal to 50% of the fair market value of the shares covered
by such grant on the date of grant. Payment or settlement of other stock-based
awards will be in shares of Common Stock or in other consideration related to
such shares.
Supplemental Payments for Taxes. The Committee may grant, in connection with
an Incentive Award (except for ISOs), a supplemental payment in an amount not
to exceed the amount necessary to pay the federal and state income taxes
payable by the grantee with respect to the Incentive Award and the receipt of
such supplemental payment.
Other Tax Considerations. Upon accelerated exercisability of Options and
accelerated lapsing of restrictions upon restricted stock or other Incentive
Awards in connection with a Change in Control (as defined in the Incentive
Plan), certain amounts associated with such Incentive Awards could, depending
upon the individual circumstances of the participant, constitute "excess
parachute payments" under Section 280G of the Code, thereby subjecting the
participant to a 20% excise tax on those payments and denying the Company a
deduction with respect thereto. The limit on the deductibility of compensation
under Section 162(m) of the Code is also reduced by the amount of any excess
parachute payments. Whether amounts constitute excess parachute payments
depends upon, among other things, the value of the Incentive Awards
accelerated and the past compensation of the participant.
Taxable compensation earned by executive officers who are subject to Section
162(m) of the Code in respect of Incentive Awards is subject to certain
limitations set forth in the Incentive Plan generally intended to satisfy the
requirements for "qualified performance-based compensation," but no assurance
can be given that the Company will be able to satisfy these requirements in
all cases, and the Company may, in its sole discretion, determine in one or
more cases that it is in its best interest not to satisfy these requirements
even if it is able to do so.
Termination of Employment and Change in Control. Except as otherwise
provided in the applicable Incentive Agreement, if a participant's employment
or other service with the Company (or its subsidiaries) is terminated (i)
other than due to his death, Disability, Retirement or for Cause (each
capitalized term as defined in the Incentive Plan), his then exercisable
Options will remain exercisable for 60 days after such termination, (ii) by
reason of Disability or death, his then exercisable Options will remain
exercisable for one year following such termination (except for ISOs, which
will remain exercisable for three months), (iii) due to his retirement, his
then exercisable Options will remain exercisable for six months (except for
ISOs, which will remain exercisable for three months), or (iv) for Cause, all
his Options will expire at the commencement of business on the date of such
termination.
Upon a Change in Control of the Company, any restrictions on restricted
stock and other stock-based awards will be deemed satisfied, all outstanding
Options will become immediately exercisable and all the performance shares and
units and any other stock-based awards will be fully vested and deemed earned
in full. These provisions could in some circumstances have the effect of an
"anti-takeover" defense because, as a result of these provisions, a Change in
Control of the Company could be more difficult or costly.
Incentive Awards Nontransferable. No Incentive Award may be assigned, sold
or otherwise transferred by a participant, other than by will or by the laws
of descent and distribution, or be subject to any encumbrance, pledge, lien,
assignment or charge. An Incentive Award may be exercised during the
participant's lifetime only by the participant or the participant's legal
guardian.
Amendment and Termination. The Company's board of directors may amend or
terminate the Incentive Plan at any time, except that the Incentive Plan may
not be modified or amended, without stockholder approval, if such amendment
would (i) increase the number of shares of Common Stock which may be issued
thereunder, except in connection with a recapitalization of the Common Stock,
(ii) amend the eligibility requirements for employees to purchase Common Stock
under the Incentive Plan, (iii) increase the maximum limits on Incentive
Awards that may be issued to executive officers who are subject to Section
162(m) of the Code, (iv) extend the
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<PAGE>
term of the Incentive Plan or (v) decrease the authority granted to the
Committee under the Incentive Plan in contravention of Rule 16b-3 under the
Exchange Act. No termination or amendment of the Incentive Plan shall
adversely affect in any material way any outstanding Incentive Award
previously granted to a participant without his consent.
On the closing of this Offering, the Company expects Options to purchase a
total of 1,318,000 shares of Common Stock will be outstanding. The Options
will be granted to the following persons to purchase the number of shares
indicated: Mr. French, 200,000; Mr. Sacco, 175,000; Mr. Hlinak, 175,000;
Messrs. Walz and Stephens, 100,000 each; each of Messrs. Sullivan, Ramsey and
Millinor, 10,000; and other employees as a group (538,000 shares). All these
options will have an initial exercise price per share equal to the initial
public offering price. Of the options issued to the individuals named above,
one-third of such shares will vest upon completion of the Offering, and the
remaining two-thirds will vest on the first anniversary of the Offering,
except that the options issued to Messrs. French and Sacco vest only as to an
additional one-third on the first anniversary and the remaining one-third on
the second anniversary. Except for 25,000 options which vest immediately upon
completion of this Offering and 52,500 options which will vest one-third upon
completion of the Offering and one-third on the first and second anniversary
of the Offering, the options issued to other employees will vest one-third on
each anniversary of the completion of the Offering.
BONUS AWARDS; OTHER PLANS
The 1998 bonuses for officers and key employees of the Company, if any, will
be based upon the performance standards to be established by the Compensation
Committee. The Company expects the Compensation Committee to establish such
performance standards for the remainder of 1998 following the closing of this
Offering.
The Company has adopted or intends to adopt deferred compensation,
supplemental disability, supplemental life and retirement or other benefit or
welfare plans in which executive officers of the Company will be eligible to
participate.
On the closing of this Offering, the Compensation Committee will be
established. In the past, matters with respect to the compensation of
executive officers of WORK were determined by its Board of Directors,
including those members who serve as executive officers.
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CERTAIN TRANSACTIONS
ORGANIZATION OF WORK
WORK was initially capitalized with an aggregate of approximately $3.5
million provided through a private placement of its Common Stock and the
Preferred Stock to a number of accredited investors, including certain
officers, directors and 5% shareholders of the Company. These funds were used
to pay expenses related to the Acquisitions and this Offering. In September
1997, certain members of management purchased an aggregate of 411,530 shares
of WORK's Common Stock at a purchase price of approximately $.003 per share as
follows: Mr. Sacco--68,393 shares; Mr. French--177,438 shares; Mr. Stephens--
62,445 shares; Mr. Walz--61,445 shares; and Mr. Hlinak--15,000 shares. WORK
also issued shares of its Common Stock to Mr. Millinor and to a partnership
owned by the adult children of Mr. Ramsey, in the amounts of 18,766 and 2,503
shares, respectively, for a purchase price of approximately $.003 per share.
Messrs. Millinor and Ramsey will become directors of Company on completion of
this Offering. In addition, WORK issued 87,578 shares to Scott Jay Wollins,
who is a founder of WORK along with Bollard and served as a director of WORK
from September to December 1997. Mr. Wollins also receives a consulting fee of
$5,000 per month from WORK pursuant to an agreement which may be continued at
the option of both parties at the same rate until the completion of this
Offering. The Company also agreed to issue options at an exercise price equal
to the initial public offering price to management and its outside director
nominees upon completion of this Offering. See "Management--Board of Directors
Classes; Director Compensation--Executive Compensation; Employment
Agreements." Mr. Sacco also purchased 25 shares of Series A Preferred Stock
for $25,000, and Mr. Ramsey purchased 200 shares of Series B Preferred Stock
for $200,000. The Preferred Stock purchased by Messrs. Sacco and Ramsey will
automatically convert into 5,012 and 25,060 shares of Common Stock,
respectively, upon completion of the Offering.
In addition, Bollard, and its principals, Richard K. Reiling, Edward J.
Hoffer, Gary D. Schwing and Richard S. Rouse, purchased shares of Common Stock
at approximately $.003 per share as follows: Bollard--43,789; Mr. Hoffer--
132,099 shares; Mr. Reiling--148,882 shares; Mr. Schwing--45,665 shares; and
Mr. Rouse--25,021 shares. Messrs. Reiling, Hoffer and Wollins served as
directors of WORK prior to the Offering. In addition, Mr. Schwing purchased 25
shares of the Company's Series A Preferred Stock for $25,000, and Mr. Reiling
purchased 40 shares of the Company's Series B Preferred Stock for $40,000. The
Preferred Stock purchased by Messrs. Schwing and Reiling will, upon completion
of this Offering, convert into 5,013 and 5,011 shares of Common Stock,
respectively. Rusty Burnett, a shareholder of Burnett and the husband of Susan
W. Burnett (who will become a director of the Company) and Scott Hoffer, the
son of Edward J. Hoffer, also purchased 200 shares of Series B Preferred Stock
and 50 Shares of Series A Preferred Stock, respectively, which automatically
convert into 25,060 and 10,024 shares of Common Stock upon completion of this
Offering.
Bollard has entered into an agreement with WORK to provide services related
to facilitating and completing this Offering. In consideration of those
services, Bollard will be reimbursed for its expenses and will be paid a fee
of $775,000 from the proceeds of this Offering. Bollard also entered into an
agreement with WORK on April 1, 1998 whereby Bollard has agreed to provide
management and administrative services to WORK relating to this Offering, for
which Bollard is paid a monthly fee of $30,000 and reimbursement of reasonable
out-of-pocket expenses. This agreement terminates on the closing of this
Offering. Effective on completion of this Offering, Bollard has agreed to
provide services to the Company, as requested, on a non-exclusive basis for
two years relating to future acquisition transactions involving the Company,
including the identification of potential acquisition candidates, due
diligence and valuation of these candidates, and negotiation of acquisition
agreements. Under this agreement, Bollard will receive a monthly fee of
$10,000 and reimbursement of reasonable out-of-pocket expenses, and will be
paid a transaction fee upon consummation of any acquisition identified by
Bollard to the Company, which fee is based on an agreed to percentage of the
value of the acquisition. The monthly fees and reimbursement of expenses will
be credited against fees earned by Bollard on acquisitions.
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Bollard has also agreed to advance WORK up to $500,000 to fund operating
expenses of WORK prior to the completion of this Offering. Such advances do
not bear interest and are payable on the earlier to occur of the completion of
this Offering or the termination of the definitive agreements regarding the
Acquisitions.
THE ACQUISITIONS
Concurrently with and as a condition of the closing of this Offering, the
Company will close the Acquisitions. Subject to certain adjustments described
below, the aggregate consideration WORK will pay to acquire the Founding
Companies consists of approximately $66.9 million in cash and 6,438,540 shares
of Common Stock. The Company will also assume all the indebtedness of the
Founding Companies (estimated to be approximately $3.3 million of indebtedness
incurred by the Founding Companies to fund AAA account distributions and
approximately $0.7 million of other indebtedness of the Founding Companies as
of the closing of this Offering). The cash portion of the purchase price will
be adjusted at the closing to the extent the working capital and long-term
debt of a Founding Company as of the end of the month prior to the closing of
the Acquisitions (or the end of the second month prior to the closing of the
Acquisitions if the closing occurs on or before the twentieth day of a month)
varies from the working capital of the Founding Company as of March 31, 1998.
The shareholders of PCN and Task are both entitled to additional
consideration (the "Earn-Outs"), payable in cash, in the event Earn-Out EBIT
(as defined) for 1998 and 1999 exceeds target levels. The shareholders of CHP
are entitled to additional compensation, payable in cash, in the event Earn-
Out EBIT (as defined) for the 12 months following the Offering exceeds
Adjusted EBIT (as defined) for the 12-month period ending on the last day of
the month during which the Offering is consummated. The Company currently
expects that the aggregate amount of Earn-Out payments will be approximately
$12.0 million if certain target levels are exceeded, but the amount of Earn-
Out payments, if any, could be greater or lesser than that amount depending
upon the performance of those companies.
Prior to the closing of the Acquisitions, the S Corporations are expected to
distribute cash to their respective stockholders in amounts equal to the
balance of their respective AAA Accounts prior to the closing of the
Acquisitions (approximately $8.2 million as of March 31, 1998). An AAA Account
generally represents undistributed earnings of an S Corporation on which taxes
have been or will be paid by its stockholders, and the Company expects that
the S Corporations will borrow approximately $3.3 million to fund their AAA
account distributions, which will be repaid by the Company upon the closing of
the Acquisitions out of available cash and cash equivalents of the Founding
Companies. Each S Corporation which uses the cash method of accounting for
income tax purposes, will, prior to the Acquisitions, distribute to its
stockholders accounts receivable which have a value equal to the net
adjustment that would be required under the Code, if, as of the time of
closing the Acquisitions, the S Corporation changed its method of accounting
for tax purposes from the cash method to the accrual method. The estimated
amount of these accounts receivable to be distributed is approximately $13.1
million. In addition to the adjustments to the purchase price described above
for changes in working capital and long term debt, the cash portion of the
purchase price of each S Corporation will be adjusted for any AAA Accounts
distributions and for any such distributions of cash basis accounts and notes
receivable after the adjustment date described above.
The Company will also repay an aggregate of $0.6 million of indebtedness of
certain of the Founding Companies with the proceeds of this Offering.
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The consideration being paid by WORK for each Founding Company was
determined by arm's-length negotiations between WORK and a representative of
that Founding Company. Subject to certain adjustments described below, the
following table sets forth for each Founding Company the consideration the
Company will pay to its stockholders in the Acquisitions in cash and shares of
Common Stock.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON
FOUNDING COMPANY CONSIDERATION STOCK
---------------- ------------- ---------
<S> <C> <C>
Absolutely/Botal........................................ $ 7,401,385 224,746
Access.................................................. 3,770,632 208,843
AIM..................................................... 866,122 72,176
BeneTemps............................................... 2,500,002 216,227
Burnett................................................. 8,421,605 1,333,333
CHP..................................................... 800,005 82,369
Core.................................................... 1,340,886 111,738
CoreLink................................................ 1,095,239 365,078
Law Pros................................................ 2,000,000 184,314
Law Resources........................................... 1,006,170 83,846
PCN..................................................... 4,820,068 401,672
Smith Hanley............................................ 8,500,008 643,149
Sparks.................................................. 15,000,004 1,467,978
Task Management......................................... 5,357,488 446,456
TOSI.................................................... 1,400,000 382,356
WSI..................................................... 2,571,108 214,259
----------- ---------
Total................................................. $66,850,722 6,438,540
=========== =========
</TABLE>
The closing of each Acquisition is subject to customary conditions. These
conditions include, among others: the accuracy on the closing date of the
Acquisitions of the representations and warranties made by the Founding
Companies, their principal stockholders and WORK; the performance of each of
their respective covenants included in the agreements relating to the
Acquisitions; and nonexistence of a material adverse change in the result of
operations, financial condition or business of each Founding Company. No
assurance can be given the conditions to the closing of all Acquisitions will
be satisfied or waived or that each of the Acquisitions will close.
Any Founding Company's acquisition agreement may be terminated, under
certain circumstances, prior to the closing of this Offering: (i) by the
mutual consent of the boards of directors of WORK and the Founding Company;
(ii) by the Founding Company, its stockholders or WORK if this Offering and
the acquisition of the Founding Company are not closed by September 30, 1998
(which date will be extended to October 31, 1998, unless Founding Companies
which represent a majority of the consideration payable to all the Founding
Companies elect not to do so); (iii) by WORK if the schedules to the
acquisition agreement are amended to reflect a material adverse change in that
Founding Company; or (iv) by the Founding Company, its stockholders or WORK if
a material breach or default under the agreement by one party occurs and is
not waived by the other party.
Pursuant to the Acquisition Agreements, certain stockholders of each of the
Founding Companies have agreed not to compete with the Company for a period of
two years commencing on the date of closing of the Acquisitions. For
information regarding the employment agreements to be entered into by certain
key officers of the Founding Companies, see "Management--Executive
Compensation; Employment Agreements."
In connection with the Acquisitions, the Company will grant certain
registration rights to former stockholders of the Founding Companies. See
"Shares Eligible for Future Sale."
62
<PAGE>
ACQUISITIONS INVOLVING CERTAIN OFFICERS, DIRECTORS AND STOCKHOLDERS
Persons who or which are or will become directors, executive officers, or
beneficial owners of 5% or more of the Common Stock will receive the following
consideration in the Acquisitions for their equity interests in the Founding
Companies.
<TABLE>
<CAPTION>
SHARES OF
CASH COMMON
NAME CONSIDERATION STOCK
- ---- ------------- ---------
<S> <C> <C>
Susan W. Burnett(1)..................................... $ 8,421,605 1,333,333
Stephen M. Sparks(2).................................... 13,229,694 950,993
Gilbert Rosen(3)........................................ 1,400,000 --
Morton Fishman(4)....................................... 800,005 82,369
John R. Haesler(5)...................................... 1,095,239 365,078
James Schneider(6)...................................... 2,169,031 180,752
Thomas A. Hanley, Jr.................................... 2,209,152 167,153
----------- ---------
$29,324,726 3,079,678
=========== =========
</TABLE>
- --------
(1) Ms. Burnett's cash and shares of Common Stock are held jointly with her
husband, Rusty Burnett.
(2) Includes shares held by Mr. Sparks and by a revocable trust established by
Mr. Sparks. Does not include 438,750 shares held in trusts for Mr. Sparks'
children as to which Mr. Sparks is not the trustee and disclaims
beneficial ownership.
(3) Includes cash consideration payable to Mr. Rosen and his wife. Excludes
382,356 shares issued to Mr. Rosen's children as to which he disclaims
beneficial ownership.
(4) Includes cash consideration and shares of Common Stock issued to Mr.
Fishman's wife, but does not include cash consideration which may be
payable pursuant to an Earn-Out.
(5) Includes cash consideration and shares of Common Stock issued to Mr.
Haesler's wife.
(6) Does not include cash consideration which may be payable pursuant to an
Earn-Out.
REAL ESTATE AND OTHER TRANSACTIONS
The Company leases a 2,323 square foot office in Denver, Colorado from S & J
Real Estate, a Colorado partnership whose shareholders include John G.
McWilliams, a 50% shareholder in WSI. The lease expires in 1999 and provides
for monthly payments of $3,034.13 through May 31, 1999.
The Company believes the consideration paid under this lease is at fair
market rates and is fair to the Company.
COMPANY POLICY
In the future, any transactions with directors, officers, employees or
affiliates of the Company are anticipated to be minimal and will, in any case,
be approved in advance by a majority of the board of directors, including a
majority of disinterested members of the board of directors.
63
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table shows, immediately after giving effect to the closing of
the Acquisitions, the conversion of the Preferred Stock, the Reverse Stock
Split and this Offering, the beneficial ownership of the Common Stock of (i)
each person who or which then will beneficially own more than five percent of
the outstanding shares of the Company Common Stock, (ii) each person who then
will be a director of the Company, (iii) each person who then will be an
executive officer of the Company and (iv) all persons who then will be
directors and executive officers of the Company as a group. The table assumes
none of these persons intends to acquire shares directly from the Underwriters
in connection with this Offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
BENEFICIAL OWNER(1) OFFERING(2)
------------------- --------------------
NUMBER PERCENT
------------ -------
<S> <C> <C>
Susan W. Burnett(3)...................................... 1,358,393 9.5%
9800 Richmond Avenue, Suite 800
Houston, Texas 77042
Stephen M. Sparks(4)..................................... 950,993 6.6%
15825 Shady Grove Road, Suite 150
Rockville, Maryland 20850
John R. Haesler(5)....................................... 365,078 2.6%
18301 Von Karman Avenue, Suite 120
Irvine, California 92612
B. Garfield French(6).................................... 244,105 1.7%
James Schneider(7)....................................... 180,752 1.3%
595 Market Street, Suite 1400
San Francisco, California 94105-2821
Thomas A. Hanley, Jr.(8)................................. 167,153 1.2%
235 Canoe Hill Road
New Canaan, Connecticut 06840
Samuel R. Sacco(9)....................................... 131,738 *
Monte R. Stephens(10).................................... 95,778 *
Mark F. Walz(11)......................................... 94,778 *
Morton Fishman(12)....................................... 82,369 *
7108 Fairway Drive, Suite 290
Palm Beach Gardens, Florida 33418
Michael L. Hlinak(13).................................... 73,333 *
Roger A. Ramsey(14)...................................... 35,060 *
401 Louisiana, 8th Floor
Houston, Texas 77002
John M. Sullivan(15)..................................... 15,012 *
8 Greenway Plaza, Suite 702
Houston, Texas 77046
J. Patrick Millinor, Jr.(16)............................. 12,503 *
8 Greenway Plaza, Suite 1500
Houston, Texas 77046
Gilbert Rosen(17)........................................ 0 *
10 King Street East, Suite 1500
Toronto, Ontario M5C1C3
Canada
All directors and officers as a group (16 persons) (3)-
(18).................................................... 3,807,045 26.0%
</TABLE>
- --------
*Less than 1%.
(1) All persons listed have sole voting and investment power with respect to
their shares unless otherwise indicated. Unless otherwise indicated, the
address of each person listed is 700 Louisiana, Suite 3900, Houston, Texas
77002.
(2) Shares shown do not include shares of Common Stock that could be acquired
on exercise of currently outstanding options which do not vest within 60
days hereof.
64
<PAGE>
(3) Includes 1,333,333 shares which will be issued as consideration for the
acquisition of Burnett and 25,060 shares issuable upon conversion of the
Series B Preferred Stock upon completion of this Offering, all of which
are held jointly with her husband, Rusty Burnett.
(4) Comprised of shares which will be issued as consideration for the
acquisition of Sparks and does not include 438,750 shares held in trusts
for Mr. Sparks children as to which Mr. Sparks is not the trustee and
disclaims beneficial ownership.
(5) Comprised of shares which will be issued as consideration for the
acquisition of CoreLink and includes 273,651 shares issued to his wife.
(6) Includes 66,667 shares issuable upon exercise of options granted to him
under the Incentive Plan.
(7) Comprised of shares which will be issued as consideration for the
acquisition of PCN.
(8) Comprised of shares which will be issued as consideration for the
acquisition of Smith/Hanley.
(9) Includes 58,333 shares issuable upon exercise of options granted to him
under the Incentive Plan and 5,012 shares issuable upon conversion of the
Series A Preferred Stock upon completion of this Offering.
(10) Includes 33,333 shares issuable upon exercise of options granted to him
under the Incentive Plan.
(11) Includes 33,333 shares issuable upon exercise of options granted to him
under the Incentive Plan.
(12) Comprised of shares which will be issued as consideration for the
acquisition of CHP and includes 41,184 shares issued to his wife.
(13) Includes 58,333 shares issuable upon exercise of options granted to him
under the Incentive Plan.
(14) Includes 10,000 shares issuable upon exercise of options granted to him
as an outside director under the Incentive Plan and 25,060 shares
issuable upon conversion of the Series B Preferred Stock upon completion
of this Offering. Does not include 18,766 shares of Common Stock owned by
Foresee Capital, Ltd., a partnership owned by Mr. Ramsey's children as to
which he disclaims beneficial ownership.
(15) Includes 10,000 shares issuable upon exercise of options granted to him
as an outside director under the Incentive Plan and 5,012 shares issuable
upon conversion of the Series A Preferred Stock upon completion of this
Offering.
(16) Includes 10,000 shares issuable upon exercise of options granted to him
as an outside director under the Incentive Plan.
(17) Comprised of shares which will be issued as consideration for the
acquisition of TOSI and does not include 382,356 shares issued to Mr.
Rosen's children as to which he disclaims beneficial ownership.
(18) Includes 305,000 shares issuable upon exercise of options granted under
the Incentive Plan.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
On closing of the Acquisitions and this Offering, 14,316,327 shares of
Common Stock will be outstanding. The shares sold in this Offering (other than
those held by affiliates of the Company) will be freely tradable by the
public. The remaining outstanding shares of Common Stock (collectively, the
"Restricted Shares") have not been registered under the Securities Act and may
be resold publicly only following their effective registration under the
Securities Act or pursuant to an available exemption from the registration
requirements of the Securities Act, such as Rule 144 thereunder.
In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of the Restricted
Shares from the Company or from an affiliate of the Company, a person (or
persons whose shares of Common Stock are aggregated), including persons who
may be deemed "affiliates" of the Company, would be entitled to sell within
any three-month period a number of Restricted Shares which does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock and (ii) the
average weekly trading volume of the Common Stock during a preceding period of
four calendar weeks. Sales under Rule 144 are also subject to certain
provisions as to the manner of sale, notice requirements and the availability
of current public information about the Company. In addition, under Rule 144,
if a period of at least two years has elapsed since the later of the date
Restricted Shares were acquired from the Company or the date they were
acquired from an affiliate of the Company, a stockholder who is not an
affiliate of the Company at the time of sale and has not been such an
affiliate for at least three months prior to the sale would be entitled to
sell shares of Common Stock in the public market immediately without
compliance with the foregoing Rule 144 requirements. Rule 144 does not require
the same person to have held the Restricted Shares for the applicable periods
under certain circumstances. The foregoing summary of Rule 144 is not intended
to be a complete description thereof. The SEC has proposed certain amendments
to Rule 144 that would, among other things, eliminate the manner of sale
requirements and revise the notice provisions of that rule. The SEC has also
solicited comments on other possible changes to Rule 144, including possible
revisions to the one- and two-year holding periods and the volume limitations
referred to above.
The Company and certain stockholders have agreed generally not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 180
days, and the Company's directors and executive officers have agreed generally
not to offer, sell or otherwise dispose of any shares of Common Stock for a
period of one year (in each case the "lockup period") following the date of
this Prospectus without the prior written consent of The Robinson-Humphrey
Company, LLC, except that the Company may issue, subject to certain
conditions, Common Stock in connection with acquisitions and upon exercise of
stock options which are either (i) outstanding on the date of this Prospectus
or (ii) issued under the Incentive Plan. Further, all persons who acquire
shares in connection with the Acquisitions have agreed that they generally
will not offer, sell or otherwise dispose of any of their shares of Common
Stock (subject to certain limited exceptions generally involving transfers to
family members and trusts or pursuant to an effective registration statement)
during the one-year period following the date of this Prospectus.
The Company will enter into a registration rights agreement (the "RRA") with
the former stockholders of the Founding Companies, which will provide certain
registration rights with respect to the Common Stock issued to such
stockholders in the Acquisitions. The RRA will provide for a single demand
registration right, exercisable by the holders of at least 51.0% of the shares
of Common Stock initially subject to the RRA, pursuant to which the Company
will file a registration statement under the Securities Act to register the
sale of not less than 1,000,000 shares by those requesting stockholders and
any other holders of Common Stock subject to the agreement who desire to sell
pursuant to such registration statement. The demand request may not be made
until the first anniversary of this Offering. The demand registration rights
conferred by the RRA will terminate on the third anniversary of this Offering.
In addition, subject to certain conditions and limitations, the RRA will
provide the holders of Common Stock subject to the RRA with the right to
participate in registrations by the Company of its equity securities in
underwritten offerings after the first anniversary of this Offering.
66
<PAGE>
The RRA requires the Company to pay the costs associated with an offering
subject thereto, other than underwriting discounts and commissions and
transfer taxes attributable to the shares sold on behalf of the selling
stockholders. The RRA provides that the number of shares of Common Stock that
must be registered on behalf of selling stockholders is subject to limitation
if the managing underwriter determines that market conditions require such a
limitation. Pursuant to the RRA, the Company will indemnify the selling
stockholders, and such selling stockholders will indemnify the Company,
against certain liabilities in respect of any registration statement or
offering covered by the RRA.
The Company intends to register up to 5,000,000 additional shares of Common
Stock under the Securities Act as soon as practicable after the completion of
the Offering for its use in connection with future acquisitions. Pursuant to
Securities Act Rule 145, the volume limitations and certain other requirements
of Rule 144 will apply to resales of these shares by affiliates of the
businesses the Company acquires for a period of one year from the date of
their acquisition (or such shorter period as the SEC may prescribe).
Otherwise, these shares generally will be freely tradable after their issuance
by persons not affiliated with the Company unless the Company contractually
restricts their sale and sales of these shares during the lockup period would
require the prior written consent of The Robinson-Humphrey Company, LLC.
The Company intends to file a registration statement on Form S-8 under the
Securities Act to register the shares of Common Stock reserved or to be
available for issuance pursuant to the Incentive Plan. Shares of Common Stock
issued pursuant to the Incentive Plan after the effective date of that
registration statement generally will be available for sale in the open market
by holders who are not affiliates of the Company and, subject to the volume
and other limitations of Rule 144, by holders who are affiliates of the
Company.
DESCRIPTION OF CAPITAL STOCK
WORK's authorized capital stock consists of 50,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"). At July 10, 1998, 905,718 shares of Common Stock and 3,500
shares of Preferred Stock were issued and outstanding. As of that date, there
were 26 holders of record of the Common Stock. On closing of this Offering,
all outstanding shares of Preferred Stock will be automatically converted into
513,735 shares of Common Stock. As a result, on the closing of the
Acquisitions and this Offering, 14,316,327 shares of Common Stock (15,285,077
if the underwriters' over-allotment option is exercised in full) will be
issued, outstanding and nonassessable, and 1,318,000 shares of Common Stock
then will be reserved for issuance pursuant to all then outstanding options,
warrants and other rights (consisting only of Incentive Plan options). The
following summary is qualified in its entirety by reference to the Charter,
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
The Common Stock possesses ordinary voting rights for the election of
directors and in respect of other corporate matters, and each share has one
vote. The Common Stock affords no cumulative voting rights, and the holders of
a majority of the shares voting for the election of directors can elect all
the directors if they choose to do so. The Common Stock carries no preemptive
rights and is not convertible, redeemable, assessable or entitled to the
benefits of any sinking fund. The holders of Common Stock are entitled to
dividends in such amounts and at such times as may be declared by the Board of
Directors out of funds legally available therefor, subject to the dividend
preference of any stock ranking senior to the Common Stock, including the
Preferred Stock. See "Dividend Policy" for information regarding the initial
dividend policy of the Company.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the
provisions of the Charter and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to
67
<PAGE>
change the number of shares constituting any series, and to provide for the
powers, designations, preferences and relative, participating, optional or
other rights, and the qualifications, limitations or restrictions thereof,
including without limitation, voting powers, dividend rights (including
whether dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any class or series of the
Preferred Stock, in each case without any further action or vote by the
holders of Common Stock. Although the Company has no present intention to
issue additional shares of Preferred Stock, the issuance of shares of
Preferred Stock, or the issuance of rights to purchase such shares, could be
used to discourage an unsolicited acquisition proposal. For example, the
issuance of a series of Preferred Stock might impede a business combination by
including class voting rights that would enable the holders to block such a
transaction; or such issuance might facilitate a business combination by
including voting rights that would provide a required percentage vote of the
stockholders. In addition, under certain circumstances, the issuance of
Preferred Stock could adversely affect the voting power of the holders of the
Common Stock. The Board of Directors could act in a manner that would
discourage an acquisition attempt or other transaction that some or a majority
of the stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then market
price of such stock. The Board of Directors does not at present intend to seek
stockholder approval prior to any issuance of currently authorized stock,
unless otherwise required by law or the rules of any market on which the
WORK's securities are traded.
OTHER MATTERS
Texas law authorizes Texas corporations to limit or eliminate the personal
liability of their directors to them and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by Texas law,
directors are accountable to Texas corporations and their stockholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Texas law enables Texas corporations to limit available
relief to equitable remedies such as injunction or rescission. The Charter
limits the liability of directors of the Company to the Company or its
stockholders to the fullest extent permitted by Texas law. Specifically, no
member of the Board of Directors will be personally liable for monetary
damages for breach of a director's fiduciary duty as a director, except for
liability (i) for any breach of the member's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
in the TBCA or (iv) for any transaction from which the member derived an
improper personal benefit. This Charter provision may have the effect of
reducing the likelihood of derivative litigation against directors and may
discourage or deter stockholders or management from bringing a lawsuit against
directors for breach of their duty of care, even though such an action, if
successful, might otherwise have benefited the Company and its stockholders.
The Charter and Bylaws provide indemnification to WORK's officers and
directors and certain other persons with respect to certain matters, and WORK
has entered into agreements with each of its directors and executive officers
providing for indemnification with respect to certain matters.
The Charter provides that: (i) stockholders may act only at an annual or
special meeting of stockholders and may not act by written consent; and (ii)
special meetings of the stockholders can be called only by the chairman of the
board, the chief executive officer, the president or a majority of the Board
of Directors. The Charter also provides that the Board of Directors shall
consist of three classes of directors serving for staggered terms. It is
currently contemplated that approximately one-third of the Board of Directors
will be elected each year. The classified board provision could prevent a
party who acquires control of a majority of the outstanding voting stock of
the Company from obtaining control of the Board of Directors until the second
annual stockholders' meeting following the date the acquirer obtains the
controlling interest. See "Management --Directors and Executive Officers." The
Charter provides that the number of directors shall be as determined by the
Board of Directors from time to time, but shall not be less than three. It
also provides that directors may be removed only for cause, and then only by
the affirmative vote of the holders of at least two-thirds of all outstanding
voting stock. This provision, in conjunction with the Charter provisions
authorizing the board of
68
<PAGE>
directors to fill vacant directorships, will prevent stockholders from
removing incumbent directors without cause and filling the resulting vacancies
with their own nominees.
STOCKHOLDER PROPOSALS
The Company's Bylaws contain provisions requiring that advance notice be
delivered to the Company of any business to be brought by a stockholder before
an annual meeting of stockholders and establishing certain procedures to be
followed by stockholders in nominating persons for election to the Board of
Directors. Generally, such advance notice provisions provide that written
notice must be given to the secretary of the Company by a stockholder (i) in
the event of business to be brought by a stockholder before an annual meeting
and (ii) in the event of nominations of persons for election to the Board of
Directors by any stockholder, not less than 60 nor more than 180 days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders (with certain exceptions if the date of the annual meeting is
different by more than specified periods from the anniversary date). Such
notice must set forth specific information regarding such stockholder and such
business or director nominee, as described in the Company's Bylaws. The
foregoing summary is qualified in its entirety by reference to the Company's
Bylaws, which are filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
69
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting agreement
(the "Underwriting Agreement") among the Company and the underwriters named
below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters, for whom The Robinson-Humphrey
Company, LLC, J.C. Bradford & Co. and ABN AMRO Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company the number of shares of Common Stock set forth below opposite
their respective names. The Underwriters are committed to purchase all of such
shares if any are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased as set forth in the Underwriting
Agreement.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
The Robinson-Humphrey Company, LLC..............................
J.C. Bradford & Co..............................................
ABN AMRO Incorporated...........................................
---------
Total.......................................................
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company has granted the Underwriters an option, exercisable by the
Representatives, to purchase up to 968,750 additional shares of Common Stock
at the initial public offering price less the underwriting discount. Such
option, which expires 30 days after the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent the Representatives
exercise such option, each of the Underwriters will be obligated, subject to
certain conditions, to purchase approximately the same percentage of the
option shares as the number of shares to be purchased initially by that
Underwriter bears to the total number of shares to be purchased initially by
the Underwriters.
Prior to this Offering, there has been no established trading market for the
Common Stock. The initial price to the public for the Common Stock offered
hereby was determined by negotiations among the Company and the
Representatives. Among the factors considered in determining the initial price
to the public were the history of and the prospects for the industry in which
the Company competes, the past and present operations of the Company and the
historical results of the operations of the Founding Companies, the prospects
for future earnings of the Company, the general condition of the securities
markets at the time of the Offering, and the recent market prices of
securities of generally comparable companies. There can be no assurance that
an active trading market will develop for the Common Stock or that the Common
Stock will trade in the public market subsequent to the Offering at or above
the initial public offering price.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.
The Representatives, on behalf of the Underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act. Over-
allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position.
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<PAGE>
Stabilizing transactions permit bids to purchase the underlying security so
long as the stabilizing bids do not exceed a specified maximum. Syndicate
covering transactions involve purchases of the Common Stock in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Representatives to reclaim a selling
concession from a syndicate member when shares of Common Stock originally sold
by such syndicate member are purchased in a syndicate covering transaction to
cover syndicate short positions. Such stabilizing transactions, syndicate
covering transactions and penalty bids may cause the price of the Common Stock
to be higher than it would otherwise be in the absence of such transactions.
These transactions may be effected on the New York Stock Exchange or otherwise
and, if commenced, may be discontinued at any time.
In connection with the Offering, the Company's officers and directors have
agreed that, during a period of one year from the date of this Prospectus, and
certain shareholders of the Company (excluding the holders of the shares of
Common Stock issuable upon conversion of the Preferred Stock) have agreed
that, during a period of 180 days from the date of this Prospectus, such
holders will not, without the prior written consent of The Robinson-Humphrey
Company, LLC, directly or indirectly, offer, sell, contract to sell, grant any
option with respect to, pledge, hypothecate or otherwise dispose of, any
shares of Common Stock except for a cashless exercise of stock options or a
bona fide gift provided that the donee agrees to be bound by the terms of the
donor's lockup agreement. In addition, the Company has agreed that, during a
period of 180 days from the date of this Prospectus, the Company will not,
without the prior written consent of The Robinson-Humphrey Company, LLC,
directly or indirectly, offer, sell, contract to sell, grant any option with
respect to, pledge, hypothecate or otherwise dispose of any shares of Common
Stock except for shares of Common Stock to be issued in the Offering, in
connection with acquisitions generally, and upon the exercise of stock options
which are either (i) outstanding on the date of this Prospectus or (ii) issued
under the Incentive Plan.
LEGAL MATTERS
Certain legal matters in connection with the sale of the Common Stock
offered hereby are being passed upon for the Company by Porter & Hedges,
L.L.P., Houston, Texas. The legality of the shares of Common Stock offered
hereby will be passed upon for the Underwriters by King & Spalding, Atlanta,
Georgia.
EXPERTS
The audited historical financial statements have been included in this
Prospectus in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting requirements of
the Exchange Act. The Company has filed a Registration Statement on Form S-1
(the "Registration Statement") under the Securities Act with the SEC with
respect to this Offering. This Prospectus, filed as a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement, or the exhibits thereto, in accordance with the rules
and regulations of the SEC, and reference is hereby made to such omitted
information. The statements made in this Prospectus concerning documents filed
as exhibits to the Registration Statement accurately describe the material
provisions of such documents and are qualified in their entirety by reference
to such exhibits for complete statements of their provisions. The Registration
Statement and the exhibits thereto may be inspected, without charge, at the
public reference facilities of the SEC at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and its
regional offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and at 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of all or any portion of the Registration Statement can
be obtained at prescribed rates from the Public Reference Section of the SEC
at its principal office at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The SEC maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. The address of that site is
http://www.sec.gov.
71
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation.................................................... F-3
Unaudited Pro Forma Combined Balance Sheet............................... F-4
Unaudited Pro Forma Combined Statement of Operations..................... F-6
Notes to Unaudited Pro Forma Combined Financial Statements............... F-10
HISTORICAL FINANCIAL STATEMENTS
WORK INTERNATIONAL CORPORATION
Independent Auditors' Report......................................... F-16
Balance Sheets....................................................... F-17
Statements of Operations............................................. F-18
Statements of Shareholders' Equity................................... F-19
Statements of Cash Flows............................................. F-20
Notes to Financial Statements........................................ F-21
THE BURNETT COMPANIES CONSOLIDATED, INC.
Independent Auditors' Report......................................... F-24
Balance Sheets....................................................... F-25
Statements of Earnings............................................... F-26
Statements of Stockholders' Equity................................... F-27
Statements of Cash Flows............................................. F-28
Notes to Financial Statements........................................ F-29
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
Independent Auditors' Report......................................... F-34
Combined Balance Sheets.............................................. F-35
Combined Statements of Operations.................................... F-36
Combined Statements of Shareholders' Equity.......................... F-37
Combined Statements of Cash Flows.................................... F-38
Notes to Combined Financial Statements............................... F-39
SMITH HANLEY ASSOCIATES, INC.
Independent Auditors' Report......................................... F-43
Combined Balance Sheets.............................................. F-44
Combined Statements of Operations.................................... F-45
Combined Statements of Shareholders' Equity.......................... F-46
Combined Statements of Cash Flows.................................... F-47
Notes to Combined Financial Statements............................... F-48
PROFESSIONAL CONSULTING NETWORK, INC.
Independent Auditors' Report......................................... F-52
Balance Sheets....................................................... F-53
Statements of Operations............................................. F-54
Statements of Shareholders' Equity................................... F-55
Statements of Cash Flows............................................. F-56
Notes to Financial Statements........................................ F-57
CORELINK STAFFING SERVICES, INC.
Independent Auditors' Report......................................... F-61
Balance Sheets....................................................... F-62
Statements of Operations............................................. F-63
Statements of Shareholders' Equity................................... F-64
Statements of Cash Flows............................................. F-65
Notes to Financial Statements........................................ F-66
ABSOLUTELY PROFESSIONAL STAFFING, INC., AND AFFILIATE
Independent Auditors' Report......................................... F-70
Combined Balance Sheets.............................................. F-71
Combined Statements of Income and Shareholders' Equity............... F-72
Combined Statements of Cash Flows.................................... F-73
Notes to Combined Financial Statements............................... F-74
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
TOSI PLACEMENT SERVICES INC.
Independent Auditors' Report........................................ F-78
Balance Sheets...................................................... F-79
Statements of Income................................................ F-80
Statements of Shareholder's Equity.................................. F-81
Statements of Changes in Financial Position......................... F-82
Notes to Financial Statements....................................... F-83
ACCESS STAFFING INC.
Independent Auditors' Report........................................ F-87
Balance Sheets...................................................... F-88
Statements of Operations............................................ F-89
Statements of Shareholders' Equity.................................. F-90
Statements of Cash Flows............................................ F-91
Notes to Financial Statements....................................... F-92
TASK MANAGEMENT, INC.
Independent Auditors' Report........................................ F-97
Balance Sheets...................................................... F-98
Statements of Operations and Retained Earnings...................... F-99
Statements of Cash Flows............................................ F-100
Notes to Financial Statements....................................... F-101
WSI PERSONNEL SERVICES, INC.
Independent Auditors' Report........................................ F-105
Balance Sheets...................................................... F-106
Statements of Operations............................................ F-107
Statements of Shareholders' Equity.................................. F-108
Statements of Cash Flows............................................ F-109
Notes to Financial Statements....................................... F-110
CORE PERSONNEL, INC., AND CORE PERSONNEL OF ARLINGTON, INC.
Independent Auditors' Report........................................ F-115
Combined Balance Sheets............................................. F-116
Combined Statements of Operations................................... F-117
Combined Statements of Shareholders' Equity......................... F-118
Combined Statements of Cash Flows................................... F-119
Notes to Combined Financial Statements.............................. F-120
BENETEMPS, INC.
Independent Auditors' Report........................................ F-125
Balance Sheets...................................................... F-126
Statements of Operations............................................ F-127
Statements of Shareholder's Equity.................................. F-128
Statements of Cash Flows............................................ F-129
Notes to Financial Statements....................................... F-130
LAW PROS LEGAL PLACEMENT SERVICES, INC.
Independent Auditors' Report........................................ F-133
Balance Sheets...................................................... F-134
Statements of Operations............................................ F-135
Statements of Shareholders' Equity.................................. F-136
Statements of Cash Flows............................................ F-137
Notes to Financial Statements....................................... F-138
LAW RESOURCES, INC.
Independent Auditors' Report........................................ F-143
Balance Sheets...................................................... F-144
Statements of Operations............................................ F-145
Statements of Shareholders' Equity.................................. F-146
Statements of Cash Flows............................................ F-147
Notes to Financial Statements....................................... F-148
CONTRACT HEALTH PROFESSIONALS, INC.
Independent Auditors' Report........................................ F-152
Balance Sheets...................................................... F-153
Statements of Operations............................................ F-154
Statements of Shareholders' Equity.................................. F-155
Statements of Cash Flows............................................ F-156
Notes to Financial Statements....................................... F-157
</TABLE>
F-2
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The following unaudited pro forma combined financial statements give effect
to the acquisitions by Work International Corporation ("WORK"), of the
outstanding capital stock of Absolutely Professional Staffing, Inc. and
Affiliate ("Absolutely"), Access Staffing Inc. ("Access"), AIM Staffing, Inc.
("AIM"), BeneTemps, Inc. ("BeneTemps"), The Burnett Companies Consolidated,
Inc. ("Burnett"), Contract Health Professionals, Inc. ("Contract Health"),
Core Personnel, Inc., and Core Personnel of Arlington, Inc. ("Core"), Corelink
Staffing Services, Inc. ("CoreLink"), Law Pros Legal Placement Services, Inc.
("Law Pros"), Law Resources, Inc. ("Law Resources"), Professional Consulting
Network, Inc. ("PCN"), Smith Hanley Associates, Inc. ("Smith Hanley"), Sparks
Personnel Services, Inc., and Affiliates ("Sparks"), Task Management, Inc.
("Task"), TOSI Placement Services Inc. ("TOSI"), and WSI Personnel Services,
Inc. ("WSI"), (together, the "Founding Companies"). WORK and the Founding
Companies are hereinafter referred to as the Company. These acquisitions (the
"Acquisitions") will occur simultaneously with and as a condition of the
closing of WORK's initial public offering (the "Offering") and will be
accounted for using the purchase method of accounting. Sparks has been
identified as the accounting acquiror in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 97 which states that the
combining company which receives the largest portion of voting rights in the
combined corporation is presumed to be the acquiror for accounting purposes.
The unaudited pro forma combined financial statements also give effect to the
issuance of common stock in connection with the Offering and as partial
consideration for the Acquisitions to the sellers of the Founding Companies.
These pro forma combined financial statements are based on the historical
financial statements of the Founding Companies and WORK included elsewhere in
this Prospectus and the estimates and assumptions set forth below and in the
notes to the unaudited pro forma combined financial statements.
The unaudited pro forma combined balance sheet gives effect to the
Acquisitions and the Offering as if they had occurred on March 31, 1998. The
unaudited pro forma combined statements of operations give effect to these
transactions as if they had occurred on January 1, 1997.
WORK has preliminarily analyzed the benefits that it expects will be
realized from reductions in salaries, bonuses and certain benefits to the
owners. To the extent the owners of the Founding Companies have agreed
prospectively to reductions in salary, bonuses and benefits, these reductions
have been reflected in the unaudited pro forma combined statements of
operations. Additionally, reductions in interest expense as the result of the
planned repayment of the preponderance of the Founding Companies' existing
debt have been reflected in the unaudited pro forma combined statements of
operations. With respect to other potential benefits, WORK has not and cannot
quantify these benefits until completion of the combination of the Founding
Companies. It is anticipated that these benefits will be offset by costs
related to WORK's new corporate management and by the costs associated with
being a public company. However, because these costs cannot be accurately
quantified at this time, they have not been included in the unaudited pro
forma financial information of WORK.
The purchase price of the Founding Companies (except Sparks, which is the
accounting acquiror) and WORK has been allocated based on the estimated fair
value of assets acquired and liabilities assumed. The pro forma adjustments
are based on estimates, available information and certain assumptions and may
be revised as additional information becomes available. In the opinion of
management, the final allocation of the purchase price will not materially
differ from these preliminary estimates. The unaudited pro forma combined
financial data presented herein do not purport to represent what the Company's
financial position or results of operations would have actually been had such
events occurred on the assumed dates or to project the Company's financial
position or results of operations for any future period. The unaudited pro
forma combined financial statements should be read in conjunction with the
historical financial statements and notes thereto included elsewhere in this
Prospectus. Also see "Risk Factors" included elsewhere herein.
F-3
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET--MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORK ABSOLUTELY ACCESS CONTRACT LAW LAW
INTERNATIONAL PROFESSIONAL STAFFING AIM BURNETT BENETEMPS HEALTH CORE CORELINK PROS RESOURCES PCN
------------- ------------ -------- ---- ------- --------- -------- ---- -------- ---- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents...... $ 1,249 $ -- $ 824 $ 80 $1,563 $175 $117 $ 39 $ $322 $ -- $ 665
Trade accounts
receivable, net . 1,672 667 337 5,631 535 161 519 948 586 587 2,293
Due from
officers......... 34 38
Available for
sale securities
at fair value.... 322
Prepaid expenses
and other assets. 1,286 88 170 5 296 10 3 10 50 1 2 52
------- ------ ------ ---- ------ ---- ---- ---- ------ ---- ---- ------
Total current
assets.......... 2,535 1,794 1,661 422 7,490 720 281 890 998 909 589 3,048
Property and
equipment, net... -- 286 46 25 812 7 20 24 199 51 -- 159
Receivable from
related parties.. 121 205 53 139
Other assets..... 438 10 97 6 326 2 317 15 7 169
Goodwill.........
------- ------ ------ ---- ------ ---- ---- ---- ------ ---- ---- ------
Total assets.... $ 3,094 $2,090 $1,804 $453 $8,833 $729 $618 $967 $1,212 $960 $735 $3,376
======= ====== ====== ==== ====== ==== ==== ==== ====== ==== ==== ======
Accounts payable
and accrued
liabilities...... $ 755 $ 409 $ 28 $181 $ 552 $ $ $ 21 $ 165 $ 89 $111 $ 626
Accrued payroll
and related
taxes............ 112 395 31 51 71 463 114 451
Line of credit... 23 80 375
Notes payable.... 54 49 10
Payable to
Founding Company
shareholders.....
Capital lease
obligation,
current portion.. 23 14
Deferred income
taxes............ 216 205 24
Other current
liabilities...... 34 63 12 3 34
------- ------ ------ ---- ------ ---- ---- ---- ------ ---- ---- ------
Total current
liabilities..... 755 486 390 181 996 31 51 383 708 111 627 1,125
Notes payable.... 10
Capital lease
obligation, less
current portion.. 86 11
Payable to
shareholder...... 112 3
Other
liabilities...... 987 2
Common stock..... 1 31 83 25 10 1 16 232 1 77
Preferred stock..
Additional paid
in capital....... 10,889 259
Subscription
receivable--
preferred stock.. (65)
Treasury stock... (246) (139)
Retained
earnings......... (8,486) 1,487 1,577 247 7,707 697 455 561 270 836 107 2,163
Common stock held
by ESOP, subject
to put........... (987)
Unrealized gains
in value of
securities....... 7
------- ------ ------ ---- ------ ---- ---- ---- ------ ---- ---- ------
Total
shareholders'
equity.......... 2,339 1,518 427 272 7,837 698 455 584 502 836 108 2,240
------- ------ ------ ---- ------ ---- ---- ---- ------ ---- ---- ------
Total
liabilities and
shareholders'
equity.......... $ 3,094 $2,090 $1,804 $453 $8,833 $729 $618 $967 $1,212 $960 $735 $3,376
======= ====== ====== ==== ====== ==== ==== ==== ====== ==== ==== ======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-4
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET--MARCH 31, 1998--(CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO PRO
SMITH SPARKS TASK TOTAL ACQUISITION FORMA OFFERING FORMA AS
HANLEY PERSONNEL MANAGEMENT TOSI WSI COMBINED ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
------ --------- ---------- ------ ------ -------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 331 $ 1,474 $ 334 $ 439 $ 46 $ 7,658 $ (6,237) $ 1,421 $ 1,117 $ 2,538
Trade accounts
receivable, net ....... 2,950 3,501 988 1,343 966 23,684 (13,144) 10,540 10,540
Due from officers...... 358 430 (430) --
Available for sale
securities at fair
value.................. 171 493 -- 493 493
Prepaid expenses and
other assets........... 56 77 8 2 2,116 (1,282) 834 834
------ ------- ------ ------ ------ ------- -------- -------- -------- --------
Total current assets.. 3,695 5,223 1,322 1,790 1,014 34,381 (21,093) 13,288 1,117 14,405
Property and equipment,
net.................... 210 326 25 52 42 2,284 (93) 2,191 2,191
Receivable from related
parties................ 208 18 744 (623) 121 121
Other assets........... 225 1 1,613 (169) 1,444 (438) 1,006
Goodwill............... 117,658 117,658 117,658
------ ------- ------ ------ ------ ------- -------- -------- -------- --------
Total assets.......... $4,130 $ 5,549 $1,556 $1,842 $1,074 $39,022 $ 95,680 $134,702 $ 679 $135,381
====== ======= ====== ====== ====== ======= ======== ======== ======== ========
Accounts payable and
accrued liabilities.... $ 25 $ 21 $ 328 $ 141 $ 125 $ 3,577 $ 660 $ 4,237 $ -- $ 4,237
Accrued payroll and
related taxes.......... 2,232 962 442 159 5,483 5,483 5,483
Line of credit......... 478 478 (478)
Notes payable.......... 113 113 (113)
Payable to Founding
Company shareholders... 90 90 66,760 66,850 (66,850) --
Capital lease
obligation, current
portion................ 37 37 37
Deferred income taxes.. 137 582 582 582
Other current
liabilities............ 20 1,051 464 58 1,739 1,739 1,739
------ ------- ------ ------ ------ ------- -------- -------- -------- --------
Total current
liabilities........... 2,347 1,003 1,821 764 320 12,099 67,420 79,519 (67,441) 12,078
Notes payable.......... 10 10 (10)
Capital lease
obligation, less
current portion........ 97 97 97
Payable to
shareholders........... 115 (115) -- --
Other liabilities...... 220 1,209 (987) 222 222
Common stock........... 1 1 2 481 (473) 8 6 14
Preferred stock........
Additional paid in
capital................ 565 71 4 11,788 42,931 54,719 68,124 122,843
Subscription
receivable--preferred
stock.................. (65) 65
Treasury stock......... (1,050) (22) (1,457) 1,457
Retained earnings...... 1,217 5,178 (270) 1,078 774 15,598 (15,598)
Common stock held by
ESOP, subject to put... (987) 987
Unrealized gains in
value of securities.... 127 134 (7) 127 127
------ ------- ------ ------ ------ ------- -------- -------- -------- --------
Total shareholders'
equity................ 1,783 4,326 (265) 1,078 754 25,492 29,362 54,854 68,130 122,984
------ ------- ------ ------ ------ ------- -------- -------- -------- --------
Total liabilities and
shareholders' equity.. $4,130 $ 5,549 $1,556 $1,842 $1,074 $39,022 $ 95,680 $134,702 $ 679 $135,381
====== ======= ====== ====== ====== ======= ======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-5
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORK ABSOLUTELY ACCESS CONTRACT LAW
INTERNATIONAL PROFESSIONAL STAFFING AIM BURNETT BENETEMPS HEALTH CORE CORELINK PROS
------------- ------------ -------- ---- ------- --------- -------- ------ -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service fees............ $ -- $2,953 $1,916 $760 $10,406 $1,043 $560 $1,069 $2,894 $582
Permanent placement fees
........................ -- 138 -- -- 589 50 -- 31 67 91
----- ------ ------ ---- ------- ------ ---- ------ ------ ----
Total revenues.......... -- 3,091 1,916 760 10,995 1,093 560 1,100 2,961 673
Cost of services........ -- 2,049 1,405 513 8,033 811 419 783 2,252 423
----- ------ ------ ---- ------- ------ ---- ------ ------ ----
Gross profit............ -- 1,042 511 247 2,962 282 141 317 709 250
Selling, general and
administrative expenses 601 651 394 180 2,256 165 96 194 731 162
----- ------ ------ ---- ------- ------ ---- ------ ------ ----
Operating income (loss). (601) 391 117 67 706 117 45 123 (22) 88
Other income (expense),
net..................... -- 2 8 2 38 2 -- -- -- 2
Interest expense........ -- 16 -- -- 1 -- 2 -- 5 --
----- ------ ------ ---- ------- ------ ---- ------ ------ ----
Income (loss) before
taxes................... (601) 377 125 69 743 119 43 123 (27) 90
Income tax expense
(benefit)............... -- 11 59 -- -- -- -- 50 -- --
----- ------ ------ ---- ------- ------ ---- ------ ------ ----
Net income (loss)....... $(601) $ 366 $ 66 $ 69 $ 743 $ 119 $ 43 $ 73 $ (27) $ 90
===== ====== ====== ==== ======= ====== ==== ====== ====== ====
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-6
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
LAW SMITH SPARKS TASK PRO FORMA PRO FORMA
RESOURCES PCN HANLEY PERSONNEL MANAGEMENT TOSI WSI TOTAL ADJUSTMENTS COMBINED
--------- ------ ------ --------- ---------- ------ ------ ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service fees............ $880 $2,878 $1,856 $7,020 $1,686 $3,116 $1,533 $41,152 $ -- $ 41,152
Permanent placement fees
........................ 104 513 2,188 148 225 31 18 4,193 4,193
---- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Total revenues......... 984 3,391 4,044 7,168 1,911 3,147 1,551 45,345 -- 45,345
Cost of services........ 541 2,281 1,358 5,116 1,220 2,426 1,060 30,690 30,690
---- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Gross profit........... 443 1,110 2,686 2,052 691 721 491 14,655 -- 14,655
Selling, general and
administrative expenses 354 733 2,261 1,210 460 379 326 11,153 (45) 11,108
---- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Operating income
(loss)................. 89 377 425 842 231 342 165 3,502 45 3,547
Other income (expense),
net..................... -- 4 7 2 1 3 1 72 -- 72
Interest expense........ 13 1 1 39 (37) 2
---- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Income (loss) before
taxes................... 76 380 431 844 232 345 166 3,535 82 3,617
Income tax expense
(benefit)............... 6 32 20 148 326 1,415 1,741
---- ------ ------ ------ ------ ------ ------ ------- ------- ----------
Net income (loss)....... $ 70 $ 380 $ 399 $ 844 $ 212 $ 197 $ 166 $ 3,209 $(1,333) $ 1,876
==== ====== ====== ====== ====== ====== ====== ======= ======= ==========
Net income per share--
basic and diluted....... $ .13
==========
Shares used in computing
pro forma net income per
share(1)................ 14,316,327
</TABLE>
- ----
(1) Includes (i) 905,718 shares issued by WORK prior to the Offering, (ii)
6,438,540 shares to be issued as consideration in the Acquisitions; (iii)
513,735 shares issued on the automatic conversion of WORK's Series A
Preferred Stock and Series B Preferred Stock (collectively, the "Preferred
Stock") on completion of this Offering; and (iv) the 6,458,334 shares
being offered hereby.
See accompanying notes to unaudited pro forma combined financial statements.
F-7
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORK ABSOLUTELY ACCESS CONTRACT LAW
INTERNATIONAL PROFESSIONAL STAFFING AIM BURNETT BENETEMPS HEALTH CORE CORELINK PROS
------------- ------------ -------- ------ ------- --------- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service fees........... $ -- $ 9,784 $8,557 $2,781 $39,450 $3,940 $2,100 $4,092 $10,947 $3,776
Permanent placement
fees .................. 625 -- -- 1,751 174 -- 92 220 155
------- ------- ------ ------ ------- ------ ------ ------ ------- ------
Total revenues........ -- 10,409 8,557 2,781 41,201 4,114 2,100 4,184 11,167 3,931
Cost of services....... 6,920 6,425 1,863 30,673 3,067 1,512 2,995 8,760 2,703
------- ------- ------ ------ ------- ------ ------ ------ ------- ------
Gross profit.......... -- 3,489 2,132 918 10,528 1,047 588 1,189 2,407 1,228
Selling, general and
administrative
expenses............... 7,886 2,555 1,555 667 8,130 1,060 325 865 2,512 522
------- ------- ------ ------ ------- ------ ------ ------ ------- ------
Operating income
(loss)................ (7,886) 934 577 251 2,398 (13) 263 324 (105) 706
Other income (expense),
net.................... 1 9 33 4 122 11 -- (4) (9) (13)
Interest expense....... -- 91 1 2 14 -- 18 3 2 5
------- ------- ------ ------ ------- ------ ------ ------ ------- ------
Income (loss) before
taxes.................. (7,885) 852 609 253 2,506 (2) 245 317 (116) 688
Income tax expense
(benefit).............. -- 43 253 -- -- -- -- 113 -- 19
------- ------- ------ ------ ------- ------ ------ ------ ------- ------
Net income (loss)...... $(7,885) $ 809 $ 356 $ 253 $ 2,506 $ (2) $ 245 $ 204 $ (116) $ 669
======= ======= ====== ====== ======= ====== ====== ====== ======= ======
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
F-8
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS--(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
LAW SMITH SPARKS TASK PRO FORMA
RESOURCES PCN HANLEY PERSONNEL MANAGEMENT TOSI WSI TOTAL ADJUSTMENTS PRO FORMA
--------- ------ ------ --------- ---------- ------ ------ -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service fees............ $3,218 $9,404 $6,081 $26,812 $5,528 $9,309 $5,635 $151,414 $ -- $ 151,414
Permanent placement fees
........................ 274 1,882 10,241 312 739 175 93 16,733 -- 16,733
------ ------ ------ ------- ------ ------ ------ -------- ------- ----------
Total revenues......... 3,492 11,286 16,322 27,124 6,267 9,484 5,728 168,147 -- 168,147
Cost of services........ 2,056 7,385 4,551 19,604 4,119 7,289 3,872 113,794 -- 113,794
------ ------ ------ ------- ------ ------ ------ -------- ------- ----------
Gross profit........... 1,436 3,901 11,771 7,520 2,148 2,195 1,856 54,353 -- 54,353
Selling, general and
administrative expenses. 1,567 3,002 11,047 4,634 2,830 1,324 1,624 52,105 (11,094) 41,011
------ ------ ------ ------- ------ ------ ------ -------- ------- ----------
Operating income
(loss)................. (131) 899 724 2,886 (682) 871 232 2,248 11,094 13,342
Other income (expense),
net..................... 1 5 16 58 21 7 6 268 -- 268
Interest expense........ 40 6 3 14 2 5 206 (199) 7
------ ------ ------ ------- ------ ------ ------ -------- ------- ----------
Income (loss) before
taxes................... (170) 898 737 2,930 (663) 873 238 2,310 11,293 13,603
Income tax expense
(benefit)............... (13) 16 152 363 (26) 920 5,814 6,734
------ ------ ------ ------- ------ ------ ------ -------- ------- ----------
Net income (loss)....... $ (157) $ 898 $ 721 $ 2,930 $ (815) $ 510 $ 264 $ 1,390 $ 5,479 $ 6,869
====== ====== ====== ======= ====== ====== ====== ======== ======= ==========
Net income per share--
basic and diluted....... $ .48
==========
Shares used in computing
pro forma net income per
share(1)................ 14,316,327
</TABLE>
- ----
(1) Includes (i) 905,718 shares issued by WORK prior to the Offering, (ii)
6,438,540 shares to be issued as consideration in the Acquisitions; (iii)
513,735 shares issued on the automatic conversion of WORK's Preferred
Stock on completion of this Offering; and (iv) the 6,458,334 shares being
offered hereby.
See accompanying notes to unaudited pro forma combined financial statements.
F-9
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL:
WORK was formed to become a leading domestic and international provider of
diversified staffing and outsourcing solutions and services. WORK conducted no
operations prior to the Offering and will acquire the Founding Companies
simultaneously with and as a condition of the consummation of the Offering.
The historical financial statements represent the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements. The periods included in
these financial statements for the individual Founding Companies are as of and
for the three months ended March 31, 1998 and for the year ended December 31,
1997. The historical financial statements included elsewhere herein have been
included in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 80.
2. ACQUISITION OF FOUNDING COMPANIES:
Concurrently with and as a condition to the closing of the Offering, WORK
will acquire all of the outstanding capital stock of the Founding Companies.
The Acquisitions were accounted for using the purchase method of accounting
with Sparks being treated as the accounting acquiror. The following table sets
forth the consideration to be paid (a) in cash and (b) in shares of WORK's
Common Stock to the stockholders of each of the Founding Companies. For
purposes of computing the estimated purchase price for accounting purposes,
the value of the shares has been determined using an estimated fair value of
$10.80 per share, which represents a discount of ten percent from the assumed
initial public offering price of $12.00 per share (the midpoint of the range
of estimated initial public offering prices set forth on the cover page of
this Prospectus) due to restrictions on the sale and transferability of the
shares issued. The estimated purchase price for the Acquisitions is based upon
preliminary estimates and is subject to certain purchase price adjustments at
and following closing. In the opinion of management, the final allocation of
the purchase price will not materially differ from these preliminary
estimates.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
VALUE
OF
CASH SHARES SHARES
------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Absolutely......................................... $ 7,401 224,746 $ 2,427
Access............................................. 3,771 208,843 2,256
AIM................................................ 866 72,176 779
BeneTemps.......................................... 2,500 216,227 2,335
Burnett............................................ 8,422 1,333,333 14,400
Contract Health.................................... 800 82,369 890
Core............................................... 1,341 111,738 1,207
Corelink........................................... 1,095 365,078 3,943
Law Pros........................................... 2,000 184,314 1,991
Law Resources...................................... 1,006 83,846 905
PCN................................................ 4,820 401,672 4,338
Smith Hanley....................................... 8,500 643,149 6,946
Sparks............................................. 15,000 1,467,978 15,854
Task............................................... 5,357 446,456 4,822
TOSI............................................... 1,400 382,356 4,129
WSI................................................ 2,571 214,259 2,314
------- --------- -------
Total............................................ $66,850 6,438,540 $69,536
======= ========= =======
</TABLE>
F-10
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
(a) Records the S Corporation Distributions of $8.2 million.
(b) Records the distribution of accounts receivable and certain nonoperating
assets and the elimination of assets and liabilities of the Founding Companies
which will not be acquired or assumed in connection with the Acquisitions.
Additionally includes the conversion to cash of $1.3 million of subscription
receivables for WORK Preferred Stock.
(c) Records the purchase of the Founding Companies for a total purchase
price of $136.4 million, including $30.9 million (cash of $15.0 million and
WORK Common Stock with an aggregate value of $15.9 million determined using an
estimated fair value of $10.80 per share) attributed to Sparks as accounting
acquiror. The entry includes the liability of $66.9 million for the cash
portion of the consideration to be paid to the stockholders of the Founding
Companies in connection with the Acquisitions, the issuance of 6,438,540
shares of WORK Common Stock to the Founding Companies and estimated
acquisition costs of $0.7 million resulting in the creation of $104.7 million
of goodwill after allocating the purchase price to the aggregate assets
acquired and liabilities assumed, excluding Sparks, as shown below. In
addition, goodwill of $13.0 million, determined using an estimated fair value
of $10.80 per share, has been recorded attributable to the shares of WORK
Common Stock issued and outstanding after the automatic conversion of the WORK
Preferred Stock. Based on its initial assessment, management believes that the
historical carrying value of the Founding Companies' assets and liabilities
will approximate fair value and that there are no other identifiable
intangible assets to which any material purchase price can be allocated.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------
(IN THOUSANDS)
ASSETS
<S> <C>
Cash and equivalents........................................ $4,884
Trade accounts receivable................................... 8,885
Available for sale securities at fair value................. 322
Prepaid expenses and other assets........................... 757
-------
Total current assets...................................... 14,848
Property and equipment, net................................. 1,865
Receivable from related parties............................. 121
Other assets................................................ 1,444
-------
Total assets.............................................. $18,278
=======
LIABILITIES
Accounts payable............................................ $3,556
Accrued payroll and related taxes........................... 4,521
Lines of credit............................................. 3,777
Notes payable, current portion.............................. 113
Capital lease obligation, current portion................... 37
Deferred income taxes....................................... 582
Other current liabilities................................... 1,719
-------
Total current liabilities................................. 14,305
Notes payable............................................... 10
Capital lease obligation, less current portion.............. 97
Other liabilities........................................... 2
-------
Total liabilities......................................... $14,414
=======
Net book value............................................ $ 3,864
=======
</TABLE>
F-11
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following reconciles the combined historical net assets of the Founding
Companies and WORK to the net assets acquired by Sparks (in thousands):
<TABLE>
<CAPTION>
TOTAL LESS: ACQUIRED
COMBINED SPARKS COMPANIES
-------- ------- ---------
<S> <C> <C> <C>
Historical net assets............................. $ 25,492 $(4,326) $21,166
S Corporation Distributions....................... (8,227) 1,638 (6,589)
Distribution of certain assets to Founding
Companies........................................ (13,611) 1,846 (11,765)
Other adjustments................................. 1,052 1,052
-------- ------- -------
$ 4,706 $ (842) $ 3,864
======== ======= =======
</TABLE>
(d) Records the cash proceeds from the issuance of 6,458,333 shares of
Common Stock, net of estimated offering costs (based on an assumed initial
public offering price of $12.00 per share, the midpoint of the range of
estimated initial public offering prices set forth on the cover page of this
Prospectus). Offering costs primarily consist of underwriting discounts and
commissions, accounting fees, legal fees and printing expenses.
(e) Records the cash portion of the consideration to be paid to the
stockholders of the Founding Companies in connection with the Acquisitions and
the repayment of the preponderance of the Founding Companies' existing debt.
F-12
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following tables summarize the unaudited pro forma combined balance sheet
adjustments (in thousands):
<TABLE>
<CAPTION>
ACQUISITION OFFERING
(A) (B) (C) ADJUSTMENTS (D) (E) ADJUSTMENTS
------- -------- --------- ----------- -------- -------- -----------
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and equivalents.... $(4,928) $ 1,990 $ (3,299) $ (6,237) $ 68,568 $(67,451) $ 1,117
Trade accounts
receivable............. (13,144) (13,144)
Due from officers....... (430) (430)
Available for sale
securities at fair
value..................
Prepaid expenses and
other assets........... (1,282) (1,282)
------- -------- --------- -------- -------- -------- --------
Total current assets... (4,928) (12,866) (3,299) (21,093) 68,568 (67,451) 1,117
Property and equipment,
net.................... (93) (93)
Receivable from related
party.................. (623) (623)
Other assets............ (169) (169) (438) (438)
Goodwill................ 117,658 117,658
------- -------- --------- -------- -------- -------- --------
Total assets........... (4,928) (13,751) 114,359 95,680 68,130 (67,451) 679
======= ======== ========= ======== ======== ======== ========
LIABILITIES
Accounts payable and
accrued liabilities....
Accrued payroll and
related taxes..........
Lines of credit......... (3,299) 2,639 (660) 478 478
Notes payable, current
portion................ 113 113
Payable to Founding
Company shareholders... 90 (66,850) (66,760) 66,850 66,850
Capital lease
obligation, current
portion................
Deferred income taxes...
Other current
liabilities............
------- -------- --------- -------- -------- -------- --------
Total current
liabilities........... (3,299) 90 (64,211) (67,420) 67,441 67,441
Note payable............ 10 10
Capital lease
obligation, less
current portion........
Payable to shareholders. 115 115
Other liabilities....... 987 987
------- -------- --------- -------- -------- -------- --------
Total liabilities...... (3,299) 1,192 (64,211) (66,318) 67,451 67,451
Common stock............ 473 473 (6) (6)
Preferred stock.........
Additional paid-in
capital................ (42,931) (42,931) (68,124) (68,124)
Subscription
receivable--preferred
stock.................. (65) (65)
Treasury stock.......... (1,457) (1,457)
Retained earnings....... 8,227 13,611 (6,240) 15,598
Common stock held by
ESOP, subject to put... (987) (987)
Unrealized gains in
value of securities.... 7 7
------- -------- --------- -------- -------- -------- --------
Total shareholders'
equity................ 8,227 12,559 (50,148) (29,362) (68,130) (68,130)
------- -------- --------- -------- -------- -------- --------
Total liabilities and
shareholders' equity.. $ 4,928 $ 13,751 $(114,359) $(95,680) $(68,130) $ 67,451 $ (679)
======= ======== ========= ======== ======== ======== ========
</TABLE>
F-13
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
Year Ended December 31, 1997
(a) Reflects the reversal of the $7.4 million non-cash compensation charge
related to the issuance of 1,055,718 shares of Common Stock to management and
directors of and consultants to the Company offset by an expected incremental
charge for the recurring portion of salary and administrative expenses of $0.8
million. Also reflects the $7.4 million reduction in salaries, bonuses and
benefits to the owners of the Founding Companies to which they agreed in
connection with the Acquisitions, as detailed in the following table (in
thousands):
<TABLE>
<S> <C>
Historical 1997 Salaries, Bonuses and Benefits...................... $13,754
Prospective 1998 Salaries, Bonuses and Benefits..................... 6,367
-------
Compensation Differential........................................... $ 7,387
=======
</TABLE>
(b) Reflects the amortization of goodwill to be recorded as a result of the
Acquisitions over a 40-year estimated life.
(c) Reflects the reduction in interest expense due to the planned repayment
of existing debt in connection with the Acquisitions.
(d) Reflects the reduction in depreciation expense for the distribution of
certain assets which will not be acquired in the Acquisitions.
(e) Reflects the incremental provision for federal and state income taxes
relating to the statement of operations pro forma adjustments and to reflect
income taxes on S corporation operations as if these entities had been taxable
as C corporations during the periods presented.
The following table summarizes the unaudited pro forma combined statements
of operations adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
-------- ------- ----- ---- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................. $ -- $ -- $ -- $ -- $ -- $ --
Cost of sales............. -- -- -- -- -- --
-------- ------- ----- ---- ------- --------
Gross profit.............. -- -- -- -- -- --
Selling, general and
administrative........... (14,023) 2,941 -- (12) -- (11,094)
-------- ------- ----- ---- ------- --------
Income from operations.... 14,023 (2,941) -- 12 -- 11,094
Other income (expense)
Interest expense........ -- -- (199) -- -- (199)
Other income (expense),
net.................... -- -- -- -- -- --
-------- ------- ----- ---- ------- --------
Income before income
taxes.................... 14,023 (2,941) 199 12 -- 11,293
Provision for income
taxes.................... -- -- -- -- 5,814 5,814
-------- ------- ----- ---- ------- --------
Net income................ $ 14,023 $(2,941) $ 199 $ 12 $(5,814) $ 5,479
======== ======= ===== ==== ======= ========
</TABLE>
F-14
<PAGE>
WORK INTERNATIONAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
Three Months Ended March 31, 1998
(a) Reflects the reduction in salaries, bonuses and benefits to the owners
of the Founding Companies to which they agreed in connection with the
Acquisitions, as detailed in the following table (in thousands):
<TABLE>
<S> <C>
Historical First Quarter 1998 Salaries, Bonuses and Benefits.......... $2,369
Pro-rata Portion of Prospective 1998 Salaries, Bonuses and Benefits... 1,592
------
Compensation Differential............................................. $ 777
======
</TABLE>
(b) Reflects the amortization of goodwill to be recorded as a result of the
Acquisitions over a 40-year estimated life.
(c) Reflects the reduction in interest expense due to the planned repayment
of existing debt in connection with the Acquisitions.
(d) Reflects the reduction in depreciation expense for the distribution of
certain assets which will not be acquired in the Acquisitions.
(e) Reflects the incremental provision for federal and state income taxes
relating to the statement of operations pro forma adjustments and to reflect
income taxes on S corporation operations as if these entities had been taxable
as C corporations during the periods presented.
The following table summarizes the unaudited pro forma combined statement of
operations adjustments (in thousands):
<TABLE>
<CAPTION>
PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
----- ----- ---- --- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues......................... $ -- $ -- $ -- $-- $ -- $ --
Cost of sales.................... -- -- -- -- -- --
----- ----- ---- --- ------- -------
Gross profit..................... -- -- -- -- -- --
Selling, general and
administrative.................. (777) 735 -- (3) -- (45)
----- ----- ---- --- ------- -------
Income from operations........... 777 (735) -- 3 -- 45
Other income (expense)
Interest expense............... -- -- (37) -- -- (37)
Other income (expense), net.... -- -- -- -- -- --
----- ----- ---- --- ------- -------
Income before income taxes....... 777 (735) 37 3 -- 82
Provision for income taxes....... -- -- -- -- 1,415 1,415
----- ----- ---- --- ------- -------
Net income....................... $ 777 $(735) $ 37 $ 3 $(1,415) $(1,333)
===== ===== ==== === ======= =======
</TABLE>
F-15
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Work International Corporation:
We have audited the accompanying balance sheet of Work International
Corporation as of December 31, 1997, and the related statements of operations,
shareholders' equity and cash flows for the period from September 4, 1997
(inception) through December 31, 1997. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Work International
Corporation as of December 31, 1997, and the results of its operations and its
cash flows for the period from September 4, 1997 (inception) through December
31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
July 10, 1998
F-16
<PAGE>
WORK INTERNATIONAL CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1997 1998
------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 554,921 $ 1,249,321
Prepaid expenses................................... -- 25,000
Subscription receivable............................ 117,975 1,261,015
----------- -----------
Total current assets............................. 672,896 2,535,336
Due from related parties............................. 18,296 120,850
Deferred offering costs.............................. 15,291 437,811
----------- -----------
Total assets..................................... $ 706,483 $ 3,093,997
=========== ===========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable................................... $ 2,419 4,117
Accrued expenses................................... 174,008 750,815
----------- -----------
Total liabilities................................ 176,427 754,932
----------- -----------
Shareholders' equity:
Common stock, $.001 par value; 20,000,000 shares
authorized, 905,718 issued and outstanding........ 906 906
Preferred stock--Series A, $.001 par value;
5,000,000 shares authorized, 1,000 issued and out-
standing.......................................... 1 1
Preferred stock--Series B, $.001 par value;
5,000,000 shares authorized, 2,450 issued and out-
standing.......................................... -- 1
Additional paid-in capital......................... 8,439,568 10,889,567
Retained deficit................................... (7,885,419) (8,486,410)
Subscriptions receivable--preferred stock.......... (25,000) (65,000)
----------- -----------
Total shareholders' equity....................... 530,056 2,339,065
----------- -----------
Total liabilities and shareholders' equity....... $ 706,483 $ 3,093,997
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
WORK INTERNATIONAL CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SEPTEMBER 4,
1997 THREE
(INCEPTION) MONTHS
THROUGH ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Selling, general and administrative expenses......... $ 7,886,481 601,055
----------- ---------
Operating income (loss).......................... (7,886,481) (601,055)
Interest income.................................... 1,062 64
----------- ---------
Loss before income tax expense................... (7,885,419) (600,991)
Income tax benefit................................. -- --
----------- ---------
Net loss......................................... $(7,885,419) $(600,991)
=========== =========
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
WORK INTERNATIONAL CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------
COMMON STOCK SERIES A SERIES B ADDITIONAL
-------------- ------------- ------------- SUBSCRIPTIONS PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT TOTAL
------- ------ ------ ------ ------ ------ ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 4,
1997 (inception)....... -- $ -- -- $-- -- $-- $ -- $ -- $ -- $ --
Issuance of management
and consultant shares.. 905,718 906 -- -- -- -- -- 7,439,569 -- 7,440,475
Issuance and
subscription of
preferred stock--Series
A...................... -- -- 1,000 1 -- -- (25,000) 999,999 -- 975,000
Net loss................ -- -- -- -- -- -- -- (7,885,419) (7,885,419)
------- ---- ----- --- ----- --- -------- ----------- ----------- -----------
Balance, December 31,
1997................... 905,718 906 1,000 1 -- -- (25,000) 8,439,568 (7,885,419) 530,056
Issuance and
subscription of
preferred stock--Series
B (unaudited).......... -- -- -- -- 2,450 1 (40,000) 2,449,999 -- 2,410,000
Net loss (unaudited).... -- -- -- -- -- -- -- -- (600,991) (600,991)
------- ---- ----- --- ----- --- -------- ----------- ----------- -----------
Balance, March 31, 1998
(unaudited)............ 905,718 $906 1,000 $ 1 2,450 $ 1 $(65,000) $10,889,567 $(8,486,410) $ 2,339,065
======= ==== ===== === ===== === ======== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
WORK INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEPTEMBER 4,
1997
(INCEPTION) THREE
THROUGH MONTHS
DECEMBER 31, ENDED MARCH
1997 31, 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................. $(7,885,419) $ (600,991)
Adjustments to reconcile net loss to net cash used in
operating activities:
Compensation expense related to issuance of common
stock to management and consultants................ 7,437,500 --
Change in operating assets and liabilities:
Prepaid expenses................................... -- (25,000)
Due from related parties........................... (18,296) (102,554)
Accounts payable and accrued expenses.............. 176,427 218,505
----------- ----------
Net cash used in operating activities............. (289,788) (510,040)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock............... -- 1,960
Proceeds from issuance of preferred stock............ 860,000 1,265,000
Deferred offering costs.............................. (15,291) (62,520)
----------- ----------
Net cash provided by financing activities......... 844,709 844,440
----------- ----------
Net increase in cash and cash equivalents............. 554,912 694,400
Cash and cash equivalents at beginning of period...... -- 554,921
----------- ----------
Cash and cash equivalents at end of period............ $ 554,921 $1,249,321
=========== ==========
Noncash financing activities:
Subscription of stock................................ $ 142,975 $1,183,040
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-20
<PAGE>
WORK INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION WITH RESPECT TO THE INTERIM PERIOD ENDED MARCH 31, 1998 IS
UNAUDITED)
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Work International Corporation (Work or the Company), a Texas corporation
was founded in September 1997 to become a leading domestic and international
provider of diversified staffing and outsourcing solutions and services. The
Company has signed definitive agreements to acquire sixteen businesses (the
Acquisitions), all of which are to close simultaneously with and as a
condition of the consummation of an initial public offering (the Offering) of
its common stock and subsequent to the Offering, continue to acquire similar
companies to expand its national operations. Consideration for the
Acquisitions will be for cash of $66,850,000 and 6,438,540 shares of Common
Stock.
All of the Company's activities to date relate to the Offering and the
Acquisitions. The Company has not yet conducted any operations relative to its
ultimate intended purpose. The Company is dependent upon the Offering to
execute the pending Acquisitions. There is no assurance that the pending
Acquisitions discussed below will be completed or that the Company will be
able to generate future operating revenue. The Company has an absence of a
combined operating history and future success is dependent upon a number of
factors which include, among others, the ability to integrate operations,
reliance on the identification and integration of satisfactory acquisition
candidates, reliance on acquisition financing, the ability to manage growth
and attract and retain quality management.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months then ended, are unaudited, and certain information and footnote
disclosures, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been omitted. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements
have been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. There were no cash payments for interest or
income taxes in 1997 or in the three months ended March 31, 1998.
Income Taxes
The Company has adopted the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Under this method deferred income taxes are
recorded for temporary differences based upon differences between the
financial reporting and tax bases of assets and liabilities and net operating
loss carryforwards and are measured using the enacted tax rates and laws that
will be in effect when the temporary differences are expected to be recovered
or settled.
F-21
<PAGE>
WORK INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1997, the Company had gross deferred tax assets of
approximately $152,000, related primarily to a net operating loss
carryforward. A valuation allowance has been established to fully offset such
deferred tax asset due to the uncertainty of realization. Accordingly, no
income tax benefit has been recorded for the losses incurred.
Subscription Receivable
The Company recognizes subscription receivables as current assets for
amounts that have been collected in cash prior to the publication of the
applicable financial statements. The subscription receivable recognized as a
current asset at December 31, 1997 and March 31, 1998 was subsequently
collected.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, subscription receivable
and accounts payable approximate their fair values due to the short-term
maturities of the instruments.
The fair value of due from related parties could not be obtained without
incurring excessive costs due to the nature of such instruments.
(3) SHAREHOLDERS' EQUITY
Common Stock
The Company is authorized to issue 20 million shares of common stock, $.001
par value. During the period ended December 31, 1997 the Company entered into
subscription agreements with management and consultants to the Company whereby
shares of common stock could be purchased for an aggregate of $2,975. These
subscriptions have been fully funded. The Company recorded a nonrecurring,
noncash compensation charge of $7.4 million in the period ended December 31,
1997 representing the difference between the amount paid for the shares and
the estimated fair value of the shares at that time.
Work effected a 1.995192-for-one reverse split in July 1998 for each share
of Common Stock then outstanding. The effects of the Common Stock split has
been retroactively reflected on the balance sheet, statement of shareholders'
equity and in the accompanying notes.
Preferred Stock
The Company is authorized to issue up to 5 million shares of preferred
stock, par value $.001 per share, in one or more series. There were 1,000
shares of Series A preferred stock issued at December 31, 1997 and March 31,
1998. As of December 31, 1997 and March 31, 1998, there were -0- and 1,150
shares of Series B preferred stock issued, respectively.
Series A Preferred Stock
During the period from inception of the Company to December 31, 1997,
pursuant to subscription agreements the Company agreed to issue 1,000 shares
of Series A Preferred Stock at $1,000 per share. The Company subsequently
received subscription payments of $975,000 and accepted a $25,000 note from a
principal of Bollard (see note 6) for the balance outstanding under the
subscription agreements. The note is non interest bearing and is payable on or
before the date of the Offering. Each share of the Series A Preferred Stock is
convertible at the holders' option into approximately 200 shares of common
stock and is automatically convertible into common stock immediately upon the
closing of the Offering.
F-22
<PAGE>
WORK INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Series B Preferred Stock
During March 1998, pursuant to subscription agreements the Company agreed to
issue 2,450 shares of Series B Preferred Stock at $1,000 per share. The
Company subsequently received payments of $2,410,000 and accepted a $40,000
note from a principal of Bollard (see note 6) for the balance outstanding
under the subscription agreements. The note is non interest bearing and is
payable on or before the date of the Offering. During April 1998 the Company
issued an additional 50 shares of Series B Preferred Stock at $1,000 per
share. Each share of the Series B Preferred Stock is convertible at the
holders' option into approximately 125 shares of common stock and is
automatically convertible into common stock immediately upon the closing of
the Offering.
(4) INCOME TAXES
There is no federal income tax provision as losses were incurred and a
valuation allowance has been established against future benefits that may be
derived from the carryforward of these losses.
(5) COMMITMENTS
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases (except
those with lease terms of a month or less that were not renewed) for 1997 was
approximately $2,165.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
PERIOD ENDING DECEMBER 31,
--------------------------
<S> <C>
1998............................................................ $100,535
1999............................................................ 118,453
2000............................................................ 118,453
2001............................................................ 17,917
--------
Total minimum lease payments.................................. $355,358
========
</TABLE>
(6) RELATED PARTY TRANSACTIONS
The Directors of the Company are principals of Bollard Group, L.L.C.
("Bollard"). Bollard has entered into an agreement with WORK to provide
services related to facilitating and completing the Offering. In consideration
of those services, Bollard will be reimbursed for its expenses and will be
paid a fee of $775,000 from the proceeds of the Offering. Bollard also entered
into an agreement with WORK on April 1, 1998 whereby Bollard has agreed to
provide management and administrative services to WORK relating to the
Offering, for which Bollard is paid a monthly fee of $30,000 and reimbursement
of reasonable out-of-pocket expenses. This agreement terminates on the closing
of the Offering. Effective on completion of the Offering, Bollard has agreed
to provide services to the Company, as requested, on a non-exclusive basis for
two years relating to future acquisition transactions involving the Company,
including the identification of potential acquisition candidates, due
diligence and valuation of these candidates, and negotiation of acquisition
agreements. Under this agreement, Bollard will receive a monthly fee of
$10,000 and reimbursement of reasonable out-of-pocket expenses, and will be
paid a transaction fee upon consummation of any acquisition identified by
Bollard to the Company, which fee is based on an agreed to percentage of the
value of the acquisition. The monthly fees and reimbursement of expenses will
be credited against fees earned by Bollard on acquisitions. Bollard has also
agreed to advance WORK up to $500,000 to fund operating expenses of WORK prior
to the completion of the Offering. Such advances do not bear interest and are
payable on the earlier to occur of the completion of the Offering or the
termination of the definitive agreements regarding the Acquisitions. The
Company and Bollard share office and general and administrative support
services. Through December 31, 1997 and March 31, 1998, the Company has
incurred costs on behalf of Bollard of $18,296 and $120,850, respectively. In
July 1998, the principals of Bollard resigned as directors of the Company.
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Burnett Companies Consolidated, Inc.:
We have audited the accompanying balance sheets of The Burnett Companies
Consolidated, Inc. as of December 28, 1996 and December 27, 1997, and the
related statements of earnings, changes in stockholders' equity and cash flows
for each of the fifty-two week periods in the three-year period ended December
27, 1997. 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 financial position of The Burnett Companies
Consolidated, Inc. at December 28, 1996 and December 27, 1997, and the results
of its operations and its cash flows for each of the fifty-two week periods in
the three-year period ended December 27, 1997, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 12, 1998
F-24
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27, MARCH 31,
ASSETS 1996 1997 1998
------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 436,863 $1,860,588 $1,563,165
Trade accounts receivable, net of
allowance of $30,000.................. 4,003,880 4,869,987 5,631,084
Other receivables...................... -- 20,047 33,408
Prepaid expenses and other............. 164,434 130,685 262,679
---------- ---------- ----------
Total current assets................. 4,605,177 6,881,307 7,490,336
Property and equipment, net.............. 795,707 771,297 812,386
Other assets............................. 306,164 529,996 530,144
---------- ---------- ----------
$5,707,048 $8,182,600 $8,833,166
========== ========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Current installments of long-term debt. $ 146,054 $ 84,762 $ 48,684
Accrued payroll costs.................. 94,895 210,585 395,732
Accounts payable and other accrued
liabilities........................... 145,001 588,939 551,991
---------- ---------- ----------
Total current liabilities............ 385,950 884,286 996,407
---------- ---------- ----------
Long-term debt, less current
installments............................ 84,762 -- --
Stockholders equity:
Common stock, $.01 par value; 1,000,000
shares authorized and issued.......... 10,000 10,000 10,000
Treasury stock, 10,000 shares in 1997
and 1998.............................. -- (139,459) (139,459)
Additional paid-in capital............. 259,506 259,506 259,506
Retained earnings...................... 4,966,830 7,168,267 7,706,712
---------- ---------- ----------
Total stockholders equity............ 5,236,336 7,298,314 7,836,759
Commitments and contingencies............
---------- ---------- ----------
$5,707,048 $8,182,600 $8,833,166
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MARCH 31,
---------------------------------------- -----------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27,
1995 1996 1997 1997 1998
------------ ------------ ------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service fees.......... $22,856,845 $29,176,027 $39,450,106 $9,199,561 $10,406,451
Permanent placement
fees................. 1,014,650 1,201,679 1,751,310 313,002 588,898
----------- ----------- ----------- ---------- -----------
Revenues from
services........... 23,871,495 30,377,706 41,201,416 9,512,563 10,995,349
Cost of services........ 17,405,147 22,152,311 30,672,682 7,206,819 8,033,436
----------- ----------- ----------- ---------- -----------
Gross profit........ 6,466,348 8,225,395 10,528,734 2,305,744 2,961,913
Selling, general and
administrative
expenses............... 5,703,143 6,570,465 8,130,151 1,812,686 2,256,125
----------- ----------- ----------- ---------- -----------
Operating income.... 763,205 1,654,930 2,398,583 493,058 705,788
Other income (expense):
Interest and other
income............... 41,756 54,707 121,621 36,386 38,319
Interest expense...... (17,770) (25,780) (13,779) (4,448) (1,548)
----------- ----------- ----------- ---------- -----------
Net income.......... $ 787,191 $ 1,683,857 $ 2,506,425 $ 524,996 $ 742,559
=========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-26
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON TREASURY PAID-IN RETAINED STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS EQUITY
------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31,
1994................... $10,000 $ -- $259,506 $3,239,282 $3,508,788
Distributions to
stockholders........... -- -- -- (428,000) (428,000)
Net income.............. -- -- -- 787,191 787,191
------- --------- -------- ---------- ----------
Balances at December 30,
1995................... 10,000 -- 259,506 3,598,473 3,867,979
Distributions to
stockholders........... -- -- -- (315,500) (315,500)
Net income.............. -- -- -- 1,683,857 1,683,857
------- --------- -------- ---------- ----------
Balances at December 28,
1996................... 10,000 -- 259,506 4,966,830 5,236,336
Distributions to
stockholders........... -- -- -- (304,988) (304,988)
Purchase of treasury
stock.................. -- (139,459) -- -- (139,459)
Net income.............. -- -- -- 2,506,425 2,506,425
------- --------- -------- ---------- ----------
Balances at December 27,
1997................... 10,000 (139,459) 259,506 7,168,267 7,298,314
Distributions to
stockholders
(unaudited)............ -- -- -- (204,114) (204,114)
Net income (unaudited).. -- -- -- 742,559 742,559
------- --------- -------- ---------- ----------
Balances at March 31,
1998 (unaudited)....... $10,000 $(139,459) $259,506 $7,706,712 $7,836,759
======= ========= ======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-27
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED MARCH 31,
--------------------------------------- ----------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27,
1995 1996 1997 1997 1998
------------ ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............. $ 787,191 $ 1,683,857 $2,506,425 $ 524,996 $ 742,559
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization of
property and
equipment............ 194,364 251,592 370,288 84,320 90,039
Other amortization.... -- 12,435 16,580 4,145 4,146
Provision for
(recovery of)
uncollectible notes
receivable........... 100,000 (9,543) -- -- --
Loss on sale of
equipment............ 17,278 2,056 -- -- --
Change in operating
assets and
liabilities:
Trade accounts
receivable.......... (507,969) (1,224,703) (866,107) (305,948) (761,097)
Other receivables.... 34,719 42,424 (20,047) (10,301) (13,361)
Prepaid expenses and
other assets........ (35,615) (60,264) (1,538) (102,267) (136,588)
Accrued payroll
costs............... 80,939 8,483 115,690 486,350 185,147
Accounts payable and
other accrued
liabilities......... 12,512 (5,712) 443,938 221,499 (36,948)
--------- ----------- ---------- ---------- ----------
Net cash provided by
operating
activities......... 683,419 700,625 2,565,229 902,794 73,897
--------- ----------- ---------- ---------- ----------
Cash flows from
investing activities:
Purchases of property
and equipment......... (339,681) (463,733) (345,878) (95,467) (131,128)
Cash paid for
acquisitions.......... -- (281,706) -- -- --
Proceeds from sale of
equipment............. 29,079 6,073 -- -- --
Additions to receivable
from stockholders..... -- -- (205,125) -- --
Additions to notes
receivable............ (127,078) -- -- -- --
Payment of notes
receivable............ 16,243 20,378 -- -- --
--------- ----------- ---------- ---------- ----------
Net cash used in
investing
activities......... (421,437) (718,988) (551,003) (95,467) (131,128)
--------- ----------- ---------- ---------- ----------
Cash flows from
financing activities:
Payments of long-term
debt.................. (197,764) (146,053) (146,054) (36,513) (36,078)
Proceeds from issuance
of long-term debt..... 438,161 -- -- -- --
Purchase of treasury
stock................. -- -- (139,459) -- --
Distributions to
stockholders.......... (428,000) (315,500) (304,988) (50,000) (204,114)
--------- ----------- ---------- ---------- ----------
Net cash used in
financing
activities......... (187,603) (461,553) (590,501) (86,513) (240,192)
--------- ----------- ---------- ---------- ----------
Net increase
(decrease) in cash
and cash
equivalents........ 74,379 (479,916) 1,423,725 720,814 (297,423)
Cash and cash
equivalents at
beginning of period.... 842,400 916,779 436,863 436,863 1,860,588
--------- ----------- ---------- ---------- ----------
Cash and cash
equivalents at end of
period................. $ 916,779 $ 436,863 $1,860,588 $1,157,677 $1,563,165
========= =========== ========== ========== ==========
Supplemental disclosure
of cash flow
information:
Cash paid for interest. $ 17,770 $ 25,780 $ 13,779 $ 4,448 $ 1,548
========= =========== ========== ========== ==========
Cash paid for income
taxes................. $ 28,016 $ 24,432 $ 17,417 $ -- $ --
========= =========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-28
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS OPERATIONS
The Burnett Companies Consolidated, Inc. (the Company) provides temporary
help and permanent placement services in Houston, El Paso and Austin, Texas.
In addition, the Company provides personal computer training services.
Most of the Company's customers are located in the state of Texas. A single
customer of the Company accounted for 11.0%, 9.0% and 8.0% of total revenue in
1995, 1996 and 1997, respectively.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reporting Periods
The fiscal year ends on the last Saturday in December. Fiscal years 1995,
1996 and 1997 include the 52 weeks ended December 30, 1995, the 52 weeks ended
December 28, 1996 and the 52 weeks ended December 27, 1997, respectively.
Reporting quarters 1997 and 1998 began on Sunday, December 29, 1996 and
December 28, 1997 and ended March 31, 1997 and 1998, respectively.
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the periods
ended March 31, 1997 and March 31, 1998, are unaudited, and certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been omitted. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present
the financial position, results of operations and cash flows with respect to
the interim financial statements have been included. The results of operations
for the interim periods are not necessarily indicative of the results for the
entire fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in
preparing its financial statements are reasonable and prudent. Actual results
could differ from these estimates.
Revenue Recognition
Temporary service fees are recognized in operations at the time the services
are performed. Permanent placement fees are recognized at the time the person
is employed.
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 Equivalents
All highly liquid investments with original maturities of three months or
less are considered to be cash equivalents. Cash equivalents consist of a U.S.
Government securities cash management fund.
F-29
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Allowance for Doubtful Accounts
The allowance for doubtful accounts is based on past experience and other
factors which, in management's judgment, deserve current recognition in
estimating possible bad debts. Such factors include growth and composition of
accounts receivable, the relationship of the allowance for doubtful accounts
to accounts receivable, and current economic conditions.
Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated
useful lives (range of three to five years) of the assets. Leasehold
improvements are amortized using the straight-line method over the shorter of
the lease term or estimated useful life of the asset.
Income Taxes
The Company has elected to be treated as an S corporation in accordance with
the provisions of the Internal Revenue Code of 1986. Under these provisions,
profits and losses are passed directly to the stockholders for inclusion in
their personal income tax returns.
(3) ACQUISITIONS
In April 1996, the Company purchased certain assets and rights of Mary Green
Employment Finder's, Inc. for cash of $250,706. In September 1996, the Company
purchased assets and certain rights of Primary Care Clinic of America for cash
of $31,000. The acquisitions were accounted for as purchases. The results of
operations of the acquired businesses are included in the financial statements
from the dates of acquisition.
(4) NOTE RECEIVABLE
The Company had a note receivable due from a customer in monthly
installments of $10,189, plus interest at 11.75%, through October 1996. The
note was secured by personal guarantees. During 1995, a provision for
uncollectible notes receivable of $100,000 was recognized. During 1996,
payments of $20,378 were received on the note receivable and the remaining
balance and allowance account were written off resulting in a recovery of
$9,543. Such write-off in 1996 did not materially affect the 1996 results of
operations.
(5) TEXAS FRANCHISE TAXES
The Texas corporate franchise tax includes a tax on income. The franchise
tax is based on the greater of .25% of net taxable capital or 4.5% of net
taxable earned surplus. Net taxable earned surplus is based on federal taxable
income after certain adjustments. During 1995, 1996 and 1997, the Company
incurred approximately $25,000, $19,000 and $99,000, respectively, of
franchise taxes based on earned surplus, which is included in selling, general
and administrative expenses in the statements of earnings.
F-30
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27, MARCH 31,
1996 1997 1998
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture, fixtures and equipment........ $ 737,604 $ 673,964 $ 746,992
Computer equipment....................... 1,298,575 1,288,273 1,338,996
Airplane................................. 108,041 115,735 115,735
Leasehold improvements................... 121,126 171,057 178,434
---------- ---------- ----------
2,265,346 2,249,029 2,380,157
Less accumulated depreciation and
amortization............................ 1,469,639 1,477,732 1,567,771
---------- ---------- ----------
$ 795,707 $ 771,297 $ 812,386
========== ========== ==========
</TABLE>
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27, MARCH 31,
1996 1997 1998
------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Note payable to bank due in monthly
installments of $12,171, plus
interest at the lender's base rate
(8.5% at December 27, 1997) through
July 1998; secured by property and
equipment........................... $230,816 $84,762 $48,684
Less current installments............ 146,054 84,762 48,684
-------- ------- -------
Long-term debt, less current
installments...................... $ 84,762 $ -- $ --
======== ======= =======
</TABLE>
(8) BANK LINE OF CREDIT
The Company has a $2,300,000 bank line of credit agreement which expires
June 30, 1998. Outstanding borrowings against the line of credit will bear
interest at either the lender's base rate or the LIBOR rate plus 2.25%, at the
option of the Company. The line of credit, with a borrowing base equal to 80%
of accounts receivable less than 90 days old, is secured by the Company's
accounts receivable and equipment. At December 27, 1997 and March 31, 1998
(unaudited), the total available line of credit amounts to $2,300,000 less two
letters of credit totaling $138,000, issued under the line of credit
agreement.
(9) RECEIVABLE FROM RELATED PARTY
The Company has a receivable from a related party of $205,125 which is
included in other assets at December 27, 1997 and March 31, 1998. Such
receivable is noninterest-bearing and has no fixed repayment terms. This asset
was distributed to stockholders on June 30, 1998 (unaudited).
(10) EMPLOYEE BENEFIT PLAN
The Company's profit sharing plan, which covers substantially all of its
salaried employees, provides for the Company to fund annually up to 15% of
"considered compensation" as defined by the trust agreement by
F-31
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
means of a cash contribution; however, the Company may adjust the percentage
prior to the end of any trust year. Such contributions, if any, are made at
the discretion of the Company's Board of Directors.
The Company's profit sharing plan and trust (the Plan) provides for a 401(k)
plan which has received a favorable determination letter from the Internal
Revenue Service. Under the terms of the Plan, all salaried employees are
eligible to participate. Hourly and highly compensated employees, as defined
under the Plan, are ineligible to participate. During 1995, 1996 and 1997, the
Company provided the required 50% match, which amounted to $56,085, $100,355,
and $103,167, respectively, of employee contributions to the Plan. Effective
January 1, 1998, the Company's match was increased to 100% of an employee's
elective deferral, up to a maximum of 6% of the employee's compensation.
The Company also established a 401(k) plan for hourly employees during 1996.
Employees are eligible to participate after completing 1,000 hours of service.
No contributions are made to the plan by the Company. Effective January 1,
1998, the plan was amended to allow hourly employees to participate after
completing three months of service.
(11) LEASES
The Company leases its office space under operating leases, some of which
contain rent escalation provisions. Rental expense for 1995, 1996 and 1997 and
the three months ended March 31, 1997 and 1998 was $410,855, $442,001,
$491,921, $134,776 (unaudited) and $112,377 (unaudited), respectively. Future
minimum lease payments under noncancelable operating leases at December 27,
1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER,
---------------------
<S> <C>
1998........................................................ $ 481,000
1999........................................................ 291,000
2000........................................................ 150,000
2001........................................................ 139,000
2002 and thereafter......................................... 72,000
----------
Total minimum lease payments.............................. $1,133,000
==========
</TABLE>
(12) CONTINGENCIES
The Company is involved in various claims arising in the ordinary course of
business. In the opinion of management, the ultimate disposition of these
matters will not materially affect the Company's financial position, results
of operations or liquidity.
(13) FAIR VALUE OF FINANCIAL INSTRUMENTS
Methods and assumptions used to estimate the fair value of each class of
financial instruments are as follows:
(a) Cash and cash equivalents, trade accounts receivable, and payables--The
carrying amounts approximate fair value because of the short maturity
of these instruments.
(b) Long-term debt--The carrying amount approximates fair value because the
note has an adjustable interest rate which is updated quarterly based
on the lender's base rate.
(c) Receivable from related party--The fair value of such instruments could
not be obtained without incurring excessive costs due to the
uncertainty of the repayment date.
F-32
<PAGE>
THE BURNETT COMPANIES CONSOLIDATED, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(14) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which all
shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Sparks Personnel Services, Inc.,
Sparks Associates, Inc., and
Customer Care Solutions, LLC:
We have audited the accompanying combined balance sheets of Sparks Personnel
Services, Inc., Sparks Associates, Inc. and Customer Care Solutions, LLC, as
of December 31, 1996 and 1997, and the related combined statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. These combined financial statements
are the responsibility of the Companies' managements. Our responsibility is to
express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Sparks Personnel
Services, Inc., Sparks Associates, Inc. and Customer Care Solutions, LLC as of
December 31, 1996 and 1997 and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 1997,
in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 24, 1998
F-34
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
MARCH 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 671,399 $ 1,003,672 $ 1,474,085
Trade accounts receivable, net of
allowance of $130,374, $76,415 and
$143,881, respectively............... 3,521,096 3,603,555 3,500,817
Available-for-sale securities at fair
value................................ 97,496 142,213 171,198
Prepaid expenses and other assets..... 33,173 63,691 76,943
----------- ----------- -----------
Total current assets................ 4,323,164 4,813,131 5,223,043
Property and equipment, net............. 298,352 340,619 325,612
----------- ----------- -----------
Total assets........................ $ 4,621,516 $ 5,153,750 $ 5,548,655
=========== =========== ===========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Line of credit........................ $ 200,000 $ -- $ --
Accounts payable...................... 92,899 54,626 20,904
Accrued payroll and related taxes..... 925,445 891,569 962,295
Other current liabilities............. 11,148 23,363 19,301
----------- ----------- -----------
Total current liabilities........... 1,229,492 969,558 1,002,500
----------- ----------- -----------
Other liabilities..................... 22,747 220,104 220,104
Shareholders' equity:
Sparks Personnel Services, Inc. common
stock, $1 par value; 1,000 shares au-
thorized, 46 shares issued and out-
standing............................. 46 46 46
Sparks Associates, Inc. common stock,
$1 par value; 1,000 shares autho-
rized, 90 shares issued and outstand-
ing.................................. 90 90 90
Customer Care Solutions, LLC members'
equity............................... 70,000 70,000 70,000
Additional paid-in capital............ 1,000 1,000 1,000
Treasury stock........................ (1,050,000) (1,050,000) (1,050,000)
Retained earnings..................... 4,291,731 4,845,079 5,178,057
Unrealized gains in value of avail-
able-for-sale securities............. 56,410 97,873 126,858
----------- ----------- -----------
Total shareholders' equity.......... 3,369,277 3,964,088 4,326,051
----------- ----------- -----------
Total liabilities and shareholders'
equity............................. $ 4,621,516 $ 5,153,750 $ 5,548,655
=========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-35
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------ ----------------------
1995 1996 1997 1997 1998
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service fees.......... $15,719,219 $22,451,356 $26,812,361 $6,831,828 $7,019,807
Permanent placement
fees................. 57,738 192,958 311,562 63,710 147,753
----------- ----------- ----------- ---------- ----------
Revenues from
services........... 15,776,957 22,644,314 27,123,923 6,895,538 7,167,560
Cost of services...... 11,248,728 16,597,926 19,603,708 5,024,863 5,115,908
----------- ----------- ----------- ---------- ----------
Gross profit........ 4,528,229 6,046,388 7,520,215 1,870,675 2,051,652
Selling, general and
administrative ex-
pense................ 2,831,507 3,802,093 4,634,171 1,069,712 1,209,930
----------- ----------- ----------- ---------- ----------
Operating income.... 1,696,722 2,244,295 2,886,044 800,963 841,722
Other income (expense):
Interest expense...... -- (2,795) (13,460) (2,344) --
Other income
(expense)............ 43,442 54,448 57,719 (6,751) 2,273
----------- ----------- ----------- ---------- ----------
Net income.......... $ 1,740,164 $ 2,295,948 $ 2,930,303 $ 791,868 $ 843,995
=========== =========== =========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-36
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
SPARKS PERSONNEL SPARKS ASSOCIATES, GAINS IN
SERVICES, INC. INC. CUSTOMER CARE VALUE OF
COMMON STOCK COMMON STOCK SOLUTIONS, ADDITIONAL AVAILABLE-
------------------ --------------------- LLC MEMBERS' PAID-IN TREASURY RETAINED FOR-SALE
SHARE AMOUNT SHARES AMOUNT EQUITY CAPITAL STOCK EARNINGS SECURITIES
-------- -------- --------- --------- ------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1994........... 46 $ 46 90 $ 90 $ $1,000 $(1,050,000) $2,455,619 $ 20,896
Net income...... -- -- -- -- -- -- -- 1,740,164 --
Shareholder
distributions -- -- -- -- -- -- -- (500,000) --
Unrealized gain
on investments. -- -- -- -- -- -- -- -- 43,033
-------- -------- --------- --------- ------- ------ ------------ ---------- --------
Balance,
December 31,
1995........... 46 46 90 90 -- 1,000 (1,050,000) 3,695,783 63,929
Shareholder
contributions.. -- -- -- -- 70,000 -- -- -- --
Net income...... -- -- -- -- -- -- -- 2,295,948 --
Shareholder
distributions.. -- -- -- -- -- -- -- (1,700,000) --
Unrealized loss
on investments. -- -- -- -- -- -- -- -- (7,519)
-------- -------- --------- --------- ------- ------ ------------ ---------- --------
Balance,
December 31,
1996........... 46 46 90 90 70,000 1,000 (1,050,000) 4,291,731 56,410
Net income...... -- -- -- -- -- -- -- 2,930,303 --
Shareholder
distributions.. -- -- -- -- -- -- -- (2,376,955) --
Unrealized gain
on investments. -- -- -- -- -- -- -- -- 41,463
-------- -------- --------- --------- ------- ------ ------------ ---------- --------
Balance,
December 31,
1997........... 46 $ 46 90 $ 90 $70,000 $1,000 $ (1,050,000) $4,845,079 $ 97,873
Net income
(unaudited).... -- -- -- -- -- -- -- 843,995 --
Shareholder
distributions
(unaudited..... -- -- -- -- -- -- -- (511,017) --
Unrealized gain
on investments
(unaudited).... -- -- -- -- -- -- -- -- 28,985
-------- -------- --------- --------- ------- ------ ------------ ---------- --------
Balance, March
31, 1998
(unaudited).... 46 $ 46 90 $ 90 $70,000 $1,000 $ (1,050,000) $5,178,057 $126,858
======== ======== ========= ========= ======= ====== ============ ========== ========
<CAPTION>
TOTAL
-----------
<S> <C>
Balance,
December 31,
1994........... $1,427,651
Net income...... 1,740,164
Shareholder
distributions (500,000)
Unrealized gain
on investments. 43,033
-----------
Balance,
December 31,
1995........... 2,710,848
Shareholder
contributions.. 70,000
Net income...... 2,295,948
Shareholder
distributions.. (1,700,000)
Unrealized loss
on investments. (7,519)
-----------
Balance,
December 31,
1996........... 3,369,277
Net income...... 2,930,303
Shareholder
distributions.. (2,376,955)
Unrealized gain
on investments. 41,463
-----------
Balance,
December 31,
1997........... $3,964,088
Net income
(unaudited).... 843,995
Shareholder
distributions
(unaudited..... (511,017)
Unrealized gain
on investments
(unaudited).... 28,985
-----------
Balance, March
31, 1998
(unaudited).... $4,326,051
===========
</TABLE>
See accompanying notes to combined financial statements.
F-37
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net income........... $1,740,164 $2,295,948 $2,930,303 $ 791,868 $ 843,995
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation....... 57,000 79,126 122,780 21,172 28,345
Change in operating
assets and
liabilities:
Trade accounts
receivable....... (855,252) (1,269,505) (82,459) 475,990 102,738
Prepaid expenses
and other assets. (11,120) (842) (30,518) (15,990) (13,252)
Accounts payable
and accrued
liabilities...... (165,403) 599,139 (59,934) (167,743) 32,942
Other liabilities. -- 22,747 197,356 57,381 --
---------- ---------- ---------- ---------- ----------
Net cash provided
by operating
activities...... 765,389 1,726,613 3,077,528 1,162,678 994,768
---------- ---------- ---------- ---------- ----------
Cash flows from
investing activities:
Purchase of property
and equipment....... (76,984) (273,133) (194,408) (17,716) (13,338)
Disposal of property
and equipment....... 55,951 14,782 29,362 29,362 --
Purchase of
investments......... (2,933) (3,115) (3,254) -- --
---------- ---------- ---------- ---------- ----------
Net cash provided
by (used in)
investing
activities...... (23,966) (261,466) (168,300) 11,646 (13,338)
---------- ---------- ---------- ---------- ----------
Cash flows from
financing activities:
Proceeds on line of
credit.............. -- 200,000 -- -- --
Principal payments on
line of credit...... -- -- (200,000) (75,000) --
Shareholder
distributions....... (500,000) (1,700,000) (2,376,955) -- (511,017)
Customer Care
Solutions, LLC
members
contributions....... -- 70,000 -- -- --
---------- ---------- ---------- ---------- ----------
Net cash used in
financing
activities...... (500,000) (1,430,000) (2,576,955) (75,000) (511,017)
---------- ---------- ---------- ---------- ----------
Net increase in cash
and cash equivalents.. 241,423 35,147 332,273 1,099,324 470,413
Cash and cash
equivalents at
beginning of period... 394,829 636,252 671,399 671,399 1,003,672
---------- ---------- ---------- ---------- ----------
Cash and cash
equivalents at end of
period................ $ 636,252 $ 671,399 $1,003,672 $1,770,723 $1,474,085
========== ========== ========== ========== ==========
Supplemental disclosure
of cash flow
information--cash paid
during the period for
interest.............. $ -- $ 1,075 $ 10,065 -- $ 1,380
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-38
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Sparks Personnel Services, Inc., Sparks Associates, Inc. and Customer Care
Solutions, LLC (collectively "the Company") were incorporated in the state of
Maryland in 1970, 1972 and 1996, respectively. The Company is under common
control. As common control exists among the entities, combined financial
statements are presented. The Company specializes in the temporary and
permanent placement of personnel to businesses, professional service
organizations, health care facilities and government agencies located
primarily in Maryland, Virginia and Washington, DC.
The accompanying combined financial statements include the accounts of
Sparks Personnel Services, Inc., Sparks Associates, Inc. and Customer Care
Solutions, LLC. All significant intercompany accounts and transactions have
been eliminated in order to present the combined financial statements of the
Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of combined financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying combined financial statements. The Company periodically
evaluates the creditworthiness of its customers' financial condition to
determine credit to be extended and to determine the adequacy of the allowance
for bad debts. Historically, bad debts have not been significant.
The Company's ability to collect amounts due from customers could be
affected by economic fluctuations in its markets or industries.
F-39
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using an accelerated method. The estimated useful
lives of property and equipment for purposes of computing depreciation range
from three to seven years.
Investment Securities
Investment securities, classified as available-for-sale, consist principally
of marketable equity securities. Such securities are recorded at fair value;
and unrealized holding gains and losses are excluded from operations and are
reported as a separate component of shareholders' equity until realized.
Realized gains and losses, which were insignificant for the periods presented,
are determined on a specific identification basis. Dividend income is
recognized when earned.
Income Taxes
For federal and state income tax reporting purposes, the Company has elected
to be taxed as an S corporation and a limited liability company under the
Internal Revenue Code and, accordingly, all tax attributes of the Company pass
through to its shareholders, except for income earned in the District of
Columbia. Therefore, no provision for federal or state income taxes is
reflected in the accompanying financial statements. The District of Columbia
does not recognize the S corporation filing status. Accordingly, a provision
for income taxes payable to the District of Columbia for income earned in the
District is included in operating costs and expenses in the statements of
operations. Such amounts, including deferred tax effects, were insignificant
for all the periods presented.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salaries and wages, (b) employment related taxes and
(c) workers'e compensation insurance premiums. The Company accounts for
service fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment in each of the periods presented is immaterial.
F-40
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, trade accounts receivable,
line of credit and accounts payable approximate their fair values due to the
short-term maturities of these instruments. Available-for-sale securities are
carried at fair value.
Newly Adopted Accounting Standards
In June 1997, Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income was issued. This statement establishes standards for
reporting and displaying comprehensive income and its components in a
financial statement that is displayed with the same prominence as other
financial statements. Reclassification of the financial statements for earlier
periods, provided for comparative purposes, is required. The statement also
requires the accumulated balance of other comprehensive income to be displayed
separately in the equity section of the balance sheet. This statement is
effective for fiscal years beginning after December 15, 1997. Total
comprehensive income for the periods ended March 31, 1997 and 1998 was
$836,411 and $872,980, respectively (unaudited).
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures......................... $219,663 $278,404 $283,775
Computer equipment............................. 342,301 454,301 462,268
Leasehold improvements......................... 2,463 5,592 5,592
Automobiles.................................... 127,426 104,525 104,525
-------- -------- --------
691,853 842,822 856,160
Less--accumulated depreciation................. 393,501 502,203 530,548
-------- -------- --------
$298,352 $340,619 $325,612
======== ======== ========
</TABLE>
(4)LINES OF CREDIT
Sparks Personnel Services, Inc. maintained a revolving line of credit of
$250,000. Borrowings made under this arrangement bore interest at prime. The
line was secured by the business assets of Sparks Personnel Services, Inc. and
the personal property of its shareholder. The line expired in 1997.
Customer Care Solutions, LLC, maintained a revolving line of credit of
$400,000 in 1996 and 1997. Borrowings made under this arrangement bear
interest at prime (8.5% at December 31, 1997). The line is secured by the
business assets of Customer Care Solutions, LLC and the personal property of
its shareholders. The amounts outstanding at December 31, 1996 and 1997 were
$200,000 and $-0-, respectively.
F-41
<PAGE>
SPARKS PERSONNEL SERVICES, INC., AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(5) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases (except
those with lease terms of a month or less that were not renewed) for 1995, 1996
and 1997 were approximately $187,489, $238,163 and $309,869, respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998.......................................................... $ 331,028
1999.......................................................... 325,932
2000.......................................................... 208,866
2001.......................................................... 193,967
2002.......................................................... 136,891
Later years, through 2004..................................... 157,032
----------
Total minimum lease payments.................................. $1,353,716
==========
</TABLE>
(6) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which all
shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-42
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Smith Hanley Associates, Inc. and
Smith Hanley Consulting Group, Inc.:
We have audited the accompanying combined balance sheets of Smith Hanley
Associates, Inc. and Smith Hanley Consulting Group, Inc. as of December 31,
1996 and 1997 and the related combined statements of operations, shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1997. These combined financial statements are the responsibility
of the Companies' managements. Our responsibility is to express an opinion on
these combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Smith
Hanley Associates Inc. and Smith Hanley Consulting Group, Inc. as of December
31, 1996 and 1997, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
April 3, 1998
F-43
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
ASSETS 1996 1997 1998
------ ---- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 950,608 $ 504,074 $ 330,548
Trade accounts receivable.................. 1,253,655 2,413,577 2,950,050
Due from officers and employees............ 103,229 263,929 358,290
Other receivables.......................... 37,126 43,356 56,239
---------- ---------- ----------
Total current assets..................... 2,344,618 3,224,936 3,695,127
Property and equipment, net.................. 176,340 216,688 209,721
Security deposits............................ 141,905 236,687 224,740
---------- ---------- ----------
Total assets............................. $2,662,863 $3,678,311 $4,129,588
========== ========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued expenses...... $1,829,815 $2,204,640 $2,256,492
Note payable............................... 155,556 -- --
Due to officers............................ 20,000 90,000 90,000
---------- ---------- ----------
Total current liabilities................ 2,005,371 2,294,640 2,346,492
---------- ---------- ----------
Commitments and contingencies
Total liabilities........................
Shareholders' equity:
Common stock $.10 par value; 11,000 shares
issued and outstanding.................... 1,100 1,100 1,100
Additional paid-in capital................. 530,000 564,812 564,812
Retained earnings.......................... 126,392 817,759 1,217,184
---------- ---------- ----------
Total shareholders' equity............... 657,492 1,383,671 1,783,096
---------- ---------- ----------
Total liabilities and shareholders'
equity.................................. $2,662,863 $3,678,311 $4,129,588
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-44
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ---------------------
1995 1996 1997 1997 1998
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue from services:
Permanent placement... $6,345,284 $8,556,918 $10,240,850 $2,743,787 $2,188,573
Temporary services.... 969,276 3,385,977 6,080,966 1,297,805 1,855,605
---------- ---------- ----------- ---------- ----------
Revenues from
services........... 7,314,560 11,942,895 16,321,816 4,041,592 4,044,178
Cost of services........ 716,651 2,545,592 4,551,252 981,852 1,357,661
---------- ---------- ----------- ---------- ----------
Gross profit........ 6,597,909 9,397,303 11,770,564 3,059,740 2,686,517
Selling, general and
administrative
expenses............... 6,327,299 9,091,653 11,047,214 2,418,442 2,260,901
---------- ---------- ----------- ---------- ----------
Operating income.... 270,610 305,650 723,350 641,298 425,616
Interest income
(expense), net......... (9,766) 2,444 13,424 258 5,806
---------- ---------- ----------- ---------- ----------
Income before income
taxes.............. 260,844 308,094 736,774 641,556 431,422
Income tax expense...... 24,659 45,027 15,681 12,794 31,997
---------- ---------- ----------- ---------- ----------
Net income.......... $ 236,185 $ 263,067 $ 721,093 $ 628,762 $ 399,425
========== ========== =========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-45
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995.... 11,000 $1,100 $ -- $ (33,241) $ (32,141)
Net income.................... -- -- -- 236,185 236,185
Capital contribution.......... -- -- 200,000 -- 200,000
Distributions................. -- -- -- (32,689) (32,689)
------ ------ -------- ---------- ----------
Balance at December 31, 1995.. 11,000 1,100 200,000 170,255 371,355
Net income.................... -- -- -- 263,067 263,067
Capital contributions......... -- -- 330,000 -- 330,000
Distributions................. -- -- -- (306,930) (306,930)
------ ------ -------- ---------- ----------
Balance at December 31, 1996.. 11,000 1,100 530,000 126,392 657,492
Net income.................... -- -- -- 721,093 721,093
Capital contributions......... -- -- 34,812 -- 34,812
Distributions................. -- -- -- (29,726) (29,726)
------ ------ -------- ---------- ----------
Balance at December 31, 1997.. 11,000 1,100 564,812 817,759 1,383,671
Net income (unaudited)........ -- -- -- 399,425 399,425
------ ------ -------- ---------- ----------
Balance at March 31, 1998
(unaudited).................. 11,000 $1,100 $564,812 $1,217,184 $1,783,096
====== ====== ======== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-46
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1995 1996 1997 1997 1998
--------- ---------- ----------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............ $ 236,185 $ 263,067 $ 721,093 $ 628,762 $ 399,425
Adjustments to
reconcile net income
to net cash (used in)
provided by operating
activities:
Depreciation......... 20,707 34,426 49,906 11,557 13,186
Change in assets and
liabilities:
Trade accounts
receivable......... (416,782) (566,511) (1,159,922) (1,098,159) (536,473)
Other receivables... (5,384) (31,742) (6,230) (62,664) (12,883)
Other noncurrent
assets............. (72,004) (708) (94,782) (11,898) 11,947
Accounts payable and
accrued expenses... 40,924 1,041,502 374,825 146,340 51,852
--------- ---------- ----------- ----------- ---------
Net cash (used in)
provided by
operating
activities........ (196,354) 740,034 (115,110) (386,062) (72,946)
--------- ---------- ----------- ----------- ---------
Cash flows from
investing activities:
Due from officers and
employees............ -- (103,229) (160,700) (46,446) (94,361)
Purchase of property
and equipment........ (58,684) (111,444) (90,254) (36,031) (6,219)
--------- ---------- ----------- ----------- ---------
Net cash used in
investing
activities........ (58,684) (214,673) (250,954) (82,477) (100,580)
--------- ---------- ----------- ----------- ---------
Cash flows from
financing activities:
Capital contributions. 200,100 330,000 34,812 -- --
Distributions......... (32,689) (306,930) (29,726) -- --
Proceeds from issuance
of notes payable..... -- 155,556 -- -- --
Repayment of notes
payable.............. -- -- (155,556) (16,667) --
Due to officers....... 113,900 (105,335) 70,000 -- --
--------- ---------- ----------- ----------- ---------
Net cash (used in)
provided by
financing
activities........ 281,311 73,291 (80,470) (16,667) --
--------- ---------- ----------- ----------- ---------
Net (decrease)
increase in cash
and cash
equivalents....... 26,273 598,652 (446,534) (485,206) (173,526)
Cash and cash
equivalents at
beginning of period... 325,683 351,956 950,608 950,608 504,074
--------- ---------- ----------- ----------- ---------
Cash and cash
equivalents at end of
period................ $ 351,956 $ 950,608 $ 504,074 $ 465,402 $ 330,548
========= ========== =========== =========== =========
Supplemental disclosure
of cash flow
information:
Cash paid for
interest............. $ 24,375 $ 20,504 $ 3,058 $ 3,715 $ 1,148
========= ========== =========== =========== =========
Cash paid for taxes... $ 24,659 $ 45,027 $ 15,681 $ -- $ --
========= ========== =========== =========== =========
</TABLE>
See accompanying notes to combined financial statements.
F-47
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION
Smith Hanley Associates, Inc. (SHA), was incorporated in 1980 in the state
of New York. SHA provides placement of permanent personnel primarily to
business and professional service organizations. SHA is headquartered in New
York and has branch offices in Chicago, Illinois, Southport, Connecticut and
Athens, Georgia. SHA elected to be treated as an S corporation on April 1,
1983. Prior to April 1, 1983, SHA was a partnership.
The accompanying combined financial statements include the accounts of SHA
and an affiliate company, under common control, Smith Hanley Consulting Group,
Inc. (Consulting, and together with SHA, the Company). Consulting provides
temporary subcontracted personnel to business and professional service
organizations. Consulting commenced operations on January 1, 1995 as an S
Corporation. As common control exists among the entities, combined financial
statements are presented. All significant intercompany accounts and
transactions have been eliminated in combination.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents of $950,608 and $504,074 at December 31, 1996 and
1997, respectively, include bank deposits and short-term investments with
original maturities of three months or less.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial condition to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant.
The Company's ability to collect amounts due from customers could be
affected by economic fluctuations in its markets.
F-48
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property is being depreciated over the estimated useful lives of the
related assets using the straight-line method. The useful lives of the
property and equipment for purposes of computing depreciation range from five
to seven years.
Income Taxes
The Company has elected to be treated as an S corporation for federal and
certain state income tax purposes. As an S corporation (and a partnership
prior to S corporation election), the earnings of the Company are reported by
the individual shareholders and the Company is not responsible for federal or
certain state income taxes. Accordingly, no provision for income taxes is
included in the accompanying financial statements with respect to these
jurisdictions. The Company has provided for state and local income taxes for
those taxing jurisdictions which do not recognize the S corporation status.
The effect of deferred income taxes in such jurisdictions is insignificant.
Revenue and Cost Recognition
The Company's revenues include service fees paid by clients under client
service agreements. In consideration for payment of such services fees, the
Company agrees to pay the following direct costs associated with worksite
employees: (a) salaries and wages, (b) employment related taxes and (c)
workers compensation insurance premiums. The Company accounts for service fees
and the related direct payroll costs using the accrual basis of accounting.
Under the accrual method, service fees relating to worksite employees with
earned but unpaid wages at the end of each period are recognized as unbilled
revenues and the related direct payroll costs for such wages are accrued as a
liability during the period in which wages are earned by the worksite
employees. Subsequent to the end of each period, such wages are paid and the
related service fees are billed.
Permanent placement fees are recognized as revenue when the candidates have
commenced employment. Revenues from permanent placements are 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
days). The net adjustment in each of the periods presented is immaterial.
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.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, and accounts
payable approximate their fair values due to the short-term maturities of
these instruments.
Fair values of the amounts due from/to officers could not be obtained
without incurring excessive costs due to the related party nature of such
instruments.
The carrying amount of borrowings pursuant to the Company's note payable
approximates fair value because the rate on such note was based on current
market rates.
F-49
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures............................ $102,514 $111,206 $111,206
Office equipment.................................. 189,875 271,437 277,656
-------- -------- --------
292,389 382,643 388,862
Less: accumulated depreciation.................... 116,049 165,955 179,141
-------- -------- --------
$176,340 $216,688 $209,721
======== ======== ========
</TABLE>
(4) NOTE PAYABLE
At December 31, 1996, the Company had outstanding a note payable in the
amount of $155,556 due in monthly installments of $5,556 through March 31,
1999. The note bore interest at prime plus 1.50% (9.75% at December 31, 1996).
The note was collateralized by all personal property and fixtures and
interest, dividends or other distributions paid (as defined) of the Company.
The note was repaid on September 15, 1997.
Additionally, at December 31, 1996, the Company had a line-of-credit
available of $400,000 which bore interest at prime plus 1%. No amounts were
utilized by the Company under the line of credit facility and it was canceled
on September 30, 1997.
(5) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases for the
years ended December 31, 1995, 1996 and 1997 were approximately $251,991,
$223,165 and $400,000, respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................ $ 613,922
1999........................................................ 632,841
2000........................................................ 612,185
2001........................................................ 550,920
2002........................................................ 550,920
thereafter.................................................. 1,434,165
----------
Total minimum lease payments.............................. $4,394,953
==========
</TABLE>
(6) RELATED-PARTY TRANSACTIONS
At December 31, 1996 and 1997 advances from officers and employees were
$103,229 and $263,929, respectively. These advances are non-interest-bearing
and due on-demand.
At December 31, 1996 and 1997 amounts due to officers were $20,000 and
$90,000, respectively. These amounts are non-interest-bearing and due on
demand.
F-50
<PAGE>
SMITH HANLEY ASSOCIATES, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1997, an officer of the Company personally guaranteed an
advance due from an employee totaling approximately $90,000.
(7) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-51
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Professional Consulting Network, Inc.:
We have audited the accompanying balance sheets of Professional Consulting
Network, Inc. as of December 31, 1996 and 1997, and the related statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. 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 financial position of Professional Consulting
Network, Inc. as of December 31, 1996 and 1997 and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
April 24, 1998
F-52
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
ASSETS 1996 1997 1998
------ ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 40,484 $ 12,395 $ 664,538
Trade accounts receivable, net of allowance
of $-0-, $4,300 and $4,300................ 2,444,497 3,176,870 2,293,330
Employee loans receivable.................. 17,301 9,900 38,001
Prepaid expenses and other assets.......... 41,033 11,977 51,977
---------- ---------- ----------
Total current assets..................... 2,543,315 3,211,142 3,047,846
Property and equipment, net................ 115,837 128,141 158,641
Other assets............................... 131,736 169,489 169,335
---------- ---------- ----------
Total assets............................. $2,790,888 $3,508,772 $3,375,822
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Line of credit............................. $ 350,000 $ 427,000 $ --
Loans due to shareholders.................. 250,000 -- --
Current portion of capital lease obliga-
tion...................................... 13,168 14,457 14,457
Accounts payable........................... 30,617 46,223 7,117
Contractors payable........................ 208,091 481,362 575,724
Accrued payroll and related taxes.......... 469,003 494,359 451,329
Accrued expenses........................... 40,517 53,875 43,672
Customer deposits and other................ 53,240 32,000 32,000
---------- ---------- ----------
Total current liabilities................ 1,414,636 1,549,276 1,124,299
---------- ---------- ----------
Long-term portion of capital lease obliga-
tion...................................... 28,930 14,473 10,983
---------- ---------- ----------
Total liabilities........................ 1,443,566 1,563,749 1,135,282
Shareholders' equity:
Common stock, no par value; 1,000,000
shares authorized, 200,000 shares issued
and outstanding........................... 77,079 77,079 77,079
Retained earnings.......................... 1,270,243 1,867,944 2,163,461
---------- ---------- ----------
Total shareholders' equity............... 1,347,322 1,945,023 2,240,540
---------- ---------- ----------
Total liabilities and shareholders'
equity.................................. $2,790,888 $3,508,772 $3,375,822
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service fees.......... $8,670,225 $8,739,132 $9,404,500 $2,162,130 $2,878,198
Permanent placement
fees................. 565,763 1,162,833 1,881,754 439,770 513,350
---------- ---------- ---------- ---------- ----------
Revenues from
services........... 9,235,988 9,901,965 11,286,254 2,601,900 3,391,548
Cost of services........ 6,905,344 6,870,834 7,384,793 1,717,270 2,281,044
---------- ---------- ---------- ---------- ----------
Gross profit........ 2,330,644 3,031,131 3,901,461 884,630 1,110,504
Selling, general and
administrative
expenses............... 2,077,924 2,591,350 3,002,821 833,174 733,236
---------- ---------- ---------- ---------- ----------
Operating income.... 252,720 439,781 898,640 51,456 377,268
Interest expense........ 1,317 5,261 5,654 2,381 1,202
Other income/(expense).. 1,304 18,846 4,715 (1,731) 4,604
---------- ---------- ---------- ---------- ----------
Net income.......... $ 252,707 $ 453,366 $ 897,701 $ 47,344 $ 380,670
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1994............. 200,000 $77,079 $ 618,170 $ 695,249
Net income............................. -- -- 252,707 252,707
------- ------- ---------- ----------
Balance, December 31, 1995............. 200,000 77,079 870,877 947,956
Distributions to shareholders.......... -- -- (54,000) (54,000)
Net income............................. -- -- 453,366 453,366
------- ------- ---------- ----------
Balance, December 31, 1996............. 200,000 77,079 1,270,243 1,347,322
Distributions to shareholders.......... -- -- (300,000) (300,000)
Net income............................. -- -- 897,701 897,701
------- ------- ---------- ----------
Balance, December 31, 1997............. 200,000 77,079 1,867,944 1,945,023
Distributions to shareholders
(unaudited)........................... -- -- (85,153) (85,153)
Net income (unaudited)................. -- -- 380,670 380,670
------- ------- ---------- ----------
Balance, March 31, 1998 (unaudited).... 200,000 $77,079 $2,163,461 $2,240,540
======= ======= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- ----------------------
1995 1996 1997 1997 1998
--------- --------- --------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............. $ 252,707 $ 453,366 $ 897,701 $ 47,344 $ 380,670
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation.......... 14,332 27,326 35,076 3,750 9,660
Change in operating
assets and
liabilities:
Trade accounts
receivable.......... (91,755) (716,693) (732,373) 1,004,662 883,540
Prepaid expenses and
other assets........ 15,136 (28,780) 29,056 23,657 (40,000)
Other assets......... 83,891 (15,973) (37,753) (501) 154
Accounts payable..... (210,550) 210,884 288,877 5,768 55,256
Accrued payroll and
related taxes....... 39,280 200,837 25,356 (16,963) (43,030)
Other current
liabilities......... 23,139 493 (7,882) (81,934) (10,203)
--------- --------- --------- ---------- ----------
Net cash provided by
operating
activities......... 126,180 131,460 498,058 985,783 1,236,047
--------- --------- --------- ---------- ----------
Cash flows from
investing activities:
Purchase of property
and equipment......... (23,045) (35,912) (47,380) (21,477) (40,160)
Repayment of advance to
shareholder........... 128,000 -- -- -- --
Employee loans, net.... (63,116) 45,815 7,401 8,051 (28,101)
--------- --------- --------- ---------- ----------
Net cash provided by
(used in) investing
activities......... 41,839 9,903 (39,979) (13,426) (68,261)
--------- --------- --------- ---------- ----------
Cash flows from
financing activities:
Distributions to
shareholders.......... -- (54,000) (300,000) -- (85,153)
Net proceeds (payments)
on line of credit..... (183,000) 40,000 77,000 (350,000) (427,000)
Proceeds on loans from
shareholders.......... 250,000 250,000 -- -- --
Repayment of loans from
shareholders.......... (256,000) (250,000) (250,000) (250,000) --
Principal payments on
long-term debt........ (100,000) (83,333) -- -- --
Principal payments on
capital lease
obligations........... (5,590) (11,990) (13,168) -- (3,490)
--------- --------- --------- ---------- ----------
Net cash used in
financing
activities......... (294,590) (109,323) (486,168) (600,000) (515,643)
--------- --------- --------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents............ (126,571) 32,040 (28,089) 372,357 652,143
Cash and cash
equivalents at
beginning of period.... 135,015 8,444 40,484 40,484 12,395
--------- --------- --------- ---------- ----------
Cash and cash
equivalents at end of
period................. $ 8,444 $ 40,484 $ 12,395 $ 412,841 $ 664,538
========= ========= ========= ========== ==========
Supplemental disclosure
of cash flow
information--
Cash paid for interest. $ 6,170 $ 5,261 $ 5,654 $ 2,381 $ 1,202
========= ========= ========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-56
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Professional Consulting Network, Inc. (the Company), incorporated in the
state of California in 1988, provides temporary and permanent information
technology personnel to business and other organizations located primarily in
Northern California and the Greater Bay Area. The Company also provides
consulting and payrolling services.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements.
The Company's ability to collect amounts due from customers could be
affected by economic fluctuations in its markets.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using the straight-line method. The estimated
useful lives of property and equipment for purposes of computing depreciation
range from three to seven years.
F-57
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The stockholders have elected to treat the Company as an S corporation under
the Internal Revenue Code, whereby the liability for federal taxes on income
is that of the stockholders, and not of the Company. Accordingly, no provision
for federal income tax is included in the accompanying financial statements.
The Company is subject to California franchise taxes, the effect of which is
insignificant.
Revenue and Cost Recognition
Revenues from services consist primarily of service fees paid by its clients
under client service agreements. The Company accounts for service fees and the
related direct costs using the accrual method of accounting. Under the accrual
method, service fees relating to worksite employees with earned but unpaid
wages at the end of each period are recognized as unbilled revenues and the
related direct payroll costs for such wages are accrued as a liability during
the period in which wages are earned by the worksite employees. Subsequent to
the end of each period, such wages are paid and the related service fees are
billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment in each of the periods presented is immaterial.
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.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and accounts
payable approximate their fair values due to the short-term maturities of
these instruments.
The carrying amounts of borrowings pursuant to the Company's revolving line
of credit agreement approximate fair value because the rates on such
agreements are variable, based on current market rates.
The fair value of the loans due to shareholders at December 31, 1996 could
not be obtained without incurring excessive costs due to the related party
nature of this financial instrument.
F-58
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 198
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures...................... $ 24,706 $ 48,011 $ 53,756
Office equipment............................ 261,047 285,122 319,487
-------- -------- --------
285,753 333,133 373,243
Less--accumulated depreciation.............. 169,916 204,992 214,602
-------- -------- --------
$115,837 $128,141 $158,641
======== ======== ========
</TABLE>
(4) LINE OF CREDIT
The Company maintains a line of credit in the amount of $1 million bearing
interest at prime plus 1% (9.5% at December 31, 1997). This agreement expires
on December 1, 1998. At December 31, 1997 and March 31, 1998, the Company had
$573,000 and $1,000,000 (unaudited), respectively, available under the line of
credit.
(5) EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan covering substantially all of its employees
who have completed at least one year of service or attained the age of twenty-
one. The Company may contribute at the discretion of the Board of Directors.
No contributions were made by the Company during 1995, 1996 and 1997.
(6) LEASES
The Company is obligated under a capital lease for computer equipment
expiring in 1999. At December 31, 1996 and 1997, and March 31, 1998, the gross
amount of equipment and related accumulated amortization recorded under such
capital leases were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment............................ $59,676 $59,676 $59,676
Less accumulated amortization................. 14,919 26,854 27,849
------- ------- -------
$44,757 $32,822 $31,827
======= ======= =======
</TABLE>
Amortization of assets held under capital leases is included with
depreciation expense.
The Company leases office space under a noncancelable lease agreement
accounted for as an operating lease expiring in 1999. Rental expense for
operating leases (except those with lease terms of a month or less that were
not renewed) for the years ended December 31, 1995, 1996, and 1997 and for the
three months ended March 31, 1998 were approximately $138,201, $140,637,
$122,713, and $47,648 (unaudited), respectively.
F-59
<PAGE>
PROFESSIONAL CONSULTING NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) and future minimum
capital lease payments as of December 31, 1997 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31,
1998................................................. $16,572 $192,960
1999 16,431 160,800
------- --------
Total minimum lease payments....................... $33,003 $353,760
========
Less amount representing interest...................... 4,073
-------
Present value of net minimum capital lease payments.. 28,930
Less current installments of obligations under capital
leases................................................ 14,457
-------
Obligations under capital leases, excluding current
installments........................................ $14,473
=======
</TABLE>
(7) SIGNIFICANT CUSTOMERS
During 1995, 1996, and 1997 and for the three months ended March 31, 1998,
one customer accounted for approximately 27%, 26%, 16% and 6% (unaudited),
respectively, of the Company's service revenue. The loss of this customer
could have a material adverse impact on the operations of the Company.
(8) RELATED PARTY TRANSACTIONS
At December 31, 1995 and 1996 the Company had loans outstanding to its two
principal shareholders aggregating $250,000. The loans were made to finance
short-term working capital requirements and were generally repaid within
thirty days. The loans bore interest at prime plus 1%.
(9) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-60
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CoreLink Staffing Services, Inc.:
We have audited the accompanying balance sheet of CoreLink Staffing
Services, Inc. as of December 28, 1997, and the related statements of
operations, shareholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CoreLink Staffing
Services, Inc. as of December 28, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 20, 1998
F-61
<PAGE>
CORELINK STAFFING SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, MARCH 29,
1997 1998
------------ -----------
(UNAUDITED)
-----------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........................... $ 468,799 $ --
Trade accounts receivable........................... 1,041,184 947,811
Prepaid expenses and other assets................... 3,710 49,996
---------- ----------
Total current assets.............................. 1,513,693 997,807
Other assets........................................ 78,966 15,505
Property and equipment, net......................... 181,291 198,833
---------- ----------
Total assets...................................... $1,773,950 $1,212,145
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Line of credit...................................... $ 575,000 $ 80,000
Bank overdraft...................................... -- 88,656
Accounts payable and accrued liabilities............ 46,282 76,533
Payroll taxes payable............................... 239,293 294,209
Accrued payroll..................................... 320,971 168,374
---------- ----------
Total current liabilities......................... 1,181,546 707,772
---------- ----------
Client deposits..................................... 63,622 2,543
Shareholders' equity:
Common stock, no par value; 75,000 shares autho-
rized, 120 shares issued and outstanding........... 231,800 231,800
Retained earnings................................... 296,982 270,030
---------- ----------
Total shareholders' equity........................ 528,782 501,830
---------- ----------
Total liabilities and shareholders' equity........ $1,773,950 $1,212,145
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-62
<PAGE>
CORELINK STAFFING SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED ----------------------
DECEMBER 28, MARCH 30, MARCH 29,
1997 1997 1998
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Service fees............................ $10,947,095 $2,094,251 $2,893,865
Permanent placement fees................ 220,234 42,605 67,734
----------- ---------- ----------
Revenues from services................ 11,167,329 2,136,856 2,961,599
Cost of services.......................... 8,760,356 1,676,904 2,252,498
----------- ---------- ----------
Gross profit.......................... 2,406,973 459,952 709,101
Selling, general and administrative
expenses................................. 2,512,420 383,566 731,317
----------- ---------- ----------
Operating loss........................ (105,447) 76,386 (22,216)
Interest expense.......................... 2,038 1,036 5,109
Other expense............................. 12,475 -- --
Other income.............................. (3,308) (503) (373)
----------- ---------- ----------
Net income (loss)..................... $ (116,652) $ 75,853 $ (26,952)
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-63
<PAGE>
CORELINK STAFFING SERVICES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
--------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ -------- -------- --------
<S> <C> <C> <C> <C>
Balance, January 1, 1997.................... 120 $231,800 $413,634 $645,434
Net loss.................................... -- -- (116,652) (116,652)
--- -------- -------- --------
Balance, December 28, 1997.................. 120 231,800 296,982 528,782
Net loss (unaudited)........................ -- -- (26,952) (26,952)
--- -------- -------- --------
Balance, March 29, 1998 (unaudited)......... 120 $231,800 $270,030 $501,830
=== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-64
<PAGE>
CORELINK STAFFING SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED --------------------
DECEMBER 28, MARCH 30, MARCH 29,
1997 1997 1998
------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $(116,652) $ 75,853 $(26,952)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation................................. 35,261 8,491 7,697
Loss on disposal of asset.................... 1,234 -- --
Change in operating assets and liabilities:
Trade accounts receivable................... (393,360) (102,911) 93,373
Prepaid expenses and other assets........... (43,211) (288) 17,175
Accounts payable and accrued liabilities.... 470,012 74,019 (128,509)
--------- -------- --------
Net cash provided by (used in) operating
activities................................ (46,716) 55,164 (37,216)
--------- -------- --------
Cash flows from investing activities--purchase
of property and equipment..................... (51,254) (4,943) (25,239)
--------- -------- --------
Cash flows from financing activities:
Net proceeds (payments) on line of credit.... 500,000 (30,000) (495,000)
Increase in bank overdraft................... -- -- 88,656
--------- -------- --------
Net cash provided by (used in) financing
activities................................ 500,000 (30,000) (406,344)
--------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................... 402,030 20,221 (468,799)
Cash and cash equivalents at beginning of
period........................................ 66,769 66,769 468,799
--------- -------- --------
Cash and cash equivalents at end of period..... $ 468,799 $ 86,990 $ --
========= ======== ========
Supplemental disclosure of cash flow
information--cash paid for interest........... $ 2,038 $ 1,036 $ 4,512
========= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-65
<PAGE>
CORELINK STAFFING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
CoreLink Staffing Services, Inc. (the Company), incorporated in the state of
California in 1983, provides temporary and permanent personnel to businesses
located primarily in California.
The Company's fiscal year ends on the last Sunday in December.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 29, 1998, and for the three
months ended March 30, 1997 and March 29, 1998, are unaudited, and certain
information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been omitted. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present
the financial position, results of operations and cash flows with respect to
the interim financial statements have been included. The results of operations
for the interim periods are not necessarily indicative of the results for the
entire fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company provides for workers' compensation, health insurance and
unemployment taxes related to its employees. A deterioration in claims
experience could result in increased costs to the Company in the future. The
Company has recorded an estimate of any existing liabilities under these
programs at each balance sheet date. The Company's future costs could also
increase if there are any material changes in government regulations related
to employment law or employee benefits.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial condition to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant.
The Company operates primarily in the office clerical industry. The
Company's ability to collect amounts due from customers could be affected by
adverse economic fluctuations in the Los Angeles Metropolitan market or this
industry.
F-66
<PAGE>
CORELINK STAFFING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using the straight-line method. The estimated
useful lives of property and equipment for purposes of computing depreciation
range from three to seven years.
Income Taxes
The Company elected to be taxed as an S corporation and accordingly all tax
attributes of the Company pass through to its shareholders. Accordingly, no
provision for federal or state income taxes is reflected in the accompanying
financial statements.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salaries and wages, (b) employment related taxes and
(c) workers' compensation insurance premiums. The Company accounts for service
fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment for each of the periods presented is immaterial.
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.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and accounts
payable approximate their fair values due to the short-term maturities of
these instruments.
The carrying amount of borrowings pursuant to the Company's revolving line
of credit agreement approximates fair value because the rate on such agreement
is variable, based on current market rates.
F-67
<PAGE>
CORELINK STAFFING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 28, MARCH 29,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures........................... $ 112,086 $ 113,191
Office equipment................................. 336,981 362,112
Leasehold improvements........................... 4,107 4,107
--------- ---------
453,174 479,410
Accumulated depreciation......................... (271,883) (280,577)
--------- ---------
$ 181,291 $ 198,833
========= =========
</TABLE>
(4) LINE OF CREDIT
The Company maintains a revolving line of credit, due on demand, that allows
for borrowings of up to $750,000. Borrowings made under this agreement bear
interest at prime plus 3/4% (9.25% at December 28, 1997). The line is secured
by all of the business assets and guaranteed by two shareholders up to
$750,000. If not called by the lender prior to August 20, 1998, the
outstanding principal plus all accrued unpaid interest is due on August 20,
1998.
The line of credit is subject to certain financial covenants including
current ratio and total liabilities in relation to tangible net worth. The
Company was in compliance with such covenants at December 28, 1997 and March
29, 1998 (unaudited).
The weighted average interest rate for the year ended December 28, 1997 was
8.25%.
(5) EMPLOYEE BENEFIT PLAN
The Company's Savings Investment and Profit Sharing Plan provides for a
401(k) plan (the Plan). Under the terms of the Plan, all employees that have
completed one year of service in which they worked at least 1,000 hours are
eligible to participate. Until December 31, 1997 highly compensated employees,
as defined under the Plan, were ineligible to participate. Effective January
1, 1998, the plan was revised to include highly compensated employees.
The Company may make a matching contribution equal to a percentage of the
employee contributions. Employees are eligible for matching contributions if
they are an active member of the Plan and have 1,000 or more hours of service
in the Plan year.
During 1997, the Company chose to match 25% of staff employee contributions
which amounted to $10,867.
(6) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expenses for operating leases
(except those with lease terms of a month or less that were not renewed) were
approximately $151,390 and $37,050 (unaudited) for the year ended December 28,
1997, and the three months ended March 29, 1998, respectively.
F-68
<PAGE>
CORELINK STAFFING SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancelable operating leases as of
December 28, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER
--------------------
<S> <C>
1998.......................................................... $169,208
1999.......................................................... 169,634
2000.......................................................... 169,634
2001.......................................................... 98,439
--------
Total minimum lease payments................................ $606,915
========
</TABLE>
(7) OTHER
In January 1998, the Company entered into an agreement with Abbott HR, Inc.
(Abbott) in order to transfer service rights of seven accounts to Abbott. The
accounts transferred to Abbott generated revenues of $1,356,000 in 1997 with
an estimated gross margin of 3.8%. The Company has the right to receive
certain payments in 1998 under the agreement, however, such amounts are not
expected to be material.
On December 28, 1997, the Company paid an officer, who is also a
shareholder, a bonus in the amount of $750,000 which is included in selling,
general and administrative expenses.
On March 29, 1998, the Company paid an officer, who is also a shareholder, a
bonus in the amount of $250,000 (unaudited) which is included in selling,
general and administrative expenses.
(8) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-69
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Absolutely Professional Staffing, Inc.
Botal Associates, Inc.:
We have audited the accompanying combined balance sheets of Absolutely
Professional Staffing, Inc. and Botal Associates, Inc. as of December 31, 1996
and 1997 and the related combined statements of income and shareholders'
equity and cash flows for the years then ended. These combined financial
statements are the responsibility of the Companies' managements. Our
responsibility is to express an opinion on these combined 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of
Absolutely Professional Staffing, Inc. and Botal Associates, Inc. as of
December 31, 1996 and 1997, and the results of their operations and their cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 8, 1998
F-70
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
------ --------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash....................................... $ 1,012 $ 16,632 $ --
Accounts receivable, net of allowance for
doubtful accounts of $19,350 in 1996, 1997
and 1998.................................. 1,121,370 1,781,230 1,672,327
Due from officers.......................... 28,795 33,795 33,795
Prepaid expenses and other current assets.. 54,067 74,195 88,094
---------- ---------- ----------
Total current assets..................... 1,205,244 1,905,852 1,794,216
Property and equipment, net................ 76,735 134,896 285,947
Other assets............................... 28,994 28,373 9,640
---------- ---------- ----------
Total assets............................. $1,310,973 $2,069,121 $2,089,803
========== ========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued liabilities... $ 265,560 $ 288,860 $ 408,821
Capital lease obligation, current portion.. 12,186 5,799 22,850
Loans payable.............................. 458,876 551,607 54,050
---------- ---------- ----------
Total current liabilities................ 736,622 846,266 485,721
---------- ---------- ----------
Capital lease obligation, less current por-
tion...................................... 17,521 15,063 86,382
Commitments and contingencies
Shareholders' equity:
Absolutely Professional Staffing, Inc.--
Common Stock no par value; 200 shares
authorized, issued and outstanding........ 2,000 2,000 2,000
Botal Associates, Inc.-- Common Stock no
par value; 10,000 shares authorized, 5,000
shares issued and outstanding............. 28,600 28,600 28,600
Retained earnings.......................... 526,230 1,177,192 1,487,100
---------- ---------- ----------
Total shareholders' equity............... 556,830 1,207,792 1,517,700
---------- ---------- ----------
Total liabilities and shareholders'
equity.................................. $1,310,973 $2,069,121 $2,089,803
========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-71
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------- ----------------------
1996 1997 1997 1998
---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Service fees................ $5,310,616 $ 9,784,027 $1,929,670 $2,952,696
Permanent placement fees.... 677,115 625,465 139,808 138,650
---------- ----------- ---------- ----------
Revenues from services.... 5,987,731 10,409,492 2,069,478 3,091,346
Cost of services.............. 3,771,947 6,920,287 1,335,810 2,049,074
---------- ----------- ---------- ----------
Gross profit.............. 2,215,784 3,489,205 733,668 1,042,272
Selling, general and
administrative expenses...... 2,039,487 2,555,198 520,585 651,235
---------- ----------- ---------- ----------
Operating income.......... 176,297 934,007 213,083 391,037
Interest expense.............. 62,343 90,839 24,554 15,599
Other (income) expense........ 890 (8,714) (2,074) (1,783)
---------- ----------- ---------- ----------
Income before income
taxes.................... 113,064 851,882 190,603 377,221
Income tax expense............ 25,705 42,560 37,194 10,603
---------- ----------- ---------- ----------
Net income................ 87,359 809,322 153,409 366,618
Retained earnings--beginning
of period.................... 446,871 526,230 526,230 1,177,192
Distributions to shareholders. (8,000) (158,360) -- (56,710)
---------- ----------- ---------- ----------
Retained earnings--end of
period....................... $ 526,230 $ 1,177,192 $ 679,639 $1,487,100
========== =========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-72
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------- -------------------
1996 1997 1997 1998
--------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 87,359 $ 809,322 $153,409 $ 366,618
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization...... 43,008 44,865 6,175 9,092
Change in operating assets and
liabilities:
Accounts receivable............... (380,345) (659,860) 26,320 108,903
Prepaid expenses and other current
assets........................... (4,638) (20,128) 11,068 (13,899)
Other assets...................... -- (892) -- 18,476
Accounts payable and accrued
liabilities...................... 158,999 23,300 (71,430) 119,961
--------- --------- -------- ---------
Net cash provided by (used in)
operating activities............ (95,617) 196,607 125,542 609,151
--------- --------- -------- ---------
Cash flows from investing activities:
Purchase of property and equipment.. (1,516) (101,513) (15,262) (65,281)
Due from officers................... 14,000 (5,000) (40,977) --
--------- --------- -------- ---------
Net cash (used in) provided by
investing activities............ 12,484 (106,513) (56,239) (65,281)
--------- --------- -------- ---------
Cash flows from financing activities:
Net borrowings (payments) under the
loans payable...................... 105,417 92,731 6,316 (497,557)
Distributions to shareholders....... (8,000) (158,360) -- (56,710)
Payment of capital lease obligation. (22,051) (8,845) (10,754) (6,235)
--------- --------- -------- ---------
Net cash (used in) provided by
financing activities............ 75,366 (74,474) (4,438) (560,502)
--------- --------- -------- ---------
Net increase (decrease) in cash...... (7,767) 15,620 64,865 (16,632)
Cash at beginning of period.......... 8,779 1,012 1,012 16,632
--------- --------- -------- ---------
Cash at end of period................ $ 1,012 $ 16,632 $ 65,877 $ --
========= ========= ======== =========
Supplemental disclosure of cash flow
information--
Cash paid for interest.............. $ 42,952 $ 69,680 $ 24,554 $ 15,599
========= ========= ======== =========
Cash paid for income taxes.......... $ 55,731 $ 33,667 $ -- $ 1,038
========= ========= ======== =========
</TABLE>
See accompanying notes to combined financial statements.
F-73
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS OF ORGANIZATION
Nature of Operations
Absolutely Professional Staffing, Inc. (APS) was incorporated in the state
of New York. APS provides temporary worksite personnel and permanent placement
of personnel to business and professional service organizations.
The accompanying combined financial statements include the accounts of APS
and an affiliated company, under common control, Botal Associates, Inc.
(Botal, and together with APS, the "Company"). Botal provides temporary
worksite personnel to business and professional service organizations. Botal
commenced operations in December 1969. As common control exists among the
entities, combined financial statements are presented. All significant
intercompany accounts and transactions have been eliminated in combination.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial condition to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant. The Company's ability to
collect amounts due from customers could be affected by economic fluctuations
in its markets.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
depreciation applicable thereto are eliminated from the accounts and resulting
gain or loss is reflected in operations. The cost of property is being
depreciated over the estimated useful lives of the related assets using the
straight-line method. The useful lives of the property and equipment for
purposes of computing depreciation was five years.
F-74
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Income taxes
APS has elected to be treated as an S corporation for Federal and certain
state income tax purposes. As an S corporation, the earnings of APS are
reported by the individual shareholders and APS is not responsible for Federal
or certain state income taxes. The Company has provided for state and local
income taxes for those taxing jurisdictions which do not recognize the S
corporation status.
Botal is treated as a C corporation for Federal and state income tax
purposes. As a C corporation, income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Revenue and Cost Recognition
The Company's revenues include service fees paid by clients under client
service agreements. In consideration for payment of such services fees, the
Company agrees to pay the following direct costs associated with worksite
employees: (a) salaries and wages, (b) employment related taxes and (c)
workers compensation insurance premiums. The Company accounts for service fees
and the related direct payroll costs using the accrual basis of accounting.
Under the accrual method, service fees relating to worksite employees with
earned but unpaid wages at the end of each period are recognized as unbilled
revenues and the related direct payroll costs for such wages are accrued as a
liability during the period in which wages are earned by the worksite
employees. Subsequent to the end of each period, such wages are paid and the
related service fees are billed.
The Company recognizes permanent placement revenues when the employment
offer and acceptance has occurred and the candidate's employment start date
has been established. Revenues from permanent placements are reported in the
statements of operations net of estimated adjustments due to placed candidates
that terminate employment within the Company's guarantee period (generally 60-
90 days). The net adjustment in each of the periods presented is immaterial.
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.
Fair Value of Financial Instruments
The carrying amounts of cash, receivables and accounts payable approximate
their fair values due to the short-term maturities of these instruments.
Fair values of the amounts due from officers could not be obtained without
incurring excessive costs due to the related party nature of such instruments.
The carrying amount of borrowings pursuant to the Company's loans payable
approximates fair value because the rate on such note is based on current
market rates.
F-75
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures...................... $138,190 $ 90,629 $191,924
Office equipment............................ 96,658 202,181 205,777
Leasehold improvements...................... 71,889 56,994 111,989
-------- -------- --------
306,737 349,804 509,690
Less: accumulated depreciation.............. 230,002 214,908 223,743
-------- -------- --------
$ 76,735 $134,896 $285,947
======== ======== ========
</TABLE>
(4) INCOME TAXES
The combined income tax provision consists of the following current income
taxes:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1996 1997
------- -------
<S> <C> <C>
Federal................................................... $ 4,138 $18,786
State..................................................... 21,567 23,774
------- -------
$25,705 $42,560
======= =======
</TABLE>
Income tax expense differs from amounts computed by applying the statutory
income tax rate to income before taxes as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1996 1997
-------- ---------
<S> <C> <C>
Income tax at statutory rate........................ $ 38,442 $ 289,640
Adjustments resulting from:
Nondeductible expenses............................ 9,845 6,681
State income taxes................................ 19,204 19,233
Income of S corporation not subject to federal
corporate tax.................................... (36,769) (261,396)
Effect of graduated tax rates..................... (5,242) (11,746)
Other............................................. 225 148
-------- ---------
Total income taxes.............................. $ 25,705 $ 42,560
======== =========
</TABLE>
Deferred income tax effects are not significant.
(5) LOANS PAYABLE
The Company has a loan financing agreement with a bank which allows the
Company to borrow up to a maximum of $600,000 and $200,000 for APS and Botal,
respectively, or up to 80% of the outstanding accounts receivable, whichever
is less. The loan is collateralized by a security interest in all of the
outstanding accounts receivable and the Company's property and equipment. The
loan bears interest at prime plus 6.0% and was 14.25% and 14.5% at December
31, 1996 and 1997, respectively.
F-76
<PAGE>
ABSOLUTELY PROFESSIONAL STAFFING, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(6) COMMITMENTS AND CONTINGENCIES
(a) Leases
The Company leases office space under noncancelable lease agreements.
Rental expense for operating leases for the years ended December 31, 1996
and 1997 was approximately $117,219 and $121,733, respectively.
Future minimum lease payments under noncancelable operating leases and
capital leases as of December 31, 1997 are:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASE LEASE
------------------------ --------- -------
<S> <C> <C>
1998................................................... $ 93,607 $11,572
1999................................................... 96,243 5,071
2000................................................... 100,094 5,071
2001................................................... 104,101 4,849
2002................................................... 108,264 --
-------- -------
Total minimum lease payments........................... $502,309 26,563
========
Less: interest component (interest rate 10.5%)......... 5,711
-------
Present value of minimum lease payments................ 20,862
Less: current portion.................................. 5,799
-------
Non-current portion.................................... $15,063
=======
</TABLE>
(b) Legal Proceedings
The Company is a defendant in a lawsuit alleging that a current employee
breached an employment agreement with a former employer. The lawsuit
alleges, among other things, unfair competition, civil conspiracy and
tortuous and malicious interference with prospective economic advantage.
Damages have not been specified. The Company will vigorously defend the
lawsuit, however, the ultimate resolution of such claim is not known.
(7) RELATED-PARTY TRANSACTIONS
At December 31, 1996 and 1997 and March 31, 1998, amounts due from officers
were $28,795, $33,795 and $33,795 (unaudited), respectively, bore interest at
8.5% and were due on-demand.
An officer of the Company has guaranteed the Loans Payable (see note 5).
(8) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-77
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
TOSI Placement Services Inc.
We have audited the accompanying balance sheets of TOSI Placement Services
Inc. as of December 28, 1996 and December 27, 1997 and the statements of
income, shareholder's equity and changes in financial position for each of the
fifty-two week periods in the three-year period ended December 27, 1997, all
expressed in United States dollars. 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 in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance 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 financial position of TOSI Placement Services
Inc. as of December 28, 1996 and December 27, 1997 and the results of its
operations and the changes in its financial position for each of the fifty-two
week periods in the three-year period ended December 27, 1997 in accordance
with generally accepted accounting principles in Canada, which also conform in
all material respects with generally accepted accounting principles in the
United States.
KPMG Peat Marwick LLP
Houston, Texas
June 3, 1998
F-78
<PAGE>
TOSI PLACEMENT SERVICES INC.
BALANCE SHEETS
(STATED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 27, MARCH 28,
ASSETS 1996 1997 1998
------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................... $ 112,215 $ 201,603 $ 439,177
Trade accounts receivable, net of
allowance of 1996--$2,253; 1997--
$2,159 and 1998--$2,400............... 798,904 1,164,114 1,342,799
Prepaid expenses and other assets...... 1,351 5,955 8,430
--------- ---------- ----------
912,470 1,371,672 1,790,406
Capital assets (note 2).................. 39,772 52,669 51,849
--------- ---------- ----------
$ 952,242 $1,424,341 $1,842,255
========= ========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued
liabilities........................... $ 95,423 $ 132,847 $ 140,481
Accrued payroll and related taxes...... 370,543 101,830 158,969
Income taxes payable................... 242 319,150 464,337
--------- ---------- ----------
466,208 553,827 763,787
Due to shareholder (note 3).............. 92,587 -- --
Shareholder's equity:
10% non-cumulative, retractable,
redeemable, non-voting special shares,
no par value; 1,000,000 shares
authorized; 0 shares issued and
outstanding........................... -- -- --
Common shares, no par value; 1,000,000
shares authorized; 100 shares issued
and outstanding....................... 79 79 79
Retained earnings...................... 399,522 909,499 1,106,987
Cumulative translation adjustment...... (6,154) (39,064) (28,598)
--------- ---------- ----------
393,447 870,514 1,078,468
Commitment (note 7)
--------- ---------- ----------
$ 952,242 $1,424,341 $1,842,255
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-79
<PAGE>
TOSI PLACEMENT SERVICES INC.
STATEMENTS OF INCOME
(STATED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
THIRTEEN WEEK
FIFTY-TWO WEEK PERIODS ENDED PERIODS ENDED
-------------------------------------- ----------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 29, MARCH 28,
1995 1996 1997 1997 1998
------------ ------------ ------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service fees.......... $4,829,220 $6,797,443 $9,309,234 $2,317,557 $3,115,724
Permanent placement
fees................. 63,871 70,081 174,382 26,793 31,181
---------- ---------- ---------- ---------- ----------
Revenues from
services........... 4,893,091 6,867,524 9,483,616 2,344,350 3,146,905
Cost of services...... 3,840,683 5,428,944 7,288,978 1,818,861 2,425,886
---------- ---------- ---------- ---------- ----------
Gross profit........ 1,052,408 1,438,580 2,194,638 525,489 721,019
Selling, general and
administrative
expenses............. 824,777 1,002,540 1,323,744 326,212 378,498
Management bonus...... 87,425 284,541 -- -- --
---------- ---------- ---------- ---------- ----------
Operating income.... 140,206 151,499 870,894 199,277 342,521
Other income (expense):
Interest expense...... (12,956) (13,666) (5,436) (2,877) --
Other income.......... 11,370 4,872 7,131 1,287 3,198
---------- ---------- ---------- ---------- ----------
Income before income
taxes.............. 138,620 142,705 872,589 197,687 345,719
Income tax expense.... 32,784 33,148 362,612 80,972 148,231
---------- ---------- ---------- ---------- ----------
Net income.......... $ 105,836 $ 109,557 $ 509,977 $ 116,715 $ 197,488
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-80
<PAGE>
TOSI PLACEMENT SERVICES INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
(STATED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
COMMON SHARES CUMULATIVE
------------- RETAINED TRANSLATION
SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL
------ ------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995...... 100 $79 $ 184,129 $ (9,845) $ 174,363
Net income.................... -- -- 105,836 -- 105,836
Translation adjustment........ -- -- -- 5,627 5,627
--- --- ---------- -------- ----------
Balance, December 30, 1995.... 100 79 289,965 (4,218) 285,826
Net income.................... -- -- 109,557 -- 109,557
Translation adjustment........ -- -- -- (1,936) (1,936)
--- --- ---------- -------- ----------
Balance, December 28, 1996.... 100 79 399,522 (6,154) 393,447
Net income.................... -- -- 509,977 -- 509,977
Translation adjustment........ -- -- -- (32,910) (32,910)
--- --- ---------- -------- ----------
Balance, December 27, 1997.... 100 79 909,499 (39,064) 870,514
Net income (unaudited)........ -- -- 197,488 -- 197,488
Translation adjustment (unau-
dited)....................... -- -- -- 10,466 10,466
--- --- ---------- -------- ----------
Balance, March 28, 1998 (unau-
dited)....................... 100 $79 $1,106,987 $(28,598) $1,078,468
=== === ========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-81
<PAGE>
TOSI PLACEMENT SERVICES INC.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
(STATED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
THIRTEEN WEEK
FIFTY-TWO WEEK PERIODS ENDED PERIODS ENDED
-------------------------------------- --------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 29, MARCH 28,
1995 1996 1997 1997 1998
------------ ------------ ------------ --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash provided by (used
for):
Operations:
Net income............ $ 105,836 $ 109,557 $ 509,977 $ 116,715 $ 197,488
Add item not involving
cash:
Amortization........ 15,715 16,234 21,289 2,965 3,759
Change in operating
assets and
liabilities:
Trade accounts
receivable......... (197,382) (188,441) (365,210) (119,766) (178,685)
Prepaid expenses and
other assets....... (11,326) 13,179 (4,604) 1,150 (2,475)
Accounts payable and
accrued
liabilities........ (29,390) 234,537 87,619 (73,932) 209,960
--------- --------- --------- --------- ---------
(116,547) 185,066 249,071 (72,868) 230,047
Financing:
Increase (decrease) of
due to shareholder... 1,037 (73,762) (92,587) 31,582 --
Other................. 5,627 (1,936) (32,910) (6,106) 10,466
--------- --------- --------- --------- ---------
6,664 (75,698) (125,497) 25,476 10,466
Investments:
Additions to capital
assets............... (29,501) (15,794) (34,186) (10,318) (2,939)
--------- --------- --------- --------- ---------
Increase (decrease) in
cash................... (139,384) 93,574 89,388 (57,710) 237,574
Cash, beginning of peri-
od..................... 158,025 18,641 112,215 112,215 201,603
--------- --------- --------- --------- ---------
Cash, end of period..... $ 18,641 $ 112,215 $ 201,603 $ 54,505 $ 439,177
========= ========= ========= ========= =========
Supplemental informa-
tion:
Cash paid for
interest............. $ 12,956 $ 13,666 $ 5,436 $ 2,877 $ --
Cash paid for taxes... 33,845 36,612 33,162 7,546 7,901
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-82
<PAGE>
TOSI PLACEMENT SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
(STATED IN UNITED STATES DOLLARS)
1. BUSINESS AND ORGANIZATION
Nature of Operation
TOSI Placement Services Inc. (the "Company") is incorporated under the laws
of Ontario, Canada and is engaged in the provision of temporary, contract and
permanent personnel to business, professional services organizations and
government agencies located in Canada.
2. SIGNIFICANT ACCOUNTING POLICIES:
The financial statements are prepared in accordance with accounting
principles generally accepted in Canada which, in the case of the Company,
conform in all material respects with accounting principles generally accepted
in the United States.
Interim financial information:
The interim financial statements as of March 28, 1998 and for the thirteen
week periods ended March 29, 1997 and March 28, 1998 are unaudited, and
certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting
principles, have been omitted. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present
the financial position, results of operations and cash flows with respect to
the interim financial statements have been included. The results of operations
for the interim periods are not necessarily indicative of the results for the
entire fiscal year.
Reporting currency:
The operating and measurement currency of the Company is the Canadian
dollar. The reporting currency used by the Company is the United States
dollar.
The Company uses the current rate method to translate the financial
statements from Canadian dollars into United States dollars. Under the current
rate method, assets and liabilities are translated at the rate of exchange in
effect at the balance sheet date and revenues and expenses at the average rate
for the period. Exchange gains or losses arising from the translation of the
financial statements are included in cumulative translation adjustments as a
separate component of shareholder's equity.
Revenue recognition:
The Company recognizes temporary staffing revenues when the services are
performed. The Company recognizes permanent placement revenues when the
employment offer and acceptance has occurred and employment has commenced.
Gross profit:
Gross profit from the Company's temporary services is determined by
deducting the direct cost of services for temporary revenues (temporary and
contract personnel payroll, vacation pay, statutory holiday pay and payroll
taxes) from total service revenues. Gross profit from the Company's permanent
placement services is equal to revenues, as the primary costs associated with
permanent placement revenues are sales commissions, which increase in
proportion with service revenue from permanent placements. Sales commissions
for permanent placement services are included in selling, general and
administrative expenses.
F-83
<PAGE>
TOSI PLACEMENT SERVICES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Capital assets:
Capital assets are recorded at cost. Amortization is calculated using the
following rates and methods:
<TABLE>
<S> <C> <C>
Computers......................... diminishing balance 30%
Furniture and fixtures............ diminishing balance 20%
Leasehold improvements............ straight-line over the lease term
</TABLE>
Use 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.
Financial instruments:
The carrying values of cash, trade accounts receivable and accounts payable
and accrued liabilities approximate their fair values due to the relatively
short periods to the maturity of the instruments.
3. CAPITAL ASSETS:
<TABLE>
<CAPTION>
DECEMBER 28, 1996
-----------------------------
NET
ACCUMULATED BOOK
COST AMORTIZATION VALUE
-------- ------------ -------
<S> <C> <C> <C>
Computers................................... $ 80,648 $47,566 $33,082
Furniture and fixtures...................... 5,724 2,646 3,078
Leasehold improvements...................... 6,020 2,408 3,612
-------- ------- -------
$ 92,392 $52,620 $39,772
======== ======= =======
<CAPTION>
DECEMBER 27, 1997
-----------------------------
NET
ACCUMULATED BOOK
COST AMORTIZATION VALUE
-------- ------------ -------
<S> <C> <C> <C>
Computers................................... $104,081 $63,126 $40,955
Furniture and fixtures...................... 11,740 4,376 7,364
Leasehold improvements...................... 7,867 3,517 4,350
-------- ------- -------
$123,688 $71,019 $52,669
======== ======= =======
<CAPTION>
MARCH 28, 1998
-----------------------------
NET
ACCUMULATED BOOK
COST AMORTIZATION VALUE
-------- ------------ -------
(UNAUDITED)
<S> <C> <C> <C>
Computers................................... $106,325 $66,878 $39,447
Furniture and fixtures...................... 13,091 4,790 8,301
Leasehold improvements...................... 7,945 3,844 4,101
-------- ------- -------
$127,361 $75,512 $51,849
======== ======= =======
</TABLE>
F-84
<PAGE>
TOSI PLACEMENT SERVICES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. DUE TO SHAREHOLDER:
The amount due to the shareholder of the Company bore interest at prime plus
1% and was not subject to specified terms of repayment. All assets of the
Company have been pledged as security. The amount was fully repaid during
1997. Interest paid was: 1995--$12,956; 1996--$13,666; 1997--$5,436.
5. CONCENTRATION OF CREDIT RISK:
The Company derives substantially all of its revenues from the financial
services industry and government agencies. At December 27, 1997, 40% (December
28, 1996--41%; December 30, 1995--31%) of the Company's trade accounts
receivable are due from customers in the financial services industry and 23%
(December 28, 1996--15%; December 30, 1995--26%) are due from government
agencies.
The Company performs ongoing credit evaluations of its customers to
determine credit to be extended and maintains reserves for potential bad
debts.
6. INCOME TAXES:
<TABLE>
<CAPTION>
THIRTEEN WEEK PERIODS
FIFTY-TWO WEEK PERIODS ENDED ENDED
-------------------------------------- ----------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 29, MARCH 28,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal....... $18,942 $19,214 $232,592 $51,938 $ 96,350
Provincial.... 13,842 13,934 130,020 29,034 51,881
------- ------- -------- ------- --------
Total....... $32,784 $33,148 $362,612 $80,972 $148,231
======= ======= ======== ======= ========
</TABLE>
Income tax expense differs from amounts computed by applying the statutory
rate to income before income taxes as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEK PERIODS
FIFTY-TWO WEEK PERIODS ENDED ENDED
-------------------------------------- ----------------------
DECEMBER 30, DECEMBER 28, DECEMBER 27, MARCH 29, MARCH 28,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax expense at
the statutory rate..... $60,022 $61,791 $387,430 $85,892 $153,499
Increase (decrease)
resulting from:
Small business
deduction............ (32,056) (32,268) (31,783) (6,971) (7,368)
Non-deductible
expenses............. 729 2,787 4,334 443 321
Other................. 4,089 838 2,631 1,608 1,779
------- ------- -------- ------- --------
$32,784 $33,148 $362,612 $80,972 $148,231
======= ======= ======== ======= ========
</TABLE>
Deferred income tax effects are not significant.
F-85
<PAGE>
TOSI PLACEMENT SERVICES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. COMMITMENT:
The Company leases premises and equipment under operating leases. The lessee
under one of the Company's operating leases is secured by an assignment of the
Company's accounts receivable. The annual minimum lease payments are as
follows:
<TABLE>
<S> <C>
1998............................................................. $ 46,486
1999............................................................. 46,486
2000............................................................. 41,256
2001............................................................. 37,166
--------
$171,394
========
</TABLE>
(8) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholder signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-86
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Access Staffing Inc.:
We have audited the accompanying balance sheets of Access Staffing Inc. as
of December 31, 1996 and 1997 and the related statements of operations,
shareholders' equity and cash flows for each of the years then ended. 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 financial position of Access Staffing Inc. as of
December 31, 1996 and 1997 and the results of its operations and its cash
flows for each of the years then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
April 24, 1998
F-87
<PAGE>
ACCESS STAFFING INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
------ ---------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents................ $ 633,821 $1,055,442 $ 824,076
Trade accounts receivable................ 859,520 672,423 667,126
Prepaid expenses and other assets........ 18,030 22,095 26,774
Cash surrender value of life insurance... 72,909 145,297 143,655
---------- ---------- ----------
Total current assets................... 1,584,280 1,895,257 1,661,631
Property and equipment, net................ 27,605 51,961 45,961
Other assets............................... 96,742 95,243 96,845
---------- ---------- ----------
Total assets........................... $1,708,627 $2,042,461 $1,804,437
========== ========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable......................... $ 22,731 $ 20,194 $ 15,431
Accrued expenses......................... 48,944 18,461 12,406
Accrued payroll and related taxes........ 104,337 82,386 111,680
Accrued income taxes..................... 178,786 315,846 34,358
Deferred tax liability................... 304,098 223,874 216,021
---------- ---------- ----------
Total liabilities...................... 658,896 660,761 389,896
Common stock held by ESOP, subject to put
(note 4).................................. 926,469 1,026,862 987,115
Shareholders' equity:
Common stock, no par value; 1,000,000
shares authorized, 296,000 shares issued
and 259,688, 255,013 and 252,961 shares
outstanding at December 31, 1996 and
1997 and March 31, 1998, respectively... 83,500 83,500 83,500
Retained earnings........................ 1,154,990 1,511,596 1,577,400
Treasury stock, 36,312, 40,987 and 43,039
shares at cost at December 31, 1996 and
1997 and March 31, 1998, respectively... (188,759) (213,396) (246,359)
Common stock held by ESOP, subject to put
(note 4)................................ (926,469) (1,026,862) (987,115)
---------- ---------- ----------
Total shareholders' equity............. 123,262 354,838 427,426
---------- ---------- ----------
Total liabilities and shareholders'
equity................................ $1,708,627 $2,042,461 $1,804,437
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-88
<PAGE>
ACCESS STAFFING INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------- ---------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues from services............. $8,866,850 $8,557,510 $2,233,521 $1,915,757
Cost of services................... 6,744,659 6,425,407 1,727,055 1,404,364
---------- ---------- ---------- ----------
Gross profit..................... 2,122,191 2,132,103 506,466 511,393
Selling, general and administrative
expense........................... 1,457,384 1,554,765 335,428 394,295
---------- ---------- ---------- ----------
Operating income................. 664,807 577,338 171,038 117,098
Interest expense................... 4,336 911 -- --
Other income....................... 63,916 32,906 10,705 8,286
---------- ---------- ---------- ----------
Income before income tax expense. 724,387 609,333 181,743 125,384
Income tax expense................. 296,134 252,727 85,674 59,580
---------- ---------- ---------- ----------
Net income....................... $ 428,253 $ 356,606 $ 96,069 $ 65,804
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-89
<PAGE>
ACCESS STAFFING INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK HELD
BY ESOP, SUBJECT TO
COMMON STOCK PUT
--------------- RETAINED TREASURY --------------------
SHARES AMOUNT EARNINGS STOCK SHARES AMOUNT TOTAL
------- ------- ---------- --------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 296,000 $83,500 $ 726,737 $ (5,230) (92,511) $ (487,533) $317,474
Net income.............. -- -- 428,253 -- -- -- 428,253
Change in value of
common stock subject to
put.................... -- -- -- -- -- (622,465) (622,465)
Repurchase of ESOP
shares................. -- -- -- (183,529) 34,823 183,529 --
------- ------- ---------- --------- ------- ----------- --------
Balance, December 31,
1996................... 296,000 83,500 1,154,990 (188,759) (57,688) (926,469) 123,262
Net income.............. -- -- 356,606 -- -- -- 356,606
Change in value of
common stock subject to
put.................... -- -- -- -- -- (125,030) (125,030)
Repurchase of ESOP
shares................. -- -- -- (24,637) 4,675 24,637 --
------- ------- ---------- --------- ------- ----------- --------
Balance, December 31,
1997................... 296,000 83,500 1,511,596 (213,396) (53,013) (1,026,862) 354,838
Net income (unaudited).. -- -- 65,804 -- -- -- 65,804
Change in value of
common stock subject to
put (unaudited)........ -- -- -- -- -- 6,784 6,784
Repurchase of ESOP
shares (unaudited)..... -- -- -- (32,963) 2,052 32,963 --
------- ------- ---------- --------- ------- ----------- --------
Balance, March 31, 1998
(unaudited)............ 296,000 $83,500 $1,577,400 $(246,359) (50,961) $ (987,115) $427,426
======= ======= ========== ========= ======= =========== ========
</TABLE>
See accompanying notes to financial statements.
F-90
<PAGE>
ACCESS STAFFING INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------- --------------------
1996 1997 1997 1998
--------- ---------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $ 428,253 $ 356,606 $ 96,069 $ 65,804
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation..................... 31,342 41,307 4,300 6,000
Change in operating assets and
liabilities:
Trade accounts receivable....... (52,023) 187,097 138,294 5,297
Prepaid expenses and other
assets......................... 10,284 (2,566) 5,376 (6,281)
Cash surrender value of life
insurance...................... (13,121) (72,388) -- 1,192
Accounts payable and accrued
liabilities.................... 98,032 (54,971) (30,054) 18,476
Accrued income taxes............ 178,786 137,060 129,666 (281,488)
Deferred tax provision.......... 97,348 (63,919) (43,991) (7,403)
--------- ---------- -------- ----------
Net cash provided by (used in)
operating activities.......... 778,901 528,226 299,660 (198,403)
--------- ---------- -------- ----------
Cash flows from investing
activities--
purchase of property and
equipment........................ (39,312) (81,968) (35,484) --
--------- ---------- -------- ----------
Cash flows from financing
activities--
repurchase of stock from ESOP..... (183,529) (24,637) -- (32,963)
--------- ---------- -------- ----------
Net change in cash and cash
equivalents....................... 556,060 421,621 264,176 (231,366)
Cash and cash equivalents at
beginning of period............... 77,761 633,821 633,821 1,055,442
--------- ---------- -------- ----------
Cash and cash equivalents at end of
period............................ $ 633,821 $1,055,442 $897,997 $ 824,076
========= ========== ======== ==========
Supplemental disclosure of cash
flow information:
Cash paid for interest............ $ 4,336 $ -- $ -- $ --
========= ========== ======== ==========
Cash paid for taxes............... $ -- $ 193,871 $ -- $ 360,000
========= ========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-91
<PAGE>
ACCESS STAFFING INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Access Staffing Inc. (the Company), incorporated in the state of California
in 1971, provides temporary personnel to business, professional service
organizations, health care facilities and government agencies located
primarily in Northern California.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company provides for workers' compensation insurance, health insurance
and unemployment taxes related to its employees. A deterioration in claims
experience could result in increased costs to the Company in the future. The
Company has recorded an estimate of any existing liabilities under these
programs at each balance sheet date. The Company's future costs could also
increase if there are any material changes in government regulations related
to employment law or employee benefits.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial condition to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant.
The Company operates primarily in the financial service and healthcare
industry. The Company's ability to collect amounts due from customers could be
affected by economic fluctuations in its markets or these industries.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
F-92
<PAGE>
ACCESS STAFFING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using the straight-line method. The estimated
useful lives of property and equipment for purposes of computing depreciation
range from five to eight years.
Income Taxes
The Company has adopted the asset and liability method of accounting for
income taxes in accordance with Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes. Deferred income taxes are
recognized for temporary differences between financial statement and income
tax bases of assets and liabilities and net operating loss carryforwards, and
is measured using enacted tax rates expected to apply to taxable income in
years in which the temporary differences are expected to be recovered or
settled.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. The Company accounts for service fees and the
related direct payroll costs using the accrual method of accounting. Under the
accrual method, service fees relating to worksite employees with earned but
unpaid wages at the end of each period are recognized as unbilled revenues and
the related direct payroll costs for such wages are accrued as a liability
during the period in which wages are earned by the worksite employees.
Subsequent to the end of each period, such wages are paid and the related
service fees are billed.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and accounts
payable approximate their fair values due to the short-term maturities of
these instruments.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures...................... $ 79,249 $ 91,349 $ 91,349
Computers................................... 124,081 165,317 165,317
-------- -------- --------
203,330 256,666 256,666
Less--accumulated depreciation.............. 175,725 204,705 210,705
-------- -------- --------
$ 27,605 $ 51,961 $ 45,961
======== ======== ========
</TABLE>
(4) EMPLOYEE STOCK OWNERSHIP PLAN
Access Staffing Inc. Employee Stock Ownership Plan (ESOP) is a defined
contribution plan which covers all employees as of the first of the following
month in which the employee has completed 1,000 hours of service and has
worked a period of 12 consecutive months.
In 1990, the ESOP borrowed $1,000,000 from a bank, in the form of a seven-
year loan. The ESOP used the proceeds of the loan to purchase 94,000 (31.76%)
shares of common stock of the Company directly from existing
F-93
<PAGE>
ACCESS STAFFING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
shareholders, which were utilized to guarantee the loan. The loan was repaid
in 1996. Interest expense incurred on such debt in 1996 was $4,336.
Prior to December 31, 1996, the guaranteed ESOP borrowing was reflected as a
liability on the Company's balance sheet, with an offsetting amount recorded
as reduction to common stock held by ESOP, subject to put. As the Company made
contributions to the ESOP, these contributions were used to repay the loan. As
the principal amount of the loan was repaid, the contra account included in
common stock held by ESOP, subject to put was reduced.
The Company recorded $140,000 of ESOP compensation expense during 1996,
utilizing the shares allocated method, related to the Company's 1996 ESOP
contribution. The Company did not make any contributions to the ESOP during
1997.
In 1996, the Company agreed to repurchase 39,498 shares of common stock held
by the ESOP at $5.27 per share, which represents the latest fair value per the
annual appraisal. During 1996 the repurchase of 34,823 of these shares was
finalized with the repurchase of the remaining 4,675 shares completed in 1997.
In accordance with the terms of the ESOP, all of these shares were repurchased
at the 1995 appraised fair value. At December 31, 1997 the ESOP owned 53,013
shares, all of which were allocated to participants.
In accordance with the requirements of the ESOP, the Company is required to
repurchase any vested shares at the current fair value. As of December 31,
1997, there were approximately 18,000 shares vested with an estimated fair
value of $19.37 per share, based on an independent appraisal.
The shares of the Company's common stock owned by the ESOP are classified
outside of shareholders' equity because of the put feature explained in the
preceding paragraph. Such shares are valued based on the estimated fair value,
as determined by independent appraisal, at the balance sheet date. Changes in
such estimated fair value are recorded directly to shareholders' equity. The
ESOP will be terminated in conjunction with the transaction with Work
International as discussed in note 9.
(5) EMPLOYEE BENEFIT PLAN
The Company has the Access Staffing, Inc. 401(k) Plan. Employees with 1,000
hours of service in a plan year may participate in the Plan. Employees may
elect to contribute up to the lesser of 15% of compensation or the maximum
allowable under the Internal Revenue Code, as defined. The Company may make
discretionary contributions to the Plan. During 1996 and 1997, the Company did
not make any contributions to the Plan.
F-94
<PAGE>
ACCESS STAFFING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) INCOME TAXES
Income tax (benefit) expense consisted of the following components:
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
----------------- -----------------
1996 1997 1997 1998
-------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal................................. $140,907 $248,686 $102,910 $53,161
State................................... 57,879 67,960 26,755 13,822
-------- -------- -------- -------
198,786 316,646 129,665 66,983
-------- -------- -------- -------
Deferred:
Federal................................. 90,515 (56,762) (32,349) (8,131)
State................................... 6,833 (7,157) (11,642) 728
-------- -------- -------- -------
97,348 (63,919) (43,991) (7,403)
-------- -------- -------- -------
Total................................. $296,134 $252,727 $ 85,674 $59,580
======== ======== ======== =======
</TABLE>
Income tax expense differs from amounts computed by applying the statutory
rate to income before income tax expense as follows:
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------ ---------------
1996 1997 1997 1998
-------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Income tax expense at the statutory rate... $246,292 $207,173 $61,793 $42,631
Increase (decrease) resulting from:
State income tax, net of benefit for
federal deduction....................... 42,710 40,130 17,659 9,123
Nondeductible expenses................... 16,890 23,006 -- 3,848
Other.................................... (9,758) (17,582) 6,222 3,978
-------- -------- ------- -------
$296,134 $252,727 $85,674 $59,580
======== ======== ======= =======
</TABLE>
The net deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred income tax assets--accrued expenses...... $ 70,017 $ 80,429 $ 89,069
-------- -------- ---------
Deferred income tax liabilities:
Property and equipment.......................... 9,028 16,187 16,187
Accounts receivable............................. 292,237 228,624 226,823
Prepaid expenses and other...................... 7,536 7, 053 8,913
State taxes..................................... 65,314 52,439 53,167
-------- -------- ---------
Total......................................... 374,115 304,303 305,090
-------- -------- ---------
Net deferred income tax liabilities............... $304,098 $223,874 $ 216,021
======== ======== =========
</TABLE>
F-95
<PAGE>
ACCESS STAFFING INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases (except
those with lease terms of a month or less that were not renewed) for the years
ended December 31, 1996 and 1997 was approximately $59,161 and $92,805,
respectively.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998.......................................................... $104,849
1999.......................................................... 77,068
2000.......................................................... 43,150
2001.......................................................... 41,800
2002.......................................................... 7,013
--------
Total minimum lease payments................................ $273,880
========
</TABLE>
(8) SIGNIFICANT CUSTOMERS
One customer accounted for approximately 15.8% of the Company's 1996
revenues. During 1997, three customers accounted for approximately 21.8%,
18.5% and 17.1%, respectively, of the Company's revenue. The loss of these
customers could have a material adverse impact on the operations of the
Company.
(9) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International. In conjunction with this transaction, the Employee Stock
Ownership Plan as discussed in note 4 will be terminated.
F-96
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Task Management, Inc.:
We have audited the accompanying balance sheets of Task Management, Inc. as
of December 31, 1996 and 1997, and the related statements of operations and
retained earnings and cash flows for the years then ended. 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 financial position of Task Management, Inc. at
December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
May 22, 1998
F-97
<PAGE>
TASK MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
ASSETS 1996 1997 1998
------ ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash...................................... $ 422,589 $ 707 $ 334,543
Accounts receivable less allowance for
doubtful accounts of $43,000 in 1997 and
1998..................................... 1,146,626 1,067,257 987,938
---------- ---------- ----------
Total current assets.................... 1,569,215 1,067,964 1,322,481
Furniture and equipment, net................ 21,849 16,839 25,006
Loans receivable--officers.................. -- -- 207,761
Other....................................... 833 833 833
---------- ---------- ----------
Total assets............................ $1,591,897 $1,085,636 $1,556,081
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
------------------------------------
Current liabilities:
Accounts payable.......................... $ 93,106 $ 314,643 $ 328,055
Accrued payroll and payroll taxes......... 281,620 216,807 441,965
Income taxes payable...................... 549,500 1,030,700 1,050,700
Deferred income taxes..................... 329,600 -- --
---------- ---------- ----------
Total liabilities....................... 1,253,826 1,562,150 1,820,720
---------- ---------- ----------
Stockholders' equity (deficit):
Common stock, $1.00 par value; 1,000
shares authorized; 1,000 shares issued
and outstanding.......................... 1,000 1,000 1,000
Additional paid in capital................ 4,000 4,000 4,000
Retained earnings (deficit)............... 333,071 (481,514) (269,639)
---------- ---------- ----------
Total stockholders' equity (deficit).... 338,071 (476,514) (264,639)
---------- ---------- ----------
$1,591,897 $1,085,636 $1,556,081
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-98
<PAGE>
TASK MANAGEMENT, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------- ---------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Service fees................... $4,651,835 $5,528,094 $1,577,042 $1,686,333
Permanent placement fees....... 587,010 738,952 224,964 225,000
---------- ---------- ---------- ----------
Revenues from services....... 5,238,845 6,267,046 1,802,006 1,911,333
Cost of services................. 3,431,201 4,118,973 1,174,976 1,219,784
---------- ---------- ---------- ----------
Gross profit................. 1,807,644 2,148,073 627,030 691,549
Selling, general and
administrative expenses......... 1,085,531 2,830,096 408,640 460,295
---------- ---------- ---------- ----------
Operating income (loss)...... 722,113 (682,023) 218,390 231,254
Interest income, net............. 7,812 19,288 6,929 871
---------- ---------- ---------- ----------
Income (loss) before income
tax expense................. 729,925 (662,735) 225,319 232,125
Income tax expense............... 548,550 151,850 115,100 20,250
---------- ---------- ---------- ----------
Net income (loss)............ 181,375 (814,585) 110,219 211,875
Retained earnings (deficit),
beginning of period............. 151,696 333,071 333,071 (481,514)
---------- ---------- ---------- ----------
Retained earnings (deficit), end
of period....................... $ 333,071 $ (481,514) $ 443,290 $ (269,639)
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-99
<PAGE>
TASK MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------------- -------------------
1996 1997 1997 1998
--------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................. $ 181,375 $(814,585) $110,219 $ 211,875
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Noncash charges and credits:
Depreciation and amortization. 6,141 6,950 1,737 1,600
Deferred income taxes......... 302,500 (329,600) (79,700) --
Changes in assets and
liabilities:
Accounts receivable........... (783,836) 79,369 (63,256) 79,319
Accounts payable.............. 22,648 221,537 236,509 13,412
Accrued payroll and payroll
taxes........................ 41,805 (64,813) 3,562 225,158
Income taxes payable.......... 245,800 481,200 194,800 20,000
--------- --------- -------- ---------
Net cash provided by (used
in) operating activities... 16,433 (419,942) 403,871 551,364
--------- --------- -------- ---------
Cash flows from investing
activities:
Payments for purchase of furniture
and equipment.................... (9,599) (1,940) -- (9,767)
Loans receivable--officers........ -- -- (50,320) (207,761)
--------- --------- -------- ---------
Net cash used in investing
activities................. (9,599) (1,940) (50,320) (217,528)
--------- --------- -------- ---------
Cash flows from financing
activities:
Repayment of notes payable........ (100,000) -- -- --
--------- --------- -------- ---------
Net increase (decrease) in cash..... (93,166) (421,882) 353,551 333,836
Cash at beginning of period......... 515,755 422,589 422,589 707
--------- --------- -------- ---------
Cash at end of period............... $ 422,589 $ 707 $776,140 $ 334,543
========= ========= ======== =========
Cash paid during the period for:
Income taxes...................... $ 250 $ 250 $ -- $ 250
========= ========= ======== =========
Interest.......................... $ 5,923 $ 1,840 $ 156 $ --
========= ========= ======== =========
</TABLE>
See accompanying notes to financial statements.
F-100
<PAGE>
TASK MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operation
Task Management, Inc. (the "Company") was incorporated as a C corporation in
Connecticut on July 1, 1990. Beginning July 1, 1997, the Company elected to be
treated as a subchapter S corporation for federal tax purposes. The Company's
principal business is to provide temporary and permanent information
technology personnel to businesses located principally in the northeastern
United States.
(2)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported and disclosed in the financial
statements and related notes. Actual results could differ from those
estimates.
Cash
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with original maturities of ninety days or less to
be cash.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial condition to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant. The Company's ability to
collect amounts due from customers could be affected by economic fluctuations
in its markets.
Furniture and Equipment
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets, which range from three to seven years. Maintenance
and repairs are charged to expense as incurred.
Income Taxes
Effective July 1, 1997, the Company elected to be taxed as an S Corporation
for federal income tax purposes. Income tax, therefore, became principally the
responsibility of the Company's shareholders as of that date except that Task
Management, Inc. may be subject to corporate-level tax on the net unrealized
built-in gain at July 1, 1997 that is realized during the ten-year period
after the conversion. The net unrealized built-in gain at
F-101
<PAGE>
TASK MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
July 1, 1997 is the excess of the fair value of the Company's assets over the
aggregate adjusted tax bases of those assets. The taxable built-in gain is
that portion of the gain on the disposition of an asset during the ten-year
period subsequent to the conversion that is attributable to a difference
between the fair market value and the tax basis of the asset on the conversion
date. As the Company is a cash basis taxpayer, the excess of its accounts
receivable over its accounts payable and accrued liabilities also represents a
built-in taxable gain.
For periods prior to July 1, 1997, the Company was taxed as a C Corporation
and deferred tax assets and liabilities were recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities were measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
Revenue and Cost Recognition
The Company's revenues include service fees paid by its clients under client
service agreements. The Company accounts for service fees and the related
direct payroll costs using the accrual method of accounting. Under the accrual
method, service fees relating to worksite employees with earned but unpaid
wages at the end of each period are recognized as unbilled revenues and the
related direct payroll costs for such wages are accrued as a liability during
the period in which wages are earned by the worksite employees. Subsequent to
the end of each period, such wages are paid and the related service fees are
billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment in each of the periods presented is immaterial.
Gross Profit
Gross profit is determined by deducting the direct costs 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 placement.
Consistent with industry practice, these costs are included in selling,
general and administrative expenses.
Fair Value of Financial Instruments
The carrying amounts of cash, receivables and accounts payable approximate
their fair values due to the short-term maturities of these instruments.
F-102
<PAGE>
TASK MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3)FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture..................................... $11,228 $13,168 $13,168
Office equipment.............................. 32,091 32,091 41,858
------- ------- -------
43,319 45,259 55,026
Less accumulated depreciation................. 21,470 28,420 30,020
------- ------- -------
$21,849 $16,839 $25,006
======= ======= =======
</TABLE>
(4)SHORT-TERM DEBT
On April 22, 1998, the Company renewed a credit facility with a financial
institution which provides for borrowings up to $1,000,000, an increase of
$500,000 from the previous credit facility. Under the credit facility, the
Company pays interest at the bank's prime rate on any outstanding balance. The
prime rate of interest was 8.25% and 8.50% at December 31, 1996 and 1997,
respectively. At December 31, 1996 and 1997, the Company had no borrowings
under this credit facility. This credit line expires on April 30, 2002.
(5) INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------ -----------------
1996 1997 1997 1998
-------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Current:
Federal................................ $212,200 $ 383,600 $170,300 $ --
State and local, net of federal
benefit............................... 33,850 97,850 24,500 20,250
-------- --------- -------- -------
246,050 481,450 194,800 20,250
-------- --------- -------- -------
Deferred:
Federal................................ 244,300 (266,800) (64,500) --
State and local, net of federal
benefit............................... 58,200 (62,800) (15,200) --
-------- --------- -------- -------
302,500 (329,600) (79,700) --
-------- --------- -------- -------
$548,550 $ 151,850 $115,100 $20,250
======== ========= ======== =======
</TABLE>
F-103
<PAGE>
TASK MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34% to income (loss) before income tax expense as a
result of the following:
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------ ----------------
1996 1997 1997 1998
-------- --------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Computed "expected" tax expense (benefit). $248,200 $(225,300) $ 76,600 $ --
Increase in income taxes resulting from:
Permanent differences................... 1,350 -- -- --
State taxes, net of federal benefit..... 92,050 35,050 9,300 20,000
Reversal of income taxes and income tax
benefit due to election of S
corporation status..................... -- 225,300
Other additional accrued tax items...... 206,950 116,800 29,200 250
-------- --------- -------- -------
$548,550 $ 151,850 $115,100 $20,250
======== ========= ======== =======
</TABLE>
At December 31, 1996, temporary differences and related deferred taxes
resulted primarily from the tax effect of filing the Company's income tax
returns using the cash basis of accounting whereas these financial statements
are prepared on an accrual basis. There are no deferred taxes as of December
31, 1997 as a result of the Company's election to be taxed as an S
corporation.
(6) LEASES
The Company leases office space under operating leases with expiration dates
through 1999. No assets were held under capital leases at December 31, 1996 or
1997.
Future minimum lease payments under all non-cancelable operating leases at
December 31, 1997:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................... $13,937
1999........................................................... 1,515
-------
Total minimum lease payments................................. $15,452
=======
</TABLE>
Rent expense under all operating leases was $14,507 and $11,733 in 1996 and
1997, respectively.
(7)CONTINGENCIES
In the ordinary course of its business, the Company has been involved in
various lawsuits, including claims related to the actions of its clients and
its employees. Management believes that the ultimate resolution of such claims
will not have a materially adverse effect on the Company's financial position,
results of operations or liquidity.
(8)BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in the Metropolitan New York
Tri-State area. One customer accounted for $983,000 of revenues in 1997
representing approximately 16% of total revenues.
(9) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its stockholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-104
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
WSI Personnel Services, Inc.:
We have audited the accompanying balance sheets of WSI Personnel Services,
Inc. as of December 31, 1996 and 1997, and the related statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997. 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 financial position of WSI Personnel Services,
Inc. as of December 31, 1996 and 1997, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 27, 1998
F-105
<PAGE>
WSI PERSONNEL SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
ASSETS 1996 1997 1998
------ -------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 5,932 $ 68,836 $ 45,638
Trade accounts receivable, net of allowance
of $32,571 in 1996, $91,000 in 1997, and
$96,363 in 1998, respectively............. 667,912 943,541 966,425
Prepaid expenses and other assets.......... 3,725 2,121 1,651
-------- ---------- ----------
Total current assets..................... 677,569 1,014,498 1,013,714
Property and equipment, net.................. 28,531 37,003 41,718
Loan to officer.............................. 17,778 17,778 17,778
-------- ---------- ----------
Total assets............................. $723,878 $1,069,279 $1,073,210
======== ========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Line of credit............................. $ 94,000 $ 185,000 $ --
Accrued income taxes....................... -- -- 58,107
Deferred tax liability..................... 220,579 194,527 136,420
Accounts payable and accrued liabilities... 86,813 102,679 125,299
-------- ---------- ----------
Total current liabilities................ 401,392 482,206 319,826
-------- ---------- ----------
Shareholders' equity:
Common stock, no par value; 100,000 shares
authorized, 2,000 shares issued and 1,800
shares outstanding........................ 2,094 2,094 2,094
Treasury stock, at cost, 200 shares held... (22,222) (22,222) (22,222)
Retained earnings.......................... 342,614 607,201 773,512
-------- ---------- ----------
Total shareholders' equity............... 322,486 587,073 753,384
-------- ---------- ----------
Total liabilities and shareholders'
equity.................................. $723,878 $1,069,279 $1,073,210
======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-106
<PAGE>
WSI PERSONNEL SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service fees.......... $2,073,667 $3,947,318 $5,635,273 $1,195,045 $1,533,334
Permanent placement
fees................. 76,659 52,459 93,018 15,066 17,873
---------- ---------- ---------- ---------- ----------
Revenues from
services........... 2,150,326 3,999,777 5,728,291 1,210,111 1,551,207
Cost of services........ 1,533,980 2,813,410 3,872,283 834,039 1,059,546
---------- ---------- ---------- ---------- ----------
Gross profit........ 616,346 1,186,367 1,856,008 376,072 491,661
Selling, general and
administrative
expenses............... 549,134 945,633 1,623,622 206,200 326,579
---------- ---------- ---------- ---------- ----------
Operating income.... 67,212 240,734 232,386 169,872 165,082
Other income (expense),
net.................... 2,356 2,240 6,149 (6,327) 1,229
---------- ---------- ---------- ---------- ----------
Income before income
taxes.............. 69,568 242,974 238,535 163,545 166,311
Income tax expense
(benefit).............. 26,606 95,437 (26,052) (26,052) --
---------- ---------- ---------- ---------- ----------
Net income.......... $ 42,962 $ 147,537 $ 264,587 $ 189,597 $ 166,311
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-107
<PAGE>
WSI PERSONNEL SERVICES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON TREASURY RETAINED
STOCK STOCK EARNINGS TOTAL
------ -------- -------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1994................... $2,094 $(22,222) $152,115 $131,987
Net income................................... -- -- 42,962 42,962
------ -------- -------- --------
Balance, December 31, 1995................... 2,094 (22,222) 195,077 174,949
Net income................................... -- -- 147,537 147,537
------ -------- -------- --------
Balance, December 31, 1996................... 2,094 (22,222) 342,614 322,486
Net income................................... -- -- 264,587 264,587
------ -------- -------- --------
Balance, December 31, 1997................... 2,094 (22,222) 607,201 587,073
Net income (unaudited)....................... -- -- 166,311 166,311
------ -------- -------- --------
Balance, March 31, 1998 (unaudited).......... $2,094 $(22,222) $773,512 $753,384
====== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-108
<PAGE>
WSI PERSONNEL SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1995 1996 1997 1997 1998
-------- --------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.............. $ 42,962 $ 147,537 $ 264,587 $189,597 $ 166,311
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation.......... 5,374 7,611 10,485 2,028 2,682
Provision for deferred
income taxes......... 26,606 95,437 (26,052) (92,547) (58,107)
Change in operating
assets and
liabilities:
Trade accounts
receivable.......... (41,533) (326,401) (275,629) 489 (22,884)
Prepaid expenses and
other assets........ (567) (2,600) 1,605 4,830 470
Accrued income taxes. -- -- -- 66,495 58,107
Accounts payable and
accrued liabilities. (2,468) 52,385 15,865 26,080 22,620
-------- --------- --------- -------- ---------
Net cash provided by
(used in) operating
activities......... 30,374 (26,031) (9,139) 196,972 169,199
-------- --------- --------- -------- ---------
Cash flows from investing
activities:
Purchase of property and
equipment.............. (9,704) (16,785) (18,957) (3,501) (7,397)
-------- --------- --------- -------- ---------
Cash flows from financing
activities:
Bank overdraft.......... 36,405 (36,405) -- -- --
Proceeds (repayments)
associated with line of
credit, net............ (55,000) 79,000 91,000 (94,000) (185,000)
-------- --------- --------- -------- ---------
Net cash provided by
(used in) financing
activities......... (18,595) 42,595 91,000 (94,000) (185,000)
-------- --------- --------- -------- ---------
Net increase (decrease) in
cash and cash
equivalents.............. 2,075 (221) 62,904 99,471 (23,198)
Cash and cash equivalents
at beginning of period... 4,078 6,153 5,932 5,932 68,836
-------- --------- --------- -------- ---------
Cash and cash equivalents
at end of period......... $ 6,153 $ 5,932 $ 68,836 $105,403 $ 45,638
======== ========= ========= ======== =========
Supplemental disclosure of
cash flow information -
cash paid for interest... $ 1,595 $ 1,126 $ 1,328 $ 1,275 $ 682
======== ========= ========= ======== =========
</TABLE>
See accompanying notes to combined financial statements.
F-109
<PAGE>
WSI PERSONNEL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
WSI Personnel Services, Inc. (the Company), incorporated in the state of
Colorado, provides clerical and technical temporary and permanent personnel to
health care organizations, professional service organizations, and government
agencies located primarily in the metropolitan Denver area.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company provides for workers' compensation, health insurance and
unemployment taxes related to its employees. A deterioration in claims
experience could result in increased costs to the Company in the future. The
Company has recorded an estimate of any existing liabilities under these
programs at each balance sheet date. The Company's future costs could also
increase if there are any material changes in government regulations related
to employment law or employee benefits.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. Historically, bad debts have not been
significant.
The Company operates primarily in the healthcare industry. The Company's
ability to collect amounts due from customers could be affected by adverse
economic fluctuations in its Metropolitan Denver market or this industry.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
F-110
<PAGE>
WSI PERSONNEL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using the straight-line method. The estimated
useful lives of property and equipment for purposes of computing depreciation
range from three to seven years.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
On January 1, 1997, the Company elected to be taxed as an S corporation and
accordingly all tax attributes of the Company pass through to its
shareholders, except for income taxes attributable to the difference between
the fair market value of the Company's assets and the tax basis of the assets
at the date of conversion to an S corporation (built-in-gain). Accordingly, a
provision for income taxes payable is required when any portion of the built-
in gain is recognized within ten years after the conversion. As a result of
the election, in 1997, the Company recognized a net tax benefit in the amount
of $26,052, which represents recognition of the gross deferred liability for
taxes payable on recognized built in gains net of the elimination of deferred
taxes recorded at December 31, 1996.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salaries and wages, (b) employment related taxes and
(c) workers' compensation insurance premiums. The Company accounts for service
fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment in each of the periods presented is immaterial.
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.
F-111
<PAGE>
WSI PERSONNEL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and accounts
payable approximate their fair values due to the short-term maturities of
these instruments.
The carrying amounts of borrowings pursuant to the Company's revolving line
of credit agreement approximate fair value because the rates on such
agreements are variable, based on current market rates.
The fair value of the loan to officer (see note 8) could not be assessed
without incurring excessive costs due to the related party nature of the
instrument.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
MARCH 31,
1996 1997 1998
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures.............................. $ 6,887 $12,778 $12,778
Office equipment.................................... 44,958 56,810 64,207
------- ------- -------
51,845 69,588 76,985
Less--accumulated depreciation...................... 23,314 32,585 35,267
------- ------- -------
$28,531 $37,003 $41,718
======= ======= =======
</TABLE>
(4) LINE OF CREDIT
The Company maintains a revolving line of credit that allows for borrowings
of up to $200,000. Borrowings made under this arrangement bear interest at
prime plus 1% (9.5% at December 31, 1997). The line is secured by
substantially all of the business assets. The line is guaranteed by the
shareholders of the Company. The agreement was renegotiated March 13, 1998 to
increase the borrowing limit to $250,000.
The weighted average interest rates for the years ended December 31, 1995,
1996 and 1997 were 8.5%, 8.3% and 8.5%, respectively.
(5) INCOME TAXES
See note 2 for discussion of the Company's election, effective January 1,
1997, to be treated as an S corporation.
F-112
<PAGE>
WSI PERSONNEL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- --------
<S> <C> <C> <C>
Year ended December 31, 1995:
U.S. federal..................................... $-- $ 23,111 $ 23,111
State and local.................................. -- 3,495 3,495
--- -------- --------
$-- $ 26,606 $ 26,606
=== ======== ========
Year ended December 31, 1996:
U.S. federal..................................... $-- $ 83,214 $ 83,214
State and local.................................. -- 12,223 12,223
--- -------- --------
$-- $ 95,437 $ 95,437
=== ======== ========
Year ended December 31, 1997:
U.S. federal..................................... $-- $(26,052) $(26,052)
State and local.................................. -- -- --
--- -------- --------
$-- $(26,052) $(26,052)
=== ======== ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- MARCH 31,
1996 1997 1998
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Accounts payable principally due to
difference in accounting methods.......... $ 33,857 $ -- $ --
Net operating loss carryforwards........... 9,869 -- --
Other...................................... 7,281 -- --
--------- --------- ---------
Total gross deferred tax assets.............. 51,007 -- --
--------- --------- ---------
Less valuation allowance..................... -- -- --
--------- --------- ---------
Net deferred tax assets...................... 51,007 -- --
--------- --------- ---------
Deferred tax liabilities:
Accounts receivable, principally due to
difference in accounting methods.......... (260,486) -- --
Plant and equipment, principally due to
differences in depreciation............... (11,100) -- --
Built-in gains............................. -- (194,527) (136,420)
--------- --------- ---------
Total gross deferred tax liabilities......... (271,586) (194,527) (136,420)
--------- --------- ---------
Net deferred tax liability................... $(220,579) $(194,527) $(136,420)
========= ========= =========
</TABLE>
The allocated tax expense differed from the amounts computed by applying the
U.S. federal tax rate of 34% in 1995 and 1996 to income before income taxes as
a result of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Computed tax................................................... $23,653 $82,611
State taxes.................................................... 3,495 12,223
Other.......................................................... (542) 603
------- -------
$26,606 $95,437
======= =======
</TABLE>
F-113
<PAGE>
WSI PERSONNEL SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases for
years ended December 31, 1995, 1996 and 1997 was approximately $12,850,
$28,630 and $40,250, respectively. Rental expense for the three months ended
March 31, 1998 was $12,139 (unaudited).
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER
--------------------
<S> <C>
1998........................................................... $48,102
1999........................................................... 18,943
2000........................................................... 4,908
2001........................................................... 4,908
2002........................................................... 4,090
-------
Total minimum lease payments................................. $80,951
=======
</TABLE>
(7) CONTINGENCIES
In the ordinary course of business the Company may be threatened with or
named as a defendant in a lawsuit, including claims related to the actions of
its clients and employees. The Company is not involved in any material
threatened or pending litigation at December 31, 1997.
(8) RELATED PARTY TRANSACTIONS
The Company has a note receivable from a shareholder totaling $17,778 at
December 31, 1996 and 1997. The note bears interest of 7.75% annually and is
due and payable on December 31, 1999.
The Company paid consulting fees to shareholders and affiliates totaling
$201,000, $285,000, $560,000 and $60,000 (unaudited) for the years ended
December 31, 1995, 1996 and 1997 and three months ended March 31, 1998,
respectively.
(9) SIGNIFICANT CUSTOMERS
The top ten customers represented approximately 25%, 33% and 33% of the
Company's revenues for 1995, 1996 and 1997, respectively. During the years
ended December 31, 1996 and 1997 and the three months ended March 31, 1998,
one customer accounted for approximately 9%, 11% and 27% (unaudited),
respectively, of the Company's revenues
(10) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-114
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Boards of Directors
Core Personnel, Inc., and
Core Personnel of Arlington, Inc.:
We have audited the accompanying combined balance sheet of Core Personnel,
Inc. and Core Personnel of Arlington, Inc., as of December 31, 1997 and the
related combined statements of operations, shareholders' equity and cash flows
for the year then ended. These combined financial statements are the
responsibility of the Companies' managements. Our responsibility is to express
an opinion on these combined financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Core Personnel,
Inc. and Core Personnel of Arlington, Inc. as of December 31, 1997 and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 30, 1998
F-115
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1997 1998
------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 42,374 $ 38,684
Trade accounts receivable, net of allowance of
$20,000............................................ 544,689 518,668
Available-for-sale securities, at fair value........ 200,992 321,992
Prepaid expenses and other assets................... 13,803 10,182
-------- --------
Total current assets.............................. 801,858 889,526
Property and equipment, net........................... 25,927 25,397
Loans receivable from shareholder..................... 55,334 52,859
-------- --------
Total assets...................................... $883,119 $967,782
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Line of credit...................................... $ 25,282 $ 23,000
Note payable........................................ 4,530 234
Accounts payable.................................... 21,080 21,710
Accrued payroll and related taxes................... 77,485 71,119
Other current liabilities........................... 9,799 --
Current taxes payable............................... 40,614 62,705
Deferred tax liabilities............................ 193,227 204,738
-------- --------
Total current liabilities......................... 372,017 383,506
-------- --------
Shareholders' equity:
Core Personnel, Inc., common stock, $1 par value;
15,000 shares authorized, issued and outstanding... 15,000 15,000
Core Personnel of Arlington, Inc., common stock, $1
par value; 1,100 shares authorized; 1,000 shares
issued and outstanding............................. 1,000 1,000
Retained earnings................................... 487,751 560,925
Unrealized gains in value of available-for-sale
securities......................................... 7,351 7,351
-------- --------
Total shareholders' equity........................ 511,102 584,276
-------- --------
Total liabilities and shareholders' equity........ $883,119 $967,782
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-116
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------------
1997 1997 1998
------------ -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Service fees................................. $4,092,493 $912,123 $1,069,360
Permanent placement fees..................... 92,355 42,985 31,115
---------- -------- ----------
Revenues from services..................... 4,184,848 955,108 1,100,475
Cost of services............................... 2,995,419 680,965 783,002
---------- -------- ----------
Gross profit................................. 1,189,429 274,143 317,473
Selling, general and administrative expense.... 864,872 177,618 193,934
---------- -------- ----------
Operating income............................. 324,557 96,525 123,539
Interest expense............................... 3,392 1,802 630
Other expense.................................. 4,094 27 133
---------- -------- ----------
Income before income tax expense............. 317,071 94,696 122,776
Income tax expense............................. 113,167 33,797 49,602
---------- -------- ----------
Net income..................................... $ 203,904 $ 60,899 $ 73,174
========== ======== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-117
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
CORE GAINS
PERSONNEL OF (LOSSES)
ARLINGTON, IN VALUE
CORE PERSONNEL, INC. INC. COMMON OF
COMMON STOCK STOCK AVAILABLE-
-------------------- ------------- RETAINED FOR-SALE
SHARES AMOUNT SHARES AMOUNT EARNINGS SECURITIES TOTAL
-------------------- ------ ------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997................... 450 $ 450 550 $ 550 $298,847 $7,594 $307,441
Issuance of common
stock.................. 14,550 14,550 450 450 -- -- 15,000
Net income.............. -- -- -- 203,904 -- 203,904
Dividends............... -- -- -- -- (15,000) -- (15,000)
Unrealized loss on
investments............ -- -- -- -- -- (243) (243)
--------- ---------- ----- ------ -------- ------ --------
Balance, December 31,
1997................... 15,000 15,000 1,000 1,000 487,751 7,351 511,102
Net income (unaudited).. -- -- -- -- 73,174 -- 73,174
--------- ---------- ----- ------ -------- ------ --------
Balance, March 31, 1998
(unaudited)............ 15,000 $ 15,000 1,000 $1,000 $560,925 $7,351 $584,276
========= ========== ===== ====== ======== ====== ========
</TABLE>
See accompanying notes to combined financial statements.
F-118
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -----------------
1997 1997 1998
------------ ------- --------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................... $203,904 $56,439 $ 73,174
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation................................ 7,672 648 3,084
Allowance for doubtful accounts............. 26,346 -- --
Deferred income taxes....................... 50,097 14,962 11,511
Change in operating assets and liabilities:
Trade accounts receivable.................. (109,577) (66,100) 26,021
Prepaid expenses and other assets.......... 2,027 1,348 3,621
Accounts payable and accrued liabilities... 46,852 2,968 (15,535)
Current taxes payable...................... 40,614 23,295 22,091
-------- ------- --------
Net cash provided by operating activities. 267,935 33,560 123,967
-------- ------- --------
Cash flows from investing activities:
Purchases of property and equipment........... (28,792) (1,463) (2,554)
Purchase of investments....................... (282,683) (15,000) (121,000)
Proceeds on sales of investments.............. 119,000 -- --
Loans receivable from shareholder............. (30,052) (10,572) 2,475
-------- ------- --------
Net cash used in investing activities..... (222,527) (27,035) (121,079)
-------- ------- --------
Cash flows from financing activities:
Payments on line of credit.................... -- -- (2,282)
Principal payments on note payable............ (24,952) (5,149) (4,296)
Issuance of common stock...................... 15,000 -- --
Dividends..................................... (15,000) -- --
-------- ------- --------
Net cash used in financing activities..... (24,952) (5,149) (6,578)
-------- ------- --------
Net increase (decrease) in cash and cash
equivalents................................... 20,456 1,376 (3,690)
Cash and cash equivalents at beginning of
period........................................ 21,918 21,918 42,374
-------- ------- --------
Cash and cash equivalents at end of period..... $ 42,374 $23,294 $ 38,684
======== ======= ========
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest...... $ 4,809 $ 1,802 $ 630
======== ======= ========
Cash paid during the period for income taxes.. $ 26,598 $ -- $ 16,000
======== ======= ========
</TABLE>
See accompanying notes to combined financial statements.
F-119
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Core Personnel, Inc. and Core Personnel of Arlington, Inc. (collectively
"the Company") were incorporated in the state of Virginia in 1971 and 1986,
respectively. Core Personnel, Inc. and Core Personnel of Arlington, Inc. have
common ownership. As common control exists among the entities, combined
financial statements are presented. The Company specializes in the placement
of temporary and staffing personnel to businesses, professional service
organizations, health care facilities and government agencies located
primarily in Maryland, Virginia and Washington, DC.
The accompanying combined financial statements include the accounts of Core
Personnel, Inc. and Core Personnel of Arlington, Inc. All significant
intercompany accounts and transactions have been eliminated in order to
present the combined financial statements of the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Investment Securities
Investment securities, classified as available-for-sale, consist principally
of marketable equity securities. Such securities are recorded at fair value;
and unrealized holding gains and losses are excluded from operations and are
reported as a separate component of shareholders' equity until realized.
Realized gains and losses, which were insignificant for 1997, are determined
on a specific identification basis. Dividend income is recognized when earned.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying combined financial statements. The Company periodically
evaluates the creditworthiness of its customers' financial condition to
determine credit to
F-120
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant.
The Company operates in various markets and industries. The Company's
ability to collect amounts due from customers could be affected by economic
fluctuations in its markets or industries.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property and equipment sold or otherwise disposed of and the
accumulated depreciation applicable thereto are eliminated from the accounts
and the resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using an accelerated method. The estimated useful
lives of property and equipment for purposes of computing depreciation range
from three to seven years.
Income Taxes
The Company has adopted the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Deferred income taxes are recognized for
temporary differences between financial statement and income tax bases of
assets and liabilities and net operating loss carryforwards, and is measured
using enacted tax rates expected to apply to taxable income in the years in
which these temporary differences are expected to be recovered or settled.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salaries and wages, (b) employment related taxes and
(c) workers' compensation insurance premiums. The Company accounts for service
fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statement of operations
net of estimated adjustments due to placed candidates that terminate
employment within the Company's guarantee period (generally 30-90 days). The
net adjustment in the period presented is immaterial.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, accounts
payable and note payable approximate their fair values due to the short-term
maturities of these instruments. Available-for-sale securities are carried at
fair value.
The carrying amounts of borrowings pursuant to the Company's revolving line
of credit agreement approximate fair value because the rates on such
agreements are variable, based on current market rates.
F-121
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The fair values of the loans receivable from shareholders could not be
obtained without incurring excessive costs due to the related party nature of
these instruments.
Newly Adopted Accounting Standards
In June 1997, Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income was issued. This statement establishes standards for
reporting and displaying comprehensive income and its components in a
financial statement that is displayed with the same prominence as other
financial statements. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. The statement also
requires the accumulated balance of other comprehensive income to be displayed
separately in the equity section of the balance sheet. This statement is
effective for fiscal years beginning after December 15, 1997. Total
comprehensive income for the periods ended March 31, 1997 and 1998 was not
materially different from the amount reported as net income.
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures........................... $ 16,481 $ 16,481
Office equipment................................. 77,091 79,645
Computer software................................ 13,500 13,500
-------- --------
107,072 109,626
Less--accumulated depreciation................... 81,145 84,229
-------- --------
$ 25,927 $ 25,397
======== ========
</TABLE>
(4) LINES OF CREDIT
Core Personnel of Arlington, Inc. maintained a revolving line of credit of
$50,000 in 1997. Borrowings made under this arrangement bear interest at prime
plus 1.0% (9.5% at December 31, 1997). The line is secured by the business
assets of Core Personnel of Arlington, Inc. and the personal property of its
shareholders. The amount outstanding at December 31, 1997 and March 31, 1998
was $25,282 and $23,000 (unaudited), respectively.
Core Personnel, Inc. also maintained a revolving line of credit of $40,000
in 1997 and 1998. Borrowings under this agreement bear interest of prime plus
0.5%. The line is secured by the business assets of Core Personnel, Inc. and
the personal property of its shareholders. The amount outstanding at December
31, 1997 and March 31, 1998 was $-0-.
(5) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases (except
those with lease terms of a month or less that were not renewed as of December
31, 1997) was approximately $54,712 and $14,513 (unaudited) for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively.
F-122
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................... $48,176
1999........................................................... 36,765
-------
Total minimum lease payments................................. $84,941
=======
</TABLE>
(6) INCOME TAXES
Income tax expense consists of the following components:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ---------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Current:
Federal.................................... $ 48,214 $14,394 $32,057
State...................................... 14,856 4,441 6,034
-------- ------- -------
63,070 18,835 38,091
-------- ------- -------
Deferred:
Federal.................................... 42,933 12,822 9,688
State...................................... 7,164 2,140 1,823
-------- ------- -------
50,097 14,962 11,511
-------- ------- -------
Total.................................... $113,167 $33,797 $49,602
======== ======= =======
</TABLE>
Income tax (benefit) expense differs from amounts computed by applying the
statutory rate to income before taxes as follows:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ----------------
1997 1997 1998
------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Income tax expense at the statutory rate.. $107,804 $32,197 $41,745
Increase (decrease) resulting from:
State income tax, net of federal
benefit................................ 14,158 4,233 5,185
Nondeductible expenses.................. 5,453 1,629 --
Differences due to graduated rates...... (7,569) (2,263) (2,263)
Other................................... (6,679) (1,999) 4,935
-------- ------- -------
$113,167 $33,797 $49,602
======== ======= =======
</TABLE>
F-123
<PAGE>
CORE PERSONNEL, INC., AND
CORE PERSONNEL OF ARLINGTON, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The deferred tax liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred income tax liabilities:
Effect of cash basis accounting for tax........ $192,274 $203,491
Other.......................................... 953 1,247
-------- --------
Net deferred income tax liabilities.............. $193,227 $204,738
======== ========
</TABLE>
(7) RELATED PARTY TRANSACTIONS
At December 31, 1997 and March 31, 1998, the Company had loans outstanding
to its two shareholders aggregating $55,334 and $52,859 (unaudited),
respectively. These loans are noninterest-bearing and have no specific
repayment terms.
(8) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-124
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
BeneTemps, Inc.:
We have audited the accompanying balance sheets of BeneTemps, Inc. as of
December 31, 1996 and 1997, and the related statements of operations,
shareholder's equity and cash flows for the years then ended. 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 financial position of BeneTemps, Inc. as of
December 31, 1996 and 1997 and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 20, 1998
F-125
<PAGE>
BENETEMPS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31,
------ ----------------- MARCH 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 23,518 $ 25,790 $175,393
Trade accounts receivable...................... 556,581 563,536 534,676
Prepaid expenses............................... 5,028 7,924 10,033
-------- -------- --------
Total current assets......................... 585,127 597,250 720,102
Computer equipment, net of accumulated
depreciation of $1,156 in 1996, $3,697 in 1997,
and $4,472 in 1998.............................. 8,154 7,907 7,132
Other assets..................................... 2,200 2,200 2,200
-------- -------- --------
Total assets................................. $595,481 $607,357 $729,434
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accrued payroll costs.......................... $ 13,849 $ 25,588 $ 31,593
Accrued expenses............................... 1,433 2,971 --
-------- -------- --------
Total current liabilities.................... 15,282 28,559 31,593
Shareholder's equity:
Common stock, no par value; 300 shares
authorized, 100 shares issued and outstanding. 1,000 1,000 1,000
Retained earnings.............................. 579,199 577,798 696,841
-------- -------- --------
Total shareholder's equity................... 580,199 578,798 697,841
-------- -------- --------
Total liabilities and shareholder's equity... $595,481 $607,357 $729,434
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-126
<PAGE>
BENETEMPS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
--------------------- -------------------
1996 1997 1997 1998
---------- ---------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Service fees...................... $3,559,808 $3,940,205 $880,772 $1,042,986
Permanent placement fees.......... 151,775 174,325 34,750 50,240
---------- ---------- -------- ----------
Revenues from services.......... 3,711,583 4,114,530 915,522 1,093,226
Cost of services.................... 2,657,744 3,067,777 675,993 810,767
---------- ---------- -------- ----------
Gross profit...................... 1,053,839 1,046,753 239,529 282,459
Selling, general and administrative
expenses........................... 918,449 1,059,629 34,630 165,435
---------- ---------- -------- ----------
Operating profit (loss)........... 135,390 (12,876) 204,899 117,024
Other income--interest.............. 11,718 11,475 -- 2,019
---------- ---------- -------- ----------
Net income (loss)................. $ 147,108 $ (1,401) $204,899 $ 119,043
========== ========== ======== ==========
</TABLE>
See accompanying notes to financial statements.
F-127
<PAGE>
BENETEMPS, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ -------- --------
<S> <C> <C> <C>
Balance at December 31, 1995......................... $1,000 $432,091 $433,091
Net income........................................... -- 147,108 147,108
------ -------- --------
Balance at December 31, 1996......................... 1,000 579,199 580,199
Net loss............................................. -- (1,401) (1,401)
------ -------- --------
Balance at December 31, 1997......................... 1,000 577,798 578,798
Net income (unaudited)............................... -- 119,043 119,043
------ -------- --------
Balance at March 31, 1998 (unaudited)................ $1,000 $696,841 $697,841
====== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-128
<PAGE>
BENETEMPS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------ ------------------
1996 1997 1997 1998
--------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $ 147,108 $(1,401) $204,899 $119,043
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........ 1,338 2,541 655 775
Change in operating assets and
liabilities:
Trade accounts receivable........... (149,292) (6,955) (24,345) 28,860
Prepaid expenses.................... (5,028) (2,896) (3,129) (2,109)
Accrued payroll costs............... 13,849 11,739 33,684 6,005
Accrued expenses.................... 1,433 1,538 (1,433) (2,971)
--------- ------- -------- --------
Net cash provided by operating
activities........................ 9,408 4,566 210,331 149,603
--------- ------- -------- --------
Cash flows from investing activities--
purchase of computer equipment........ (9,310) (2,294) -- --
--------- ------- -------- --------
Net increase in cash and cash
equivalent............................ 98 2,272 210,331 149,603
Cash and cash equivalents at beginning
of period............................. 23,420 23,518 23,518 25,790
--------- ------- -------- --------
Cash and cash equivalents at end of
period................................ $ 23,518 $25,790 $233,849 $175,393
========= ======= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-129
<PAGE>
BENETEMPS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
BeneTemps, Inc. (the Company), incorporated in the State of New Hampshire in
1991, provides temporary and permanent personnel to major corporations,
universities, healthcare facilities, and professional service organizations in
Massachusetts, Rhode Island, and New Hampshire.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for three months
ended March 31, 1997 and 1998, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to fairly present the financial position,
results of operations and cash flows with respect to the interim financial
statements have been included. The results of operations for the interim
periods are not necessarily indicative of the results for the entire fiscal
year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company provides for workers' compensation, health insurance and
unemployment taxes related to its employees. A deterioration in claims
experience could result in increased costs to the Company in the future. The
Company has recorded an estimate of any existing liabilities under these
programs at each balance sheet date. The Company's future costs could also
increase if there are any material changes in government regulations related
to employment law or employee benefits.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial condition to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant. The Company's ability to
collect amounts due from customers could be affected by economic fluctuations
in its markets.
Computer Equipment
Computer equipment is recorded at cost. Maintenance and repairs are charged
to expense as incurred, renewals and betterments are capitalized. The cost of
property sold or otherwise disposed of and the accumulated depreciation
applicable thereto are eliminated from the accounts and the resulting gain or
loss is reflected in
F-130
<PAGE>
BENETEMPS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
operations. The cost of computer equipment is depreciated over the estimated
useful lives of the related assets using the straight-line method. The
estimated useful lives of computer equipment for purposes of computing
depreciation range from three to five years.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salaries and wages, (b) employment related taxes and
(c) workers' compensation insurance premiums. The Company accounts for service
fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment in each of the periods presented is immaterial.
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
For federal and state income tax reporting purposes, the Company has elected
to be taxed as an S corporation and, accordingly, all tax attributes of the
Company pass through to its shareholder. Accordingly, no provision for income
taxes is included in the accompanying financial statements.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables and payables
approximate their fair values due to the short-term maturities of these
instruments.
(3) EMPLOYEE BENEFIT PLAN
The Company provides for a 401(k) plan which has received a favorable
determination letter from the Internal Revenue Service. Under the terms of the
plan all employees with 1,000 hours of service completed in a twelve-month
period are eligible to participate. During 1996 and 1997, the Company's
contributions to the plan amounted to $8,518 and $6,159, respectively.
(4) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases (except
those with lease terms of a month or less that were not renewed) for
F-131
<PAGE>
BENETEMPS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the years ended December 31, 1996 and 1997 and the three months ended March
31, 1998 were approximately $13,500, $16,800 and $5,000 (unaudited),
respectively.
Future minimum lease payments under a noncancelable operating lease as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................... $18,000
1999........................................................... 18,000
-------
Total minimum lease payments................................. $36,000
=======
</TABLE>
(5) SIGNIFICANT CUSTOMERS
In 1996, one customer accounted for approximately 10% of the Company's
revenue. In 1997, three customers accounted for approximately 32% of the
Company's service revenue. During the three months ended March 31, 1998, two
customers accounted for approximately 19% (unaudited) of the Company's
revenue. The loss of these customers could have a material adverse impact on
the operations of the Company.
(6) RELATED PARTY TRANSACTION
Included in selling, general and administrative expenses are salaries and
benefits paid to the shareholder, who is also an officer of the Company,
during the years ended December 31, 1996 and 1997 and three months ended March
31, 1998 of $776,494, $957,238 and $132,939 (unaudited), respectively.
(7) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholder signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-132
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Law Pros Legal Placement Services, Inc.:
We have audited the accompanying balance sheet of Law Pros Legal Placement
Services, Inc. as of December 31, 1997 and the related statements of
operations, shareholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Law Pros Legal Placement
Services, Inc. as of December 31, 1997 and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
April 3, 1998
F-133
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1997 1998
------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 199,211 $322,143
Trade accounts receivable........................... 768,776 585,967
Prepaid expenses.................................... 1,000
---------- --------
Total current assets.............................. 967,987 909,110
Property and equipment, net........................... 35,077 51,311
---------- --------
Total assets...................................... $1,003,064 $960,421
========== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt.............. $ 11,674 $ 9,557
Accounts payable and accrued expenses............... 33,838 88,924
Deferred state income tax liability................. 19,900 13,094
---------- --------
Total current liabilities......................... 65,412 111,575
Notes payable, less current portion................... 10,093 9,835
Shareholder loans..................................... 2,944 2,944
---------- --------
Total liabilities................................. 78,449 124,354
Shareholders' equity:
Common stock, $1 par value; 100 shares authorized,
issued and outstanding............................. 100 100
Retained earnings................................... 924,515 835,967
---------- --------
Total shareholders' equity........................ 924,615 836,067
Commitments and contingencies.........................
---------- --------
Total liabilities and shareholders' equity........ $1,003,064 $960,421
========== ========
</TABLE>
See accompanying notes to financial statements.
F-134
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ------------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Service fees.............. $3,776,351 $628,118 $582,113
Permanent placement fees.. 155,000 35,132 90,750
---------- -------- --------
Revenues from services.. 3,931,351 663,250 672,863
Cost of services............ 2,703,275 447,694 422,594
---------- -------- --------
Gross profit............ 1,228,076 215,556 250,269
Selling, general, and
administrative expenses.... 522,010 115,125 162,192
---------- -------- --------
Operating profit........ 706,066 100,431 88,077
Other income (expense):
Interest expense.......... (5,369) (574) (492)
Other expense............. (15,373) -- --
Other income.............. 3,070 -- 2,441
---------- -------- --------
Income before state
income tax expense..... 688,394 99,857 90,026
State income tax expense.... 19,105 2,498 (40)
---------- -------- --------
Net income.............. $ 669,289 $ 97,359 $ 90,066
========== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-135
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1996.................... 100 $100 $263,226 $263,326
Net income.................................. -- -- 669,289 669,289
Dividends................................... -- -- (8,000) (8,000)
--- ---- -------- --------
Balance, December 31, 1997.................. 100 100 924,515 924,615
Net income (unaudited)...................... -- -- 90,066 90,066
Dividends (unaudited)....................... -- -- (178,614) (178,614)
--- ---- -------- --------
Balance, March 31, 1998 (unaudited)......... 100 $100 $835,967 $836,067
=== ==== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-136
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, ------------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $669,289 $ 97,359 $ 90,066
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation................................ 10,293 2,573 1,386
Deferred state taxes........................ 13,400 1,752 (6,806)
Change in operating assets and liabilities:
Trade accounts receivable.................. (506,749) (102,020) 182,809
Prepaid expenses........................... -- -- (1,000)
Accounts payable and accrued expenses...... 22,751 5,083 55,086
-------- -------- --------
Net cash provided by operating
activities.............................. 208,984 4,747 321,541
-------- -------- --------
Cash flows used in investing activities--
purchase of property and equipment........... (34,669) (6,712) (17,620)
-------- -------- --------
Cash flows from financing activities:
Proceeds from line of credit................. 65,000 50,000 --
Principal payments on line of credit......... (65,000) -- --
Proceeds from long-term debt................. 20,000 -- --
Principal payments on long-term debt......... (6,566) (834) (2,375)
Repayment of shareholder loans............... (6,000) (2,000) --
Dividends paid............................... (8,000) (5,000) (178,614)
-------- -------- --------
Net cash provided by (used in) financing
activities.............................. (566) 42,166 (180,989)
-------- -------- --------
Net increase in cash and cash equivalents..... 173,749 40,201 122,932
Cash and cash equivalents at beginning of
period....................................... 25,462 25,462 199,211
-------- -------- --------
Cash and cash equivalents at end of period.... $199,211 $ 65,663 $322,143
======== ======== ========
Supplemental disclosure of cash flow
information:
Cash paid for interest....................... $ 5,369 $ 574 $ 492
======== ======== ========
Cash paid for taxes.......................... $ 1,533 $ -- $ --
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-137
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Law Pros Legal Placement Services, Inc. (the Company), was incorporated in
the state of New Jersey in 1994. The Company provides primarily temporary and
some permanent placement services for attorneys and paralegals, primarily in
New Jersey.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial conditions to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant.
The Company provides legal professionals to companies in a variety of
industries. The Company's ability to collect amounts due from customers could
be affected by economic fluctuations in its markets or these industries.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations. The cost of property and
equipment is depreciated over the estimated useful lives (5 to 7 years) of the
related assets using the straight-line method.
F-138
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Effective August 8, 1994, the Company has elected to be treated as an S
corporation in accordance with the provisions of the Internal Revenue Code of
1986. Under these provisions, profits and losses are passed directly to the
shareholders for inclusion in their personal income tax returns. Accordingly,
no liability or provision for federal income tax is included in the
accompanying statements. The Company has also elected S corporation status for
state income tax reporting. The effect of this election is a reduction in the
state tax rate from 9% to 2.63%.
State income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus deferred
taxes related to differences between the bases of assets and liabilities.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salaries and wages, (b) employment related taxes and
(c) workers' compensation insurance premiums. The Company accounts for service
fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30-90
days). The net adjustment in each of the periods presented is immaterial.
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.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, payables and
debt approximate their fair values due to their terms and rates as applicable.
F-139
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following :
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures........................... $ 6,078 $14,665
Office equipment................................. 48,507 57,540
------- -------
54,585 72,205
Less--accumulated depreciation................... 19,508 20,894
------- -------
$35,077 $51,311
======= =======
</TABLE>
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Note payable to bank due in monthly installments of
$641, including interest at 9.5%; secured by all
Company assets and due May 1, 2000.................. $16,490 $14,949
Note payable to bank due in monthly installments of
$278, plus interest at prime plus 1.0% (9.5% at
December 31, 1997) due June 30, 1999; secured by all
Company assets...................................... 5,277 4,443
------- -------
Total long-term debt............................... 21,767 19,392
Less current installments............................ 11,674 9,557
------- -------
Long-term debt, excluding current installments..... $10,093 $ 9,835
======= =======
</TABLE>
Future maturities of long-term debt as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998............................................................ $11,674
1999............................................................ 7,031
2000............................................................ 3,062
-------
$21,767
=======
</TABLE>
(5) LINE OF CREDIT
The Company maintained a line of credit with a bank during 1997 in the
aggregate amount of $150,000. There were no borrowings against the line of
credit at December 31, 1997 and March 31, 1998 (unaudited). The line of credit
expires April 30, 1998. Any amount borrowed against the line of credit would
be charged interest at the prevailing bank rate plus 1% due monthly.
(6) EMPLOYEE BENEFIT PLAN
The Company has a 401(k) Profit Sharing Plan (the Plan). Employees who have
completed three months of service may participate in the Plan on semiannual
entrance dates, January 1 and July 1 of each year. Employees may elect to make
contributions in cumulative amounts not to exceed the annual limitation set
under Section 401(k) of the Internal Revenue Code. The Company will match 30%
of the employee's elected contribution up
F-140
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
to a maximum of 2% of the employee's compensation. The Company's matching
contribution vests to the employee at the rate of 20% per year of service
beginning on the third year of service. The Company may also fund a
discretionary amount. The allocation is based on total pay while a member of
the Plan. Plan members do not need to contribute to the Plan during the year
in order to share in the discretionary contributions. The Company made total
contributions to the Plan totaling approximately $10,000 for the year ended
December 31, 1997.
(7) INCOME TAXES
State income tax expense consisted of the following components:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
YEAR ENDED 31,
DECEMBER 31, --------------
1997 1997 1998
------------ ------ -------
(UNAUDITED)
<S> <C> <C> <C>
Current...................................... $ 5,705 $ 746 $ 6,766
Deferred..................................... 13,400 1,752 (6,806)
------- ------ -------
Total...................................... $19,105 $2,498 $ (40)
======= ====== =======
</TABLE>
The net deferred tax liability consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Deferred income tax liabilities:
Accounts receivable............................ $19,600 $12,794
Other.......................................... 300 300
------- -------
Net deferred tax liability................... $19,900 $13,094
======= =======
</TABLE>
(8) LEASES
The Company leases office space and office equipment under noncancelable
lease agreements accounted for as operating leases. Rental expense for
operating leases for the year ended December 31, 1997 and for three months
ended March 31, 1998 was approximately $14,000 and $13,350 (unaudited),
respectively. The Company is moving to a new office in April of 1998. The
lease term is for two years ending on March 31, 2000. The monthly lease
payments are $3,400.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................... $31,105
1999........................................................... 41,305
2000........................................................... 10,705
2001........................................................... 252
-------
Total minimum lease payments................................... $83,367
=======
</TABLE>
(9) SIGNIFICANT CUSTOMERS
During 1997, two customers accounted for approximately 52% and 18%,
respectively, of the Company's service revenue. During the three months ended
March 31, 1998, two customers accounted for approximately
F-141
<PAGE>
LAW PROS LEGAL PLACEMENT SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
24% and 23%, respectively, of the Company's service revenues (unaudited). The
loss of these customers could have a significant impact on the scope of
operations of the Company.
(10) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which all
shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-142
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Law Resources, Inc.
We have audited the accompanying balance sheet of Law Resources, Inc. as of
December 31, 1997, and the related statements of operations, shareholders'
equity and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Law Resources, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
April 2, 1998, except as to note 4
which is as of May 12, 1998
F-143
<PAGE>
LAW RESOURCES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
ASSETS
------ (UNAUDITED)
<S> <C> <C>
Current assets:
Trade accounts receivable........................... $529,571 $586,844
Prepaid expenses and other assets................... 1,983 1,983
-------- --------
Total current assets.............................. 531,554 588,827
Due from shareholders................................. 136,921 138,621
Other assets.......................................... 7,371 7,371
-------- --------
Total assets $675,846 734,819
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Current portion of line of credit................... $ -- $375,000
Bank overdraft...................................... 62,300 83,590
Accounts payable.................................... 21,565 26,973
Accrued payroll and related taxes................... 141,713 113,867
Deferred income taxes............................... 18,087 24,116
Other current liabilities........................... 19,387 3,391
-------- --------
Total current liabilities......................... 263,052 626,937
Line of credit...................................... 375,000 --
-------- --------
Total liabilities................................. 638,052 626,937
-------- --------
Shareholders' equity:
Common stock, no par value; 100 shares authorized, 2
shares issued and outstanding...................... 1,000 1,000
Retained earnings................................... 36,794 106,882
-------- --------
Total shareholders' equity........................ 37,794 107,882
-------- --------
Total liabilities and shareholders' equity........ $675,846 $734,819
======== ========
</TABLE>
See accompanying notes to financial statements.
F-144
<PAGE>
LAW RESOURCES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------------
1997 1997 1998
------------ --------- --------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Service fees................................ $3,217,825 $ 666,332 $879,817
Permanent placement fees.................... 274,482 57,920 104,285
---------- --------- --------
Revenues from services.................... 3,492,307 724,252 984,102
Cost of services.............................. 2,056,538 425,703 540,439
---------- --------- --------
Gross profit.............................. 1,435,769 298,549 443,663
Selling, general and administrative expense... 1,567,316 348,552 354,148
---------- --------- --------
Operating income (loss)................... (131,547) (50,003) 89,515
Other expense (income):
Interest expense............................ 40,081 10,002 13,398
Other income................................ (1,091) -- --
---------- --------- --------
38,990 10,002 13,398
---------- --------- --------
Income (loss) before income taxes......... (170,537) (60,005) 76,117
Income tax benefit (expense).................. 13,409 4,752 (6,029)
---------- --------- --------
Net income (loss)......................... $ (157,128) $ (55,253) $ 70,088
========== ========= ========
</TABLE>
See accompanying notes to financial statements.
F-145
<PAGE>
LAW RESOURCES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ --------- ---------
<S> <C> <C> <C> <C>
Balance, December 31, 1996.................. 2 $1,000 $ 193,922 $ 194,922
Net loss.................................... -- -- (157,128) (157,128)
--- ------ --------- ---------
Balance, December 31, 1997.................. 2 1,000 36,794 37,794
Net income (unaudited)...................... -- -- 70,088 70,088
--- ------ --------- ---------
Balance, March 31, 1998 (unaudited)......... 2 $1,000 $ 106,882 $ 107,882
=== ====== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-146
<PAGE>
LAW RESOURCES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -----------------
1997 1997 1998
------------ -------- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $(157,128) $(55,253) $70,088
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation................................. 200 200 --
Deferred tax expense (benefit)............... (13,409) (4,752) 6,029
Change in operating assets and liabilities:
Trade accounts receivable................... (67,236) (84,070) (57,273)
Prepaid expenses............................ 2,378 -- --
Accounts payable............................ 6,639 5,953 5,408
Accrued payroll and related taxes........... 57,492 9,959 (27,846)
Other current liabilities................... 11,293 7,183 (15,996)
--------- -------- -------
Net cash used in operating activities..... (159,771) (120,780) (19,590)
--------- -------- -------
Cash flows from investing activities:
Payments on due from shareholders............. 167,500 110,000 --
Advances to shareholders...................... (76,850) -- (1,700)
--------- -------- -------
Net cash provided by (used in) investing
activities............................... 90 650 110,000 (1,700)
--------- -------- -------
Cash flows from financing activities--increase
in bank overdraft............................. 62,300 3,959 21,290
--------- -------- -------
Net decrease in cash and cash equivalents...... (6,821) (6,821) --
Cash and cash equivalents at beginning of
period........................................ 6,821 6,821 --
--------- -------- -------
Cash and cash equivalents at end of period..... $ -- $ -- $ --
========= ======== =======
Supplemental disclosure of cash flow
information:
Cash paid for interest........................ $ 39,836 $ 9,609 $10,008
========= ======== =======
Cash paid for taxes........................... $ 100 $ 100 $ --
========= ======== =======
</TABLE>
See accompanying notes to financial statements.
F-147
<PAGE>
LAW RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Law Resources, Inc. (the Company), is incorporated in the District of
Columbia. The Company is engaged in the temporary and permanent placement of
paralegals, attorneys and support staff in the Washington, D.C. and Chicago,
Illinois areas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial conditions to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant.
The Company operates primarily in the legal profession. The Company's
ability to collect amounts due from customers could be affected by economic
fluctuations in its markets or industry.
For the year ended December 31, 1997, one customer accounted for
approximately 17% of revenues. No other customer accounted for greater than
10% of revenues.
Furniture and Equipment
Furniture and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of furniture and equipment sold or otherwise disposed of and the
accumulated depreciation applicable thereto are eliminated from the accounts
and the resulting gain or loss is reflected in operations.
The cost of furniture and equipment is depreciated over the estimated useful
lives of the related assets using accelerated methods. The estimated useful
lives of property and equipment for purposes of computing depreciation range
from five to seven years.
F-148
<PAGE>
LAW RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
For federal and state income tax reporting purposes, the Company has elected
to be taxed as an S corporation and, accordingly all tax attributes of the
Company pass through to its shareholders, except for income earned in the
District of Columbia. Therefore, no provision for federal or state income
taxes is reflected in the accompanying financial statements. The District of
Columbia does not recognize the S corporation filing status. Accordingly, a
provision for income taxes payable to the District of Columbia for income
earned in the District is included in the accompanying financial statements.
Revenue and expenses are reported for tax purposes using the cash basis of
accounting, whereby revenue is recognized when received and expenses are
recognized when paid.
The Company has adopted the liability method of accounting for income taxes
in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Deferred income taxes are recognized for
temporary differences between financial statement and income tax bases of
assets and liabilities and net operating loss carryforwards related to
operations in the District of Columbia.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. In consideration for payment of such service
fees, the Company agrees to pay the following direct costs associated with the
worksite employees: (a) salary and wages, (b) employment related taxes and (c)
workers' compensation insurance premiums. The Company accounts for service
fees and the related direct payroll costs using the accrual method of
accounting. Under the accrual method, service fees relating to worksite
employees with earned but unpaid wages at the end of each period are
recognized as unbilled revenues and the related direct payroll costs for such
wages are accrued as a liability during the period in which wages are earned
by the worksite employees. Subsequent to the end of each period, such wages
are paid and the related service fees are billed.
Permanent placement fees are recognized when the employment offer and
acceptance has occurred and the candidate's start date has been established.
Revenues from permanent placements are reported in the statements of
operations net of estimated adjustments due to placed candidates that
terminate employment within the Company's guarantee period (generally 30--90
days). The net adjustment for each of the periods presented is immaterial.
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.
Fair Value of Financial Instruments
The carrying amounts of receivables and accounts payable approximate their
fair values due to the short-term maturities of these instruments.
F-149
<PAGE>
LAW RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures........................... $ 22,689 $ 22,689
Office equipment................................. 33,990 33,990
-------- --------
56,679 56,679
Less--accumulated depreciation................... (56,679) (56,679)
-------- --------
$ -- $ --
======== ========
</TABLE>
(4) LINE OF CREDIT
The Company is party to a line of credit with a bank with a total borrowing
base of $375,000 or 75% of accounts receivable less than 90 days old,
whichever is lower. At December 31, 1997 and March 31, 1998 (unaudited), the
Company had borrowings under the line of credit of $375,000 which were
originally set to mature on April 30, 1998. The line of credit bears interest
at a rate of prime plus 2%, equal to 10.5% at December 31, 1997. The weighted
average interest rate for the year ended December 31, 1997 and the period
ended March 31, 1998 (unaudited) was 10.5%. The line of credit is secured by
accounts receivable of the Company and is guaranteed by the shareholders of
the Company. The line of credit contains certain restrictive covenants that
limit the Company's ability to incur additional indebtedness. At December 31,
1997 and March 31, 1998 (unaudited), the Company was in violation of certain
covenants of the debt agreement including a minimum net worth ratio. On May
12, 1998, the bank waived the covenant violations and committed to extend the
line of credit to January 31, 1999. Accordingly, such amount has been
reclassified from current liabilities to noncurrent liabilities at December
31, 1997.
The carrying amount of the Company's line of credit approximates its fair
value because the interest rate on such approximates current market rates.
(5) INCOME TAXES
The components of the benefit (expense) for District of Columbia income
taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current $ -- $ --
Deferred........................................ 13,409 (6,029)
------- -------
$13,409 $(6,029)
======= =======
The net deferred tax liability is comprised of the following:
Deferred tax liability--cash basis of accounting
for income tax purposes........................ $30,654 $32,610
Deferred tax asset--primarily net operating loss
carryforwards.................................. 12,567 8,494
------- -------
Net deferred tax liability.................... $18,087 $24,116
======= =======
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards for
District of Columbia purposes of $125,982 expiring 2012.
F-150
<PAGE>
LAW RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) LEASES
The Company leases office space under noncancelable lease agreements
accounted for as operating leases. Rental expense for operating leases (except
those with lease terms of a month or less that were not renewed) for year
ended December 31, 1997 was approximately $121,000.
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER
--------------------
<S> <C>
1998.......................................................... $118,218
1999.......................................................... 90,828
2000.......................................................... 90,828
2001.......................................................... 30,276
--------
Total minimum lease payments................................ $330,150
========
</TABLE>
(7) RELATED PARTY TRANSACTIONS
The shareholders of the Company are also officers. Included in selling,
general and administrative expenses are salaries paid to officers during the
year ended December 31, 1997 of $638,363.
At December 31, 1997, the Company has advanced $136,921 to its shareholders.
These advances are noninterest-bearing and have no specific repayment terms.
The fair value of such advances could not be obtained without incurring
excessive costs due to the related party nature of this instrument.
(8) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which
all shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-151
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Contract Health Professionals, Inc.:
We have audited the accompanying balance sheet of Contract Health
Professionals, Inc. as of December 31, 1997 and the related statements of
operations, shareholders' equity and cash flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Contract Health
Professionals, Inc. as of December 31, 1997 and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
March 26, 1998
F-152
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1997 1998
------ ------------ -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................... $ 22,724 $116,690
Trade accounts receivable, net of allowance of
$3,350............................................. 256,260 161,416
Prepaid expenses and other assets................... 3,635 2,300
-------- --------
Total current assets.............................. 282,619 280,406
Property and equipment, net........................... 12,731 20,185
Goodwill, net of amortization of $30,566 and $32,563,
respectively......................................... 318,760 316,763
-------- --------
Total assets...................................... $614,110 $617,354
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accrued payroll and related taxes................... $ 48,992 $ 50,642
Other current liabilities........................... 5,494 --
-------- --------
Current liabilities............................... 54,486 50,642
Notes payable to shareholders......................... 148,089 111,694
-------- --------
Total liabilities................................. 202,575 162,336
Shareholders' equity:
Common stock, no par value; 100 shares authorized,
issued and outstanding............................. 100 100
Retained earnings................................... 411,435 454,918
-------- --------
Total shareholders' equity........................ 411,535 455,018
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity........ $614,110 $617,354
======== ========
</TABLE>
See accompanying notes to financial statements.
F-153
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -----------------
1997 1997 1998
------------ -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Revenues--service fees........................... $2,099,691 $434,527 $560,598
Cost of services................................. 1,511,792 313,035 419,243
---------- -------- --------
Gross profit................................... 587,899 121,492 141,355
Selling, general, and administrative expenses.... 315,762 68,308 93,161
Amortization of goodwill......................... 8,883 5,722 2,221
Interest expense................................. 18,007 1,875 2,490
---------- -------- --------
Net income..................................... $ 245,247 $ 45,587 $ 43,483
========== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-154
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------ ------ -------- --------
<S> <C> <C> <C> <C>
Balance, December 31, 1996..................... 100 $100 $166,188 $166,288
Net income..................................... -- -- 245,247 245,247
--- ---- -------- --------
Balance, December 31, 1997..................... 100 100 411,435 411,535
Net income (unaudited)......................... -- -- 43,483 43,483
--- ---- -------- --------
Balance, March 31, 1998 (unaudited)............ 100 $100 $454,918 $455,018
=== ==== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-155
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -----------------
1997 1997 1998
------------ ------- --------
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $245,247 $45,587 $ 43,483
Adjustments to reconcile net income to
operating net cash provided by (used in)
activities:
Depreciation and amortization................. 13,527 5,722 3,835
Provision for bad debt........................ 3,350 -- --
Change in operating assets and liabilities:
Trade accounts receivable.................... (124,005) (26,282) 94,844
Prepaid expenses and other assets............ (2,510) (900) 1,111
Current liabilities and accrued expenses..... 29,007 (24,358) (3,844)
-------- ------- --------
Net cash provided by (used in) operating
activities................................. 164,616 (231) 139,429
-------- ------- --------
Cash flows from investing activities--purchase
of furniture, fixtures and office equipment.... (8,678) -- (9,068)
-------- ------- --------
Cash flows from financing activities:
Proceeds from notes payable due to
shareholders.................................. -- 16,480 --
Payments on notes payable due to shareholders.. (160,216) -- (36,395)
-------- ------- --------
Net cash provided by (used in) financing
activities................................. (160,216) 16,480 (36,395)
-------- ------- --------
Increase (decrease) in cash and cash
equivalents.................................... (4,278) 16,249 93,966
Cash and cash equivalents at beginning of
period......................................... 27,002 27,002 22,724
-------- ------- --------
Cash and cash equivalents at end of period...... $ 22,724 $43,251 $116,690
======== ======= ========
Supplemental disclosure of cash flow
information--cash paid for interest............ $ 18,007 $ 1,875 $ 2,490
======== ======= ========
</TABLE>
See accompanying notes to financial statements.
F-156
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
Nature of Operations
Contract Health Professionals, Inc. (the Company), incorporated in the state
of Florida in 1994, provides primarily temporary and permanent personnel to
health care facilities located in Florida.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
The interim financial statements as of March 31, 1998, and for the three
months ended March 31, 1997 and 1998, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared
in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
financial statements have been included. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
fiscal year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include bank deposits and short-term investments
with original maturities of three months or less when purchased.
Trade Accounts Receivable--Credit Risk
The Company provides, if necessary, allowances which management believes are
adequate to absorb losses to be incurred in realizing the amounts recorded in
the accompanying financial statements. The Company periodically evaluates the
creditworthiness of its customers' financial conditions to determine credit to
be extended and to determine the adequacy of the allowance for bad debts.
Historically, bad debts have not been significant. The Company's ability to
collect amounts due from customers could be affected by economic fluctuations
in its markets.
Property and Equipment
Property and equipment is recorded at cost. Maintenance and repairs are
charged to expense as incurred; renewals and betterments are capitalized. The
cost of property sold or otherwise disposed of and the accumulated
depreciation applicable thereto are eliminated from the accounts and the
resulting gain or loss is reflected in operations.
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets using the straight-line method. The estimated
useful lives of property and equipment for purposes of computing depreciation
range from three to nine years.
F-157
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The Company has elected to be treated as an S Corporation in accordance with
the provisions of the Internal Revenue Code of 1986. Under these provisions,
profits and losses are passed directly to the shareholders for inclusion in
their personal income tax returns. Shareholders are also responsible for state
income taxes.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 40 years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can
be recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved.
Revenue and Cost Recognition
The Company's revenues consist primarily of service fees paid by its clients
under client service agreements. The Company accounts for service fees and the
related direct professional costs using the accrual method of accounting.
Under the accrual method, service fees relating to professionals with earned
but unpaid costs at the end of each period are recognized as unbilled revenues
and the related direct costs are accrued as a liability during the period in
which costs are incurred by worksite professionals. Subsequent to the end of
each period, such costs are paid and the related service fees are billed.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, receivables, payables and
notes payable approximate their fair values due to their terms and rates as
applicable.
(3) CONCENTRATION OF RISK
At December 31, 1997 approximately 28% of the Company's trade accounts
receivable were derived from one customer. At March 31, 1998, approximately
32% (unaudited) of the Company's trade accounts receivable were derived from
three customers. Approximately 30% of the Company's revenues for the year
ended December 31, 1997 were derived from two customers. Approximately 36%
(unaudited) of the Company's revenues for the three months ended March 31,
1998 were derived from two customers.
F-158
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Furniture and fixtures........................... $10,305 $19,373
Office equipment................................. 12,916 12,916
------- -------
23,221 32,289
Less accumulated depreciation.................... 10,490 12,104
------- -------
$12,731 $20,185
======= =======
</TABLE>
(5) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Note payable to shareholders due in monthly
installments of interest only at 7% per annum with a
lump sum principal payment due July 31, 2000........ $105,000 $105,000
Note payable to shareholders due in monthly
installments of interest only at 7% annually with a
lump sum principal payment due July 31, 2000........ 43,089 6,694
-------- --------
Long-term debt..................................... $148,089 $111,694
======== ========
</TABLE>
Future maturities of long-term debt as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER,
---------------------
<S> <C>
1998........................................................... $ --
1999........................................................... --
2000........................................................... 148,089
--------
$148,089
========
</TABLE>
(6) EMPLOYEE BENEFIT PLAN
The Company has a defined benefit pension plan (the Plan), which currently
covers two (shareholders) of its five salaried employees. Under the terms of
the Plan, employees working a minimum of one thousand hours per year with
twenty four months of service and who have attained twenty one years of age
are eligible to participate. During 1997, the Company recognized $35,498 of
expense related to the Plan. The projected benefit obligation for service
rendered to December 31, 1997 is approximately $40,000 and plan assets
approximate $51,000.
(7) LEASES
The Company leases office space under a noncancelable lease agreements
accounted for as operating leases. Rental expense for the year ended December
31, 1997 and three months ended March 31, 1998 was approximately $13,272 and
$5,962 (unaudited), respectively.
F-159
<PAGE>
CONTRACT HEALTH PROFESSIONALS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancelable operating leases as of
December 31, 1997 are:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998.......................................................... $ 30,422
1999.......................................................... 32,121
2000.......................................................... 32,121
2001.......................................................... 32,121
2002.......................................................... 32,121
2003.......................................................... 2,678
--------
Total minimum lease payments................................ $161,584
========
</TABLE>
(8) SUBSEQUENT EVENT (UNAUDITED)
In July 1998, the Company and its shareholders signed a definitive agreement
with Work International Corporation (Work International), pursuant to which all
shares of the Company will be exchanged for cash and shares of Work
International's common stock concurrent with and as a condition of the
consummation of an initial public offering of the common stock of Work
International.
F-160
<PAGE>
[PLATFORM/SKILL LINKS CHART]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE UNDERWRITERS
OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLIC-
ITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY ANY OF THE SHARES OF COMMON STOCK OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALI-
FIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLIC-
ITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Company............................................................... 17
Use of Proceeds........................................................... 20
Dividend Policy........................................................... 20
Capitalization............................................................ 21
Dilution.................................................................. 22
Selected Historical and Pro Forma Financial Data.......................... 23
Management's Discussion and Analysis of Pro Forma Financial Condition and
Pro Forma Results of Operations.......................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Combined and Selected Founding Companies..................... 30
Business.................................................................. 41
Management................................................................ 52
Certain Transactions...................................................... 60
Principal Stockholders.................................................... 64
Shares Eligible for Future Sale........................................... 66
Description of Capital Stock.............................................. 67
Underwriting.............................................................. 70
Legal Matters............................................................. 71
Experts................................................................... 71
Additional Information.................................................... 71
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6,458,334 SHARES
[LOGO TO COME]
WORK INTERNATIONAL CORPORATION
COMMON STOCK
----------------
PROSPECTUS
----------------
THE ROBINSON-HUMPHREY COMPANY
J.C. BRADFORD & CO.
ABN AMRO INCORPORATED
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses (other than underwriting
discounts and commissions) in connection with the offering described in this
Registration Statement, all of which shall be paid by the Company. All of such
amounts (except the SEC Registration Fee, the NASD Filing Fee and the New York
Stock Exchange Listing Fee) are estimated.
<TABLE>
<S> <C>
SEC Registration Fee................................................... $28,483
NASD Filing Fee........................................................ *
New York Stock Exchange Listing Fee.................................... *
Blue Sky Fees and Expenses............................................. *
Printing and Engraving Costs........................................... *
Legal Fees and Expenses................................................ *
Accounting Fees and Expenses........................................... *
Transfer Agent and Registrar Fees and Expenses......................... *
Miscellaneous.......................................................... *
-------
Total.................................................................. *
=======
</TABLE>
- --------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The TBCA permits a corporation to indemnify any 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, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action. In an action
brought to obtain a judgment in the corporation's favor, whether by the
corporation itself or derivatively by a stockholder, the corporation may only
indemnify for expenses, including attorney's fees, actually and reasonably
incurred in connection with the defense or settlement of such action, and the
corporation may not indemnify for amounts paid in satisfaction of a judgment
or in settlement of the claim. In any such action, no indemnification may be
paid in respect of any claim, issue or matter as to which such person shall
have been adjudged liable to the corporation except as otherwise approved by
the court in which the claim was brought. In any other type of proceeding, the
indemnification may extend to judgments, fines and amounts paid in settlement,
actually and reasonably incurred in connection with such other proceeding, as
well as to expenses.
The statute does not permit indemnification unless the person seeking
indemnification has acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation and, in the
case of criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. The statute contains additional limitations
applicable to criminal actions and to actions brought by or in the name of the
corporation. The determination as to whether a person seeking indemnification
has met the required standard of conduct is to be made (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.
WORK's Certificate of Incorporation and Bylaws require WORK to indemnify its
directors and officers to the fullest extent permitted under Texas law. In
addition, pursuant to employment agreements entered into by WORK with its
executive officers and certain other key employees, WORK must indemnify such
officers and
II-1
<PAGE>
employees in the same manner and to the same extent that WORK is required to
indemnify its directors under WORK's Certificate of Incorporation and Bylaws.
WORK's Certificate of Incorporation limits the personal liability of a
director to the corporation or its stockholders to damages for breach of the
director's fiduciary duty.
WORK has not purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted against, or incurred by, such
persons in their capacities as directors or officers of the registrant, or
that may arise out of their status as directors or officers of the registrant,
including liabilities under the federal and state securities laws. WORK has
entered into indemnification agreements to indemnify its directors and
executive officers to the maximum extent permitted under Texas law.
The Underwriting Agreement provides for indemnification of the directors and
officers of the Company in certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since its inception (September 4, 1997), WORK has issued and sold the
following unregistered securities:
(1) On July 10, 1998, WORK underwent a recapitalization which included
the Reverse Stock Split. As adjusted for the recapitalization, WORK has
issued and sold an aggregate of 885,718 shares of Common Stock to its
employees, directors and consultants at a purchase price of approximately
$.003 per share as follows:
COMMON STOCK PURCHASERS
<TABLE>
<CAPTION>
NUMBER
OF DATE OF
SHAREHOLDER SHARES SUBSCRIPTION
----------- ------- -----------------
<S> <C> <C>
Edward J. Hoffer...................................... 101,339 September 4, 1997
Scott J. Wollins...................................... 87,578 September 4, 1997
Richard K. Reiling.................................... 153,886 September 4, 1997
Richard S. Rouse...................................... 25,021 September 4, 1997
Bollard Group LLC..................................... 43,789 September 4, 1997
J. Patrick Millinor, Jr............................... 2,503 September 4, 1997
Chester J. Jachimiec.................................. 2,503 September 4, 1997
Jerome L. Strom....................................... 1,876 September 4, 1997
Debra Joy Eklove...................................... 2,503 September 4, 1997
S*H Family Limited Partnership........................ 45,665 September 4, 1997
Darren Miller......................................... 2,503 September 4, 1997
Pamela Gaye Anderson Reiling.......................... 2,503 September 4, 1997
Jeanette R. Sooley.................................... 2,503 September 4, 1997
Donna L. Vernon....................................... 1,983 September 4, 1997
Samuel R. Sacco....................................... 68,393 September 4, 1997
French Family Trust................................... 177,438 September 4, 1997
Jones Joint Trust..................................... 19,826 September 4, 1997
Monte R. Stephens..................................... 62,445 September 4, 1997
Arthur C. Goetze...................................... 1,250 September 4, 1997
Foresee Capital Ltd................................... 18,766 September 4, 1997
Mark F. Walz.......................................... 61,445 September 4, 1997
-------
TOTAL COMMON SHARES............................. 885,718
=======
</TABLE>
(2) On May 15, 1998, the Company granted Michael Hlinak, Kay Berry and
Curt Mackey 15,000, 2,500 and 2,500 shares of Common Stock, respectively,
in exchange for services.
II-2
<PAGE>
(3) From November to December 1997, WORK issued and sold an aggregate
1,000 shares of Series A Preferred Stock for an aggregate cash
consideration of $1 million. Upon closing of the Offering, the outstanding
shares of Series A Preferred Stock were automatically converted into
200,482 shares of Common Stock. Shares of Series A Preferred Stock were
issued to the following accredited investors:
SERIES A PREFERRED STOCK PURCHASERS
<TABLE>
<CAPTION>
NUMBER
OF DATE OF
NAME SHARES SUBSCRIPTION
---- ------- ----------------
<S> <C> <C>
Atlantis Software...................................... 62.5 November 5, 1997
Vincent Vazquez........................................ 62.5 November 5, 1997
J. Martin and Sandra Barrash........................... 40.0 December 1, 1997
Deborah Ilene Barrash.................................. 20.0 December 1, 1997
Lauren Michelle Barrash................................ 20.0 December 1, 1997
Jennifer Lynn Barrash.................................. 20.0 December 1, 1997
P. Jeffrey Bogert...................................... 50.0 December 1, 1997
Stanley W. Crawford.................................... 25.0 December 1, 1997
David H. Davis......................................... 25.0 December 1, 1997
David L. Fink.......................................... 50.0 December 1, 1997
Bradley R. Freels...................................... 25.0 December 1, 1997
John H. Hessel Living Trust, U/A 09-22-89.............. 50.0 December 1, 1997
Scott M. Hoffer........................................ 50.0 December 1, 1997
Husky Boy, LLC......................................... 25.0 December 1, 1997
Daniel H. Mainini...................................... 25.0 December 1, 1997
S*H Family Limited Partnership......................... 25.0 December 1, 1997
Ralph and Carole Minton................................ 50.0 December 1, 1997
John D. Morell......................................... 15.0 December 1, 1997
Samuel R. Sacco........................................ 25.0 December 1, 1997
Thomas P. Sawyer....................................... 25.0 December 1, 1997
W. Craig Schmitz....................................... 25.0 December 1, 1997
Spectra Partners, Ltd.................................. 65.0 December 1, 1997
Jerome L. and Rosie Ann Strom.......................... 75.0 December 1, 1997
Roger and Jane Strom................................... 20.0 December 1, 1997
John M. Sullivan....................................... 25.0 December 1, 1997
Jack & Janyce Turturici................................ 50.0 December 1, 1997
Irwin M. Barg.......................................... 50.0 December 1, 1997
-------
TOTAL SERIES A SHARES............................ 1,000.0
=======
</TABLE>
II-3
<PAGE>
(4) During March and April 1998, WORK issued and sold an aggregate 2,500
shares of Series B Preferred Stock for an aggregate cash consideration of
$2.5 million. Upon closing of the Offering, the outstanding shares of
Series B Preferred Stock were automatically converted into 313,253 shares
of Common Stock. Shares of Series B Preferred Stock were issued to the
following accredited investors:
SERIES B PREFERRED STOCK PURCHASERS
<TABLE>
<CAPTION>
NUMBER DATE OF
SHAREHOLDER OF SHARES SUBSCRIPTION
----------- --------- --------------
<S> <C> <C>
Frank Blumenfeld....................................... 100.0 March 26, 1998
B. R. Eubanks.......................................... 150.0 March 26, 1998
Stephen L. Hughey...................................... 50.0 March 26, 1998
Kase Family LTD........................................ 100.0 March 26, 1998
Kenneth H. Kase........................................ 10.0 March 26, 1998
Jerome L. Strom and Rosie Ann Strom.................... 100.0 March 26, 1998
Merit Systems, Inc..................................... 200.0 March 27, 1998
3 K Partnership........................................ 200.0 March 30, 1998
Earle S. Lilly......................................... 40.0 March 30, 1998
Barry W. Adkins........................................ 7.5 March 31, 1998
Joseph F. & Vera Brown, LTD. Trust..................... 50.0 March 31, 1998
B. R. Eubanks.......................................... 100.0 March 31, 1998
Doris T. Finger Trust.................................. 70.0 March 31, 1998
Alan S. Finger......................................... 100.0 March 31, 1998
Finger Interests Number One, LTD....................... 100.0 March 31, 1998
Sherri E. Hughey....................................... 50.0 March 31, 1998
Barney F. Kogen and Company, Inc....................... 95.0 March 31, 1998
Leslie W. Levenson..................................... 50.0 March 31, 1998
John H. Lindsey........................................ 100.0 March 31, 1998
Daniel A. Mainini...................................... 25.0 March 31, 1998
W. Mark Moore.......................................... 5.0 March 31, 1998
Roger A. Ramsey........................................ 200.0 March 31, 1998
Don K. Rice Investment Company......................... 50.0 March 31, 1998
Wayne A. Risoli........................................ 7.5 March 31, 1998
Tierney Investments.................................... 50.0 March 31, 1998
Thomas J. Tierney...................................... 100.0 March 31, 1998
Marvin Z. Woskow....................................... 100.0 March 31, 1998
Richard K. Reiling..................................... 40.0 March 31, 1998
Rusty Burnett and Susan W. Burnett..................... 200.0 March 31, 1998
Ralph & Carole Minton.................................. 50.0 April 1, 1998
-------
TOTAL SERIES B SHARES............................ 2,500.0
=======
</TABLE>
The sales of the securities described in paragraphs (1) through (3) were
exempt from registration under the Securities Act in reliance upon Section
4(2) of the Securities Act, or Regulation D promulgated thereunder, as
transactions by an issuer not involving a public offering. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates and other instruments issued in such transactions.
All recipients either received adequate information about WORK or had access,
through employment or other relationships, to such information.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 --Form of Underwriting Agreement.
2.1 --Agreement and Plan of Reorganization dated July 10, 1998 by and
among the Company, APS Acquisition, Inc., Absolutely Professional
Staffing, Inc. and its Stockholders.
2.2 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, BAI Acquisition, Inc., Botal Associates, Inc.
and its Stockholders.
2.3 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, AIM Acquisition, Inc., Aim Staffing, Inc. and
its Stockholders.
2.4 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, ACC Acquisition, Inc., Access Staffing, Inc.
and its Stockholders.
2.5 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, BT Acquisition, Inc., Benetemps, Inc. and its
Stockholders.
2.6 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, BCC Acquisition, Inc., The Burnett Companies
Consolidated, Inc. and its Stockholders.
2.7 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, CHPI Acquisition, Inc., Contract Health
Professionals Inc. and its Stockholders.
2.8 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, CPI Acquisition, Inc., Core Personnel, Inc.
and its Stockholders.
2.9 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, CPA Acquisition, Inc., Core Personnel of
Arlington, Inc. and its Stockholders.
2.10 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, CSSI Acquisition, Inc., CoreLink Staffing
Services, Inc. and its Stockholders.
2.11 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, LPL Acquisition, Inc., Law Pros Legal
Placement Services, Inc. and its Stockholders.
2.12 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, LRI Acquisition, Inc., Law Resources, Inc. and
its Stockholders.
2.13 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, PCN Acquisition, Inc., Professional Consulting
Network, Inc. and its Stockholders.
2.14 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, SHA Acquisition, Inc., Smith Hanley
Associates, Inc. and its Stockholders.
2.15 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, SHCG Acquisition, Inc., Smith Hanley
Consulting Group, Inc. and its Stockholders.
2.16 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, SPS Acquisition, Inc., Sparks Personnel
Services, Inc. and its Stockholders.
2.17 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, SAI Acquisition, Inc., Sparks Associates, Inc.
and its Stockholders.
2.18 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, CCS Acquisition, L.L.C., Customer Care
Solutions, LLC and its Stockholders.
2.19 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, TMI Acquisition, Inc., Task Management, Inc.
and its Stockholders.
2.20 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, 1296209 Ontario Inc., TOSI Placement Services
Inc. and its Stockholders.
2.21 --Agreement and Plan of Reorganization dated as of July 10, 1998 by
and among the Company, WSI Acquisition, Inc., WSI Personnel Services,
Inc. and its Stockholders.
2.22 --Uniform Provisions of the Agreements and Plans of Reorganization for
the Acquisition of the Founding Companies.
2.23 --Form of General Release executed by the Founding Companies'
stockholders.
3.1 --Amended and Restated Articles of Incorporation of the Company dated
July 10, 1998.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.2 --Bylaws of the Company.
*4.1 --Form of Certificate representing Common Stock.
4.2 --Form of Registration Rights Agreement among the Company and the
Founding Companies' stockholders.
*5.1 --Opinion of Porter & Hedges, L.L.P.
*10.1 --1998 Incentive Stock Plan of the Company.
*10.2 --Form of Indemnification Agreement between the Company and each of
its directors and officers.
10.3 --Employment Agreement by and between the Company and Samuel R. Sacco
dated effective as of September 30, 1997.
10.4 --Employment Agreement by and between the Company and B. Garfield
French dated November 1, 1997.
10.5 --Employment Agreement by and between the Company and Mark F. Walz
dated effective as of December 6, 1997.
10.6 --Employment Agreement by and between the Company and Monte R.
Stephens dated effective as of November 15, 1997.
*10.7 --Employment Agreement by and between the Company and Michael L.
Hlinak.
10.8 --Employment Agreement by and between the Company and Susan W. Burnett
to be effective upon consummation of the Acquisitions.
10.9 --Employment Agreement by and between the Company and Stephen M.
Sparks to be effective upon consummation of the Acquisitions.
10.10 --Employment Agreement by and between the Company and Gilbert Rosen to
be effective upon consummation of the Acquisitions.
10.11 --Employment Agreement by and between the Company and Morton Fishman
to be effective upon consummation of the Acquisitions.
10.12 --Employment Agreement by and between the Company and John R. Haesler
to be effective upon consummation of the Acquisitions.
10.13 --Employment Agreement by and between the Company and James Schneider
to be effective upon consummation of the Acquisitions.
10.14 --Employment Agreement by and between the Company and Thomas A.
Hanley, Jr. to be effective upon consummation of the Acquisitions.
10.15 --Form of Employment Agreement by and between the Company and certain
key officers of the Founding Companies to be effective upon
consummation of the Acquisitions.
10.16 --Engagement Agreement by and between the Company and Bollard dated
July 2, 1998.
10.17 --Consulting Agreement by and between the Company and Bollard dated
April 1, 1998.
10.18 --Agreement by and between the Company and Bollard dated July 2, 1998.
*10.19 --Funding Agreement by and between the Company and Bollard.
21.1 --Subsidiaries of WORK.
23.1 --Consent of KPMG Peat Marwick LLP.
*23.2 --Consent of Porter & Hedges, L.L.P. (contained in Exhibit 5.1)
23.3 --Consent of Roger A. Ramsey as nominee for director
23.4 --Consent of John M. Sullivan as a nominee for director
23.5 --Consent of J. Patrick Millinor, Jr. as a nominee for director
23.6 --Consent of Susan W. Burnett as a nominee for director
23.7 --Consent of Stephen M. Sparks as a nominee for director
23.8 --Consent of Gilbert Rosen as a nominee for director
23.9 --Consent of Morton Fishman as a nominee for director
23.10 --Consent of John R. Haesler as a nominee for director
23.11 --Consent of James Schneider as a nominee for director
23.12 --Consent of Thomas A. Hanley, Jr. as a nominee for director
24.1 --Power of Attorney (included on the signature page of this
Registration Statement).
*27.1 --Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
II-6
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates
representing the shares of Common Stock offered hereby in such denominations
and registered in such names as required by the Underwriters 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
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised 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. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant 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 securities being registered, the registrant 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 undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant 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-7
<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 HOUSTON, STATE OF TEXAS,
ON JULY 10, 1998.
WORK INTERNATIONAL CORPORATION
/s/ B. Garfield French
By: __________________________________
B. Garfield French,
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints B. Garfield French
and Mark F. Walz, and both of them, either of whom may act without the joinder
of the other, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any registration
statement for the same offering filed pursuant to Rule 462 under the Securities
Act of 1933, and to file the same, with all exhibits thereto and all other
documents in connection therewith, with the Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each
and every act and thing appropriate or necessary to be done, as fully and for
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or their substitute
or substitutes may 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 AND ON THE
DATES INDICATED.
SIGNATURE CAPACITY IN WHICH DATE
SIGNED
/s/ B. Garfield French President and Chief July 10, 1998
- ---------------------------------- Executive Officer,
B. GARFIELD FRENCH Director
(Principal
Executive Officer)
/s/ Mark F. Walz Vice President and July 10, 1998
- ---------------------------------- Chief Financial
MARK F. WALZ Officer (Principal
Financial and
Accounting
Officer)
/s/ Samuel R. Sacco Director July 10, 1998
- ----------------------------------
SAMUEL R. SACCO
II-8
<PAGE>
EXHIBIT 2.1
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
APS ACQUISITION, INC.,
ABSOLUTELY PROFESSIONAL STAFFING, INC.
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), APS ACQUISITION, INC., a New York corporation and a wholly owned
subsidiary of WORK ("Newco"), ABSOLUTELY PROFESSIONAL STAFFING, INC., a New York
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the Company
identified in the accompanying Addendum I (each an "Other Founding Company" and,
collectively with the Company, the "Founding Companies") under agreements
similar to this Agreement entered into among the Other Founding Companies, their
stockholders, WORK and other subsidiaries of WORK (collectively, the "Other
Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account for
all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment account
maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the date of
the Closing and (b) if the Closing occurs after the twentieth day, and on or
before the last day, of a month, the last day of the month preceding the date of
the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and Exhibits, as
each of them may be amended, modified or supplemented from time to time under
their provisions or the provisions of this Agreement.
"Botal Associates" means Botal Associates, Inc., a New York corporation and
an Affiliate of the Company.
"Business Corporation Act" means the New York Business Corporation Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time $10,098,337.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Newman Tannenbaum
Helpern Syracuse & Hirschtritt, LLP.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of the
Company and Botal Associates at March 31, 1998, which is included in the Initial
Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
<PAGE>
"Designated Current Liabilities" means current liabilities of the Company
with respect to current accrued and current deferred income taxes and current
liabilities of the Company with respect to indebtedness incurred by the Company
to enable the Company to make AAA Distributions after the Initial Calculation
Date.
"Disclosure Statement" means the written statement executed by the Company
and each of the Stockholders and delivered to WORK prior to the execution and
delivery of this Agreement, in which either (a) exceptions are taken to certain
of the representations and warranties made by the Company and the Stockholders
in this Agreement or (b) it is confirmed that no exception is taken to that
representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $162,167, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $1,140,179 the estimated
amount, as of the Initial Calculation Date, of the net adjustment that would be
required under Section 481(a) of the Code if the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis.
"Graham Litigation" has the meaning specified in Section 11.18.(a).
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company and Botal Associates at December 31, 1997 and 1996 and the
related audited combined statements of income, stockholders' equity and cash
flows for each of the two fiscal years in the two-year period ended December 31,
1997, together with the related audit report of KPMG Peat Marwick LLP, and (b)
the Current Balance Sheet and the related unaudited combined statements of
income, stockholders' equity and cash flows for the three-month period ended on
the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company with
a maturity of one year or more and includes indebtedness incurred under Capital
Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of Company
Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means APS Acquisition, Inc., a New York corporation.
<PAGE>
"New Employment Agreement" means the Employment Agreement entered into
as of the date of this Agreement between the Company and Steven Sayetta.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of John J. Talabisco or Steven
Sayetta.
"Section 11.17 Pro Rata Share" means 77.863% with respect to John J.
Talabisco and 19.466% with respect to Steven Sayetta.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary
<PAGE>
Statements or in Article I of the Uniform Provisions (the text of which is by
this reference incorporated in this Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of New York.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of New York, (e) the Charter Documents of the
Company then in effect (after giving effect to the amendment of the Company's
certificate or articles of incorporation specified in clause (c) of this
sentence) will become and thereafter remain (until changed in accordance with
(i) applicable law, in the case of the certificate or articles of incorporation
or (ii) their terms, in the case of the bylaws) the Charter Documents of the
Surviving Corporation, (f) the initial board of directors of the Surviving
Corporation will be the Persons named in Schedule 2.03, who will hold the office
of director of the Surviving Corporation subject to the provisions of the
applicable laws of the State of New York and the Charter Documents of the
Surviving Corporation, and (g) the officers of the Surviving Corporation
immediately following the Merger will be as set forth in Schedule 2.03, and each
of the Persons so designated in Schedule 2.03 will serve in each office
specified for that Person in Schedule 2.03, subject to the provisions of the
Charter Documents of the Surviving Corporation, until his or her successor is
duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash set forth or determined as
provided in Schedule 2.04 (the "Merger Consideration"), (ii) cease to be
outstanding and to exist, and (iii) be canceled and retired;
<PAGE>
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder the Merger Consideration; and (ii)
until any certificate representing Company Common Stock has been
surrendered and replaced pursuant to this Section 2.05, that certificate
will, for all purposes, be deemed to evidence ownership of the right to
receive the Merger Consideration payable in respect of that certificate
pursuant to Section 2.04. All cash included in the Merger Consideration
shall be paid, at WORK's option, by (a) WORK's company check or checks, (b)
one or more wire transfers to accounts designated by the respective
Stockholders at least five Business Days before the IPO Closing Date, or
(c) certified or official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may
be appointed by WORK for purposes of this Section 2.05), on or before the
IPO Closing Date, the certificates representing Company Common Stock owned
by the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
Section 2.06. [Intentionally Omitted.]
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that,
<PAGE>
notwithstanding such distribution, the Company receives any payment with respect
to any such receivables, the Company will promptly pay the amount so received
over to the Stockholders in accordance with their respective Pro Rata Shares.
The aggregate amount of accounts and notes receivable to be distributed pursuant
to this Section 2.07 is herein referred to as the "Cash Basis Accounts
Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
<PAGE>
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of New York, (ii) verify the existence and
ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to John J. Talabisco. The actions taken at
the Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant
to Section 2.05. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.02, and all transactions
contemplated by this Agreement to be closed or completed on or before the
IPO Closing Date, including the surrender of the Company Common Stock in
exchange for the Merger Consideration will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
<PAGE>
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
<PAGE>
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04 Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05 Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06 Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01 Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by
<PAGE>
law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), each Stockholder shall, if possible, give prior written notice
thereof to WORK and provide WORK with the opportunity to contest such
disclosure, or (iii) information with respect to which the disclosing party
reasonably believes disclosure is required in connection with the defense
of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any Stockholder of the provisions of this Section
11.01 with respect to any Confidential Information, WORK shall be entitled
to an injunction restraining such Stockholder from disclosing, in whole or
in part, that Confidential Information. Nothing herein shall be construed
as prohibiting WORK from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. [Intentionally Omitted.]
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the
<PAGE>
subject matter of this Agreement. This Agreement may be amended, modified or
supplemented, and any right hereunder may be waived, if, but only if, the
amendment, modification, supplement or waiver is in writing and signed by the
Majority Stockholders, the Company and WORK. The waiver of any of the terms and
conditions of this Agreement shall not be construed or interpreted as, or deemed
to be, a waiver of any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Absolutely Professional Staffing, Inc.
7 Dey Street
New York, NY 10007
Attn: President
Telecopy No.: (212) 964-5033
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Newman Tannenbaum Helpern Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, NY 10022
Attn: Joel A. Klarreich
Telecopy No.: (212) 371-1084
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
<PAGE>
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the
plan of merger contemplated by this Agreement pursuant to Sections 615 and
903 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 615 and 903 of
the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Indemnity Limitation. Notwithstanding any
----------------------------
provision hereof to the contrary, in no event shall (a) the aggregate liability
of the Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the Stockholders under
<PAGE>
Article IX of the Other Agreement to which Botal Associates is a party exceed
the Ceiling Amount or (b) the sum of the aggregate liability of each Stockholder
under Article IX of this Agreement plus the aggregate liability of that
Stockholder under Article IX of such Other Agreement exceed such Stockholder's
Section 11.17 Pro Rata Share of the Ceiling Amount.
Section 11.18. Special Provisions.
------------------
(a) The Stockholders covenant and agree that they, jointly and
severally, will indemnify each WORK Indemnified Party against, and hold
each WORK Indemnified Party harmless from and in respect of, all Damages
that arise from, are based on or relate or otherwise are attributable to
(i) the litigation described in Section 4.12 of the Disclosure Statement
(the "Graham Litigation"), and any agreements or other obligations
(written, oral, implied or otherwise) between the Company and Jane Graham,
including but not limited to the agreements referred to in Section 4.16 of
the Disclosure Statement, pursuant to which the Company is obligated to
indemnify Ms. Graham or any other party with respect to the subject matter
of the Graham Litigation and (ii) the Company's practice of engaging
service providers on an "independent contractor" basis, in each case, to
the same extent as if such matters were WORK Indemnified Losses except that
such indemnification shall be without regard to the Threshold Amount
limitation on indemnification contained in the first sentence of Section
9.06(a).
(b) The obligation of the Company and the Stockholders to take the
actions to be taken by them on the IPO Closing Date are subject to WORK
being ready, willing and able to acquire Botal Associates on the IPO
Closing Date pursuant to the Agreement and Plan of Reorganization dated the
date hereof among WORK, BAI Acquisition, Inc., Botal Associates and the
stockholders of Botal Associates, and the obligation of WORK and Newco to
take the actions to be taken by them on the IPO Closing Date are subject to
Botal Associates and the stockholders thereof being ready, willing and able
to perform their obligations on the IPO Closing Date pursuant to such
Agreement and Plan of Reorganization.
Section 11.19. Certain Indebtedness. Until such time as the Stockholder
--------------------
Guarantees with respect to the Summa Capital Corporation Financing Agreement
have been terminated, the principal amount of obligations of the Company to
Summa Capital Corporation will not be increased.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
<PAGE>
(ii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by September 30, 1998, unless the failure of
such transactions to be consummated results from the willful failure
of the Party (or in the case of the Stockholders and the Company, any
of them) seeking to terminate this Agreement to perform or adhere to
any agreement required hereby to be performed or adhered to by that
Party prior to or at the Closing or thereafter on the IPO Closing
Date; provided, however, that the date September 30, 1998, set forth
above shall be extended to October 31, 1998, unless, on or before
September 15, 1998, Founding Companies which are to receive a majority
of the initial merger consideration (valuing shares of WORK Common
Stock at $12 per share) to be received by all the Founding Companies
on the IPO Closing Date notify WORK that they have elected not to
extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholders and the Company, any of them) in the observance or in the
due and timely performance of any of the covenants, agreements or
conditions contained herein and such breach or default continues for
fifteen days after written notice from the Majority Stockholders or
the Company, on the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement
is terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this Agreement is terminated pursuant to this
Section 12.01 after the Certificate of Merger has been filed with the
Secretary of State of the State of New York, but before the IPO has been
consummated, WORK (at WORK's expense) will take all actions that Counsel
for the Company and the Stockholders advises WORK are required by the
applicable laws of the State of New York to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
--------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
APS ACQUISITION, INC.
By: /s/ Monte R. Stephens
--------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
ABSOLUTELY PROFESSIONAL STAFFING, INC.
By: /s/ John J. Talabisco
--------------------------------------
John J. Talabisco, President
STOCKHOLDERS:
/s/ John J. Talabisco
--------------------------------------------
John J. Talabisco
/s/ Steven Sayetta
--------------------------------------------
Steven Sayetta
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Steven Sayetta
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President and Secretary Steven Sayetta
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
NAME ADDRESS
---- -------
John J. Talabisco 235 East 95th St., Apt. 325
New York, NY 10128
Steven Sayetta 11-1 Jackson Ave.
Scarsdale, NY 10583
C. The aggregate Merger Consideration shall be comprised of an amount of
cash equal to $7,401,385, as adjusted pursuant to paragraph D below which shall
be payable to the Stockholders pro rata in accordance with their respective Pro
Rata Shares. The Pro Rata Shares of the Stockholders are as follows:
<TABLE>
<CAPTION>
No. of Pre-Merger Shares Pro-Rata
Name of Company Common Stock Shares
---- ----------------------- ------
<S> <C> <C>
John J. Talabisco 160 80%
Steven Sayetta 40 20%
--- ---
TOTAL 200 100%
</TABLE>
D. The Merger Consideration will be subject to adjustment based upon
changes in Working Capital and Long Term Debt between the Initial Calculation
Date and the Adjustment Date as follows: (i) the Merger Consideration will be
increased for any positive change, and decreased any negative change, in the
Company's Working Capital between the Initial Calculation Date and the
Adjustment Date and (ii) the Merger Consideration will be increased for any
decrease, and decreased for any increase, in the amount of Long Term Debt,
between the Initial Calculation Date and the Adjustment Date. In addition, the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
<PAGE>
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
John J. Talabisco Common 160
Steven Sayetta Common 40
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
The Stockholders own 90% of the capital stock of Botal Associates.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Capital Stock None 200 200 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreement.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the
amount equal to the sum of the Accumulated Adjustment
Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In
addition, the Company shall make distributions of cash basis
accounts and notes receivable as contemplated by Section
2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
(a) Prior to the Closing, the Company shall distribute
the cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07.
(b) Prior to the Closing, the Company shall be
permitted to transfer to John J. Talabisco and Steven
Sayetta the life insurance policies owned by the Company and
insuring their respective lives.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
APS Acquisition, Inc.
Absolutely Professional Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
The Guaranties dated May 6, 1996, by the Stockholders of the
obligations incurred by the Company pursuant to the
Financing Agreement dated as of May 6, 1996, between the
Company and Summa Capital Corporation.
The Guaranties by the Stockholders of the equipment lease,
and the amendments and additions thereto, dated December 19,
1997, between the Company and Wasco Funding Corp.
Until such time as the Stockholder Guarantees with respect to the Summa
Capital Corporation Financing Agreement have been terminated, the principal
amount of obligations of the Company to Summa Capital Corporation will not be
increased.
<PAGE>
EXHIBIT 2.2
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
BAI ACQUISITION, INC.,
BOTAL ASSOCIATES, INC.
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), BAI ACQUISITION, INC., a New York corporation and a wholly owned
subsidiary of WORK ("Newco"), BOTAL ASSOCIATES, INC., a New York corporation
(the "Company"), and the persons listed on the signature pages of this Agreement
under the caption "Stockholders" (collectively, the "Stockholders," and each of
them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
"Absolutely Professional" means Absolutely Professional Staffing,
Inc., a New York corporation and an Affiliate of the Company.
<PAGE>
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the New York Business Corporation
Law.
"Ceiling Amount" means at any time $10,098,337.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Newman Tannenbaum
Helpern Syracuse & Hirschtritt, LLP.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company and Absolutely Professional at March 31, 1998, which is
included in the Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Initial Calculation Date" means March 31, 1998.
<PAGE>
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company and Absolutely Professional at December 31, 1997 and
1996 and the related audited combined statements of income, stockholders'
equity and cash flows for each of the two fiscal years in the two-year
period ended December 31, 1997, together with the related audit report of
KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the related
unaudited combined statements of income, stockholders' equity and cash
flows for the three-month period ended on the Current Balance Sheet Date.
"Limitation Period" has the meaning specified in Section 11.19.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means BAI Acquisition, Inc., a New York corporation.
"New Employment Agreement" means the Employment Agreement entered into
as of the date of this Agreement between the Company and Peter Elia.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of John J. Talabisco or Steven
Sayetta.
"Restricted Period" has the meaning specified in Section 11.02.
"Section 11.17 Pro Rata Share" means 77.863% with respect to John J.
Talabisco, 19.466% with respect to Steven Sayetta and 2.671% with respect
to Peter Elia.
<PAGE>
"Shareholders Agreement" means the Shareholders Agreement dated
October 1, 1997, among the Stockholders and the Company.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02 Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of New York.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the
<PAGE>
Certificate of Merger does not specify another time, 8:00 a.m., central
time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of New York, (e) the Charter Documents of the
Company then in effect (after giving effect to the amendment of the Company's
certificate or articles of incorporation specified in clause (c) of this
sentence) will become and thereafter remain (until changed in accordance with
(i) applicable law, in the case of the certificate or articles of incorporation
or (ii) their terms, in the case of the bylaws) the Charter Documents of the
Surviving Corporation, (f) the initial board of directors of the Surviving
Corporation will be the Persons named in Schedule 2.03, who will hold the office
of director of the Surviving Corporation subject to the provisions of the
applicable laws of the State of New York and the Charter Documents of the
Surviving Corporation, and (g) the officers of the Surviving Corporation
immediately following the Merger will be as set forth in Schedule 2.03, and each
of the Persons so designated in Schedule 2.03 will serve in each office
specified for that Person in Schedule 2.03, subject to the provisions of the
Charter Documents of the Surviving Corporation, until his or her successor is
duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the number of shares of WORK Common Stock set
forth or determined as provided in Schedule 2.04 (the "Merger
Consideration"), (ii) cease to be outstanding and to exist, and (iii) be
canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting
<PAGE>
those shares other than the right to receive, without interest, the Merger
Consideration and the additional cash, if any, owing with respect to those
shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock included in the Merger Consideration payable in respect
of that certificate pursuant to Section 2.04. All shares of WORK Common
Stock issuable in the Merger will be deemed for all purposes to have been
issued by WORK at the Effective Time. All cash payable hereunder shall be
paid, at WORK's option, by (a) WORK's company check or checks, (b) one or
more wire transfers to accounts designated by the respective Stockholders
at least five Business Days before the IPO Closing Date, or (c) certified
or official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will
<PAGE>
be payable with respect to the payment of such dividends or other
distributions (or cash for and in lieu of fractional shares) on surrender
of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
<PAGE>
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing an Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of New York, (ii) verify the existence and
ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to John J. Talabisco. The actions taken at
the Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant
to Section 2.05. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.02, and all transactions
contemplated by this Agreement to be closed or completed on or before the
IPO Closing Date, including the surrender of the Company Common Stock in
exchange for the Merger Consideration will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
<PAGE>
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
<PAGE>
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05 Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06 Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by
<PAGE>
law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), each Stockholder shall, if possible, give prior written notice
thereof to WORK and provide WORK with the opportunity to contest such
disclosure, or (iii) information with respect to which the disclosing party
reasonably believes disclosure is required in connection with the defense
of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any Stockholder of the provisions of this Section
11.01 with respect to any Confidential Information, WORK shall be entitled
to an injunction restraining such Stockholder from disclosing, in whole or
in part, that Confidential Information. Nothing herein shall be construed
as prohibiting WORK from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE
<PAGE>
OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
<PAGE>
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder
-------
shall be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below
<PAGE>
(or at such other address as such party may designate by written notice to all
other Parties in accordance herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Botal Associates, Inc.
7 Dey Street
New York, NY 10007
Attn: President
Telecopy No.: (212) 964-5033
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Newman Tannenbaum Helpern Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, NY
Attn: Joel A. Klarreich
Telecopy No.: (212) 371-1084
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS
<PAGE>
PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL BE
GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
<PAGE>
(a) The Stockholders, as the owners and holders of all the
Capital Stock of the Company, hereby consent to and approve the Merger and
the plan of merger contemplated by this Agreement pursuant to Sections 615
and 903 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 615 and 903
of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Indemnity Limitation. Notwithstanding any provision
----------------------------
hereof to the contrary, in no event shall (a) the aggregate liability of the
Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the Stockholders under Article IX of the
Other Agreement to which Absolutely Professional is a party exceed the Ceiling
Amount or (b) the sum of the aggregate liability of each Stockholder under
Article IX of this Agreement plus the aggregate liability of that Stockholder
under Article IX of such Other Agreement exceed such Stockholder's Section 11.17
Pro Rata Share of the Ceiling Amount.
Section 11.18. Special Provisions.
------------------
(a) The Stockholders covenant and agree that (i) on or before
the date hereof, they have caused the Company to deposit with Counsel for
the Company and the Stockholders an amount sufficient to discharge the tax
warrant referred to in Sections 4.19(b) and 4.28(a) of the Disclosure
Statement and any related Lien, with such amount to be held in escrow by
Counsel for the Company and the Stockholders solely for such purpose, they
will use their best effects to cause such warrant and any related Lien, to
be paid and discharged without cost to the Company prior to the date of the
Closing and any amount so deposited will be excluded from the calculation
of current assets at the Adjustment Date and (ii) they, jointly and
severally, will indemnify each WORK Indemnified Party against, and hold
each WORK Indemnified Party harmless from and in respect of, all Damages
that arise from, are based on or relate or otherwise are attributable to
(x) the warrant referred to in Sections 4.19(b) and 4.28(a) of the
Disclosure Statement, and any related Lien, and (y) the Company's practice
of engaging service providers on an "independent contractor" basis, in each
case, to the same extent as if such matters were WORK Indemnified Losses
except that such indemnification shall be without regard to the Threshold
Amount limitation on indemnification contained in the first sentence of
Section 9.06(a).
(b) The obligation of the Company and the Stockholders to take
the actions to be taken by them on the IPO Closing Date are subject to WORK
being ready, willing and able to acquire Absolutely Professional on the IPO
Closing Date pursuant to the Agreement and Plan of Reorganization dated the
date hereof among WORK, APS Acquisition, Inc., Absolutely Professional and
the stockholders of Absolutely Professional and the obligation of WORK and
Newco to take the actions to be taken by them on the IPO Closing Date are
subject to Absolutely Professional and the stockholders thereof being
ready, willing and able
<PAGE>
to perform their obligations on the IPO Closing Date pursuant to such
Agreement and Plan of Reorganization.
Section 11.19. Suspension and Termination of Shareholders Agreement.
----------------------------------------------------
Certain of the outstanding shares of the Company Common Stock are subject to the
Shareholders Agreement which, inter alia, provides options to purchase and to
sell shares of the Company Common Stock upon the occurrence of certain events
specified therein. The Company and the Stockholders agree that:
(a) at the Effective Time, the Shareholders Agreement shall be
terminated without any further action on the part of any party thereto;
(b) the execution and delivery of this Agreement by the Company
and the Stockholders shall not be affected by, or constitute a breach of or
default under, the Shareholders Agreement;
(c) if at the date hereof there has began to run, or if after
the date hereof and prior to the Effective Time there shall begin to run,
any period of time (herein called a "Limitation Period") within which any
party bound by or entitled to the benefits of, or whose shares of the
Company Common Stock are subject to, the Shareholders Agreement must, under
the terms of the Shareholders Agreement, give any notice, offer such shares
for sale, accept any offer to purchase any such shares, purchase shares,
make any election or take any other action in order to preserve or maintain
any right or benefit of such party, then such Limitation Period shall cease
to run and shall be tolled as of the date of this Agreement, or, in the
case of any Limitation Period beginning after the date hereof, shall not
begin to run, unless and until such Limitation Period shall be resumed and
reinstated as provided in the following Section 11.19(e);
(d) so long as any Limitation Period is tolled pursuant to
Section 11.19(c), no party to the Shareholders Agreement may exercise any
right or option such party would otherwise have but for the provisions of
this Section 11.19; and
(e) if this Agreement is terminated pursuant to Article XII,
then as of the close of business on the date this Agreement is so
terminated, the provisions of this Section 11.19 shall terminate and any
Limitation Period shall resume and be reinstated or shall commence, as the
case may be, ten days following such termination, and promptly thereafter,
the Company shall notify each of the parties to the Shareholders Agreement
that the provisions of this Section 11.19 have terminated.
By their execution and delivery of this Agreement, the Company and the
Stockholders (who hold 100% of the shares of Capital Stock subject to the
Shareholders Agreement) hereby amend the Shareholders Agreement as set forth in
this Section 11.19.
Section 11.20. Certain Indebtedness. Until such time as the Stockholder
--------------------
Guarantees with respect to the Summa Capital Corporation Financing Agreement
have been terminated, the principal amount of obligations of the Company to
Summa Capital Corporation will not be increased.
<PAGE>
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall
not have been consummated by September 30, 1998, unless the failure
of such transactions to be consummated results from the willful
failure of the Party (or in the case of the Stockholders and the
Company, any of them) seeking to terminate this Agreement to
perform or adhere to any agreement required hereby to be performed
or adhered to by that Party prior to or at the Closing or
thereafter on the IPO Closing Date; provided, however, that the
date September 30, 1998, set forth above shall be extended to
October 31, 1998, unless, on or before September 15, 1998, Founding
Companies which are to receive a majority of the initial merger
consideration (valuing shares of WORK Common Stock at $12 per
share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholders and the Company, any of them) in the observance or in
the due and timely performance of any of the covenants, agreements
or conditions contained herein and such breach or default continues
for fifteen days after written notice from the Majority
Stockholders or the Company, on the one hand, or from WORK on the
other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement
is terminated pursuant to its terms after the Closing and prior to
the consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this
<PAGE>
Agreement is terminated pursuant to this Section 12.01 after the
Certificate of Merger has been filed with the Secretary of State of the
State of New York, but before the IPO has been consummated, WORK (at WORK's
expense) will take all actions that Counsel for the Company and the
Stockholders advises WORK are required by the applicable laws of the State
of New York to rescind the Merger.
Section 12.02 Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
--------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
BAI ACQUISITION, INC.
By: /s/ Monte R. Stephens
--------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
BOTAL ASSOCIATES, INC.
By: /s/ John J. Talabisco
--------------------------------------
John J. Talabisco, President
STOCKHOLDERS:
/s/ John J. Talabisco
--------------------------------------------
John J. Talabisco
/s/ Steven Sayetta
--------------------------------------------
Steven Sayetta
/s/ Peter Elia
--------------------------------------------
Peter Elia
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Steve Sayetta
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President and Secretary Steven Sayetta
Vice President Peter Elia
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
NAME ADDRESS
---- -------
John J. Talabisco 235 East 95th St., Apt. 325
New York, NY 10128
Steven Sayetta 11-1 Jackson Ave.
Scarsdale, NY 10583
Peter Elia 235 Nottingham Rd.
Marlboro Township, N.J. 07751
C. The aggregate Merger Consideration shall be comprised of 224,746
shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
No. of Pre-Merger Shares Pro-Rata
Name of Company Common Stock Shares
---- ------------------------ --------
John J. Talabisco 3,600 72%
Steven Sayetta 900 18%
Peter Elia 500 10%
----- ---
TOTAL 5,000 100%
D. On the IPO Closing Date, (i) if the Closing Adjustment (as defined
below) is a positive number, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, cash in the aggregate amount
of the Closing Adjustment and (ii) if the Closing Adjustment is a negative
number, the Stockholders, pro rata in accordance with their respective Pro Rata
Shares, will pay to the Company cash in the aggregate amount of the Closing
Adjustment. The term "Closing Adjustment" means the sum of (i) the amount, if
any, by which Working Capital on the Adjustment Date exceeds Working Capital on
the Initial Calculation Date minus (ii) the amount,
<PAGE>
if any, by which Working Capital on the Initial Calculation Date exceeds Working
Capital on the Adjustment Date plus (iii) the amount, if any, by which Long Term
Debt on the Initial Calculation Date exceeds Long Term Debt on the Adjustment
Date minus (iv) the amount, if any, by which Long Term Debt on the Adjustment
Date exceeds Long Term Debt on the Initial Calculation Date.
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a), except for the following:
1) Peter Elia
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
John J. Talabisco N/A 3,600
Steven Sayetta N/A 900
Peter Elia N/A 500
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Two of the Stockholders own 100% of the capital stock of Absolutely
Professional.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common None 10,000 5,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreement.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has not, and there is not now in effect, an election with
the IRS to be taxed as an S corporation within the meaning of Section 1361 of
the Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
None.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BAI Acquisition, Inc.
Botal Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
The Guaranties dated May 6, 1996, by the Stockholders of the
obligations incurred by the Company pursuant to the Financing
Agreement dated as of May 6, 1996, between the Company and Summa
Capital Corporation.
Until such time as the Stockholder Guarantees with respect to the Summa
Capital Corporation Financing Agreement have been terminated, the principal
amount of obligations of the Company to Summa Capital Corporation will not be
increased.
<PAGE>
EXHIBIT 2.3
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
AIM ACQUISITION, INC.,
AIM STAFFING, INC.,
AND
ITS SOLE STOCKHOLDER
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), AIM ACQUISITION, INC., a California corporation and a wholly owned
subsidiary of WORK ("Newco"), AIM STAFFING, INC., a California corporation (the
"Company"), and the person listed on the signature pages of this Agreement under
the caption "Sole Stockholder" (the "Stockholder," or a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholder will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the California General Corporation
Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time $1,732,233.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholder" means David L. Lowe,
Esq.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the sole
proprietorship conducted by the Stockholder, as predecessor to the Company,
at March 31, 1998, which is included in the Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
<PAGE>
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholder and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholder in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $78,063, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $193,868, the
estimated amount, as of the Initial Calculation Date, of the net adjustment
that would be required under Section 481(a) of the Code if the Company
changed its method of accounting for tax purposes from the cash basis to
the accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the unaudited balance sheet
of the sole proprietorship conducted by the Stockholder, as predecessor to
the Company, at December 31, 1997, and the related unaudited statement of
income for the year ended December 31, 1997, and (b) the Current Balance
Sheet and the related unaudited statement of income for the three-month
period ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means AIM Acquisition, Inc., a California corporation.
"New Employment Agreement" means the Employment Agreement entered into
as of the date of this Agreement between the Company and Linda McKell.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
<PAGE>
"Responsible Officer" means Linda McKell.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of California.
<PAGE>
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of California, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the State of California and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
<PAGE>
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date
<PAGE>
subsequent to surrender, which are payable with respect to such number of
whole shares of WORK Common Stock, subject in all cases to any applicable
escheat laws. No interest will be payable with respect to the payment of
such dividends or other distributions (or cash for and in lieu of
fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholder, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholder in accordance with their respective Pro Rata
Shares. The aggregate amount of accounts and notes receivable to be distributed
pursuant to this Section 2.07 is herein referred to as the "Cash Basis Accounts
Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
<PAGE>
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of California), (ii) verify the existence
and ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to Linda McKell. The actions taken at the
Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant
to Section 2.05. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.02, and all transactions
contemplated by this Agreement to be closed or completed on or before the
IPO Closing Date, including the surrender of the Company Common Stock in
exchange for the Merger Consideration will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
<PAGE>
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
<PAGE>
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholder in light of the
activities and business of WORK on the date hereof, the current business plans
of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
<PAGE>
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholder, severally and not jointly
with any other Person, acknowledges that it has or may have had in the
past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholder, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholder agrees that WORK may enforce the provisions of Section 11.01(a)
by injunctions and restraining orders against each of them who breaches any
of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock,
<PAGE>
in whole or in part, and WORK will have no obligation to, and shall not,
treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of
WORK Common Stock or any interest therein, the intent or effect of which is
to reduce the risk of owning the shares of WORK Common Stock acquired
pursuant to Section 2.04 (including, for example engaging in put, call,
short-sale, straddle or similar market transactions); provided, however,
that this Section 11.02 shall not restrict any transfer of WORK Common
Stock acquired by a Stockholder pursuant to Section 2.04 to any of that
Stockholder's Related Persons who agree in writing to be bound by the
provisions of Section 11.01 and this Section 11.02. The certificates
evidencing the WORK Common Stock delivered to each Stockholder pursuant to
Section 2.05 will bear a legend substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF
ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT
IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED
PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock
issued pursuant to Section 2.04 will bear the following legend in addition
to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND
OTHER APPLICABLE SECURITIES LAWS.
<PAGE>
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholder (and, in the
case of any trust, the successor trustees of the trust). Neither this Agreement
nor any other Transaction Document is intended, or shall be construed, deemed or
interpreted, to confer on any Person not a party hereto or thereto any rights or
remedies hereunder or thereunder, except as provided in Section 6.05(b) or
11.14, in Article IX, or as otherwise provided expressly herein or therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholder will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby,
<PAGE>
and (ii) the fees, expenses and disbursements of Counsel for the
Company and the Stockholder incurred in connection with the subject
matter of this Agreement and the Registration Statement on or before
the IPO Closing Date. The Stockholders will file all necessary
documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company,
WORK or the Surviving Corporation, will pay all Taxes due upon receipt
of the consideration payable to the Stockholder pursuant to Article
II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholder, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
444 Castro Street, #320
Mountain View, CA 94041
Attn: President
Telecopy No.: (650) 965-7907
with copies (which shall not constitute notice for purposes of this
Agreement) to:
David L. Lowe, Esq.
<PAGE>
101 Park Center Plaza, Suite 1007
San Jose, CA 95113
Telecopy No.: (408) 275-9121
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholder acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholder or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of
<PAGE>
Stockholders to enter into this Agreement, or to vote in favor of or consent to
the Merger, has been or will be made independent of, and without reliance on,
any statements, opinions or other communications of, or due diligence
investigations that have been or will be made or performed by, any prospective
underwriter relative to WORK or the IPO. The Underwriter shall have no
obligation to any of the Company and the Stockholder with respect to any
disclosure contained in the Registration Statement except for written
information concerning the Underwriter furnished to the Company by or on behalf
of the Underwriter specifically for inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Section 1113 and 603
of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 1113 and 603 of
the Business Corporation Act.
Section 11.16. Special Provisions.
------------------
(a) On or before the date hereof, the leases of office space referred
to in Section 4.18(a) of the Disclosure Statement have been assigned by the
Stockholder to the Company, and the landlords under such leases have
consented to such assignments.
(b) The Company was recently formed to succeed to the operations of
the sole proprietorship operated by the Stockholders. The Stockholders
have assigned to the Company all assets owned by the Stockholders which
were used in the operations of the Company (including the right to use the
name "Advanced Information Management"), and the Company has assumed the
liabilities of the Company reflected on the Current Balance Sheet or
incurred after the Current Balance Sheet Date in the ordinary course of
business and consistent with prior practices, including an aggregate of up
to $24,000 payable pursuant to the Completion Bonus Program adopted by the
Stockholders for the benefit of certain employees of the Company. In no
event will the Company have any responsibility for any liability under such
Completion Bonus Program in excess of $24,000. The liability for up to
$12,000 payable six months after the IPO Closing Date pursuant to the
Completion Bonus Program will be accrued as a current liability of the
Company as of the Adjustment Date. The liability for up to $12,000 payable
one year after the IPO Closing Date pursuant to the Completion Bonus
Program will not reduce the amount of Merger Consideration payable to the
Stockholders and will be paid when and as due by the Company. The
Stockholders covenant and agree that they, jointly and severally, will
indemnify each WORK Indemnified Party against, and hold each WORK
Indemnified Party harmless from and in respect of, all Damages that arise
from, are based on or relate or otherwise are attributable to liability
with respect to the Completion Bonus Program in excess of the aggregate
amount of $24,000 payable six months and one year after the IPO Closing
Date as described above in this Section 11.16(b), to the same extent as if
such matters were WORK Indemnified Losses
<PAGE>
except that such indemnification shall be without regard to the Threshold
Amount limitation on indemnification contained in the first sentence of
Section 9.06(a).
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholder and the Company, any of them)
seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholder
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
<PAGE>
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of California, but before the IPO has been consummated,
WORK (at WORK's expense) will take all actions that Counsel for the Company
and the Stockholder advises WORK are required by the applicable laws of the
State of California to rescind the Merger.
Section 12.02 Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
AIM ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
AIM STAFFING, INC.
By: /s/ Linda McKell
-------------------------------------------
Linda McKell, President
SOLE STOCKHOLDER:
/s/ Linda McKell
----------------------------------------------
Linda McKell
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Linda McKell
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Linda McKell
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
NAME ADDRESS
---- -------
Linda McKell 402 Hillwood Court
Mountain View, CA 94040
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $866,122, as adjusted pursuant to paragraph D below, and (ii)
72,176 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholder. The Stockholder's Pro Rata Share is 100%.
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
<PAGE>
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
<S> <C> <C>
Linda McKell Common 100,000
</TABLE>
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholder is, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common None 100,000 10,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreement.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 5.08
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 5.08 are used
herein as therein defined.
B. Notwithstanding the provisions of Section 5.08 to the contrary, the
Company and the Stockholders acknowledge that WORK has engaged the services of
R.A. Cohen Consulting as a broker with respect to the transaction contemplated
hereby. WORK is solely responsible for payment of any fees and expenses owed by
WORK as a result of its agreement with such broker.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the Closing,
the Company may make AAA Distributions up to the amount equal to
the sum of the Accumulated Adjustment Account as of the Initial
Calculation Date plus any additions to the Accumulated Adjustment
Account between the Initial Calculation Date and the date of
Closing. In addition, the Company shall make distributions of
cash basis accounts and notes receivable as contemplated by
Section 2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
AIM Acquisition, Inc.
AIM Staffing, Inc.
and
the Stockholder Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.4
-----------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
ACC ACQUISITION, INC.,
ACCESS STAFFING, INC.,
AND
ITS STOCKHOLDERS
-----------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), ACC ACQUISITION, INC., a California corporation and a wholly owned
subsidiary of WORK ("Newco"), ACCESS STAFFING, INC., a California corporation
(the "Company"), and the persons listed on the signature pages of this Agreement
under the caption "Stockholders" (collectively, the "Stockholders," and each of
them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01:
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the
<PAGE>
Closing occurs after the twentieth day, and on or before the last day, of a
month, the last day of the month preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the California General Corporation Law.
"Ceiling Amount" means at any time $6,276,748.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Severson & Werson.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Date" means any day during the 20-day period ending on the date
of the Closing.
"Designated Current Liabilities" means current liabilities of the Company
with respect to (i) current accrued and current deferred income taxes or
(ii) amounts borrowed by the Company to pay the amount of the redemption
payment to be paid to the ESOP pursuant to the Redemption Agreement or
amounts accrued by the Company at the Adjustment Date with respect to the
Supplemental ESOP Payment.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"ESOP" means the Access Staffing, Inc. Employee Stock Ownership Plan
created pursuant to the Employee Stock Ownership Trust Agreement dated
January 1, 1990, as amended and restated.
"ESOP Appraisal" means the current fair market value appraisal of the per
share value of the Company Common Stock obtained by the ESOP from the ESOP
Appraiser.
"ESOP Appraised Value per Share" means the value per share of Company
Common Stock set forth in the ESOP Appraisal.
<PAGE>
"ESOP Appraiser" means L.F. Sherman & Co., Inc.
"ESOT" means the trust created pursuant to the ESOP.
"Evans Revocable Trust" means The Evans Revocable Trust, an Arizona
trust, created pursuant to The Evans Revocable Trust Agreement dated as of
February 19, 1998, the general partner of the RAE L.L.P.
"Evans Unitrust" means The Evans Charitable Remainder Unitrust, an
Indiana trust, created under The Evans Charitable Remainder Unitrust
Agreement dated as of April 2, 1997.
"Holdback Termination Time" has the meaning specified in Section 11.21.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997 and 1996, and the related audited
statements of operations, stockholders' equity and cash flows for each of
two fiscal years in the two-year period ended December 31, 1997, together
with the related audit report of KPMG Peat Marwick LLP, and (b) the Current
Balance Sheet and the related unaudited statements of operations,
stockholders' equity and cash flows for the three-month period ended on the
Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means ACC Acquisition, Inc., a California corporation.
"New Employment Agreement" means the Employment Agreement entered into as
of the date of this Agreement, between the Company and Ingrid A. Evans.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means, with respect to the ESOP, 0%, with respect to the
RAE L.L.P., 50%, and with respect to the Evans Unitrust, 50%.
"RAE L.L.P." means RAE Family Limited Partnership, L.L.P., an Arizona
limited partnership.
<PAGE>
"Redemption Agreement" has the meaning specified in Section 11.17(a).
"Responsible Officer" means either of Ingrid A. Evans or Rodney A. Evans.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary personnel
staffing, personnel placement, staff leasing, professional employer
organization and training and business solutions.
"Supplemental ESOP Payment" has the meaning specified in Section
11.17(a).
"Surviving Corporation" means the Company, which is to be designated in
the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition of
Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b) the
sum of (i) the product of current liabilities of the Company (other than
Designated Current Liabilities) multiplied by 1.25 and (ii) the product of
the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
<PAGE>
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of California.
Section 2.02. The Effective Time. The effective time of the Merger
(the "Effective Time") will be the time on the IPO Closing Date which the
Certificate of Merger specifies or, if the Certificate of Merger does not
specify another time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of California, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the State of California and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office. The Company
will remain a wholly owned subsidiary of WORK for a time period at least equal
to the Restricted Period.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time will (i) be converted into the right to
receive, without interest, on surrender of the certificate evidencing those
shares, the amount of cash and the number of WORK Common Stock set forth or
determined as provided in Schedule 2.04 (the "Merger Consideration"), (ii)
cease to be outstanding and to exist, and (iii) be canceled and retired;
<PAGE>
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into one share of Common
Stock, par value $1.00 per share, of the Surviving Corporation, and the
shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
(a) At or after the Effective Time: (i) each Stockholder, as the holder
of certificates representing shares of Company Common Stock, will, on
surrender of his certificates to WORK (or any agent which may be appointed
by WORK for purposes of this Section 2.05), receive, and WORK will pay and
issue to each Stockholder, in each case subject to the provisions of
Section 2.06, the Merger Consideration; and (ii) until any certificate
representing Company Common Stock has been surrendered and replaced
pursuant to this Section 2.05, that certificate will, for all purposes, be
deemed to evidence ownership of the number of whole shares of WORK Common
Stock, and the right to receive cash, included in the Merger Consideration
payable in respect of that certificate pursuant to Section 2.04. All
shares of WORK Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by WORK at the Effective Time. All cash
included in the Merger Consideration shall be paid, at WORK's option, by
(a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock
<PAGE>
have been issued in the Merger until the unsurrendered certificates are
surrendered as provided herein, but (i) on such surrender, WORK will cause
to be paid, to the Person in whose name the certificates representing such
shares of WORK Common Stock shall then be issued, the amount of dividends
or other distributions previously paid with respect to such whole shares of
WORK Common Stock with a record date, or which have accrued, subsequent to
the Effective Time, but prior to surrender, and the amount of any cash
payable to such Person for and in lieu of fractional shares pursuant to
Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, WORK will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which
have been accrued, subsequent to the Effective Time, but which are not
payable until a date subsequent to surrender, which are payable with
respect to such number of whole shares of WORK Common Stock, subject in all
cases to any applicable escheat laws. No interest will be payable with
respect to the payment of such dividends or other distributions (or cash
for and in lieu of fractional shares) on surrender of outstanding
certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
(a) The Closing. On or before the IPO Pricing Date, the Parties will
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of California), (ii) verify the existence
and ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to Ingrid A. Evans. The actions taken at
the Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant
to Section 2.05. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.02, and all transactions
contemplated by this Agreement to be closed or completed on or before the
IPO Closing Date, including the surrender of the Company Common Stock in
exchange for the Merger Consideration will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
12.01 (b).
<PAGE>
(b) Incorporation by Reference. The text of Article VII of the Uniform
Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally
agrees that he will not during the period beginning on the date hereof and
ending on the second anniversary of the IPO Closing Date, directly or
indirectly, for any reason, for his own account or on behalf of or together with
any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the
<PAGE>
Territory, (i) for the purpose of soliciting or selling any product or
service in competition with the Company, any Company Subsidiary or WORK
within the Territory and (ii) with the knowledge of the customer
relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
(a) Each of the Company and the Stockholders, severally and not jointly
with any other Person, acknowledges that it has or may have had in the
past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result of
the breach of the foregoing covenants in Section 11.01(a), and because of
the immediate and irreparable damage that would be caused to WORK for which
it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are incorporated
in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall survive
the termination of this Agreement.
<PAGE>
Section 11.02. Restrictions on Transfers of WORK Common Stock.
(a) During the one-year period ending on the first anniversary of the IPO
Closing Date (the "Restricted Period"), no Stockholder voluntarily will:
(i) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint
or otherwise dispose of (A) any shares of WORK Common Stock received by any
Stockholder in the Merger or (B) any interest in (including any option to
buy or sell) any such shares of WORK Common Stock, in whole or in part, and
WORK will have no obligation to, and shall not, treat any such attempted
transfer as effective for any purpose; or (ii) engage in any transaction,
whether or not with respect to any shares of WORK Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of
owning the shares of WORK Common Stock acquired pursuant to Section 2.04
(including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE
OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT
BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION OF ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT
IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE "RESTRICTED
PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates
<PAGE>
evidencing shares of WORK Common Stock issued pursuant to Section 2.04 will
bear the following legend in addition to the legend prescribed by Section
11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and
severally represent and warrant to WORK that the Company is not directly or
indirectly obligated to pay any broker or similar agent in connection with the
transactions contemplated hereby and agree, without regard to the Threshold
Amount limitations set forth in Article IX, to indemnify WORK against all Damage
Claims arising out of claims for any and all fees and commissions of brokers or
similar agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and
<PAGE>
any amendments to this Agreement including all costs and expenses incurred in
the performance of and compliance with all conditions to be performed by WORK
and Newco under this Agreement, including the costs of preparing the
Registration Statement, (b) WORK will pay up to a maximum of $25,000 in the
aggregate of the fees, expenses and disbursements of Bracewell and Patterson,
L.L.P., counsel to the Founding Companies, incurred in connection with the
subject matter of this Agreement, and (c) the Stockholders will pay from
personal funds, and not from funds of the Company or any Company Subsidiary, (i)
all sales, use, transfer and other similar taxes and fees (collectively,
"Transfer Taxes") incurred in connection with the transactions contemplated
hereby, and (ii) the fees, expenses and disbursements of Counsel for the Company
and the Stockholders incurred in connection with the subject matter of this
Agreement and the Registration Statement on or before the IPO Closing Date. The
Stockholders will file all necessary documentation and Returns with respect to
all Transfer Taxes. In addition, each Stockholder acknowledges that he, and not
the Company, WORK or the Surviving Corporation, will pay all Taxes due upon
receipt of the consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder
shall be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
<PAGE>
(iii) if to the Company, addressed to it at:
100 Pine Street
San Francisco, CA 94111
Attn: President
Telecopy No.: (415) 781-6226
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Severson & Werson
One Embarcadero Center, Suite 2600
San Francisco, CA 94111
Attn: Roberta Romberg
Telecopy No.: (415) 956-0439
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of
this Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
<PAGE>
Section 11.14. Respecting the IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
(a) The Stockholders, as the owners and holders of all the Capital Stock
of the Company, hereby consent to and approve the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 603 and 1113 of
the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and plan of merger
contemplated by this Agreement pursuant to Sections 603 and 1113 of the
Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Redemption of ESOP Shares; Termination of ESOP.
(a) As of June 29, 1998, the Company terminated the ESOP and in
connection therewith redeemed 50,961 shares of Company Common Stock from
the ESOP for an aggregate purchase price of $912,201.90 pursuant to the
ESOP Stock Redemption Agreement dated June 29, 1998 (the "Redemption
Agreement"), between the Company and the trustees of ESOP, a true and
correct copy of which has been delivered to WORK. Pursuant to Section 2(c)
of the Redemption Agreement, the Company is required to pay to the ESOP an
additional amount (the "Supplemental ESOP Payment") on or before the IPO
Closing Date if the Merger is consummated. Pursuant to the provisions of
Schedule 2.04, the cash portion of the Merger Consideration will be reduced
by the amount, if any, by which the Supplemental ESOP Payment exceeds
$352,298.90 and, if the Supplemental ESOP Payment is not accrued as of the
Adjustment Date, by any portion of the Supplemental ESOP Payment which is
paid by the Company after the Adjustment Date.
<PAGE>
(b) After the effective date of termination of the ESOP, no distribution
of its assets to participants and their beneficiaries, (other than normal
distributions in the ordinary course of business to or on behalf of
employees who have separated service with the Company), will be made until
the Company shall have received a determination letter from the IRS to the
effect set forth in the following paragraph.
As soon as practicable following the redemption referred to in Section
11.17(a) above, and in any event within 90 days after the date hereof, the
Company agrees to file a submission to formally request a determination
letter from the IRS to the effect that the ESOP is a qualified plan under
Section 401(a) of the Code upon its termination and that the ESOT is tax
exempt under Section 501(a) of the Code. As soon as administratively
practicable following receipt of a favorable IRS determination letter, the
trustee of the ESOT shall effectuate distributions of all remaining assets
from the ESOT and, thereafter, it shall be liquidated. After liquidation
of the ESOT, WORK agrees to file a final IRS form 5500 for the Plan with
the IRS.
WORK assumes no liability or obligation with respect to the ESOP or ESOT
that results from, relates to, or arises out of, any act or omission by any
person or entity occurring on or prior to the IPO Closing Date or by the
Trustee at any time. The Stockholders covenant and agree that they,
jointly and severally, will indemnify each WORK Indemnified Party against,
and hold each WORK Indemnified Party harmless from and in respect of, all
Damages that arise from, are based on or relate or otherwise are
attributable to any such liability or obligation, to the same extent as if
such matters were WORK Indemnified Losses except that such indemnification
shall be without regard to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
Section 11.18. Authority of Trustees. Rodney A. Evans and Ingrid A.
Evans hereby represent and warrant to WORK and Newco that they are the duly
named and serving trustees of each of the ESOT, the Evans Unitrust and the Evans
Revocable Trust, the execution and delivery by them of this Agreement are within
their powers, and the performance by them of this Agreement are within the
powers and purposes of the ESOT, the Evans Unitrust and the Evans Revocable
Trust under the terms of all documents creating, evidencing or governing them,
true and correct copies of all of which have been delivered to WORK, and neither
the execution, delivery nor performance by the ESOT, the Evans Unitrust and the
Evans Revocable Trust of this Agreement will violate, constitute a breach of, or
conflict with any documents creating, evidencing or governing the ESOT, the
Evans Unitrust and the Evans Revocable Trust.
Section 11.19. Certain Obligations. Ingrid A. Evans and Rodney A. Evans
hereby agree that they shall be liable for, and obligated to perform, each
representation, warranty, covenant, indemnity obligation and each other
agreement and undertaking of the RAE L.L.P. and the Evans Unitrust to the same
extent, and subject to the same qualifications and limitations, as if they were
named in this Agreement as Stockholders in the place and stead of the RAE L.L.P.
and the Evans Unitrust. The obligations of Mr. and Mrs. Evans and of the RAE
L.L.P. and the Evans Unitrust shall in all respects be joint and several, and
any right or obligation which any Party would be entitled to enforce against the
RAE L.L.P. and the Evans Unitrust may be enforced directly against Mr. and Mrs.
Evans as their direct and primary obligation.
<PAGE>
Section 11.20. Amendment to Bylaws. Prior to the date hereof, the Board
of Directors of the Company has approved a resolution amending the bylaws of the
Company to permit WORK to acquire all the shares of Company Common Stock as
provided in this Agreement and to provide that, at the Effective Time, the
restrictions on the ownership of Company Common Stock provided in Article X,
Section 1 of the bylaws of the Company will be of no further force and effect.
Section 11.21. Certain Claims. The Stockholders covenant and agree
that they, jointly and severally, will indemnify each WORK Indemnified Party
against, and hold each WORK Indemnified Party harmless from and in respect of,
all Damages that arise from, are based on or relate or otherwise are
attributable to (i) the pending inquiry by the U.S. Department of Labor with
respect to the ESOP and (ii) any payment made or required to be made pursuant to
Section 2(b) of the Redemption Agreement, in each case to the same extent as if
such matters were WORK Indemnified Losses except that such indemnification shall
be without regard to the Threshold Amount limitation on indemnification
contained in the first sentence of Section 9.06(a).
Until the inquiry by the U.S. Department of Labor referred to in clause (i)
of the preceding paragraph is concluded and the Stockholders have fully
performed their indemnity obligations pursuant to Article IX and this Section
11.21 with respect thereto (the "Holdback Termination Time"), WORK shall
withhold from the Stockholders in accordance with their respective Pro Rata
Shares an aggregate of $250,000 in cash from the Merger Consideration to insure
performance by the Stockholders of their obligations to indemnify and hold
harmless the WORK Indemnified Parties with respect to any Damages that arise
from, are based on or relate or are otherwise attributable to such inquiry. For
purposes of the holdback contemplated by this paragraph, if the Company (x) has
received the determination letter from the IRS referred to in 11.17(b), (y)
provided all information requested by the U.S. Department of Labor with respect
to the ESOP and (z) is unable to determine whether the inquiry referred to in
clause (i) of this Section 11.21 has been concluded, such inquiry will be deemed
concluded if the U.S. Department of Labor fails to respond to each of three
requests from the Company for advice as as to the status of the inquiry. Either
the Company or the trustee of the ESOP may make such requests of the U.S.
Department of Labor within 30 days, 60 days and 90 days, respectively, after
receipt by the Company of the aforementioned determination letter. In the event
that, notwithstanding such indemnity, any WORK Indemnified Party (including the
Company) sustains any Damages, the Company may transfer to such WORK Indemnified
Party (or may retain if such WORK Indemnified Party is the Company) the amount
of such Damages. Any amount retained hereunder which remains in the possession
of WORK at the Holdback Termination Time, shall be transferred to the
Stockholders in accordance with their respective Pro Rata Shares. In lieu of the
cash to be withheld by WORK pursuant to this paragraph, at or prior to the IPO
Closing Date, the Stockholders may deliver to WORK a stand-by letter of credit
in substantially the form of Exhibit 11.21 or in such other form as may be
reasonably acceptable to WORK. Such stand-by letter of credit shall be in the
amount set forth above in this paragraph, shall be issued by a bank reasonably
acceptable to WORK and shall expire December 31, 1999; provided, however, that
to the extent the period during which WORK would be entitled to withhold cash as
hereinabove provided is extended beyond December 31, 1999, the expiration date
of such letter of credit shall likewise be extended.
<PAGE>
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this
<PAGE>
Agreement is terminated pursuant to this Section 12.01 after the
Certificate of Merger has been filed with the Secretary of State of the
State of California, but before the IPO has been consummated, WORK (at
WORK's expense) will take all actions that Counsel for the Company and the
Stockholders advises WORK are required by the applicable laws of the State
of California to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
---------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
ACC ACQUISITION, INC.
By: /s/ Monte R. Stephens
---------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
ACCESS STAFFING, INC.
By: /s/ Ingrid A. Evans
---------------------------------------
Ingrid A. Evans, President
STOCKHOLDERS:
THE RAE FAMILY LIMITED PARTNERSHIP, L.L.P
By: The Evans Revocable Trust created under The
Evans Revocable Trust Agreement dated February
19, 1998, General Partner
By: /s/ Rodney A. Evans
----------------------------------------
Rodney A. Evans, Co-Trustee
By: /s/ Ingrid A. Evans
----------------------------------------
Ingrid A. Evans, Co-Trustee
<PAGE>
THE EVANS CHARITABLE REMAINDER UNITRUST created
under The Evans Charitable Remainder Unitrust
Agreement dated as of April 2, 1997
By: /s/ Rodney A. Evans
-------------------------------
Rodney A. Evans, Co-Trustee
By: /s/ Ingrid A. Evans
---------------------------------
Ingrid A. Evans, Co-Trustee
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Ingrid A. Evans
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Ingrid A. Evans
Vice President, Chief Financial Officer Rodney A. Evans
and Secretary
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
- ----------------- --------------------
RAE L.L.P. 28 Deer Trail
Lafayette, CA 94549
Evans Unitrust 28 Deer Trail
Lafayette, CA 94549
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $2,506,132, as adjusted pursuant to paragraph D below, and (ii)
208,843 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders in accordance with their respective Pro Rata Shares. The Pro Rata
Share of each Stockholder is 50%.
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date, (ii) the cash portion of
the Merger Consideration will be increased for any decrease, and decreased for
any increase, in the amount of Long Term Debt, between the Initial Calculation
Date and the Adjustment Date and (iii) the cash portion of the Merger
Consideration will be reduced by the amount, if any, by which the Supplemental
ESOP Payment exceeds $352,298.90 and, if the Supplemental ESOP Payment is not
accrued as of the Adjustment Date, by any portion of the Supplemental ESOP
Payment which is paid, or to be paid, by the Company after the Adjustment Date.
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
RAE L.L.P. Common 101,000
Evans Unitrust Common 101,000
-------
202,000
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- --------- --------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Common None 1,000,000 202,000 94,000 None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue in
effect past the date of the Closing in accordance with their terms, subject to
the following provisions of this Schedule:
The New Employment Agreement.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has not made, and there is not now in effect, an election
with the IRS to be taxed as an S corporation within the meaning of Section 1361
of the Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
None.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as are
necessary and satisfactory to WORK to dispose, prior to the Effective Time, of
the following assets in the manner indicated below:
None.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
ACC Acquisition, Inc.
Access Staffing, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.5
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
BT ACQUISITION, INC.,
BENETEMPS, INC.
AND
ITS SOLE STOCKHOLDER
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), BT ACQUISITION, INC., a New Hampshire corporation and a wholly owned
subsidiary of WORK ("Newco"), BENETEMPS, INC., a New Hampshire corporation (the
"Company"), and the persons listed on the signature pages of this Agreement
under the caption "Stockholders" (collectively, the "Stockholders," and each of
them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the New Hampshire Business
Corporation Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $5,094,726.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Sheehan Phinney
Bass + Green.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
<PAGE>
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $176,594, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $534,291, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997 and 1996, and the related audited
statements of operations, stockholders' equity and cash flows for each of
the Company's two fiscal years in the two-year period ended December 31,
1997, together with the related audit report of KPMG Peat Marwick LLP, and
(b) the Current Balance Sheet and the related unaudited statements of
operations, stockholders' equity and cash flows for the three-month period
ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means BT Acquisition, Inc., a New Hampshire corporation.
"New Employment Agreement" means the Employment Agreement entered into
as of the date of this Agreement between the Company and Robert Spiegelman.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule
<PAGE>
2.04, and (b) the denominator of which is the total number of shares of
outstanding Company Common Stock owned by all Stockholders, as set forth in
Schedule 2.04.
"Responsible Officer" means Robert Spiegelman.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
<PAGE>
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of New Hampshire.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of New Hampshire, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the State of New Hampshire and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
<PAGE>
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as
the holder of certificates representing shares of Company Common Stock,
will, on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be deemed
for all purposes to have been issued by WORK at the Effective Time. All
cash included in the Merger Consideration shall be paid, at WORK's option,
by (a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that
may be appointed by WORK for purposes of this Section 2.05), on or before
the IPO Closing Date, the certificates representing Company Common Stock
owned by the Stockholder, duly endorsed in blank by him, or accompanied by
stock powers duly executed by him in blank, and with all necessary transfer
tax and other revenue stamps, acquired at his expense, affixed and
canceled. Each Stockholder shall cure any deficiencies in the endorsement
of the certificates or other documents of conveyance respecting, or in the
stock powers accompanying, the certificates representing Company Common
Stock delivered by him .
(c) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock
<PAGE>
have been issued in the Merger until the unsurrendered certificates are
surrendered as provided herein, but (i) on such surrender, WORK will cause
to be paid, to the Person in whose name the certificates representing such
shares of WORK Common Stock shall then be issued, the amount of dividends
or other distributions previously paid with respect to such whole shares of
WORK Common Stock with a record date, or which have accrued, subsequent to
the Effective Time, but prior to surrender, and the amount of any cash
payable to such Person for and in lieu of fractional shares pursuant to
Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, WORK will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which
have been accrued, subsequent to the Effective Time, but which are not
payable until a date subsequent to surrender, which are payable with
respect to such number of whole shares of WORK Common Stock, subject in all
cases to any applicable escheat laws. No interest will be payable with
respect to the payment of such dividends or other distributions (or cash
for and in lieu of fractional shares) on surrender of outstanding
certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties
-----------
will take all actions necessary to (i) effect the Merger on the IPO
Closing Date (including, as permitted by the Business Corporation Act, (A)
the execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Secretary of State of the State of New Hampshire, (ii)
verify the existence and ownership of the certificates evidencing the
Company Common Stock to be exchanged for the Merger Consideration pursuant
to Section 2.05, and (iii) satisfy the document delivery requirements to
which the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
<PAGE>
time on the IPO Pricing Date as WORK shall specify by written notice to
Robert Spiegelman. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately
<PAGE>
prior to the Effective Time (for purposes of this Article X, the territory
surrounding a facility shall be the area located within 50 miles of the
facility, all of such locations being herein collectively called the
"Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK,
<PAGE>
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by WORK of any covenant in this Article X. It is
specifically agreed that the period specified in Section 10.01 shall be computed
in the case of each Stockholder by excluding from that computation any time
during which that Stockholder is in violation of any provision of Section 10.01.
The covenants contained in this Article X shall not be affected by any breach of
any other provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may
<PAGE>
enforce the provisions of Section 11.01(a) by injunctions and restraining
orders against each of them who breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold
<PAGE>
by him without compliance with the Securities Act and (B) will, as a result
of their restrictions on transferability which are imposed by this
Agreement during the Restricted Period, have a value materially less at the
Effective Time than the value of then freely tradeable shares of WORK
Common Stock, and (ii) covenants that none of the shares of WORK Common
Stock issued to him pursuant to Section 2.04 will be offered, sold,
assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all the applicable provisions of the
Securities Act and the rules and regulations of the SEC and applicable
state securities laws and regulations. All certificates evidencing shares
of WORK Common Stock issued pursuant to Section 2.04 will bear the
following legend in addition to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
<PAGE>
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transaction contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Benetemps, Inc.
88 Stiles Road, Suite 203
Salem, NH 03079
Attn: President
Telecopy No.: (603) 898-6210
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Sheehan Phinney Bass + Green
1000 Elm Street
Manchester, NH 03010
Attn: Alan Reische
Telecopy No.: (603) 627-8121
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW HAMPSHIRE WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
<PAGE>
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14 Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Board of Directors of the Company has approved and
recommended the plan of merger contemplated hereby to the Stockholders. The
Stockholders, as the owners and holders of all the Capital Stock of the
Company, hereby consent to and approve the Merger and the plan of merger
contemplated by this Agreement pursuant to Sections 293-A:11.03 and 293-
A:7.04 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the
plan of merger contemplated by this Agreement pursuant to Sections 293-
A:11.03 and 293-A:7.04 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
<PAGE>
ARTICLE XII
TERMINATION
Section 12.01 Termination of This Agreement.
------------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the Company ;
(ii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall
not have been consummated by September 30, 1998, unless the
failure of such transactions to be consummated results from the
willful failure of the Party (or in the case of the Stockholders
and the Company, any of them) seeking to terminate this Agreement
to perform or adhere to any agreement required hereby to be
performed or adhered to by that Party prior to or at the Closing
or thereafter on the IPO Closing Date; provided, however, that the
date September 30, 1998, set forth above shall be extended to
October 31, 1998, unless, on or before September 15, 1998,
Founding Companies which are to receive a majority of the initial
merger consideration (valuing shares of WORK Common Stock at $12
per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholders and the Company, any of them) in the observance or in
the due and timely performance of any of the covenants, agreements
or conditions contained herein and such breach or default
continues for fifteen days after written notice from the Majority
Stockholders or the Company, on the one hand, or from WORK on the
other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.06.
(b) This Agreement may be terminated after the Closingsolely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to
the consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been
abandoned and of no force or effect. If this
<PAGE>
Agreement is terminated pursuant to this Section 12.01 after the
Certificate of Merger has been filed with the Secretary of State
of the State of New Hampshire, but before the IPO has been
consummated, WORK (at WORK's expense) will take all actions that
Counsel for the Company and the Stockholders advises WORK are
required by the applicable laws of the State of New Hampshire to
rescind the Merger.
Section 12.02 Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or
obligation on the part of any Party except (a) as provided in Section 11.07,
or (b) to the extent that such liability is based on the breach by that Party
of any of its or his representations, warranties or covenants set forth in of
this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
BT ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
BENETEMPS, INC.
By: /s/ Robert Spiegelman
-----------------------------------------
Robert Spiegelman, President
STOCKHOLDER:
/s/ Robert Spiegelman
---------------------------------------------
Robert Spiegelman
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Robert Spiegelman
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Robert Spiegelman
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
-------- -----------
Robert Spiegelman 18 Windsor Blvd.
Londonderry, NH 03053
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $2,500,002, as adjusted pursuant to paragraph D below, and (ii)
216,227 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- -----
Robert Spiegelman 100 100%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv)
<PAGE>
increased by the amount, if any, by which (x) the estimated amount of the net
adjustment that would be required under Section 481(a) of the Code if, as of the
Adjustment Date, the Company changed its method of accounting for tax purposes
from the cash basis to the accrual basis is less than (y) the Estimated Cash
Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Robert Spiegelman Common 100
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Capital Stock None 300 100 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreement.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the
amount equal to the sum of the Accumulated Adjustment
Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In
addition, the Company shall make distributions of cash basis
accounts and notes receivable as contemplated by Section
2.07.
Prior to the IPO Closing Date, the Company may incur
Indebtedness on terms reasonably acceptable to WORK to
enable the Company to make AAA Distributions.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to
be distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BT Acquisition, Inc.
Benetemps, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
Any Indebtedness incurred by the Company to enable the
Company to make AAA Distributions.
<PAGE>
EXHIBIT 2.6
________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
BCC ACQUISITION, INC.
THE BURNETT COMPANIES CONSOLIDATED, INC.
AND
ITS STOCKHOLDERS
________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), BCC ACQUISITION, INC., a Texas corporation and a wholly owned
subsidiary of WORK ("Newco"),THE BURNETT COMPANIES CONSOLIDATED, INC., a Texas
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Texas Business Corporation Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $24,421,601.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Counsel for the Company and the Stockholders" means Cochran, Rooke &
Craft, L.L.P.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
<PAGE>
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $2,653,124, the estimated amount, as of
the Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $5,525,211, the
estimated amount, as of the Initial Calculation Date, of the net adjustment
that would be required under Section 481(a) of the Code if the Company
changed its method of accounting from the cash basis to the accrual basis.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 27, 1997, December 28, 1996, and December 30, 1995
and the related audited statements of earnings, stockholders' equity and
cash flows for each of the Company's three fiscal years in the three-year
period ended December 27, 1997, together with the related audit report of
KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the related
unaudited statements of earnings, stockholders' equity and cash flows for
the three-month period ended on the Current Balance Sheet Date.
"Initial Calculation Date" means March 31, 1998.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means BCC Acquisition, Inc., a Texas corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and Susan W.
Burnett and Rusty Burnett, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of
<PAGE>
outstanding Company Common Stock owned by that Stockholder, as set forth in
Schedule 2.04, and (b) the denominator of which is the total number of
shares of outstanding Company Common Stock owned by all Stockholders, as
set forth in Schedule 2.04.
"Responsible Officer" means either of Rusty Burnett or Susan W.
Burnett.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
<PAGE>
Section 1.02. Definitions in Uniform Provisions. Capitalized terms
used in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of Texas.
Section 2.02. The Effective Time. The effective time of the Merger the
("Effective Time") will be the time on the IPO Closing Date which the
Certificate of Merger specifies or, if the Certificate of Merger does not
specify another time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of Texas, (e) the Charter Documents of the
Company then in effect (after giving effect to the amendment of the Company's
certificate or articles of incorporation specified in clause (c) of this
sentence) will become and thereafter remain (until changed in accordance with
(i) applicable law, in the case of the certificate or articles of incorporation
or (ii) their terms, in the case of the bylaws) the Charter Documents of the
Surviving Corporation, (f) the initial board of directors of the Surviving
Corporation will be the Persons named in Schedule 2.03, who will hold the office
of director of the Surviving Corporation subject to the provisions of the
applicable laws of the State of Texas and the Charter Documents of the Surviving
Corporation, and (g) the officers of the Surviving Corporation immediately
following the Merger will be as set forth in Schedule 2.03, and each of the
Persons so designated in Schedule 2.03 will serve in each office specified for
that Person in Schedule 2.03, subject to the provisions of the Charter Documents
of the Surviving Corporation, until his or her successor is duly elected to,
and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time will (i) be converted into the right to
receive, without interest, on surrender of the certificate evidencing those
shares, the amount of cash and the number of whole and fractional shares of
WORK Common Stock set forth or determined as provided
<PAGE>
in Schedule 2.04 (the "Merger Consideration"), (ii) cease to be
outstanding and to exist, and (iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into one share of Common
Stock, par value $1.00 per share, of the Surviving Corporation, and the
shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
(a) At or after the Effective Time: (i) each Stockholder, as the holder
of certificates representing shares of Company Common Stock, will, on
surrender of his certificates to WORK (or any agent which may be appointed
by WORK for purposes of this Section 2.05), receive, and WORK will pay and
issue to each Stockholder, in each case subject to the provisions of
Section 2.06, the Merger Consideration; and (ii) until any certificate
representing Company Common Stock has been surrendered and replaced
pursuant to this Section 2.05, that certificate will, for all purposes, be
deemed to evidence ownership of the number of whole shares of WORK Common
Stock, and the right to receive cash, included in the Merger Consideration
payable in respect of that certificate pursuant to Section 2.04. All
shares of WORK Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by WORK at the Effective Time. All cash
included in the Merger Consideration shall be paid, at WORK's option, by
(a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
<PAGE>
(c) No dividends (or interest) or other distributions declared or earned
after the Effective Time with respect to WORK Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company
Common Stock for which shares of WORK Common Stock have been issued in the
Merger until the unsurrendered certificates are surrendered as provided
herein, but (i) on such surrender, WORK will cause to be paid, to the
Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
before the day preceding the IPO Closing Date, the Company shall distribute in
kind (in addition to, and not as a part of, the Merger Consideration) to the
Stockholders, in accordance with their respective Pro Rata Shares, cash basis
accounts and notes receivable outstanding at such time which have a value equal
to the net adjustment that would be required under Section 481(a) of the Code
if, as of the IPO Closing Date, the Company changed its method of accounting
from the cash basis to the accrual basis. In the event that, notwithstanding
such distribution, the Company receives any payment with respect to any such
receivables, the Company will promptly pay the amount so received over to the
Stockholders in accordance with their respective Pro Rata Shares. The aggregate
amount of accounts and notes receivable to be distributed pursuant to this
Section 2.07 is herein referred to as the "Cash Basis Accounts Receivable
Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
(a) The Closing. On or before the IPO Pricing Date, the Parties will
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Texas), (ii) verify the existence and
ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later
<PAGE>
time on the IPO Pricing Date as WORK shall specify by written notice to
Rusty Burnett. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the Uniform
Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity or
as an owner, co-owner or other investor of or in, whether as an employee,
independent contractor, consultant or advisor, in any business in the
Staffing Industry in competition with the Company, any Company Subsidiary
or WORK or any Subsidiary of WORK (WORK and its Subsidiaries collectively
being called "WORK" for purposes of this Article X) within any territory
surrounding any office or facility (each a "facility") in which any of the
Company or the Company Subsidiaries was engaged in business on the date
hereof or immediately prior to the Effective Time (for purposes of this
Article X, the territory surrounding a facility
<PAGE>
shall be the area located within 50 miles of the facility, all of such
locations being herein collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that
Sections 10.01 and 10.02 impose a reasonable restraint on the Stockholders in
light of the activities and business of WORK on the date hereof, the current
business plans of WORK and the investment by each Stockholder in WORK as a
result of the Merger.
Section 10.04. Severability; Reformation. The covenants in this Article
X are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
<PAGE>
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
(a) Each of the Company and the Stockholders, severally and not jointly
with any other Person, acknowledges that it has or may have had in the
past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages. Notwithstanding anything to the
contrary set forth herein, the obligations imposed herein upon the Company
and the Stockholders shall be in addition to, and not in lieu or limitation
of, the obligations of confidentiality set forth in the Nondisclosure
Agreement.
(b) Because of the difficulty of measuring economic losses as a result of
the breach of the foregoing covenants in Section 11.01(a), and because of
the immediate and irreparable damage that would be caused to WORK for which
it would have no other
<PAGE>
adequate remedy, each of the Company and the Stockholders agrees that WORK
may enforce the provisions of Section 11.01(a) by injunctions and
restraining orders against each of them who breaches any of those
provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are incorporated
in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall survive
the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
(a) During the one-year period ending on the first anniversary of the IPO
Closing Date (the "Restricted Period"), no Stockholder voluntarily will:
(i) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint
or otherwise dispose of (A) any shares of WORK Common Stock received by any
Stockholder in the Merger or (B) any interest in (including any option to
buy or sell) any such shares of WORK Common Stock, in whole or in part, and
WORK will have no obligation to, and shall not, treat any such attempted
transfer as effective for any purpose; or (ii) engage in any transaction,
whether or not with respect to any shares of WORK Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of
owning the shares of WORK Common Stock acquired pursuant to Section 2.04
(including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND THE
OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT
BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION OF ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT
IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE "RESTRICTED
PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED
WITH THE TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement,
<PAGE>
if applicable, will not be registered under the Securities Act and
therefore may not be resold by him without compliance with the Securities
Act and (B) will, as a result of their restrictions on transferability
which are imposed by this Agreement during the Restricted Period, have a
value materially less at the Effective Time than the value of then freely
tradeable shares of WORK Common Stock, and (ii) covenants that none of the
shares of WORK Common Stock issued to him pursuant to Section 2.04 will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all the applicable provisions
of the Securities Act and the rules and regulations of the SEC and
applicable state securities laws and regulations. All certificates
evidencing shares of WORK Common Stock issued pursuant to Section 2.04 will
bear the following legend in addition to the legend prescribed by Section
11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and
severally represent and warrant to WORK that the Company is not directly or
indirectly obligated to pay any broker or similar agent in connection with the
transactions contemplated hereby and agree, without regard to the Threshold
Amount limitations set forth in Article IX, to indemnify WORK against all Damage
Claims arising out of claims for any and all fees and commissions of brokers or
similar agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver
<PAGE>
of any of the terms and conditions of this Agreement shall not be construed or
interpreted as, or deemed to be, a waiver of any of its other term or
conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
9800 Richmond Avenue, Suite 800
Houston, Texas 77042
Attn: President
Telecopy No.: (713) 268-6032
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Cochran, Rooke & Craft, L.L.P.
2200 Post Oak Blvd., Suite 700
Houston, Texas 77056
Attn: John R. Cochran, Jr.
Telecopy No.: (713) 621-8562
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
TEXAS WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B) MATTERS
PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL BE
GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
Agreement in all respects.
<PAGE>
Section 11.12. Reformation and Severability. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
(a) The Stockholders, as the owners and holders of all the Capital Stock
of the Company, hereby consent to and approve the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 5.03 and 9.10 of
the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 5.03 and 9.10 of
the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Litigation Matters. The Stockholders covenant and agree
that they, jointly and severally, will indemnify each WORK Indemnified Party
against, and hold each WORK Indemnified Party harmless from and in respect of,
all Damages that arise from, are based on or
<PAGE>
relate or otherwise are attributable to the litigation described in Section 4.12
of the Disclosure Statement, to the same extent as if such matters were WORK
Indemnified Losses except that such indemnification shall be without regard to
the Threshold Amount limitation on indemnification contained in the first
sentence of Section 9.06(a).
Section 11.18. Certain Rights. WORK hereby acknowledges that the
Stockholders have acquired shares of the Class B Preferred Stock of WORK and
such shares will be converted into shares of WORK Common Stock upon consummation
of the IPO, and in no event shall such conversion be deemed a breach of the
representation and warranty contained in Section 3.06.
Section 11.19. Franchise Taxes. The Company will promptly prepare and
file the franchise tax return for 1998, and the taxes reflected thereon shall be
apportioned between the Company on the one hand and the Stockholders
proportionately in accordance with their respective Pro Rata Shares on the
other. The Stockholders will be apportioned an amount of such taxes equal to the
fraction obtained by dividing the number of days during the period commencing
January 1, 1998 and ending on the day before the IPO Closing Date multiplied
times the amount of such taxes, and the Company shall be apportioned the balance
of such taxes.
Section 11.20. No Obligation To Terminate Plans. Notwithstanding the
provisions of Section 6.09, WORK will not require the Company to terminate the
Plans described in Section 4.26(d) of the Disclosure Statement without the
consent of the Stockholders.
Section 11.21. Split Dollar Agreement. Prior to the date hereof, the
Company, the Stockholders and the trustee of the Rusty and Susan Burnett Joint
Life Insurance Trusts under agreement dated October 27, 1997, have agreed that
the Company will be released from liability for the payment of any further
premiums from and after June 30, 1998, and the Stockholders have provided a copy
of such agreement to WORK.
Section 11.22. Company Software. The Stockholders acknowledge and agree
that, while the Company's front and back office software was authored by one or
both of the Stockholders, it is owned by the Company and not the Stockholders,
and the Company has obtained a copyright with respect thereto. The Stockholders
hereby assign and convey to the Company all right, title and interest which they
otherwise might have in such software.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to
<PAGE>
take place at the Closing shall not have been consummated by September
30, 1998, unless the failure of such transactions to be consummated
results from the willful failure of the Party (or in the case of the
Stockholders and the Company, any of them) seeking to terminate this
Agreement to perform or adhere to any agreement required hereby to be
performed or adhered to by that Party prior to or at the Closing or
thereafter on the IPO Closing Date; provided, however, that the date
September 30, 1998, set forth above shall be extended to October 31,
1998, unless, on or before September 15, 1998, Founding Companies
which are to receive a majority of the initial merger consideration
(valuing shares of WORK Common Stock at $12 per share) to be received
by all the Founding Companies on the IPO Closing Date notify WORK that
they have elected not to extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01, the
Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of Texas, but before the IPO has been consummated, WORK
(at WORK's expense) will take all actions that Counsel for the Company and
the Stockholders advises WORK are required by the applicable laws of the
State of Texas to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
----------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
BCC ACQUISITION, INC.
By: /s/ Monte R. Stephens
-----------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
THE BURNETT COMPANIES CONSOLIDATED, INC.
By: /s/ Susan W. Burnett
------------------------------------
Susan W. Burnett, President
STOCKHOLDERS:
/s/ Rusty Burnett
---------------------------------------
Rusty Burnett
/s/ Susan W. Burnett
---------------------------------------
Susan W. Burnett
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Susan W. Burnett
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Susan W. Burnett
Vice President Rusty Burnett
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
- ------------------- ----------------------
Rusty Burnett 201 Vanderpool, No. 34
Houston, Texas 77024
Susan W. Burnett 201 Vanderpool, No. 34
Houston, Texas 77024
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $8,421,605, as adjusted pursuant to paragraph D below, and (ii)
1,333,333 shares of WORK Common Stock, which shall be payable and issuable to
the Stockholders pro rata in accordance with their respective Pro Rata Shares.
The Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- ---------
Rusty Burnett 480,000 48.485%
Susan W. Burnett 510,000 51.515%
------- -------
990,000 100.000%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if,
<PAGE>
as of the Adjustment Date, the Company changed its method of accounting for tax
purposes from the cash basis to the accrual basis exceeds (y) the Estimated Cash
Basis Adjustment Amount and (iv) increased by the amount, if any, by which (x)
the estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis is less
than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholders is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Rusty Burnett Common 480,000
Susan W. Burnett Common 510,000
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- --------- --------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Common $.01 1,000,000 990,000 10,000 None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. The Company may enter into a Fifth Amendment to Lease Agreement
between Fraydun Realty Company and the Company, on substantially the same terms
as previously provided to WORK.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company may make the following Restricted Payments prior to the
Effective Time:
a) Between the Initial Calculation Date and the date of the Closing, the
Company may make AAA Distributions up to the amount equal to the sum
of the Accumulated Adjustment Account as of the Initial Calculation
Date plus any additions to the Accumulated Adjustment Account between
the Initial Calculation Date and the date of Closing. In addition, the
Company shall make distributions of cash basis accounts and notes
receivable as contemplated by Section 2.07.
b) The Company may transfer to the Stockholders (i) the 1982 Cessna
Pressurized 210 airplane (N6598W) owned by the Company and (ii) life
insurance policies on the lives of the Stockholders and the Company's
interest therein.
c) The Company may enter into a Fifth Amendment to Lease Agreement between
Fraydun Realty Company and the Company, on substantially the same
terms as previously provided to WORK.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
The 1982 Cessna Pressurized 210 airplane (N6598W) and insurance
policies owned by the Company may be distributed to the Stockholders
as set forth in Schedule 6.03.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
BCC Acquisition, Inc.
The Burnett Companies Consolidated, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.7
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
CHPI ACQUISITION, INC.,
CONTRACT HEALTH PROFESSIONALS INC.
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), CHPI ACQUISITION, INC., a Florida corporation and a wholly owned
subsidiary of WORK ("Newco"), CONTRACT HEALTH PROFESSIONALS INC., a Florida
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjusted EBIT" means, for the twelve-month period ending on the last
day of the month during which the IPO Closing Date occurs, earnings of the
Company for such period before interest expense and federal and state
income taxes, all determined in accordance with GAAP, adjusted to: (a)
exclude the results of any operations of the Company which have been
discontinued; (b) exclude charges to earnings of the Company which will not
be continuing after consummation of the Acquisition; (c) exclude investment
income and gains and losses from dispositions of capital assets; (d)
exclude all other extraordinary items of gain or loss, as defined by GAAP;
and (e) restate the annual compensation of Morton and Melanie Fishman from
its actual amount to an assumed level of $100,000 each.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Florida General Corporation Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time (a) $1,788,433 plus (b) the
aggregate amount of Contingent Merger Consideration which the Stockholders
have been paid, or are entitled to be paid, at such time.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Contingent Merger Consideration" means the consideration payable to
the Stockholders pursuant to Sections 2.08(a) and 2.08(b).
"Counsel for the Company and the Stockholders" means Mathison and
Mathison.
<PAGE>
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
"Designated Plan" has the meaning specified in Section 11.17.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Earn-Out EBIT" means, for the twelve-month period beginning on the
first day of the month following the IPO Closing Date, earnings of the
Company (including on a combined basis all pharmacy personnel agencies
acquired by WORK during such period) for such period before interest
expense and federal and state income taxes, all determined in accordance
with GAAP, adjusted to: (a) exclude investment income and gains and losses
from dispositions of capital assets, (b) exclude all extraordinary items of
gain or loss, as defined by GAAP, and (c) eliminate any management fees or
administrative costs (including audit fees) charged by WORK to the Company,
and any charges to the Company's earnings with respect of allocations of
indirect corporate overhead expenses, including amortization of goodwill,
but not eliminating expenses directly attributable to the Company or its
operations, such as charges for insurance coverage, charges for employee
benefit plans and charges associated with obtaining the Company's
accounting and financial information in an accurate and timely manner. Any
acquisition of pharmacy personnel agencies during the aforementioned period
whose earnings are included in calculating Earn-Out EBIT will, for purposes
of calculating Earn-Out EBIT, be accounted for using the purchase method of
accounting.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $303,903, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
<PAGE>
"Estimated Cash Basis Adjustment Amount" means $113,074, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997 and the related audited statements of
operations, stockholders' equity and cash flows for the Company's fiscal
year period ended December 31, 1997, together with the related audit report
of KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the related
unaudited statements of operations, stockholders' equity and cash flows for
the three-month period ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means CHPI Acquisition, Inc., a Florida corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement between the Company and Morton
Fishman and Melanie Fishman, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of Morton Fishman or Melanie
Fishman.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
<PAGE>
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Trust" has the meaning specified in Section 11.17.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of Florida.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business
<PAGE>
Corporation Act, (b) Newco will cease to exist as a separate legal entity, (c)
the certificate or articles of incorporation of the Company will be amended to
change its authorized capital stock to 1,000 shares, par value $1.00 per share,
of Common Stock, (d) the Company will be the Surviving Corporation and, as such,
will, all with the effect provided by the Business Corporation Act, (i) possess
all the properties and rights, and be subject to all the restrictions and
duties, of the Company and Newco and (ii) be governed by the laws of the State
of Florida, (e) the Charter Documents of the Company then in effect (after
giving effect to the amendment of the Company's certificate or articles of
incorporation specified in clause (c) of this sentence) will become and
thereafter remain (until changed in accordance with (i) applicable law, in the
case of the certificate or articles of incorporation or (ii) their terms, in the
case of the bylaws) the Charter Documents of the Surviving Corporation, (f) the
initial board of directors of the Surviving Corporation will be the Persons
named in Schedule 2.03, who will hold the office of director of the Surviving
Corporation subject to the provisions of the applicable laws of the State of
Florida and the Charter Documents of the Surviving Corporation, and (g) the
officers of the Surviving Corporation immediately following the Merger will be
as set forth in Schedule 2.03, and each of the Persons so designated in Schedule
2.03 will serve in each office specified for that Person in Schedule 2.03,
subject to the provisions of the Charter Documents of the Surviving Corporation,
until his or her successor is duly elected to, and, if necessary, qualified for,
that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration") and the Contingent Merger Consideration, (ii) cease
to be outstanding and to exist, and (iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
<PAGE>
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
<PAGE>
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
Section 2.08. Contingent Merger Consideration.
-------------------------------
(a) On the first day of the fifteenth month following the IPO, WORK
will pay to the Stockholders, pro rata in accordance with their respective
Pro Rata Shares, an amount equal to four times the amount by which the
Earn-out EBIT for the twelve-month period beginning on the first day of the
month following the IPO Closing Date exceeds Adjusted EBIT for the twelve-
month period ending on the last day of the month during which the IPO
Closing Date occurs minus WORK's cost of capital incurred to generate any
growth in earnings. WORK's cost of capital at any time shall be calculated
at an annual rate equal to the average rate WORK is then paying, or is
obligated to pay, for operating advances under its primary line of credit
with a bank.
(b) The Company may at any time change or discontinue any of its
present or future assets or operations, or may close any of its present or
future offices, or undertake new operations, or may take any and all steps
which the Company's Board of Directors, in its reasonable unanimous
business judgment, shall deem advisable and in the best interest of the
Company, and if any such action adversely affects the ability of the
Stockholders to earn additional consideration pursuant to this Section
2.08, the Stockholders shall have no claim or recourse by reason of such
action.
(c) The calculation of Earn-out EBIT will be performed by the Company
based on the Company's financial statements as audited by WORK's
independent public accountants. Any dispute that arises with respect to
the amount of the Contingent Merger Consideration shall be resolved by
WORK's independent public accountants or any other mutually acceptable
dispute resolution procedure.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the
<PAGE>
requirements of the Business Corporation Act and providing that the Merger
will become effective on the IPO Closing Date and (B) the filing of the
Certificate of Merger with the Secretary of State of the State of Florida),
(ii) verify the existence and ownership of the certificates evidencing the
Company Common Stock to be exchanged for the Merger Consideration pursuant
to Section 2.05, and (iii) satisfy the document delivery requirements to
which the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as WORK shall specify by written notice to
Morton Fishman. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
<PAGE>
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in
<PAGE>
question, acknowledge their mutual intention and agreement that those
restrictions be enforced to the fullest extent the court deems reasonable, and
thereby shall be reformed to that extent as applied to that Stockholder and any
other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from
<PAGE>
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN
OF REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF
THE IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND
<PAGE>
ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD
OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES
WITH THAT ACT AND OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
<PAGE>
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
<PAGE>
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
7108 Fairway Drive, Suite 290
Palm Beach Gardens, FL 33418
Attn: President
Telecopy No.: (561) 624-4324
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Mathison and Mathison
5606 PGA Boulevard, Suite 211
Palm Beach Gardens, FL 33418
Attn: Stephen Mathison
Telecopy No.: (561) 624-0036
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
FLORIDA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
<PAGE>
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Section 607.221 and
607.394 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 607.221 and
607.394 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
<PAGE>
Section 11.17. Termination of Defined Benefit Plan.
-----------------------------------
(a) Prior to the IPO Closing Date, the Company hereby covenants and
agrees to take all such action as may be necessary to terminate its
participation in the Datair Mass-Submitter Prototype Defined Benefit
Pension Plan and Trust (the "Designated Plan"), including, but not limited
to (i) termination of the Adoption Agreement; (ii) adoption of board
resolutions; and (iii) adoption of an agreement for amendment and
termination of the Designated Plan. After the effective date of
termination of the Designated Plan, the Designated Plan shall be "frozen"
pending distribution of its assets to participants and their beneficiaries.
No persons who are not participants as of the termination date shall be
eligible to participate in the Designated Plan or receive benefits
thereunder, and no distributions shall be made by the Designated Plan
except normal distributions in the ordinary course of business to or on
behalf of employees who have separated service with the Company.
(b) Within 90 days after the IPO Closing Date, WORK agrees to file a
submission to formally request a determination letter from the IRS to the
effect that the Designated Plan is a qualified plan under Section 401(a) of
the Code upon its termination and that the trust used to fund the
Designated Plan (the "Trust") is tax exempt under Section 501(a) of the
Code. As soon as administratively practicable following receipt of a
favorable IRS determination letter, the trustee of the Trust shall
effectuate distributions of all remaining assets from the Trust and,
thereafter, it shall be liquidated. After liquidation of the Trust, WORK
agrees to file a final IRS form 5500 for the Designated Plan with the IRS.
(c) WORK assumes no liability or obligation with respect to the
Designated Plan that results from, relates to, or arises out of, any act or
omission by any person or entity occurring on or prior to the IPO Closing
Date, or by the Plan Administrator, Mass Submitter, or Trustee (as defined
in the Designated Plan) at any time. The Stockholders covenant and agree
that they, jointly and severally, will indemnify each WORK Indemnified
Party against, and hold each WORK Indemnified Party harmless from and in
respect of, all Damages that arise from, are based on or relate or
otherwise are attributable to any such liability or obligation, to the same
extent as if such matters were WORK Indemnified Losses except that such
indemnification shall be without regard to the Threshold Amount limitation
on indemnification contained in the first sentence of Section 9.06(a).
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to
<PAGE>
take place at the Closing shall not have been consummated by September
30, 1998, unless the failure of such transactions to be consummated
results from the willful failure of the Party (or in the case of the
Stockholders and the Company, any of them) seeking to terminate this
Agreement to perform or adhere to any agreement required hereby to be
performed or adhered to by that Party prior to or at the Closing or
thereafter on the IPO Closing Date; provided, however, that the date
September 30, 1998, set forth above shall be extended to October 31,
1998, unless, on or before September 15, 1998, Founding Companies
which are to receive a majority of the initial merger consideration
(valuing shares of WORK Common Stock at $12 per share) to be received
by all the Founding Companies on the IPO Closing Date notify WORK that
they have elected not to extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of Florida, but before the IPO has been consummated,
WORK (at WORK's expense) will take all actions that Counsel for the Company
and the Stockholders advises WORK are required by the applicable laws of
the State of Florida to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
CHPI ACQUISITION, INC.
By: /s/ Monte R. Stephens
------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
CONTRACT HEALTH PROFESSIONALS INC.
By: /s/ Morton Fishman
------------------------------------------
Morton Fishman, President
STOCKHOLDERS:
/s/ Morton Fishman
---------------------------------------------
Morton Fishman
/s/ Melanie Fishman
---------------------------------------------
Melanie Fishman
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Morton Fishman
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Morton Fishman
Vice President Melanie Fishman
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
---- -------
Morton Fishman 11 St. James Drive
Palm Beach Gardens, FL 33410
Melanie Fishman 11 St. James Drive
Palm Beach Gardens, FL 33410
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $800,005, as adjusted pursuant to paragraph D below, and (ii)
82,369 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- -----
Morton Fishman 50 50%
Melanie Fishman 50 50%
--- ----
100 100%
D. The cash portion of the Merger Consideration will be subject to adjustment
based upon changes in Working Capital and Long Term Debt between the Initial
Calculation Date and the Adjustment Date as follows: (i) the cash portion of the
Merger Consideration will be increased for any positive change, and decreased
for any negative change, in the Company's Working Capital between the Initial
Calculation Date and the Adjustment Date and (ii) the cash portion of the Merger
Consideration will be increased for any decrease, and decreased for any
increase, in the amount of Long Term Debt, between the Initial Calculation Date
and the Adjustment Date. In addition, the cash portion of the Merger
Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date
<PAGE>
is less than (y) the Estimated AAA Amount, (iii) reduced by the amount, if any,
by which (x) the estimated amount of the net adjustment that would be required
under Section 481(a) of the Code if, as of the Adjustment Date, the Company
changed its method of accounting for tax purposes from the cash basis to the
accrual basis exceeds (y) the Estimated Cash Basis Adjustment Amount and (iv)
increased by the amount, if any, by which (x) the estimated amount of the net
adjustment that would be required under Section 481(a) of the Code if, as of the
Adjustment Date, the Company changed its method of accounting for tax purposes
from the cash basis to the accrual basis is less than (y) the Estimated Cash
Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
Name CLASS SHARES OWNED
---- ----- ------------
Morton Fishman Common 50
Melanie Fishman Common 50
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common $1.00 5000 100 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 5.08
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 5.08 are used
herein as therein defined.
B. Notwithstanding the provisions of Section 5.08 to the contrary, the
Company and the Stockholders acknowledge that WORK has engaged the services of
R.A. Cohen Consulting as a broker with respect to the transaction contemplated
hereby. WORK is solely responsible for payment of any fees and expenses owed by
WORK as a result of its agreement with such broker.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the
amount equal to the sum of the Accumulated Adjustment
Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In
addition, the Company shall make distributions of cash basis
accounts and notes receivable as contemplated by Section
2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
Prior to the Closing, the Company shall distribute the cash
basis accounts and notes receivable to be distributed
pursuant to Section 2.07.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CHPI Acquisition, Inc.
Contract Health Professionals Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
1. $50,000 line of credit with Barnett Bank secured by the personal
guarantee of Morton Fishman and Melanie Fishman.
<PAGE>
EXHIBIT 2.8
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
CPI ACQUISITION, INC.,
CORE PERSONNEL, INC.
AND
ITS STOCKHOLDERS
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), CPI ACQUISITION, INC., a Virginia corporation and a wholly owned
subsidiary of WORK ("Newco"), CORE PERSONNEL, INC., a Virginia corporation (the
"Company"), and the persons listed on the signature pages of this Agreement
under the caption "Stockholders" (collectively, the "Stockholders," and each of
them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the terms and
subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will acquire
the stock of all or some of the entities other than the Company identified in
the accompanying Addendum I (each an "Other Founding Company" and, collectively
with the Company, the "Founding Companies") under agreements similar to this
Agreement entered into among the Other Founding Companies, their stockholders,
WORK and other subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as such
term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement,
the following terms have the meanings assigned to them below in this Section
1.01:
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the
<PAGE>
Closing occurs after the twentieth day, and on or before the last day, of a
month, the last day of the month preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Virginia Stock Corporation Act.
"Ceiling Amount" means at any time $2,681,742.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Core Arlington" means Core Personnel of Arlington, Inc., a Virginia
corporation and an Affiliate of the Company.
"Counsel for the Company and the Stockholders" means Tucker, Flyer &
Lewis.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company and Core Arlington at March 31, 1998, which is included in the
Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means combined current liabilities of
the Company and Core Arlington with respect to combined current accrued and
combined current deferred income taxes.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Initial Calculation Date" means March 31, 1998.
<PAGE>
"Initial Financial Statements" means (a) the audited combined balance
sheet of the Company and Core Arlington at December 31, 1997, and the
related audited combined statements of operations, stockholders' equity and
cash flows for the fiscal year ended December 31, 1997, together with the
related audit report of KPMG Peat Marwick LLP, and (b) the Current Balance
Sheet and the related unaudited combined statements of operations,
stockholders' equity and cash flows for the three-month period ended on the
Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
and Core Arlington with a maturity of one year or more and includes
indebtedness incurred under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means CPI Acquisition, Inc., a Virginia corporation.
"New Employment Agreement" means the Employment Agreement entered into
as of the date of this Agreement, between the Company and Harvey Silver.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Harvey Silver.
"Restricted Period" has the meaning specified in Section 11.02.
"Section 11.18 Pro Rata Share" means with respect to each Stockholder,
the percentage set forth below opposite the name of such Stockholder:
Section 11.18
Name Pro Rata Share
---- --------------
Harvey Silver 45%
Susan Silver 55%
<PAGE>
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) combined current assets of the Company and
Core Arlington minus (b) the sum of (i) the product of combined current
liabilities of the Company and Core Arlington (other than Designated
Current Liabilities) multiplied by 1.25 and (ii) the product of the
combined Designated Current Liabilities of the Company and Core Arlington
multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms
used in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to
the conditions of this Agreement, the Company will cause a Certificate of Merger
to be duly executed and delivered on or promptly after the date of the Closing
to the State Corporation Commission of the Commonwealth of Virginia.
Section 2.02. The Effective Time. The effective time of the Merger
(the "Effective Time") will be the time on the IPO Closing Date which the
Certificate of Merger specifies or, if the
<PAGE>
Certificate of Merger does not specify another time, 8:00 a.m., central time, on
the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the
Effective Time, (a) Newco will be merged with and into the Company in accordance
with the provisions of the Business Corporation Act, (b) Newco will cease to
exist as a separate legal entity, (c) the certificate or articles of
incorporation of the Company will be amended to change its authorized capital
stock to 1,000 shares, par value $1.00 per share, of Common Stock, (d) the
Company will be the Surviving Corporation and, as such, will, all with the
effect provided by the Business Corporation Act, (i) possess all the properties
and rights, and be subject to all the restrictions and duties, of the Company
and Newco and (ii) be governed by the laws of the Commonwealth of Virginia, (e)
the Charter Documents of the Company then in effect (after giving effect to the
amendment of the Company's certificate or articles of incorporation specified in
clause (c) of this sentence) will become and thereafter remain (until changed in
accordance with (i) applicable law, in the case of the certificate or articles
of incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the Commonwealth of Virginia and the
Charter Documents of the Surviving Corporation, and (g) the officers of the
Surviving Corporation immediately following the Merger will be as set forth in
Schedule 2.03, and each of the Persons so designated in Schedule 2.03 will serve
in each office specified for that Person in Schedule 2.03, subject to the
provisions of the Charter Documents of the Surviving Corporation, until his or
her successor is duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(a) the shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time will (i) be converted into the right to
receive, without interest, on surrender of the certificate evidencing those
shares, the amount of cash and the number of shares of WORK Common Stock
set forth or determined as provided in Schedule 2.04 (the "Merger
Consideration"), (ii) cease to be outstanding and to exist, and (iii) be
canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into one share of Common
Stock, par value $1.00 per share, of the Surviving Corporation, and the
shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting
<PAGE>
those shares other than the right to receive, without interest, the Merger
Consideration and the additional cash, if any, owing with respect to those
shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
(a) At or after the Effective Time: (i) each Stockholder, as the holder
of certificates representing shares of Company Common Stock, will, on
surrender of his certificates to WORK (or any agent which may be appointed
by WORK for purposes of this Section 2.05), receive, and WORK will pay and
issue to each Stockholder, in each case subject to the provisions of
Section 2.06, the Merger Consideration; and (ii) until any certificate
representing Company Common Stock has been surrendered and replaced
pursuant to this Section 2.05, that certificate will, for all purposes, be
deemed to evidence ownership of the number of whole shares of WORK Common
Stock, and the right to receive cash, included in the Merger Consideration
payable in respect of that certificate pursuant to Section 2.04. All
shares of WORK Common Stock issuable in the Merger will be deemed for all
purposes to have been issued by WORK at the Effective Time. All cash
included in the Merger Consideration shall be paid, at WORK's option, by
(a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or earned
after the Effective Time with respect to WORK Common Stock and payable to
the holders of record thereof after the Effective Time will be paid to the
holder of any unsurrendered certificates representing shares of Company
Common Stock for which shares of WORK Common Stock have been issued in the
Merger until the unsurrendered certificates are surrendered as provided
herein, but (i) on such surrender, WORK will cause to be paid, to the
Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will
<PAGE>
be payable with respect to the payment of such dividends or other
distributions (or cash for and in lieu of fractional shares) on surrender
of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
<PAGE>
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
(a) The Closing. On or before the IPO Pricing Date, the Parties will
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
State Corporation Commission of the Commonwealth of Virginia, (ii) verify
the existence and ownership of the certificates evidencing the Company
Common Stock to be exchanged for the Merger Consideration pursuant to
Section 2.05, and (iii) satisfy the document delivery requirements to which
the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as WORK shall specify by written notice to
Harvey Silver. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the Uniform
Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
<PAGE>
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity or
as an owner, co-owner or other investor of or in, whether as an employee,
independent contractor, consultant or advisor, in any business in the
Staffing Industry in competition with the Company, any Company Subsidiary
or WORK or any Subsidiary of WORK (WORK and its Subsidiaries collectively
being called "WORK" for purposes of this Article X) within any territory
surrounding any office or facility (each a "facility") in which any of the
Company or the Company Subsidiaries was engaged in business on the date
hereof or immediately prior to the Effective Time (for purposes of this
Article X, the territory surrounding a facility shall be the area located
within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
<PAGE>
Section 10.02. Damages. Because of the difficulty of measuring economic
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
(a) Each of the Company and the Stockholders, severally and not jointly
with any other Person, acknowledges that it has or may have had in the
past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished
<PAGE>
to it and, except with the specific prior written consent of WORK will not
disclose such Confidential Information to any Person except (a)
Representatives of WORK, (b) its own Representatives, provided that these
Representatives (other than counsel) agree to the confidentiality
provisions of this Section 11.01; and provided, further, that Confidential
Information shall not include (i) such information which becomes known to
the public generally through no fault of any Stockholder, (ii) information
required to be disclosed by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), each Stockholder shall, if possible, give
prior written notice thereof to WORK and provide WORK with the opportunity
to contest such disclosure, or (iii) information with respect to which the
disclosing party reasonably believes disclosure is required in connection
with the defense of a lawsuit against the disclosing party. In the event of
a breach or threatened breach by any Stockholder of the provisions of this
Section 11.01 with respect to any Confidential Information, WORK shall be
entitled to an injunction restraining such Stockholder from disclosing, in
whole or in part, that Confidential Information. Nothing herein shall be
construed as prohibiting WORK from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result of
the breach of the foregoing covenants in Section 11.01(a), and because of
the immediate and irreparable damage that would be caused to WORK for which
it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall survive
the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
(a) During the one-year period ending on the first anniversary of the IPO
Closing Date (the "Restricted Period"), no Stockholder voluntarily will:
(i) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint
or otherwise dispose of (A) any shares of WORK Common Stock received by any
Stockholder in the Merger or (B) any interest in (including any option to
buy or sell) any such shares of WORK Common Stock, in whole or in part, and
WORK will have no obligation to, and shall not, treat any such attempted
transfer as effective for any purpose; or (ii) engage in any transaction,
whether or not with respect to any shares of WORK Common Stock or any
interest therein, the intent or effect of which is to reduce the risk of
owning the shares of WORK Common Stock acquired pursuant to Section 2.04
(including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the
<PAGE>
provisions of Section 11.01 and this Section 11.02. The certificates
evidencing the WORK Common Stock delivered to each Stockholder pursuant to
Section 2.05 will bear a legend substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or
<PAGE>
similar agent in connection with the transactions contemplated hereby and agree,
without regard to the Threshold Amount limitations set forth in Article IX, to
indemnify WORK against all Damage Claims arising out of claims for any and all
fees and commissions of brokers or similar agents employed or promised payment
by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
<PAGE>
Section 11.08. Notices. All notices required or permitted hereunder shall
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their respective
addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Core Personnel, Inc.
1800 Diagonal Road, Suite 470
Alexandria, VA 22314
Attn: President
Telecopy No.: (703) 519-0906
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Tucker, Flyer & Lewis
1615 L. Street, N.W., Suite 410
Washington, D.C. 20036
Attn: Michael Schlesinger
Telecopy No.: (202) 429-3231
<PAGE>
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF AND (B) MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF
THE MERGER SHALL BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
<PAGE>
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
(a) The Stockholders, as the owners and holders of all the Capital Stock
of the Company, hereby consent to and approve the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 13.1-718 and
13.1-657 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 13.1-718 and
13.1-657 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Condition. The obligation of the Company and the
Stockholders to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready, willing and able to acquire Core Arlington on the
IPO Closing Date pursuant to the Other Agreement among WORK, Core Arlington and
the other parties identified therein, and the obligation of WORK and Newco to
take the actions to be taken by them on the IPO Closing Date are subject to Core
Arlington and the stockholders thereof being ready, willing and able to perform
their obligations on the IPO Closing Date pursuant to such Other Agreement.
Section 11.18. Special Indemnity Limitation. Notwithstanding any provision
hereof to the contrary, in no event shall (a) the aggregate liability of the
Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the Stockholders under Article IX of the
Other Agreement to which Core Arlington is a party exceed the Ceiling Amount or
(b) the sum of the aggregate liability of each Stockholder under Article IX of
this Agreement plus the aggregate liability of that Stockholder under Article IX
of such Other Agreement exceed such Stockholder's Section 11.18 Pro Rata Share
of the Ceiling Amount.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to
<PAGE>
take place at the Closing shall not have been consummated by September
30, 1998, unless the failure of such transactions to be consummated
results from the willful failure of the Party (or in the case of the
Stockholders and the Company, any of them) seeking to terminate this
Agreement to perform or adhere to any agreement required hereby to be
performed or adhered to by that Party prior to or at the Closing or
thereafter on the IPO Closing Date; provided, however, that the date
September 30, 1998, set forth above shall be extended to October 31,
1998, unless, on or before September 15, 1998, Founding Companies
which are to receive a majority of the initial merger consideration
(valuing shares of WORK Common Stock at $12 per share) to be received
by all the Founding Companies on the IPO Closing Date notify WORK that
they have elected not to extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01, the
Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the State
Corporation Commission of the Commonwealth of Virginia, but before the IPO
has been consummated, WORK (at WORK's expense) will take all actions that
Counsel for the Company and the Stockholders advises WORK are required by
the applicable laws of the Commonwealth of Virginia to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this
Agreement is terminated pursuant to Section 12.01, there shall be no liability
or obligation on the part of any Party except (a) as provided in Section 11.07,
or (b) to the extent that such liability is based on the breach by that Party of
any of its or his representations, warranties or covenants set forth in of this
Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
--------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
CPI ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
CORE PERSONNEL, INC.
By: /s/ Susan Silver
-------------------------------------
Susan Silver, President
STOCKHOLDERS:
/s/ Harvey Silver
---------------------------------------
Harvey Silver
/s/ Susan Silver
---------------------------------------
Susan Silver
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Harvey Silver
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Harvey Silver
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
- ---------------- -----------------
Harvey Silver 7302 Aynsley Lane
McLean, VA 22102
Susan Silver 7302 Aynsley Lane
McLean, VA 22102
C. The aggregate Merger Consideration shall be comprised of (i) an
amount of cash equal to $1,330,882, as adjusted pursuant to paragraph D below,
and (ii) 110,905 shares of WORK Common Stock, which shall be payable and
issuable to the Stockholders pro rata in accordance with their respective Pro
Rata Shares. The Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- ---------
Harvey Silver 6,750 45%
Susan Silver 8,250 55%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date.
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Harvey Silver Common 6,750
Susan Silver Common 8,250
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Core Arlington
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- --------- --------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Common None 15,000 15,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreement
Software Licensing Agreement dated ____________ __, 199___, between
the Company and TUG Staffing Systems, L.L.C.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has not made, and there is not now in effect, an election
with the IRS to be taxed as an S corporation within the meaning of Section 1361
of the Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
None.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPI Acquisition, Inc.
Core Personnel, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.9
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
CPA ACQUISITION, INC.,
CORE PERSONNEL OF ARLINGTON, INC.
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), CPA ACQUISITION, INC., a Virginia corporation and a wholly owned
subsidiary of WORK ("Newco"), CORE PERSONNEL OF ARLINGTON, INC., a Virginia
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries,
will acquire the stock of all or some of the entities other than the Company
identified in the accompanying Addendum I (each an "Other Founding Company" and,
collectively with the Company, the "Founding Companies") under agreements
similar to this Agreement entered into among the Other Founding Companies, their
stockholders, WORK and other subsidiaries of WORK (collectively, the "Other
Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv) the Stockholders will receive the Merger Consideration
(as such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the
<PAGE>
Closing occurs after the twentieth day, and on or before the last day, of
a month, the last day of the month preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Virginia Stock Corporation Act.
"Ceiling Amount" means at any time $2,681,742.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, par value $1.00 per
share, of the Company.
"Core Personnel" means Core Personnel, Inc., a Virginia corporation
and an Affiliate of the Company.
"Counsel for the Company and the Stockholders" means Tucker, Flyer &
Lewis.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company and Core Personnel at March 31, 1998, which is included in the
Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheet of the Company and Core Personnel at December 31, 1997, and the
related audited combined statements of operations, stockholders' equity and
cash flows for the fiscal year ended
<PAGE>
December 31, 1997, together with the related audit report of KPMG Peat
Marwick LLP, and (b) the Current Balance Sheet and the related unaudited
combined statements of operations, stockholders' equity and cash flows for
the three-month period ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means CPA Acquisition, Inc., a Virginia corporation.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Harvey Silver.
"Restricted Period" has the meaning specified in Section 11.02.
"Section 11.18 Pro Rata Share" means with respect to each Stockholder,
the percentage set forth below opposite the name of such Stockholder:
Section 11.18
Name Pro Rata Share
---- --------------
Harvey Silver 45%
Susan Silver 55%
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
<PAGE>
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
Section 1.02 Definitions in Uniform Provisions. Capitalized terms
---------------------------------
used in this Agreement but not defined in this Section 1.01 have the
meanings assigned to them in the Preliminary Statements or in Article I of
the Uniform Provisions (the text of which is by this reference incorporated
in this Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the State Corporation Commission of the Commonwealth of Virginia.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the Commonwealth of Virginia, (e) the Charter Documents
of the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the
<PAGE>
Persons named in Schedule 2.03, who will hold the office of director of the
Surviving Corporation subject to the provisions of the applicable laws of the
Commonwealth of Virginia and the Charter Documents of the Surviving Corporation,
and (g) the officers of the Surviving Corporation immediately following the
Merger will be as set forth in Schedule 2.03, and each of the Persons so
designated in Schedule 2.03 will serve in each office specified for that Person
in Schedule 2.03, subject to the provisions of the Charter Documents of the
Surviving Corporation, until his or her successor is duly elected to, and, if
necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in
<PAGE>
the Merger Consideration shall be paid, at WORK's option, by (a) WORK's
company check or checks, (b) one or more wire transfers to accounts
designated by the respective Stockholders at least five Business Days
before the IPO Closing Date, or (c) certified or official bank check or
checks.
(b) Each Stockholder will deliver to WORK (or any agent that may
be appointed by WORK for purposes of this Section 2.05), on or before the
IPO Closing Date, the certificates representing Company Common Stock owned
by the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.00.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform
<PAGE>
Provisions (the text of which Article hereby is incorporated herein by this
reference) are true and correct, and the agreements set forth therein are hereby
agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties
-----------
will take all actions necessary to (i) effect the Merger on the IPO Closing
Date (including, as permitted by the Business Corporation Act, (A) the
execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the State Corporation Commission of the Commonwealth of
Virginia, (ii) verify the existence and ownership of the certificates
evidencing the Company Common Stock to be exchanged for the Merger
Consideration pursuant to Section 2.05, and (iii) satisfy the document
delivery requirements to which the obligations of the Parties to effect the
Merger and the other transactions contemplated hereby are conditioned by
the provisions of this Article VII (all
<PAGE>
those actions collectively being the "Closing"). The Closing will take
place at the offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston,
Texas at 10:00 a.m., Houston time, or at such later time on the IPO Pricing
Date as WORK shall specify by written notice to Harvey Silver. The actions
taken at the Closing will not include the completion of either the Merger
or the delivery of the Company Common Stock or the Merger Consideration
pursuant to Section 2.05. Instead, on the IPO Closing Date, the Certificate
of Merger will become effective pursuant to Section 2.02, and all
transactions contemplated by this Agreement to be closed or completed on or
before the IPO Closing Date, including the surrender of the Company Common
Stock in exchange for the Merger Consideration will be closed or completed,
as the case may be. During the period from the Closing to the IPO Closing
Date, this Agreement may be terminated by the parties only pursuant to
Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
<PAGE>
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by
the Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time
within one year prior to that time was, a customer of the Company, any
Company Subsidiary or WORK within the Territory, (i) for the purpose of
soliciting or selling any product or service in competition with the
Company, any Company Subsidiary or WORK within the Territory and (ii) with
the knowledge of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge
of that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
<PAGE>
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and
<PAGE>
irreparable damage that would be caused to WORK for which it would have no
other adequate remedy, each of the Company and the Stockholders agrees that
WORK may enforce the provisions of Section 11.01(a) by injunctions and
restraining orders against each of them who breaches any of those
provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF
ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT
IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED
PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to
<PAGE>
Section 2.04 (A) have not been and, except pursuant to the Registration
Rights Agreement, if applicable, will not be registered under the
Securities Act and therefore may not be resold by him without compliance
with the Securities Act and (B) will, as a result of their restrictions on
transferability which are imposed by this Agreement during the Restricted
Period, have a value materially less at the Effective Time than the value
of then freely tradeable shares of WORK Common Stock, and (ii) covenants
that none of the shares of WORK Common Stock issued to him pursuant to
Section 2.04 will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all
the applicable provisions of the Securities Act and the rules and
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND
OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver
<PAGE>
of any of the terms and conditions of this Agreement shall not be construed or
interpreted as, or deemed to be, a waiver of any of its other term or
conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Core Personnel of Arlington, Inc.
1800 Diagonal Road, Suite 470
Alexandria, VA 22314
Attn: President
Telecopy No.: (703) 519-0906
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Tucker, Flyer & Lewis
1615 L. Street, N.W., Suite 410
Washington, D.C. 20036
Attn: Michael Schlesinger
Telecopy No.: (202) 429-3231
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
COMMONWEALTH OF VIRGINIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF AND (B) MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF
THE MERGER SHALL BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
<PAGE>
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 13.1-718 and
13.1-657 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 13.1-718 and
13.1-657 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Condition. The obligation of the Company and the
-----------------
Stockholders to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready,
<PAGE>
willing and able to acquire Core Personnel on the IPO Closing Date pursuant to
the Other Agreement among WORK, Core Personnel and the other parties identified
therein, and the obligation of WORK and Newco to take the actions to be taken by
them on the IPO Closing Date are subject to Core Personnel and the stockholders
thereof being ready, willing and able to perform their obligations on the IPO
Closing Date pursuant to such Other Agreement.
Section 11.18. Special Indemnity Limitation. Notwithstanding any provision
----------------------------
hereof to the contrary, in no event shall (a) the aggregate liability of the
Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the Stockholders under Article IX of the
Other Agreement to which Core Personnel is a party exceed the Ceiling Amount or
(b) the sum of the aggregate liability of each Stockholder under Article IX of
this Agreement plus the aggregate liability of that Stockholder under Article IX
of such Other Agreement exceed such Stockholder's Section 11.18 Pro Rata Share
of the Ceiling Amount.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
<PAGE>
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the State
Corporation Commission of the Commonwealth of Virginia, but before the IPO
has been consummated, WORK (at WORK's expense) will take all actions that
Counsel for the Company and the Stockholders advises WORK are required by
the applicable laws of the Commonwealth of Virginia to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
--------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
CPA ACQUISITION, INC.
By: /s/ Monte R. Stephens
--------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
CORE PERSONNEL OF ARLINGTON, INC.
By: /s/ Susan Silver
--------------------------------------------
Susan Silver, President
STOCKHOLDERS:
/s/ Harvey Silver
-----------------------------------------------
Harvey Silver
/s/ Susan Silver
-----------------------------------------------
Susan Silver
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Harvey Silver
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Harvey Silver
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
---- -------
Harvey Silver 7302 Aynsley Lane
McLean, VA 22102
Susan Silver 7302 Aynsley Lane
McLean, VA 22102
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $10,004, as adjusted pursuant to paragraph D below, and (ii)
833 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
<TABLE>
<CAPTION>
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- -----
<S> <C> <C>
Harvey Silver 450 45%
Susan Silver 550 55%
</TABLE>
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Harvey Silver Common 450
Susan Silver Common 550
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Core Personnel
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- -------- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common None 1,100 1,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
None.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has not made, and there is not now in effect, an election
with the IRS to be taxed as an S corporation within the meaning of Section 1361
of the Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
None.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CPA Acquisition, Inc.
Core Personnel of Arlington, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.10
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
CSSI ACQUISITION, INC.,
CORELINK STAFFING SERVICES, INC.,
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), CSSI ACQUISITION, INC., a California corporation and a wholly owned
subsidiary of WORK ("Newco"), CORELINK STAFFING SERVICES, INC., a California
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries,
will acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv) the Stockholders will receive the Merger Consideration
(as such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the California General Corporation
Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time, $5,476,175.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value per share,
of the Company.
"Counsel for the Company and the Stockholders" means Bainbridge Group,
a Law Corporation.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
<PAGE>
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $0, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $615,754, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheet of
the Company at December 28, 1997, and the related audited statements of
operations, stockholders' equity and cash flows for the Company's fiscal
year ended December 28, 1997, together with the related audit report of
KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the related
unaudited statements of operations, stockholders' equity and cash flows for
the three-month period ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means CSSI Acquisition, Inc., a California corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and John R.
Haesler and Linda J. Haesler, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule
<PAGE>
2.04, and (b) the denominator of which is the total number of shares of
outstanding Company Common Stock owned by all Stockholders, as set forth in
Schedule 2.04.
"Responsible Officer" means either of John R. Haesler or Linda J.
Haesler.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
<PAGE>
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of California.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of California, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the State of California and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04
(the "Merger Consideration"), (ii) cease to be outstanding and to exist,
and (iii) be canceled and retired;
<PAGE>
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be deemed
for all purposes to have been issued by WORK at the Effective Time. All
cash included in the Merger Consideration shall be paid, at WORK's option,
by (a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may
be appointed by WORK for purposes of this Section 2.05), on or before the
IPO Closing Date, the certificates representing Company Common Stock owned
by the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock
<PAGE>
have been issued in the Merger until the unsurrendered certificates are
surrendered as provided herein, but (i) on such surrender, WORK will cause
to be paid, to the Person in whose name the certificates representing such
shares of WORK Common Stock shall then be issued, the amount of dividends
or other distributions previously paid with respect to such whole shares of
WORK Common Stock with a record date, or which have accrued, subsequent to
the Effective Time, but prior to surrender, and the amount of any cash
payable to such Person for and in lieu of fractional shares pursuant to
Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, WORK will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which
have been accrued, subsequent to the Effective Time, but which are not
payable until a date subsequent to surrender, which are payable with
respect to such number of whole shares of WORK Common Stock, subject in all
cases to any applicable escheat laws. No interest will be payable with
respect to the payment of such dividends or other distributions (or cash
for and in lieu of fractional shares) on surrender of outstanding
certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties
-----------
will take all actions necessary to (i) effect the Merger on the IPO Closing
Date (including, as permitted by the Business Corporation Act, (A) the
execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Secretary of State of the State of California), (ii) verify
the existence and ownership of the certificates evidencing the Company
Common Stock to be exchanged for the Merger Consideration pursuant to
Section 2.05, and (iii) satisfy the document delivery requirements to which
the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
<PAGE>
time on the IPO Pricing Date as WORK shall specify by written notice to
Linda J. Haesler. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility
<PAGE>
shall be the area located within 50 miles of the facility, all of such
locations being herein collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02 Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03 Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04 Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05 Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
<PAGE>
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06 Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01 Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of the
Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
<PAGE>
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02 Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely
<PAGE>
tradeable shares of WORK Common Stock, and (ii) covenants that none of the
shares of WORK Common Stock issued to him pursuant to Section 2.04 will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all the applicable provisions
of the Securities Act and the rules and regulations of the SEC and
applicable state securities laws and regulations. All certificates
evidencing shares of WORK Common Stock issued pursuant to Section 2.04 will
bear the following legend in addition to the legend prescribed by Section
11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD
OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES
WITH THAT ACT AND OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03 Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04 Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05 Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
<PAGE>
Section 11.06 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07 Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08 Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
18301 Von Karman Avenue
Suite 120
Irvine, CA 92612
Attn: President
Telecopy No.: (714) 883-0163
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Bainbridge Group
18301 Von Karman Ave., Suite 410
Irvine, CA 92612
Attn: Michael E. Johnson
Telecopy No.: (714) 442-6609
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
<PAGE>
Section 11.12 Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13 Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14 Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15 Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 1113 and 603
of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and plan of merger
contemplated by this Agreement pursuant to Sections 1113 and 603 of the
Business Corporation Act.
Section 11.16 Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
<PAGE>
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this
<PAGE>
Agreement is terminated pursuant to this Section 12.01 after the
Certificate of Merger has been filed with the Secretary of State of the
State of California, but before the IPO has been consummated, WORK (at
WORK's expense) will take all actions that Counsel for the Company and the
Stockholders advises WORK are required by the applicable laws of the State
of California to rescind the Merger.
Section 12.02 Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-----------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
CSSI ACQUISITION, INC.
By: /s/ Monte R. Stephens
-----------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
CORELINK STAFFING SERVICES, INC.
By: /s/ Linda J. Haesler
-----------------------------------------
Linda J. Haesler, President
STOCKHOLDERS:
/s/ John R. Haesler
--------------------------------------------
John R. Haesler
/s/ Linda J. Haesler
--------------------------------------------
Linda J. Haesler
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Linda J. Haesler
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Linda J. Haesler
Vice President, Secretary and Treasurer John R. Haesler
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
<TABLE>
<CAPTION>
Name Address
-------- -----------
<S> <C>
John R. Haesler 24 San Ramon
Irvine, CA 92612
Linda J. Haesler 24 San Ramon
Irvine, CA 92612
</TABLE>
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $1,095,239, as adjusted pursuant to paragraph D below, and
(ii) 365,078 shares of WORK Common Stock, which shall be payable and issuable
to the Stockholders pro rata in accordance with their respective Pro Rata
Shares. The Pro Rata Shares of the Stockholders are as follows:
<TABLE>
<CAPTION>
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- -----
<S> <C> <C>
John R. Haesler 30 25%
Linda J. Haesler 90 75%
--- ---
120 100%
</TABLE>
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
<PAGE>
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the Company's accounting records reflect that
the negative balance in the Accumulated Adjustment Account as of the IPO Closing
Date is greater than the negative balance in the Accumulated Adjustment Account
as of December 31, 1997, the Stockholders shall repay to the Company the amount
of such difference in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
<S> <C> <C>
John R. Haesler Common 30
Linda J. Haesler Common 90
</TABLE>
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common None 75,000 120 Not Applicable None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the
amount equal to the sum of the Accumulated Adjustment
Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In
addition, the Company shall make distributions of cash basis
accounts and notes receivable as contemplated by Section
2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
(a) Prior to the Closing, the Company shall distribute
the cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07.
(b) Prior to the Closing, the Company shall be
permitted to transfer to the Stockholders the life insurance
policies owned by the Company and insuring their lives.
(c) Prior to the Closing, the Company may transfer the
vehicles identified below to the Stockholders designated
below in exchange for the assumption by the Stockholders of
the lease or note referred to below:
<TABLE>
<CAPTION>
Name Description of Auto Lease or Note
---- ------------------- -------------
<S> <C> <C>
Key Lease Program 1997 Mercedes S600C Lease
Southern California Bank 1996 Toyota 4 Runner Limited Lease
</TABLE>
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CSSI Acquisition, Inc.
CoreLink Staffing Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.11
______________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
LPL ACQUISITION, INC.,
LAW PROS LEGAL PLACEMENT SERVICES, INC.,
AND
ITS STOCKHOLDERS
______________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), LPL ACQUISITION, INC., a New Jersey corporation and a wholly owned
subsidiary of WORK ("Newco"), LAW PROS LEGAL PLACEMENT SERVICES, INC., a New
Jersey corporation (the "Company"), and the persons listed on the signature
pages of this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv the Stockholders will receive the Merger Consideration
(as such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the New Jersey Business Corporation
Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $4,211,768.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the capital stock, no par value per
share, of the Company.
"Counsel for the Company and the Stockholders" means Bachner Tally
Polevoy & Misher, LLP.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the
<PAGE>
Company with respect to indebtedness incurred by the Company to enable the
Company to make AAA Distributions after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $257,271, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $491,097, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheet of
the Company at December 31, 1997, and the related audited statements of
operations, stockholders' equity and cash flows for the Company's fiscal
year ended December 31, 1997, together with the related audit report of
KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the related
unaudited statements of operations, stockholders' equity and cash flows for
the three-month period ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means LPL Acquisition, Inc., a New Jersey corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and each of Beth
E. Fleischer and Jodi L. Nadler, respectively.
<PAGE>
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of Beth E. Fleischer or Jodi L.
Nadler.
"Restricted Period" has the meaning specified in Section 11.02.
"Shareholders Agreement" means the Shareholders' Agreement dated March
23, 1998, among the Company and the Stockholders.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company(other than
Designated Current Liabilities) multiplied by 1.25 and (ii) the product of
the Designated Current Liabilities multiplied by 1.00.
<PAGE>
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of New Jersey.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of New Jersey, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the State of New Jersey and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on
<PAGE>
surrender of the certificate evidencing those shares, the amount of cash
and the number of whole and fractional shares of WORK Common Stock set
forth or determined as provided in Schedule 2.04 (the "Merger
Consideration"), (ii) cease to be outstanding and to exist, and (iii) be
canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be deemed
for all purposes to have been issued by WORK at the Effective Time. All
cash included in the Merger Consideration shall be paid, at WORK's option,
by (a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates
<PAGE>
or other documents of conveyance respecting, or in the stock powers
accompanying, the certificates representing Company Common Stock delivered
by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07 Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
<PAGE>
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of New Jersey), (ii) verify the existence
and ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to either of Jodi L. Nadler or Beth E.
Fleischer. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
<PAGE>
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
<PAGE>
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01
shall survive the termination of this Agreement.
<PAGE>
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary
of the IPO Closing Date (the "Restricted Period"), no Stockholder
voluntarily will: (i) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (A) any shares of WORK Common
Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any such shares of WORK Common Stock,
in whole or in part, and WORK will have no obligation to, and shall not,
treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of
WORK Common Stock or any interest therein, the intent or effect of which is
to reduce the risk of owning the shares of WORK Common Stock acquired
pursuant to Section 2.04 (including, for example engaging in put, call,
short-sale, straddle or similar market transactions); provided, however,
that this Section 11.02 shall not restrict any transfer of WORK Common
Stock acquired by a Stockholder pursuant to Section 2.04 to any of that
Stockholder's Related Persons who agree in writing to be bound by the
provisions of Section 11.01 and this Section 11.02. The certificates
evidencing the WORK Common Stock delivered to each Stockholder pursuant to
Section 2.05 will bear a legend substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE
AND THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION OF ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON
[DATE THAT IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER OF
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER
THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and
<PAGE>
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
<PAGE>
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. In connection with the agreement
of the Stockholders contained in clause (c) of the preceding sentence, WORK
hereby represents and warrants to the Stockholders that the Other Agreements all
contain provisions to the same effect as that contained in such clause (c). The
Stockholders will file all necessary documentation and Returns with respect to
all Transfer Taxes. In addition, each Stockholder acknowledges that he, and not
the Company, WORK or the Surviving Corporation, will pay all Taxes due upon
receipt of the consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
511 Millburn Avenue
Short Hills, New Jersey 07078
Attn: President
Telecopy No.: (973) 912-8558
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Bachner Tally Polevoy & Misher, LLP
380 Madison Avenue
New York, New York 10017
Attn: Marc S. Goldfarb
Telecopy No.:(212) 682-5729
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW JERSEY WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
<PAGE>
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the
Capital Stock of the Company, hereby consent to and approve the Merger and
the plan of merger contemplated by this Agreement pursuant to Sections
14A:10-3 and 14A:5-6 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 14A:10-3 and
14A:5-6 of the Business Corporation Act.
<PAGE>
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Suspension and Termination of Shareholders Agreement. The
----------------------------------------------------
Company Common Stock is subject to the Shareholders Agreement which, inter alia,
provides options to purchase and to sell shares of the Company Common Stock upon
the occurrence of certain events specified therein. The Company and the
Stockholders agree that:
(a) at the Effective Time, the Shareholders Agreement shall be
terminated without any further action on the part of any party thereto;
(b) the execution and delivery of this Agreement by the Company
and the Stockholders shall not be affected by, or constitute a breach of or
default under, the Shareholders Agreement;
(c) if at the date hereof there has began to run, or if after
the date hereof and prior to the Effective Time there shall begin to run,
any period of time (herein called a "Limitation Period") within which any
party bound by or entitled to the benefits of, or whose shares of the
Company Common Stock are subject to, the Shareholders Agreement must, under
the terms of the Shareholders Agreement, give any notice, offer such shares
for sale, accept any offer to purchase any such shares, purchase shares,
make any election or take any other action in order to preserve or maintain
any right or benefit of such party, then such Limitation Period shall cease
to run and shall be tolled as of the date of this Agreement, or, in the
case of any Limitation Period beginning after the date hereof, shall not
begin to run, unless and until such Limitation Period shall be resumed and
reinstated as provided in the following Section 11.17 (e);
(d) so long as any Limitation Period is tolled pursuant to
Section 11.17(c), no party to the Shareholders Agreement may exercise any
right or option such party would otherwise have but for the provisions of
this Section 11.17; and
(e) if this Agreement is terminated pursuant to Article XII,
then as of the close of business on the date this Agreement is so
terminated, the provisions of this Section 11.17 shall terminate and any
Limitation Period shall resume and be reinstated or shall commence, as the
case may be, ten days following such termination, and promptly thereafter,
the Company shall notify each of the parties to the Shareholders Agreement
that the provisions of this Section 11.17 have terminated.
By their execution and delivery of this Agreement, the Company and the
Stockholders (who hold 100% of the shares of Capital Stock subject to the
Shareholders Agreement) hereby amend the Shareholders Agreement as set forth in
this Section 11.17.
<PAGE>
Section 11.18. Termination of Defined Benefit Plan.
-----------------------------------
(a) Prior to the IPO Closing Date, the Company hereby covenants
and agrees to take all such action as may be necessary to terminate its
participation in the Aetna Life Insurance and Annuity Company 401(k) Profit
Sharing Plan and Trust (the "Plan"), including, but not limited to (i)
termination of the Adoption Agreement; (ii) adoption of appropriate board
resolutions; and (iii) adoption of an agreement for amendment and
termination of the Plan. After the effective date of termination of the
Plan, the Plan shall be "frozen" pending distribution of its assets to
participants and their beneficiaries. No persons who are not participants
as of the termination date shall be eligible to participate in the Plan or
receive benefits thereunder, and no distributions shall be made by the Plan
except normal distributions in the ordinary course of business to or on
behalf of employees who have separated service with the Company.
(b) Within 90 days after the IPO Closing Date, WORK agrees to
file a submission to formally request a determination letter from the
Internal Revenue Service ("IRS") to the effect that the Plan is a qualified
plan under Section 401(a) of the Code upon its termination and that the
trust used to fund the Plan (the "Trust") is tax exempt under Section
501(a) of the Code. As soon as administratively practicable following
receipt of a favorable IRS determination letter, the trustee of the Trust
shall effectuate distributions of all remaining assets from the Trust and,
thereafter, it shall be liquidated. After liquidation of the Trust, WORK
agrees to file a final IRS form 5500 for the Plan with the IRS.
(c) WORK assumes no liability or obligation with respect to the
Plan that results from, relates to, or arises out of, any act or omission
by any person or entity occurring on or prior to the IPO Closing Date, or
by the Custodian or Trustees (as defined in the Plan) at any time. The
Stockholders covenant and agree that they, jointly and severally, will
indemnify each WORK Indemnified Party against, and hold each WORK
Indemnified Party harmless from and in respect of, all Damages that arise
from, are based on or relate or otherwise are attributable to any such
liability or obligation, to the same extent as if such matters were WORK
Indemnified Losses except that such indemnification shall be without regard
to the Threshold Amount limitation on indemnification contained in the
first sentence of Section 9.06(a).
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the Company;
<PAGE>
(ii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall not
have been consummated by September 30, 1998, unless the failure of
such transactions to be consummated results from the willful failure
of the Party (or in the case of the Stockholders and the Company, any
of them) seeking to terminate this Agreement to perform or adhere to
any agreement required hereby to be performed or adhered to by that
Party prior to or at the Closing or thereafter on the IPO Closing
Date; provided, however, that the date September 30, 1998, set forth
above shall be extended to October 31, 1998, unless, on or before
September 15, 1998, Founding Companies which are to receive a majority
of the initial merger consideration (valuing shares of WORK Common
Stock at $12 per share) to be received by all the Founding Companies
on the IPO Closing Date notify WORK that they have elected not to
extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholders and the Company, any of them) in the observance or in the
due and timely performance of any of the covenants, agreements or
conditions contained herein and such breach or default continues for
fifteen days after written notice from the Majority Stockholders or
the Company, on the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement
is terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this Agreement is terminated pursuant to this
Section 12.01 after the Certificate of Merger has been filed with the
Secretary of State of the State of New Jersey, but before the IPO has been
consummated, WORK (at WORK's expense) will take all actions that Counsel
for the Company and the Stockholders advises WORK are required by the
applicable laws of the State of New Jersey to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as
<PAGE>
provided in Section 11.07, or (b) to the extent that such liability is based on
the breach by that Party of any of its or his representations, warranties or
covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
--------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
LPL ACQUISITION, INC.
By: /s/ Monte R. Stephens
--------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
LAW PROS LEGAL PLACEMENT SERVICES, INC.
By: /s/ Beth E. Fleischer
--------------------------------------------
Beth E. Fleischer, President
STOCKHOLDERS:
/s/ Jodi L. Nadler
-----------------------------------------------
Jodi L. Nadler
/s/ Beth E. Fleischer
-----------------------------------------------
Beth E. Fleischer
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Beth E. Fleischer
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President and Treasurer Beth E. Fleischer
Vice President and Secretary Jodi L. Nadler
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
<TABLE>
<CAPTION>
Name Address
------- -----------------
<S> <C>
Jodi L. Nadler 150 Marion Drive
West Orange, NJ 07052
Beth E. Fleischer 11 Perkins Drive
West Orange, NJ 07052
</TABLE>
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $2,000,000, as adjusted pursuant to paragraph D below, and (ii)
184,314 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
<TABLE>
<CAPTION>
Shares of Pre-Merger Pro-Rata
Name Company Common Stock Share
------ -------------------- ---------
<S> <C> <C>
Jodi L. Nadler 50 50%
Beth E. Fleischer 50 50%
---- ----
TOTAL 100 100%
</TABLE>
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date
<PAGE>
exceeds (y) the Estimated AAA Amount, (ii) increased by the amount, if any, by
which (x) the estimated undistributed balance in the Accumulated Adjustment
Account as of the Adjustment Date is less than (y) the Estimated AAA Amount,
(iii) reduced by the amount, if any, by which (x) the estimated amount of the
net adjustment that would be required under Section 481(a) of the Code if, as of
the Adjustment Date, the Company changed its method of accounting for tax
purposes from the cash basis to the accrual basis exceeds (y) the Estimated Cash
Basis Adjustment Amount and (iv) increased by the amount, if any, by which (x)
the estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis is less
than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
<TABLE>
<CAPTION> NUMBER OF
NAME CLASS SHARES OWNED
---- ------- -------------
<S> <C> <C>
Jodi L. Nadler Capital 50
Beth E. Fleischer Capital 50
---
100
</TABLE>
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- -------- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common $1 100 100 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the
amount equal to the sum of the Accumulated Adjustment
Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between
the Initial Calculation Date and the date of Closing. In
addition, the Company shall make distributions of cash
basis accounts and notes receivable as contemplated by
Section 2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
Prior to the Closing, the Company shall distribute the cash basis
accounts and notes receivable to be distributed pursuant to Section 2.07.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LPL Acquisition, Inc.
Law Pros Legal Placement Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.12
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
LRI ACQUISITION, INC.,
LAW RESOURCES, INC.
AND
ITS STOCKHOLDERS
________________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), LRI ACQUISITION, INC., a District of Columbia corporation and a wholly
owned subsidiary of WORK ("Newco"), LAW RESOURCES, INC., a District of Columbia
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv) the Stockholders will receive the Merger Consideration
(as such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the District of Columbia Business
Corporation Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time $2,012,322.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Tucker, Flyer &
Lewis.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the
<PAGE>
Company with respect to indebtedness incurred by the Company to enable the
Company to make AAA Distributions after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $0, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $442,613, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheet of
the Company at December 31, 1997, and the related audited statements of
operations, stockholders' equity and cash flows for the fiscal year ended
December 31, 1997, together with the related audit report of KPMG Peat
Marwick LLP, and (b) the Current Balance Sheet and the related unaudited
statements of operations, stockholders' equity and cash flows for the
three-month period ended on the Current Balance Sheet Date.
"Limitation Period" has the meaning specified in Section 11.17.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means LRI Acquisition, Inc., a District of Columbia
corporation.
<PAGE>
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and Robert G.
Joseph and Ilyse A. Parzow, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of Robert G. Joseph or Ilyse A.
Parzow.
"Restricted Period" has the meaning specified in Section 11.02.
"Shareholders Agreement" means the Shareholders Agreement dated July
10, 1985, among the Company and the Stockholders.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current
<PAGE>
Liabilities) multiplied by 1.25 and (ii) the product of the Designated
Current Liabilities multiplied by 1.00.
Section 1.02 Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01 Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Department of Consumer and Regulatory Affairs of the District of Columbia.
Section 2.02 The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03 Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the District of Columbia, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the District of Columbia and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office.
<PAGE>
Section 2.04 Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05 Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be deemed
for all purposes to have been issued by WORK at the Effective Time. All
cash included in the Merger Consideration shall be paid, at WORK's option,
by (a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
<PAGE>
(b) Each Stockholder will deliver to WORK (or any agent that may
be appointed by WORK for purposes of this Section 2.05), on or before the
IPO Closing Date, the certificates representing Company Common Stock owned
by the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06 Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07 Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable (including Indebtedness owed by the
Stockholders to the Company) outstanding at such time which have a value equal
to the net adjustment that would be required under Section 481(a) of the Code
if, as of the IPO Closing Date, the Company changed its method of accounting for
tax purposes from the cash basis to the accrual basis. In the event that,
notwithstanding such distribution, the Company receives any payment with respect
to any such receivables, the Company will promptly pay the amount so received
over to the Stockholders in accordance with their respective Pro Rata Shares.
<PAGE>
The aggregate amount of accounts and notes receivable to be distributed pursuant
to this Section 2.07 is herein referred to as the "Cash Basis Accounts
Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
<PAGE>
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01 The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties
-----------
will take all actions necessary to (i) effect the Merger on the IPO Closing
Date (including, as permitted by the Business Corporation Act, (A) the
execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Department of Consumer and Regulatory Affairs of the
District of Columbia), (ii) verify the existence and ownership of the
certificates evidencing the Company Common Stock to be exchanged for the
Merger Consideration pursuant to Section 2.05, and (iii) satisfy the
document delivery requirements to which the obligations of the Parties to
effect the Merger and the other transactions contemplated hereby are
conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to Robert G. Joseph. The actions taken at
the Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant
to Section 2.05. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.02, and all transactions
contemplated by this Agreement to be closed or completed on or before the
IPO Closing Date, including the surrender of the Company Common Stock in
exchange for the Merger Consideration will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
<PAGE>
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
<PAGE>
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
<PAGE>
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF
ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT
IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER
OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED
PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and
<PAGE>
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND
OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
<PAGE>
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of
this Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
<PAGE>
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Law Resources, Inc.
1140 Connecticut Ave., N.W., Suite 675
Washington, D.C. 20036
Attn: President
Telecopy No.: (202) 371-0979
with copies (which shall not constitute notice for purposes of
this Agreement) to:
Tucker, Flyer & Lewis
1615 L. Street, N.W.
Washington, D.C. 20036
Attn: Michael Schlesinger
Telecopy No.: (202) 429-3231
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE DISTRICT
OF COLUMBIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this
<PAGE>
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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 29-399.37
and 29-367 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 29-399.37 and
29-367 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Suspension and Termination of Shareholders Agreement. The
----------------------------------------------------
Company Common Stock is subject to the Shareholders Agreement which, inter alia,
provides options to purchase and to sell shares of the Company Common Stock upon
the occurrence of certain events specified therein. The Company and the
Stockholders agree that:
<PAGE>
(a) at the Effective Time, the Shareholders Agreement shall be
terminated without any further action on the part of any party thereto;
(b) the execution and delivery of this Agreement by the Company and
the Stockholders shall not be affected by, or constitute a breach of or
default under, the Shareholders Agreement;
(c) if at the date hereof there has began to run, or if after the
date hereof and prior to the Effective Time there shall begin to run, any
period of time (herein called a "Limitation Period") within which any party
bound by or entitled to the benefits of, or whose shares of the Company
Common Stock are subject to, the Shareholders Agreement must, under the
terms of the Shareholders Agreement, give any notice, offer such shares for
sale, accept any offer to purchase any such shares, purchase shares, make
any election or take any other action in order to preserve or maintain any
right or benefit of such party, then such Limitation Period shall cease to
run and shall be tolled as of the date of this Agreement, or, in the case
of any Limitation Period beginning after the date hereof, shall not begin
to run, unless and until such Limitation Period shall be resumed and
reinstated as provided in the following Section 11.17 (e);
(d) so long as any Limitation Period is tolled pursuant to Section
11.17(c), no party to the Shareholders Agreement may exercise any right or
option such party would otherwise have but for the provisions of this
Section 11.17; and
(e) if this Agreement is terminated pursuant to Article XII, then as
of the close of business on the date this Agreement is so terminated, the
provisions of this Section 11.17 shall terminate and any Limitation Period
shall resume and be reinstated or shall commence, as the case may be, ten
days following such termination, and promptly thereafter, the Company shall
notify each of the parties to the Shareholders Agreement that the
provisions of this Section 11.17 have terminated; provided, however, that
if this Agreement has so terminated any Limitation Period occasioned by the
execution and delivery of this Agreement or by any action taken pursuant to
this Agreement shall be null and void and of no further force and effect.
By their execution and delivery of this Agreement, the Company and the
Stockholders (who hold 100% of the shares of Capital Stock subject to the
Shareholders Agreement) hereby amend the Shareholders Agreement as set forth in
this Section 11.17.
Section 11.18. Litigation Matters and Tax Disputes. The Stockholders
-----------------------------------
covenant and agree that they, jointly and severally, will indemnify each WORK
Indemnified Party against, and hold each WORK Indemnified Party harmless from
and in respect of, all Damages that arise from, are based on or relate or
otherwise are attributable to the litigation described in Section 4.12 of the
Disclosure Statement or to the tax matter referred to in Section 4.28(a)(2) of
the Disclosure Statement, to the same extent as if such matters were WORK
Indemnified Losses except that such
<PAGE>
indemnification shall be without regard to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
Section 11.19. Certain Returns. The Stockholders shall be responsible
---------------
for, and shall cause to be promptly prepared and filed, all Returns for income
taxes due for all periods ended prior to the IPO Closing Date. Within 45 days
after the date hereof, and in any event, prior to the Adjustment Date, the
Company shall prepare and file its federal and state income tax Returns for
1997, pay any and all Taxes due with respect thereto and provide copies thereof
to WORK.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
<PAGE>
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Department of
Consumer and Regulatory Affairs of the District of Columbia, but before the
IPO has been consummated, WORK (at WORK's expense) will take all actions
that Counsel for the Company and the Stockholders advises WORK are required
by the applicable laws of the District of Columbia to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
LRI ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
LAW RESOURCES, INC.
By: /s/ Robert G. Joseph
-------------------------------------------
Robert G. Joseph, President
STOCKHOLDERS:
/s/ Robert G. Joseph
----------------------------------------------
Robert G. Joseph
/s/ Ilyse A. Parzow
----------------------------------------------
Ilyse A. Parzow
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Robert G. Joseph
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Robert G. Joseph
Vice President Ilyse A. Parzow
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
------ ---------
Robert G. Joseph 6515 Deidre Terrace
McLean, VA 22101
Ilyse A. Parzow 12609 Maidens Bower Dr.
Potomac, MD 20854
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $1,006,170, as adjusted pursuant to paragraph D below, and (ii)
83,846 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro-Rata
Name Company Common Stock Share
---- -------------------- --------
Robert G. Joseph 1 50%
Ilyse A. Parzow 1 50%
- ----
TOTAL 2 100%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the
<PAGE>
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date is less than (y) the Estimated AAA Amount, (iii) reduced by the
amount, if any, by which (x) the estimated amount of the net adjustment that
would be required under Section 481(a) of the Code if, as of the Adjustment
Date, the Company changed its method of accounting for tax purposes from the
cash basis to the accrual basis exceeds (y) the Estimated Cash Basis Adjustment
Amount and (iv) increased by the amount, if any, by which (x) the estimated
amount of the net adjustment that would be required under Section 481(a) of the
Code if, as of the Adjustment Date, the Company changed its method of accounting
for tax purposes from the cash basis to the accrual basis is less than (y) the
The cash portion of the Merger Consideration will be subject to adjustment based
Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the Company's accounting records reflect that
the negative balance in the Accumulated Adjustment Account as of the IPO Closing
Date is greater than the negative balance in the Accumulated Adjustment Account
as of March 31, 1998 (which negative balance was approximately $306,000 at such
date) as a result of distribution to the Stockholders, the Stockholders shall
repay to the Company the amount of such difference in accordance with their
respective Pro Rata Shares, and the Stockholders' obligation to repay such
amount (and their indemnification with respect thereto) shall not be subject to
the Threshold Amount limitation on indemnification contained in the first
sentence of Section 9.06(a). For purposes of this paragraph E, any increase in
the negative balance in the Accumulated Adjustment Account occasioned by the
distribution by the Company to the Stockholders of Indebtedness of the
Stockholders to the Company in the principal amount of approximately $137,000
shall be disregarded.
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Robert G. Joseph Common 1
Ilyse A. Parzow Common 1
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common Stock None 100 2 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 5.08
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 5.08 are used
herein as therein defined.
B. Notwithstanding the provisions of Section 5.08 to the contrary, the
Company and the Stockholders acknowledge that WORK has engaged the services of
DeBellas & Co. as a broker with respect to the transaction contemplated hereby.
WORK is solely responsible for payment of any fees and expenses owed by WORK as
a result of its agreement with such broker.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the Closing, the
Company may make AAA Distributions up to the amount equal to the sum
of the Accumulated Adjustment Account as of the Initial Calculation
Date plus any additions to the Accumulated Adjustment Account between
the Initial Calculation Date and the date of Closing. In addition,
the Company shall make distributions of cash basis accounts and notes
receivable as contemplated by Section 2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
1. The cash basis accounts and notes receivable to be distributed
pursuant to Section 2.07.
2. Term life insurance policies owned by the Company which name the
Stockholders as the insureds.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
LRI Acquisition, Inc.
Law Resources, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
Loan Agreement and Promissory Note dated May 5, 1997, and as amended
May 12, 1998, between the Company, the Stockholders and Franklin
National Bank.
<PAGE>
EXHIBIT 2.13
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
PCN ACQUISITION, INC.,
PROFESSIONAL CONSULTING NETWORK, INC.,
ITS STOCKHOLDERS,
AND
ITS PROSPECTIVE STOCKHOLDERS
________________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998 among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), PCN ACQUISITION, INC., a California corporation and a wholly owned
subsidiary of WORK ("Newco"), PROFESSIONAL CONSULTING NETWORK, INC., a
California corporation (the "Company"), the persons listed on the signature
pages of this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder"), and the
persons listed on the signature pages of this Agreement under the caption
"Prospective Stockholders" (collectively, the "Prospective Stockholders," and
each of them, individually, a "Prospective Stockholder."
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries,
will acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv) the Stockholders will receive the Merger Consideration
(as such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the California General Corporation
Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time (a) $9,640,132 plus (b) the
aggregate amount of Contingent Merger Consideration which the Stockholders
have been paid, or are entitled to be paid, at such time.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value per share,
of the Company.
"Contingent Merger Consideration" means the consideration payable to
the Stockholders pursuant to Sections 2.08(a) and 2.08(b).
"Counsel for the Company and the Stockholders" means Mandel Bruder &
Verges.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
<PAGE>
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Earn-Out EBIT" means, for any period, earnings of the Company for
such period before interest expense and federal and state income taxes, all
determined in accordance with GAAP, adjusted to: (a) exclude investment
income and gains and losses from dispositions of capital assets, (b)
exclude all extraordinary items of gain or loss, as defined by GAAP, to be
applied on a basis consistent with the Initial Financial Statements dated
as of December 31, 1997, and (c) eliminate any management fees or
administrative costs (including audit fees) charged by WORK to the Company,
and any charges to the Company's earnings with respect of allocations of
indirect corporate overhead expenses, including amortization of goodwill
and other intangibles, but not eliminating expenses directly attributable
to the Company or its operations, such as charges for insurance coverage,
charges for employee benefit plans and charges associated with obtaining
the Company's accounting and financial information in an accurate and
timely manner; provided, however, that such charges for insurance coverage
shall not be greater than the cost being paid by the Company for similar
coverage at the time of the Closing, and any employee benefit plan charges
per employee will not be greater than the charges being paid at the time of
Closing.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $1,255,893, the estimated amount, as of
the Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $1,235,464, the
estimated amount, as of the Initial Calculation Date, of the net adjustment
that would be required under
<PAGE>
Section 481(a) of the Code if the Company changed its method of accounting
for tax purposes from the cash basis to the accrued basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997 and 1996 and the related audited
statements of operations, stockholders' equity and cash flows for each of
the Company's three fiscal years in the three-year period ended December
31, 1997, together with the related audit report of KPMG Peat Marwick LLP,
and (b) the Current Balance Sheet and the related unaudited statements of
operations, stockholders' equity and cash flows for the three-month period
ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means PCN Acquisition, Inc., a California corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and James
Schneider and Peter Jozwik, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of James Schneider or Peter Jozwik.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
<PAGE>
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of California.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business
<PAGE>
Corporation Act, (b) Newco will cease to exist as a separate legal entity, (c)
the certificate or articles of incorporation of the Company will be amended to
change its authorized capital stock to 1,000 shares, par value $1.00 per share,
of Common Stock, (d) the Company will be the Surviving Corporation and, as such,
will, all with the effect provided by the Business Corporation Act, (i) possess
all the properties and rights, and be subject to all the restrictions and
duties, of the Company and Newco and (ii) be governed by the laws of the State
of California, (e) the Charter Documents of the Company then in effect (after
giving effect to the amendment of the Company's certificate or articles of
incorporation specified in clause (c) of this sentence) will become and
thereafter remain (until changed in accordance with (i) applicable law, in the
case of the certificate or articles of incorporation or (ii) their terms, in the
case of the bylaws) the Charter Documents of the Surviving Corporation, (f) the
initial board of directors of the Surviving Corporation will be the Persons
named in Schedule 2.03, who will hold the office of director of the Surviving
Corporation subject to the provisions of the applicable laws of the State of
California and the Charter Documents of the Surviving Corporation, and (g) the
officers of the Surviving Corporation immediately following the Merger will be
as set forth in Schedule 2.03, and each of the Persons so designated in Schedule
2.03 will serve in each office specified for that Person in Schedule 2.03,
subject to the provisions of the Charter Documents of the Surviving Corporation,
until his or her successor is duly elected to, and, if necessary, qualified for,
that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration") and the Contingent Merger Consideration, (ii) cease
to be outstanding and to exist, and (iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
<PAGE>
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will
<PAGE>
be payable with respect to the payment of such dividends or other
distributions (or cash for and in lieu of fractional shares) on surrender
of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or before
----------------------------------------------
the day preceding the IPO Closing Date, the Company shall distribute in kind to
the Stockholders, in accordance with their respective Pro Rata Shares, cash
basis accounts and notes receivable outstanding at such time (including, without
limitation, notes, advances and other payment obligations of the Stockholders to
the Company) which have a value equal to the net adjustment that would be
required under Section 481(a) of the Code if, as of the IPO Closing Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis. In the event that, notwithstanding such distribution, the
Company receives any payment with respect to any such receivables, the Company
will promptly pay the amount so received over to the Stockholders in accordance
with their respective Pro Rata Shares. The aggregate amount of accounts and
notes receivable to be distributed pursuant to this Section 2.07 is herein
referred to as the "Cash Basis Accounts Receivable Distribution Amount."
Section 2.08. Contingent Merger Consideration.
--------------------------------
(a) On April 1, 1999, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, cash in an amount equal
to seven times the amount by which the Earn-out EBIT for the twelve-month
period ended December 31, 1998 exceeds $1,139,006.
(b) On April 1, 2000, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, cash in an amount equal
to five times the amount by which the Earn-out EBIT for the twelve-month
period ended December 31, 1999 exceeds the Earn-out EBIT for the twelve-
month period ended December 31, 1998.
(c) The obligation of WORK to pay Contingent Merger Consideration to
any Stockholder will not be affected by the termination of such
Stockholder's employment by the Company as the result of such Stockholder's
death, disability or for any other reason.
(d) During the period from the date of Closing until December 31,
1999, (i) the Stockholders will be given sufficient autonomy, working
capital and other reasonable support to manage the daily operations of the
Company, consistent with prior practices and reasonable business judgment,
(ii) WORK will cause James Schneider to be elected a director of the
Company to serve throughout such period; provided, however, that in the
<PAGE>
event that prior to the end of such period Mr. Schneider is no longer a
director of the Company for any reason, WORK will cause Peter Jozwik to be
elected to serve, as of the time of the vacancy of the seat held by Mr.
Schneider until the end of the remainder of such period, as a director of
the Company and (iii) WORK will, and will cause the Company, to sign such
proxies and other documents and to take such other action as may be
reasonably required from time to time to accomplish the action reflected in
clause (ii) above. In addition, the Company will not terminate the
employment of Mr. Schneider or Mr. Jozwik during such period except for
death, disability or Cause (as such term is defined in the New Employment
Agreement).
(e) WORK agrees that from the IPO Closing Date until December 31,
1999, WORK will not cause the Company to:
(i) be liquidated or dissolved;
(ii) sell all or substantially all of its assets, sell all or
substantially all of the Company's stock, or merge the
Company with any other entity;
(iii)relocate the Company's principal office from its present
location or open any new offices or locations;
(iv) acquire another business entity or the assets or operations
of another business entity;
(v) increase the number of employees; or
(vi) make any expenditures outside the normal course of the
Company's business.
Except as specifically prohibited above in this Section 2.08(e), the
Company may at any time change or discontinue any of its present or future
assets or operations, or may close any of its present or future offices, or
undertake new operations, or may take any and all steps which the Company's
Board of Directors, in its reasonable business judgment and by unanimous
vote, shall deem advisable and in the best interest of the Company, and if
any such action adversely affects the Earn-Out EBIT, the Stockholders shall
have no claim or recourse by reason of such action.
(f) The calculation of Earn-out EBIT will be performed by the Company
based on the Company's financial statements as audited by WORK's
independent public accountants. Any dispute arises with respect to the
amount of the Contingent Merger Consideration shall be resolved by WORK's
independent public accountants or any other mutually acceptable dispute
resolution procedure.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
<PAGE>
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties
-----------
will take all actions necessary to (i) effect the Merger on the IPO
Closing Date (including, as permitted by the Business Corporation Act, (A)
the execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Secretary of State of the State of California), (ii) verify
the existence and ownership of the certificates evidencing the Company
Common Stock to be exchanged for the Merger Consideration pursuant to
Section 2.05, and (iii) satisfy the document delivery requirements to which
the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as WORK shall specify by written notice to
James Schneider. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
<PAGE>
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01 Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
<PAGE>
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
<PAGE>
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and
<PAGE>
regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
<PAGE>
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
<PAGE>
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
595 Market Street
Suite 1400
San Francisco, CA 94105-2821
Attn: Jim Schneider
Telecopy No.: (415) 777-8632
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Mandel Buder & Verges
101 Vallejo Street
San Francisco, CA 94111
Attn: Bill Mandel
Telecopy No.: (415) 989-5143
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CALIFORNIA WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that provision
shall be severed from this
<PAGE>
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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 603 and 1113
of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 603 and 1113 of
the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay (or distribute in accordance with
Section 2.07) the entire unpaid amount of all notes, advances and other payment
obligations owed by such Stockholder to the Company.
Section 11.17. Treatment of Prospective Stockholders. Each of the
-------------------------------------
Prospective Stockholders has been granted the conditional right to acquire
shares of the Company Common Stock from the Stockholders. The Company and the
Stockholders agree that, prior to Closing, they intend to take all such actions
as may be reasonably necessary to transfer such shares of Company Common Stock
to the Prospective Stockholders pursuant to the terms and conditions set forth
in any
<PAGE>
and all agreements entered into by the Stockholders and the Prospective
Stockholders. Upon the transfer of those shares, the Company Common Shares will
be owned as follows:
<TABLE>
<CAPTION>
Name No. of Shares Percentage Interest
------ ------------- -------------------
<S> <C> <C>
James Schneider 90,000 45%
Peter Jozwik 90,000 45%
Heinz H. Bartesch 10,000 5%
Gregory J. Krueger 10,000 5%
------------- -------------------
200,000 100%
</TABLE>
From and after the transfer of such shares to the Prospective Stockholders, the
Prospective Stockholders will be deemed to be Stockholders hereunder and the Pro
Rata Shares of the Stockholder and the Prospective Stockholders will be adjusted
in accordance with the foregoing percentage interests. The Prospective
Stockholders hereby agree that their rights to acquire shares of Company Capital
Stock, and their right, if any, to receive compensation pursuant to "phantom
stock" or any other similar arrangement, will terminate and be of no further
force and effect upon the issuance of the shares of Company Common Stock
contemplated hereby or the occurrence of the Effective Time, whichever first
occurs. If the transfer of such shares has not taken place as of the Effective
Time, the Prospective Stockholders shall have no rights hereunder or claims
against WORK, the Company or the Stockholders.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per
<PAGE>
share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of California, but before the IPO has been consummated,
WORK (at WORK's expense) will take all actions that Counsel for the Company
and the Stockholders advises WORK are required by the applicable laws of
the State of California to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
PCN ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
PROFESSIONAL CONSULTING NETWORK, INC.
By: /s/ James Schneider
--------------------------------------
James Schneider, President
STOCKHOLDERS:
/s/ James Schneider
--------------------------------------------
James Schneider
/s/ Peter Jozwik
--------------------------------------------
Peter Jozwik
PROSPECTIVE STOCKHOLDERS:
/s/ Heinz H. Bartesch
--------------------------------------------
Heinz H. Bartesch
/s/ Gregory J. Krueger
--------------------------------------------
Gregory J. Krueger
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
James Schneider
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President James Schneider
Vice President Peter Jozwik
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder and each Prospective
Stockholder are as follows:
<TABLE>
<CAPTION>
Name Address
-------------------- ----------------------
<S> <C>
James Schneider 8 Deer Hill
Mill Valley, CA 94941
Peter Jozwik 20 Dutch Valley Lane
San Anselmo, CA 94960
Heinz H. Bartesch 16 Regina Way
San Rafael, CA 94903
Gregory J. Krueger 513 Valley View Ct.
Martinez, CA 94553
</TABLE>
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $4,820,068, as adjusted pursuant to paragraph D below, and (ii)
401,672 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares.
Subject to adjustment as set forth in Section 11.17, the Pro Rata Shares of the
Stockholders are as follows:
<TABLE>
<CAPTION>
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---------- --------------------- --------
<S> <C> <C>
James Schneider 100,000 50%
Peter Jozwik 100,000 50%
</TABLE>
Following the transfer of shares of the Company Common Stock to the
Prospective Stockholders contemplated by Section 11.17, the Pro Rata Shares will
be as follows:
<PAGE>
<TABLE>
<CAPTION>
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---------- --------------------- --------
<S> <C> <C>
James Schneider 90,000 45%
Peter Jozwik 90,000 45%
Heinz H. Bartesch 10,000 5%
Gregory J. Krueger 10,000 5%
--------------------- ----------------
200,000 100%
</TABLE>
D. The cash portion of the Merger Consideration will be subject to
adjustment ba ed upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder and each Prospective Stockholder is an "accredited
investor" as defined in Securities Act Rule 501(a), except for the following:
Gregory J. Krueger
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. Subject to the provisions of Section 11.17, the following table sets
forth the ownership of the Company's Capital Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
<S> <C> <C>
James Schneider Common 100,000
Peter Jozwik Common 100,000
</TABLE>
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ----------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common None 1,000,000 200,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. The Company intends to ask Union Bank of California, N.A. to extend
the maturity date of its Commercial Promissory Note from August 31, 1999 to
October 31, 1999. Otherwise, no exception is taken to the covenants contained
in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the Closing, the
Company may make AAA Distributions, in cash or other assets, up to
the amount equal to the sum of the Accumulated Adjustment Account as
of the Initial Calculation Date plus the Company's good faith estimate
of any additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In addition, the
Company shall make distributions of cash basis accounts and notes
receivable as contemplated by Section 2.07 and of life insurance
policies as contemplated by Schedule 6.10(B)(b).
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
(a) Prior to the Closing, the Company shall distribute the cash
basis accounts and notes receivable (including notes, advances or
other payment obligations of the Stockholders to the Company) to be
distributed pursuant to Section 2.07.
(b) Prior to the Closing, the Company shall be permitted to
transfer to the Stockholders (at no cost to the Stockholders) the life
insurance policies owned by the Company and insuring their lives.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
PCN Acquisition, Inc.
Professional Consulting Network, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
1. Guarantee by Peter Jozwik and James Schneider, dated September
29, 1995, of Equipment Lease Agreement between the Company and Taylor Leasing,
Inc.
2. Continuing Guaranty by James Schneider, dated December 1, 1997,
of all obligations of the Company to Union Bank of California, N.A.
3. Continuing Guaranty by Peter Jozwik, dated December 1, 1997, of
all obligations of the Company to Union Bank of California, N.A.
<PAGE>
EXHIBIT 2.14
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
SHA ACQUISITION, INC.,
SMITH HANLEY ASSOCIATES, INC.
AND
ITS STOCKHOLDERS
================================================================================
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), SHA ACQUISITION, INC., a New York corporation and a wholly owned
subsidiary of WORK ("Newco"), SMITH HANLEY ASSOCIATES, INC., a New York
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the Company
identified in the accompanying Addendum I (each an "Other Founding Company" and,
collectively with the Company, the "Founding Companies") under agreements
similar to this Agreement entered into among the Other Founding Companies, their
stockholders, WORK and other subsidiaries of WORK (collectively, the "Other
Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
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following terms have the meanings assigned to them below in this Section 1.01:
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"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the New York Business Corporation
Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $16,217,796.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the stock, $.10 par value, of the
Company.
"Counsel for the Company and the Stockholders" means Bachner Tally
Polevoy & Misher, LLP.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the combined balance sheet of the
Company and Smith Consulting at March 31, 1998, which is included in the
Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the
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Company with respect to indebtedness incurred by the Company to enable the
Company to make AAA Distributions after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $1,189,368, the estimated amount, as of
the Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $0, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company and Smith Consulting at December 31, 1997 and 1996,
and the related audited combined statements of operations, stockholders'
equity and cash flows for each of the Company's three fiscal years in the
three-year period ended December 31, 1997, together with the related audit
report of KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the
related unaudited combined statements of operations, stockholders' equity
and cash flows for the three-month period ended on the Current Balance
Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means SHA Acquisition, Inc., a New York corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and each of
Thomas A. Hanley, Jr. and Brant R. Smith, respectively.
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"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Thomas A. Hanley, Jr.
"Restricted Period" has the meaning specified in Section 11.02.
"Smith Consulting" means Smith Hanley Consulting Group, Inc., a
Connecticut corporation and an Affiliate of the Company.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
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Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
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in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
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conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of New York.
Section 2.02. The Effective Time. The effective time of the Merger (the
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"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
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Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of New York, (e) the Charter Documents of the
Company then in effect (after giving effect to the amendment of the Company's
certificate or articles of incorporation specified in clause (c) of this
sentence) will become and thereafter remain (until changed in accordance with
(i) applicable law, in the case of the certificate or articles of incorporation
or (ii) their terms, in the case of the bylaws) the Charter Documents of the
Surviving Corporation, (f) the initial board of directors of the Surviving
Corporation will be the Persons named in Schedule 2.03, who will hold the office
of director of the Surviving Corporation subject to the provisions of the
applicable laws of the State of New York and the Charter Documents of the
Surviving Corporation, and (g) the officers of the Surviving Corporation
immediately following the Merger will be as set forth in Schedule 2.03, and each
of the Persons so designated in Schedule 2.03 will serve in each office
specified for that Person in Schedule 2.03, subject to the provisions of the
Charter Documents of the Surviving Corporation, until his or her successor is
duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
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Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on
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surrender of the certificate evidencing those shares, the amount of cash
and the number of shares of WORK Common Stock set forth or determined as
provided in Schedule 2.04 (the "Merger Consideration"), (ii) cease to be
outstanding and to exist, and (iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
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(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be deemed
for all purposes to have been issued by WORK at the Effective Time. All
cash included in the Merger Consideration shall be paid, at WORK's option,
by (a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may
be appointed by WORK for purposes of this Section 2.05), on or before the
IPO Closing Date, the certificates representing Company Common Stock owned
by the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates
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or other documents of conveyance respecting, or in the stock powers
accompanying, the certificates representing Company Common Stock delivered
by him.
(c) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
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this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
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before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
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ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
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(a) The Closing. On or before the IPO Pricing Date, the Parties
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will take all actions necessary to (i) effect the Merger on the IPO Closing
Date (including, as permitted by the Business Corporation Act, (A) the
execution of a Certificate of Merger meeting the requirements of the
Business Corporation Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Secretary of State of the State of New York, (ii) verify
the existence and ownership of the certificates evidencing the Company
Common Stock to be exchanged for the Merger Consideration pursuant to
Section 2.05, and (iii) satisfy the document delivery requirements to which
the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as WORK shall specify by written notice to
Thomas A. Hanley, Jr. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
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Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
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ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder (other than Keith
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Shelly, Dan Friedman and Jacqueline Montras) severally agrees that he will not
during the period beginning on the date hereof and ending on the second
anniversary of the IPO Closing Date, directly or indirectly, for any reason, for
his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by
the Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time
within one year prior to that time was, a customer of the Company, any
Company Subsidiary or WORK within the Territory, (i) for the purpose of
soliciting or selling any product or service in competition with the
Company, any Company Subsidiary or WORK within the Territory and (ii) with
the knowledge of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge
of that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
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Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
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losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
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10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
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are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
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are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06 Materiality. The Company and each Stockholder, severally
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and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
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ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
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(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01
shall survive the termination of this Agreement.
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Section 11.02. Restrictions on Transfers of WORK Common Stock.
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(a) During the one-year period ending on the first anniversary
of the IPO Closing Date (the "Restricted Period"), no Stockholder
voluntarily will: (i) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (A) any shares of WORK Common
Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any such shares of WORK Common Stock,
in whole or in part, and WORK will have no obligation to, and shall not,
treat any such attempted transfer as effective for any purpose; or (ii)
engage in any transaction, whether or not with respect to any shares of
WORK Common Stock or any interest therein, the intent or effect of which is
to reduce the risk of owning the shares of WORK Common Stock acquired
pursuant to Section 2.04 (including, for example engaging in put, call,
short-sale, straddle or similar market transactions); provided, however,
that this Section 11.02 shall not restrict any transfer of WORK Common
Stock acquired by a Stockholder pursuant to Section 2.04 to any of that
Stockholder's Related Persons who agree in writing to be bound by the
provisions of Section 11.01 and this Section 11.02. The certificates
evidencing the WORK Common Stock delivered to each Stockholder pursuant to
Section 2.05 will bear a legend substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER
DISPOSITION OF ANY OF THOSE SHARES, DURING THE PERIOD
ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE IPO
CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE EXPIRATION
OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and
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regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND
OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
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represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
<PAGE>
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. In connection with the agreement
of the Stockholders contained in clause (c) of the preceding sentence, WORK
hereby represents and warrants to the Stockholders that the Other Agreements all
contain provisions to the same effect as that contained in such clause (c). The
Stockholders will file all necessary documentation and Returns with respect to
all Transfer Taxes. In addition, each Stockholder acknowledges that he, and not
the Company, WORK or the Surviving Corporation, will pay all Taxes due upon
receipt of the consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Smith Hanley Associates, Inc.
99 Park Avenue
New York, NY 10016
Attn: President
Telecopy No.: (212) 818-9067
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Bachner Tally Polevoy & Misher, LLP
380 Madison Avenue
New York, NY 10017
Attn: Marc S. Goldfarb
Telecopy No.: (212) 682-5729
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
<PAGE>
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the
Capital Stock of the Company, hereby consent to and approve the Merger and
the plan of merger contemplated by this Agreement pursuant to Sections 615
and 903 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 615 and 903
of the Business Corporation Act.
<PAGE>
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Condition. The obligation of the Company and the
-----------------
Stockholders to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready, willing and able to acquire Smith Consulting on the
IPO Closing Date pursuant to the Other Agreement among WORK, Smith Consulting
and the other parties identified therein, and the obligation of WORK and Newco
to take the actions to be taken by them on the IPO Closing Date are subject to
Smith Consulting and the stockholders thereof being ready, willing and able to
perform their obligations on the IPO Closing Date pursuant to such Other
Agreement.
Section 11.18. Special Indemnity Limitation. Notwithstanding any provision
----------------------------
hereof to the contrary, in no event shall (a) the aggregate liability of the
Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the Stockholders under Article IX of the
Other Agreement to which Smith Consulting is a party exceed the Ceiling Amount
or (b) the sum of the aggregate liability of each Stockholder under Article IX
of this Agreement plus the aggregate liability of that Stockholder under Article
IX of such Other Agreement exceed such Stockholder's Pro Rata Share of the
Ceiling Amount.
Section 11.19. Top Heavy Plan. Prior to the Adjustment Date, the Company
--------------
will pay and discharge all liabilities with respect to underfunding of the Smith
Hanley Associates Inc. Savings Plan and the Smith Hanley Consulting Group
Savings Plan (the "Designated Plans"), and at or prior to the Closing, the
Company will provide evidence reasonably satisfactory to WORK that all such
liabilities have been paid and discharged.
Section 11.20. SHA Holding Company. Prior to the date of the Closing, SHA
-------------------
Holding Company, a Connecticut corporation, will terminate its existence and
will transfer all of its assets (all such assets having heretofore been
identified in writing to WORK) to the Company.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful
<PAGE>
failure of the Party (or in the case of the Stockholders and the
Company, any of them) seeking to terminate this Agreement to perform
or adhere to any agreement required hereby to be performed or adhered
to by that Party prior to or at the Closing or thereafter on the IPO
Closing Date; provided, however, that the date September 30, 1998, set
forth above shall be extended to October 31, 1998, unless, on or
before September 15, 1998, Founding Companies which are to receive a
majority of the initial merger consideration (valuing shares of WORK
Common Stock at $12 per share) to be received by all the Founding
Companies on the IPO Closing Date notify WORK that they have elected
not to extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of New York, but before the IPO has been consummated,
WORK (at WORK's expense) will take all actions that Counsel for the Company
and the Stockholders advises WORK are required by the applicable laws of
the State of New York to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
SHA ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
SMITH HANLEY ASSOCIATES, INC.
By: /s/ Thomas A. Hanley, Jr.
-------------------------------------------
Thomas A. Hanley, Jr., President
STOCKHOLDERS:
/s/ Brant R. Smith
----------------------------------------------
Brant R. Smith
/s/ Thomas A. Hanley, Jr.
----------------------------------------------
Thomas A. Hanley, Jr.
/s/ Linda Burtch Honnold
----------------------------------------------
Linda Burtch Honnold
/s/ Andrew O. Davis
----------------------------------------------
Andrew O. Davis
/s/ Thomas Schwarz
----------------------------------------------
Thomas Schwarz
<PAGE>
/s/ David Carpenter
----------------------------------------------
David Carpenter
/s/ Richard P. Wastrom
----------------------------------------------
Richard P. Wastrom
/s/ Tracey Gmoser
----------------------------------------------
Tracey Gmoser
/s/ Robin Judson
----------------------------------------------
Robin Judson
/s/ Jaqueline Paige
----------------------------------------------
Jaqueline Paige
/s/ Dan Friedman
----------------------------------------------
Dan Friedman
/s/ Jacqueline Montras
----------------------------------------------
Jacqueline Montras
/s/ Keith Shelly
----------------------------------------------
Keith Shelly
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Thomas A. Hanley, Jr.
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Thomas A. Hanley, Jr.
Vice President Brant R. Smith
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
<TABLE>
<CAPTION>
Name Address
-------- -----------
<S> <C>
Brant R. Smith 33 Foxboro Point
Essex, CT 06426
Thomas A. Hanley, Jr. 235 Canoe Hill Road
New Canaan, CT 06840
Linda Burtch Honnold 930 Michigan
Evanston, IL 60202
Andrew O. Davis 1446 Redding Road
Fairfield, CT 06430
Thomas Schwarz 315 East 68 Street - 2K
New York, NY 10021
David Carpenter 1 Balwyn Place
Bala Cynwyd, PA 19004
Richard P. Wastrom 71 Diamond Hill Road
Redding, CT 06896
Tracey Gmoser 303 E. 83rd Street 10A
New York, NY 10028
Robin Judson 5 Seely Place
Scarsdale, NY 10583
Jacqueline Paige 45 Browns Lane
Fairfield CT 06430
Dan Friedman 429 Beach Avenue
Mamaroneck, NY 10543
Jacqueline Montras 3015 Bronson Road
Fairfield, CT 06430
Keith Shelly 805 Musago Run
Lake Mary, FL 32746
</TABLE>
<PAGE>
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $7,281,098 as adjusted pursuant to paragraph D below, and (ii)
550,922 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
<TABLE>
<CAPTION>
Shares of Pre Merger Section 11.18
Name Common Stock Pro Rata Share
- ---- ------------ --------------
<S> <C> <C>
Brant R. Smith 3,147 31.47%
Thomas A. Hanley, Jr. 2,599 25.99%
Linda Burtch Honnold 870 8.70%
Andrew O. Davis 294 2.94%
Thomas Schwarz 232 2.32%
David Carpenter 340 3.40%
Richard P. Wastrom 675 6.75%
Tracey Gmoser 569 5.69%
Robin Judson 498 4.98%
Jacqueline Paige 468 4.68%
Dan Friedman 84 .84%
Jacqueline Montras 84 .84%
Keith Shelley 140 1.40%
------ -------
10,000 100.00%
</TABLE>
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
<PAGE>
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a), except for the following:
1) Andrew O. Davis
2) David Carpenter
3) Jacqueline Paige
4) Jacqueline Montras
5) Keith Shelly
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
<S> <C> <C>
Brant R. Smith Common 3,147
Thomas A. Hanley, Jr. Common 2,599
Linda Burtch Honnold Common 870
Andrew O. Davis Common 294
Thomas Schwarz Common 232
David Carpenter Common 340
Richard P. Wastrom Common 675
Tracey Gmoser Common 569
Robin Judson Common 498
Jacqueline Paige Common 468
Dan Friedman Common 84
Jacqueline Montras Common 84
Keith Shelly Common 140
</TABLE>
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Smith Consulting.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common $.10 2,000,000 10,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 5.08
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 5.08 are used
herein as therein defined.
B. Notwithstanding the provisions of Section 5.08 to the contrary, the
Company and the Stockholders acknowledge that WORK has engaged the services of
R.A. Cohen Consulting as a broker with respect to the transaction contemplated
hereby. WORK is solely responsible for payment of any fees and expenses owed by
WORK as a result of its agreement with such broker.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the Closing, the
Company may make AAA Distributions up to the amount equal to the sum
of the Accumulated Adjustment Account as of the Initial Calculation
Date plus any additions to the Accumulated Adjustment Account between
the Initial Calculation Date and the date of Closing. In addition,
the Company shall make distributions of cash basis accounts and notes
receivable as contemplated by Section 2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHA Acquisition, Inc.
Smith Hanley Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.15
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
SHCG ACQUISITION, INC.,
SMITH HANLEY CONSULTING GROUP, INC.
AND
ITS STOCKHOLDERS
________________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), SHCG ACQUISITION, INC., a Connecticut corporation and a wholly-owned
subsidiary of WORK ("Newco"), SMITH HANLEY CONSULTING GROUP, INC., a Connecticut
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the Company
identified in the accompanying Addendum I (each an "Other Founding Company" and,
collectively with the Company, the "Founding Companies") under agreements
similar to this Agreement entered into among the Other Founding Companies, their
stockholders, WORK and other subsidiaries of WORK (collectively, the "Other
Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Connecticut Business Corporation
Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $16,217,796.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, [.10] par value, of the
Company.
"Counsel for the Company and the Stockholders" means Bachner Tally
Polevoy & Misher, LLP.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company and Smith Associates at March 31, 1998, which is included in
the Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the
<PAGE>
Company with respect to indebtedness incurred by the Company to enable the
Company to make AAA Distributions after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $762,848, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $0, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Holdback Termination Time" has the meaning specified in Section
11.19.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company and Smith Associates at December 31, 1997 and 1996
and the related audited combined statements of operations, stockholders'
equity and cash flows for each of the Company's three fiscal years in the
three-year period ended December 31, 1997, together with the related audit
report of KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the
related unaudited combined statements of operations, stockholders' equity
and cash flows of the Company and Smith Associates for the three-month
period ended on the Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means SHCG Acquisition, Inc., a Connecticut corporation.
"Parties" means the parties to this Agreement.
<PAGE>
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Thomas A. Hanley, Jr.
"Restricted Period" has the meaning specified in Section 11.02.
"Smith Associates" means Smith Hanley Associates, Inc., a New York
corporation and an Affiliate of the Company.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
<PAGE>
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of Connecticut.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of Connecticut, (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of incorporation specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named in Schedule 2.03, who will
hold the office of director of the Surviving Corporation subject to the
provisions of the applicable laws of the State of Connecticut and the Charter
Documents of the Surviving Corporation, and (g) the officers of the Surviving
Corporation immediately following the Merger will be as set forth in Schedule
2.03, and each of the Persons so designated in Schedule 2.03 will serve in each
office specified for that Person in Schedule 2.03, subject to the provisions of
the Charter Documents of the Surviving Corporation, until his or her successor
is duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04
(the "Merger Consideration"), (ii) cease to be outstanding and to exist,
and (iii) be canceled and retired;
<PAGE>
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock
<PAGE>
have been issued in the Merger until the unsurrendered certificates are
surrendered as provided herein, but (i) on such surrender, WORK will cause
to be paid, to the Person in whose name the certificates representing such
shares of WORK Common Stock shall then be issued, the amount of dividends
or other distributions previously paid with respect to such whole shares of
WORK Common Stock with a record date, or which have accrued, subsequent to
the Effective Time, but prior to surrender, and the amount of any cash
payable to such Person for and in lieu of fractional shares pursuant to
Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, WORK will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which
have been accrued, subsequent to the Effective Time, but which are not
payable until a date subsequent to surrender, which are payable with
respect to such number of whole shares of WORK Common Stock, subject in all
cases to any applicable escheat laws. No interest will be payable with
respect to the payment of such dividends or other distributions (or cash
for and in lieu of fractional shares) on surrender of outstanding
certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Connecticut, (ii) verify the existence
and ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later
<PAGE>
time on the IPO Pricing Date as WORK shall specify by written notice to
Thomas A. Hanley, Jr.. The actions taken at the Closing will not include
the completion of either the Merger or the delivery of the Company Common
Stock or the Merger Consideration pursuant to Section 2.05. Instead, on the
IPO Closing Date, the Certificate of Merger will become effective pursuant
to Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder (other than Keith
---------------------
Shelly, Dan Friedman and Jacqueline Montras) severally agrees that he will not
during the period beginning on the date hereof and ending on the second
anniversary of the IPO Closing Date, directly or indirectly, for any reason, for
his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility
<PAGE>
shall be the area located within 50 miles of the facility, all of such
locations being herein collectively called the "Territory");
(b) call on any natural Person who is at that time employed by
the Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time
within one year prior to that time was, a customer of the Company, any
Company Subsidiary or WORK within the Territory, (i) for the purpose of
soliciting or selling any product or service in competition with the
Company, any Company Subsidiary or WORK within the Territory and (ii) with
the knowledge of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge
of that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
<PAGE>
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other
Founding Companies and their Subsidiaries and WORK and its Subsidiaries.
Each of the Company and the Stockholders, severally and not jointly with
any other Person, agrees that it will keep confidential all such
Confidential Information furnished to it and, except with the specific
prior written consent of WORK will not disclose such Confidential
Information to any Person except (a) Representatives of WORK, (b) its own
Representatives, provided that these Representatives (other than counsel)
agree to the confidentiality provisions of this Section 11.01; and
provided, further, that Confidential Information shall not include (i)
such information which becomes known to the public generally through no
fault of any Stockholder, (ii) information required to be disclosed by law
or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
each Stockholder shall, if possible, give prior written notice thereof to
WORK and provide WORK with the opportunity to contest such disclosure, or
(iii) information with respect to which the disclosing party reasonably
believes disclosure is required in connection with the defense of a
lawsuit against the disclosing party. In the event of a breach or
threatened breach by any Stockholder of the provisions of this Section
11.01 with respect to any Confidential Information, WORK shall be entitled
to an injunction restraining such Stockholder from disclosing, in whole or
in part, that Confidential Information. Nothing herein shall be construed
as prohibiting WORK from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of
Section 11.01(a) by injunctions and restraining orders against each of
them who breaches any of those provisions.
<PAGE>
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01
shall survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary
of the IPO Closing Date (the "Restricted Period"), no Stockholder
voluntarily will: (i) sell, assign, exchange, transfer, encumber, pledge,
distribute, appoint or otherwise dispose of (A) any shares of WORK Common
Stock received by any Stockholder in the Merger or (B) any interest in
(including any option to buy or sell) any such shares of WORK Common
Stock, in whole or in part, and WORK will have no obligation to, and shall
not, treat any such attempted transfer as effective for any purpose; or
(ii) engage in any transaction, whether or not with respect to any shares
of WORK Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning the shares of WORK Common Stock
acquired pursuant to Section 2.04 (including, for example engaging in put,
call, short-sale, straddle or similar market transactions); provided,
however, that this Section 11.02 shall not restrict any transfer of WORK
Common Stock acquired by a Stockholder pursuant to Section 2.04 to any of
that Stockholder's Related Persons who agree in writing to be bound by the
provisions of Section 11.01 and this Section 11.02. The certificates
evidencing the WORK Common Stock delivered to each Stockholder pursuant to
Section 2.05 will bear a legend substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE
AND THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING
THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN
REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH
THE TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED
PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the
Effective Time than the value of then freely
<PAGE>
tradeable shares of WORK Common Stock, and (ii) covenants that none of the
shares of WORK Common Stock issued to him pursuant to Section 2.04 will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all the applicable
provisions of the Securities Act and the rules and regulations of the SEC
and applicable state securities laws and regulations. All certificates
evidencing shares of WORK Common Stock issued pursuant to Section 2.04
will bear the following legend in addition to the legend prescribed by
Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER
APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04 Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
<PAGE>
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. In connection with the agreement
of the Stockholders contained in clause (c) of the preceding sentence, WORK
hereby represents and warrants to the Stockholders that the Other Agreements all
contain provisions to the same effect as that contained in such clause (c). The
Stockholders will file all necessary documentation and Returns with respect to
all Transfer Taxes. In addition, each Stockholder acknowledges that he, and not
the Company, WORK or the Surviving Corporation, will pay all Taxes due upon
receipt of the consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
<PAGE>
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
Smith Hanley Associates, Inc.
99 Park Avenue
New York, NY 10016
Attn: President
Telecopy No.: (212) 818-9067
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Bachner Tally Polevoy & Misher, LLP
380 Madison Avenue
New York, NY 10017
Attn: Marc S. Goldfarb
Telecopy No.: (212) 682-5729
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CONNECTICUT WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
<PAGE>
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the
Capital Stock of the Company, hereby consent to and approve the Merger and
the plan of merger contemplated by this Agreement pursuant to Sections 33-
698 and 33-817 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the
plan of merger contemplated by this Agreement pursuant to Sections 33-698
and 33-817 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Condition. The obligation of the Company and the
-----------------
Stockholders to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready, willing and able to acquire Smith Associates on the
IPO Closing Date pursuant to the Other
<PAGE>
Agreement among WORK, Smith Associates and the other parties identified therein,
and the obligation of WORK and Newco to take the actions to be taken by them on
the IPO Closing Date are subject to Smith Associates and the stockholders
thereof being ready, willing and able to perform their obligations on the IPO
Closing Date pursuant to such Other Agreement.
Section 11.18. Special Indemnity Limitation. Notwithstanding any
----------------------------
provision hereof to the contrary, in no event shall (a) the aggregate liability
of the Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the Stockholders under Article IX of the
Other Agreement to which Smith Associates is a party exceed the Ceiling Amount
or (b) the sum of the aggregate liability of each Stockholder under Article IX
of this Agreement plus the aggregate liability of that Stockholder under Article
IX of such Other Agreement exceed such Stockholder's Pro Rata Share of the
Ceiling Amount.
Section 11.19. Top Heavy Plan. Prior to the Adjustment Date, the Company
--------------
will pay and discharge all liabilities with respect to underfunding of the Smith
Hanley Associates Inc. Savings Plan and the Smith Hanley Consulting Group
Savings Plan (the "Designated Plans"), and at or prior to the Closing, the
Company will provide evidence reasonably satisfactory to WORK that all such
liabilities have been paid and discharged.
Section 11.20. SHA Holding Company. Prior to the date of the Closing, SHA
-------------------
Holding Company, a Connecticut corporation, will terminate its existence and
will transfer all of its assets (all such assets having heretofore been
identified in writing to WORK) to Smith Associates.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall
not have been consummated by September 30, 1998, unless the
failure of such transactions to be consummated results from the
willful failure of the Party (or in the case of the Stockholders
and the Company, any of them) seeking to terminate this Agreement
to perform or adhere to any agreement required hereby to be
performed or adhered to by that Party prior to or at the Closing
or thereafter on the IPO Closing Date; provided, however, that
the date September 30, 1998, set forth above shall be extended to
October 31, 1998, unless, on or before September 15, 1998,
Founding Companies which are to receive a majority of the initial
merger consideration (valuing shares of WORK Common Stock at $12
per share) to be received by all the Founding Companies on the
IPO Closing Date notify WORK that they have elected not to extend
such date beyond September 30, 1998;
<PAGE>
(iii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholders and the Company, any of them) in the observance or
in the due and timely performance of any of the covenants,
agreements or conditions contained herein and such breach or
default continues for fifteen days after written notice from the
Majority Stockholders or the Company, on the one hand, or from
WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.07.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement
is terminated pursuant to its terms after the Closing and prior
to the consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business
Days after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this Agreement is terminated pursuant to
this Section 12.01 after the Certificate of Merger has been filed with the
Secretary of State of the State of Connecticut, but before the IPO has
been consummated, WORK (at WORK's expense) will take all actions that
Counsel for the Company and the Stockholders advises WORK are required by
the applicable laws of the State of Connecticut to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-----------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
SHCG ACQUISITION, INC.
By: /s/ Monte R. Stephens
-----------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
SMITH HANLEY CONSULTING GROUP, INC.
By: /s/ Thomas A. Hanley, Jr.
-----------------------------------------
Thomas A. Hanley, Jr., President
STOCKHOLDERS:
/s/ Brant R. Smith
--------------------------------------------
Brant R. Smith
/s/ Thomas A. Hanley, Jr.
--------------------------------------------
Thomas A. Hanley, Jr.
/s/ Linda Burtch Honnold
--------------------------------------------
Linda Burtch Honnold
/s/ Andrew O. Davis
--------------------------------------------
Andrew O. Davis
/s/ Thomas Schwarz
--------------------------------------------
Thomas Schwarz
<PAGE>
/s/ David Carpenter
--------------------------------------------
David Carpenter
/s/ Richard P. Wastrom
--------------------------------------------
Richard P. Wastrom
/s/ Tracey Gmoser
--------------------------------------------
Tracey Gmoser
/s/ Robin Judson
--------------------------------------------
Robin Judson
/s/ Jaqueline Paige
--------------------------------------------
Jaqueline Paige
/s/ Dan Friedman
--------------------------------------------
Dan Friedman
/s/ Jacqueline Montras
--------------------------------------------
Jacqueline Montras
/s/ Keith Shelly
--------------------------------------------
Keith Shelly
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Thomas A. Hanley, Jr.
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Thomas A. Hanley, Jr.
Vice President Brant R. Smith
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
----------- ---------------
Brant R. Smith 33 Foxboro Point
Essex, CT 06426
Thomas A. Hanley, Jr. 235 Canoe Hill Road
New Canaan, CT 06840
Linda Burtch Honnold 930 Michigan
Evanston, IL 60202
Andrew O. Davis 1446 Redding Road
Fairfield, CT 06430
Thomas Schwarz 315 East 68 Street - 2K
New York, NY 10021
David Carpenter 1 Balwyn Place
Bala Cynwyd, PA 19004
Richard P. Wastrom 71 Diamond Hill Road
Redding, CT 06896
Tracey Gmoser 303 E. 83rd Street 10A
New York, NY 10028
Robin Judson 5 Seely Place
Scarsdale, NY 10583
Jacqueline Paige 45 Browns Lane
Fairfield CT 06430
Dan Friedman 429 Beach Avenue
Mamaroneck, NY 10543
Jacqueline Montras 3015 Bronson Road
Fairfield, CT 06430
Keith Shelly 805 Musago Run
Lake Mary, FL 32746
C. The aggregate Merger Consideration shall be equal to $1,218,910, as
adjusted pursuant to comprised of (i) an amount of cash paragraph D below,
and (ii) 92,227 shares of WORK
<PAGE>
Common Stock, which shall be payable and issuable to the Stockholders pro
rata in accordance with their respective Pro Rata Shares. The Pro Rata
Shares of the Stockholders are as follows:
Name No. of Shares Pro Rata Share
---------- ---------------- --------------
Brant R. Smith 1,573.5 31.47%
Thomas A. Hanley, Jr. 1,299.5 25.99%
Linda Burtch Honnold 435.0 8.70%
Andrew O. Davis 147.0 2.94%
Thomas Schwarz 116.0 2.32%
David Carpenter 170.0 3.40%
Richard P. Wastrom 337.5 6.75%
Tracey Gmoser 284.5 5.69%
Robin Judson 249.0 4.98%
Jacqueline Paige 234.0 4.68%
Dan Friedman 42.0 .84%
Jacqueline Montras 42.0 .84%
Keith Shelly 70.0 1.40%
------- -------
5,000.0 100.00%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if,
<PAGE>
as of the Adjustment Date, the Company changed its method of accounting for tax
purposes from the cash basis to the accrual basis, the Stockholders shall repay
to the Company the amount of such excess in accordance with their respective Pro
Rata Shares, and the Stockholders' obligation to repay such amount (and their
indemnification with respect thereto) shall not be subject to the Threshold
Amount limitation on indemnification contained in the first sentence of Section
9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a), except for the following:
1) Andrew O. Davis
2) David Carpenter
3) Jacqueline Paige
4) Jacqueline Montras
5) Keith Shelly
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
----- ------ ------------
Brant R. Smith Common 1,573.5
Thomas A. Hanley, Jr. Common 1,299.5
Linda Burtch Honnold Common 435.0
Andrew O. Davis Common 147.0
Thomas Schwarz Common 116.0
David Carpenter Common 170.0
Richard P. Wastrom Common 337.5
Tracey Gmoser Common 284.5
Robin Judson Common 249.0
Jacqueline Paige Common 234.0
Dan Friedman Common 42.0
Jacqueline Montras Common 42.0
Keith Shelly Common 70.0
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Smith Associates
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- -------- --------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Common No 5,000 5,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
None.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 5.08
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 5.08 are used
herein as therein defined.
B. Notwithstanding the provisions of Section 5.08 to the contrary, the
Company and the Stockholders acknowledge that WORK has engaged the services of
R.A. Cohen Consulting as a broker with respect to the transaction contemplated
hereby. WORK is solely responsible for payment of any fees and expenses owed by
WORK as a result of its agreement with such broker.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the
amount equal to the sum of the Accumulated Adjustment
Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the
Initial Calculation Date and the date of Closing. In
addition, the Company shall make distributions of cash basis
accounts and notes receivable as contemplated by Section
2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to
be distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SHCG Acquisition, Inc.
Smith Hanley Consulting Group, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.16
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
SPS ACQUISITION, INC.,
SPARKS PERSONNEL SERVICES, INC.,
ITS SOLE STOCKHOLDER
AND
ITS PROSPECTIVE STOCKHOLDER
________________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), SPS ACQUISITION, INC., a Maryland corporation and a wholly owned
subsidiary of WORK ("Newco"), SPARKS PERSONNEL SERVICES, INC., a Maryland
corporation (the "Company"), the persons listed on the signature pages of this
Agreement under the caption "Stockholder" (the "Stockholder") and the person
listed on the signature pages of this Agreement under the caption "Prospective
Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Maryland Business Corporation
Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time $32,615,740.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value per share,
of the Company.
"Counsel for the Company and the Stockholders" means Lerch, Early &
Brewer, Chartered.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company, Sparks Associates and Customer Care at March 31, 1998, which
is included in the Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Customer Care" means Customer Care Solutions, LLC, a Maryland limited
liability company and an Affiliate of the Company.
<PAGE>
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $1,465,324, the estimated amount, as of
the Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $1,680,533, the
estimated amount, as of the Initial Calculation Date, of the net adjustment
that would be required under Section 481(a) of the Code if the Company
changed its method of accounting for tax purposes from the cash basis to
the accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company, Sparks Associates and Customer Care at December 31,
1997 and 1996 and the related audited combined statements of operations,
stockholders' equity and cash flows for each of the three fiscal years of
the Company, Sparks Associates and Customer Care in the three-year period
ended December 31, 1997, together with the related audit report of KPMG
Peat Marwick LLP, and (b) the Current Balance Sheet and the related
unaudited combined statements of operations, stockholders' equity and cash
flows of the Company, Sparks Associates and Customer Care for the three-
month period ended on the Current Balance Sheet Date.
"Kamm Cash Bonus" has the meaning specified in Section 11.21.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
<PAGE>
"Newco" means SPS Acquisition, Inc., a Maryland corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and Stephen M.
Sparks and Scott Newlin, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Stephen M. Sparks.
"Restricted Period" has the meaning specified in Section 11.02.
"Section 11.18 Pro Rata Share" means, with respect to the Stockholder,
76.8285% and, following the issuance of the shares of the Company Common
Stock contemplated by Section 11.20, means with respect to the Stockholder
and the Prospective Stockholder, the following:
<TABLE>
<CAPTION>
Section 11.18 Pro Rata
----------------------
Name Share
---- -----
<S> <C>
The Stephen M. Sparks Revocable Trust created under 72.3320%
Revocable Trust Agreement dated July 7, 1995
Scott Newlin 6.5126%
</TABLE>
"Sparks Associates" means Sparks Associates, Inc., a Maryland
corporation and an Affiliate of the Company.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
<PAGE>
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the State Department of Assessments and Taxation.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i)
<PAGE>
possess all the properties and rights, and be subject to all the restrictions
and duties, of the Company and Newco and (ii) be governed by the laws of the
State of Maryland, (e) the Charter Documents of the Company then in effect
(after giving effect to the amendment of the Company's certificate or articles
of incorporation specified in clause (c) of this sentence) will become and
thereafter remain (until changed in accordance with (i) applicable law, in the
case of the certificate or articles of incorporation or (ii) their terms, in the
case of the bylaws) the Charter Documents of the Surviving Corporation, (f) the
initial board of directors of the Surviving Corporation will be the Persons
named in Schedule 2.03, who will hold the office of director of the Surviving
Corporation subject to the provisions of the applicable laws of the State of
Maryland and the Charter Documents of the Surviving Corporation, and (g) the
officers of the Surviving Corporation immediately following the Merger will be
as set forth in Schedule 2.03, and each of the Persons so designated in Schedule
2.03 will serve in each office specified for that Person in Schedule 2.03,
subject to the provisions of the Charter Documents of the Surviving Corporation,
until his or her successor is duly elected to, and, if necessary, qualified for,
that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this
<PAGE>
Section 2.05), receive, and WORK will pay and issue to each Stockholder, in
each case subject to the provisions of Section 2.06, the Merger
Consideration; and (ii) until any certificate representing Company Common
Stock has been surrendered and replaced pursuant to this Section 2.05, that
certificate will, for all purposes, be deemed to evidence ownership of the
number of whole shares of WORK Common Stock, and the right to receive cash,
included in the Merger Consideration payable in respect of that certificate
pursuant to Section 2.04. All shares of WORK Common Stock issuable in the
Merger will be deemed for all purposes to have been issued by WORK at the
Effective Time. All cash included in the Merger Consideration shall be
paid, at WORK's option, by (a) WORK's company check or checks, (b) one or
more wire transfers to accounts designated by the respective Stockholders
at least five Business Days before the IPO Closing Date, or (c) certified
or official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
<PAGE>
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to The Stephen M. Sparks Revocable Trust, cash basis accounts and notes
receivable outstanding at such time which have a value equal to the net
adjustment that would be required under Section 481(a) of the Code if, as of the
IPO Closing Date, the Company changed its method of accounting for tax purposes
from the cash basis to the accrual basis. In the event that, notwithstanding
such distribution, the Company receives any payment with respect to any such
receivables, the Company will promptly pay the amount so received over to The
Stephen M. Sparks Revocable Trust. The aggregate amount of accounts and notes
receivable to be distributed pursuant to this Section 2.07 is herein referred to
as the "Cash Basis Accounts Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
AND PROSPECTIVE STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
THE STOCKHOLDER AND THE PROSPECTIVE STOCKHOLDER
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties will
-----------
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Maryland State Department of Assessments and Taxation), (ii) verify the
existence and ownership of the certificates evidencing the Company Common
Stock to be exchanged for the Merger Consideration pursuant to Section
2.05, and (iii) satisfy the document delivery requirements to which the
obligations of the Parties to effect the Merger and the other transactions
contemplated hereby are conditioned by the provisions of this Article VII
(all those actions collectively being the "Closing"). The Closing will
take place at the offices of Porter & Hedges, L.L.P., 700 Louisiana,
Houston, Texas at 10:00 a.m., Houston time, or at such later time on the
IPO Pricing Date as WORK shall specify by written notice to Stephen M.
Sparks. The actions taken at the Closing will not include the completion
of either the Merger or the delivery of the Company Common Stock or the
Merger Consideration pursuant to Section 2.05. Instead, on the IPO Closing
Date, the Certificate of Merger will become effective pursuant to Section
2.02, and all transactions contemplated by this Agreement to be closed or
completed on or before the IPO Closing Date, including the surrender of the
Company Common Stock in exchange for the Merger Consideration will be
closed or completed, as the case may be. During the period from the
Closing to the IPO Closing Date, this Agreement may be terminated by the
parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
<PAGE>
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition
<PAGE>
with the Company, any Company Subsidiary or WORK within the Territory and
(ii) with the knowledge of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
<PAGE>
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN
OF REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED VOLUNTARY SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF
THE IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY
STOP ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE
EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates
<PAGE>
evidencing shares of WORK Common Stock issued pursuant to Section 2.04 will
bear the following legend in addition to the legend prescribed by Section
11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD
OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES
WITH THAT ACT AND OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and
<PAGE>
their Representatives which are incurred in connection with the subject matter
of this Agreement and any amendments to this Agreement including all costs and
expenses incurred in the performance of and compliance with all conditions to be
performed by WORK and Newco under this Agreement, including the costs of
preparing the Registration Statement, (b) WORK will pay up to a maximum of
$25,000 in the aggregate of the fees, expenses and disbursements of Bracewell
and Patterson, L.L.P., counsel to the Founding Companies, incurred in connection
with the subject matter of this Agreement, and (c) the Stockholders will pay
from personal funds, and not from funds of the Company or any Company
Subsidiary, (i) all sales, use, transfer and other similar taxes and fees
(collectively, "Transfer Taxes") incurred in connection with the transactions
contemplated hereby, and (ii) the fees, expenses and disbursements of Counsel
for the Company and the Stockholders incurred in connection with the subject
matter of this Agreement and the Registration Statement on or before the IPO
Closing Date. The Stockholders will file all necessary documentation and Returns
with respect to all Transfer Taxes. In addition, each Stockholder acknowledges
that he, and not the Company, WORK or the Surviving Corporation, will pay all
Taxes due upon receipt of the consideration payable to the Stockholder pursuant
to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
<PAGE>
(iii) if to the Company, addressed to it at:
15825 Shady Grove Road
Suite 150
Rockville, MD 20850
Attn: President
Telecopy No.: (301) 948-5890
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Lerch, Early & Brewer, Chartered
Suite 380, 3 Bethesda Metro Center
Bethesda, Maryland 20814-5367
Attn: Paul J. DiPiazza
Telecopy No.: (301) 986-0332
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
MARYLAND WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
<PAGE>
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 2-505 and 3-
105 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and plan of
merger contemplated by this Agreement pursuant to Sections 2-505 and 3-105
of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Conditions. The obligation of the Company and the
------------------
Stockholders to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready, willing and able to acquire Sparks Associates on
the IPO Closing Date pursuant to the Other Agreement among WORK, Sparks
Associates and the other parties identified therein and to acquire Customer Care
on the IPO Closing Date pursuant to the Other Agreement among WORK, Customer
Care and the other parties identified therein, and the obligation of WORK and
Newco to take the actions to be taken by them on the IPO Closing Date are
subject to Customer Care and Sparks Associates and the stockholders or members
thereof being ready, willing and able to perform their obligations on the IPO
Closing Date pursuant to such Other Agreements.
<PAGE>
Section 11.18. Special Indemnity Limitations. Notwithstanding any
-----------------------------
provision hereof to the contrary, in no event shall (a) the aggregate liability
of the Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the stockholders or members under Article
IX of the Other Agreements to which Customer Care and Sparks Associates,
respectively, are parties exceed the Ceiling Amount or (b) the sum of the
aggregate liability of each Stockholder under Article IX of this Agreement plus
the aggregate liability of that Stockholder under Article IX of such Other
Agreements exceed such Stockholder's Section 11.18 Pro Rata Share of the Ceiling
Amount.
Section 11.19. Litigation Matters. The Stockholders covenant and agree
------------------
that they, jointly and severally, will indemnify each WORK Indemnified Party
against, and hold each WORK Indemnified Party harmless from and in respect of,
all Damages that arise from, are based on or relate or otherwise are
attributable to the litigation and claims described in Section 4.26(g) of the
Disclosure Statement, to the same extent as if such matters were WORK
Indemnified Losses except that such indemnification shall be without regard to
the Threshold Amount limitation on indemnification contained in the first
sentence of Section 9.06(a).
Section 11.20. Treatment of Prospective Stockholder. The Prospective
------------------------------------
Stockholder has been granted the right to receive shares of the Company Common
Stock, and it is contemplated that the authorized Company Common Stock will be
increased to 10,000 shares and that the Prospective Stockholder will acquire the
shares of the Common Stock which he has the right to receive prior to the IPO
Closing Date. The Company and the Stockholder agree to take all such actions as
may be necessary to increase the number of authorized shares of Company Common
Stock and to cause such shares to be so issued. Upon the issuance of those
shares, the Company Common Shares will be owned as follows:
<TABLE>
<CAPTION>
Name No. of Shares Percentage Interest
---- ------------- -------------------
<S> <C> <C>
Scott Newlin 826 8.26%
The Stephen M. Sparks Revocable Trust 9,174 91.74%
---------- ----------
10,000 100.00%
</TABLE>
From and after the acquisition of such shares by the Prospective Stockholder,
the Prospective Stockholder will be deemed to be Stockholders hereunder and the
Pro Rata Shares of the Stockholder and the Prospective Stockholder will be
adjusted in accordance with the foregoing percentage interests. The Prospective
Stockholder hereby agree that their rights to acquire shares of Company Capital
Stock, and their right to receive compensation pursuant to "phantom stock" or
any other similar arrangement, will terminate and be of no further force and
effect upon the issuance of the shares of Company Common Stock contemplated
hereby or the occurrence of the Effective Time, whichever first occurs.
Section 11.21. Amendment of Employment Agreement. Prior to the date
---------------------------------
hereof, the Company and Bonnie Kamm have entered into an amendment to the
Employment Agreement dated January 1, 1997, between the Company and Ms. Kamm to
provide her a cash bonus (the "Kamm
<PAGE>
Cash Bonus") in lieu of her right to receive a stock and cash bonus and Ms. Kamm
acknowledged that she had no further right to receive compensation pursuant to
"phantom stock" or other similar arrangements. A true and correct copy of such
amendment has been delivered to WORK. Prior to the date hereof, the Company and
Scott Newlin have entered into an amendment to the Employment Agreement dated
January 1, 1997, between the Company and Mr. Newlin to limit the amount of the
Equity Bonus payable to Mr. Newlin. A true and correct copy of such amendment as
been delivered to WORK.
Section 11.22. Trust Affiliate. Stephen M. Sparks hereby agrees that he
---------------
shall be liable for, and obligated to perform, each representation, warranty,
covenant, indemnity obligation and each other agreement and undertaking of the
Stephen M. Sparks Revocable Trust created under Revocable Trust Agreement dated
June 7, 1995 to the same extent, and subject to the same qualifications and
limitations, as if he were named in this Agreement as a Stockholder in the place
and stead of such Trust. The obligations of Mr. Sparks and of such Trust shall
in all respects be joint and several, and any right or obligation which any
Party would be entitled to enforce against such Trust may be enforced directly
against Mr. Sparks as a direct and primary obligation of Mr. Sparks.
Section 11.23. Consents to Transfers. The Stockholder consents to the
---------------------
transfers of Company Common Stock to the Prospective Stockholder contemplated by
Section 11.20, and the Stockholder and the Prospective Stockholder (a) consent
to the transfers to WORK contemplated by this Agreement and (b) waive the
restrictions upon transfer and sale of Company Common Stock contained in
Articles V and VI of the by-laws of the Company.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
<PAGE>
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Maryland
State Department of Assessments and Taxation, but before the IPO has been
consummated, WORK (at WORK's expense) will take all actions that Counsel
for the Company and the Stockholders advises WORK are required by the
applicable laws of the State of Maryland to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
---------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
SPS ACQUISITION, INC.
By: /s/ Monte R. Stephens
---------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
SPARKS PERSONNEL SERVICES, INC.
By: /s/ Stephen M. Sparks
---------------------------------
Stephen M. Sparks, President
STOCKHOLDER:
THE STEPHEN M. SPARKS REVOCABLE TRUST created
under Revocable Trust Agreement dated June 7, 1995
By: /s/ Stephen M. Sparks
---------------------------------
Stephen M. Sparks, Co-Trustee
By: /s/ Elisabeth B. Sparks
---------------------------------
Elisabeth B. Sparks, Co-Trustee
PROSPECTIVE STOCKHOLDER:
/s/ Scott Newlin
---------------------------------------
Scott Newlin
<PAGE>
The undersigned has executed this Agreement in the space provided below to
indicate his agreement to be bound by the provisions to Section 11.22 of the
foregoing Agreement.
/s/ Stephen M. Sparks
---------------------------------
Stephen M. Sparks
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Stephen M. Sparks
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Stephen M. Sparks
Chief Operating Officer Scott Newlin
Vice President Bonnie Kamm
Secretary Phyllis Miller
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder and each Prospective
Shareholder are as follows:
Name Address
---- -------
The Stephen M. Sparks Revocable Trust created 12021 Wetherfield Lane
under Revocable Trust Agreement dated July 7, Potomac, MD 20854
1995
Scott Newlin 30 Walker Avenue
Gaitnerburg, MD 21035
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $14,350,000, as adjusted pursuant to paragraph D below, and
(ii) 947,145 shares of WORK Common Stock, which shall be payable and issuable to
the Stockholders pro rata in accordance with their respective Pro Rata Shares.
Subject to adjustment as set forth in Section 11.20, the Pro Rata Shares of the
Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- --------
The Stephen M. Sparks Revocable
Trust created under Revocable Trust
Agreement dated July 7, 1995 46 100%
Following the issuance of shares of the Company Common Stock to the
Prospective Stockholder contemplated by Section 11.20, the Pro Rata Shares will
be as follows:
<PAGE>
Shares of Pre-Merger
Name Company Common Stock Pro Rata Share
---- -------------------- --------------
The Stephen M. Sparks Revocable 9,174 91.74%
Trust created under Revocable Trust
Agreement dated July 7, 1995
Scott Newlin 826 8.26%
----- --------
10,000 100.00%
D. The cash portion of the Merger Consideration will be subject to
adjustment basedupon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x)
the estimated undistributed balance in the Accumulated Adjustment Account as of
the Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its
method of accounting for tax purposes from the cash basis to the accrual basis
exceeds (y) the Estimated Cash Basis Adjustment Amount, (iv) increased by the
amount, if any, by which (x) the estimated amount of the net adjustment that
would be required under Section 481(a) of the Code if, as of the Adjustment
Date, the Company changed its method of accounting for tax purposes from the
cash basis to the accrual basis is less than (y) the Estimated Cash Basis
Adjustment Amount, (v) increased or decreased by the amount by which 40% of the
value of the Merger Consideration (calculated based upon a value of $12 for
each share of WORK Common Stock) received by the Prospective Stockholder is
greater or less, respectively, than $2,125,000 and (vi) decreased by any
portion of the Kamm Cash Bonus or the cash bonus payable to the Prospective
Stockholder which is paid after the Adjustment Date.
E. The Stockholders will promptly prepare a final Return for the
Company for the period ending on the day prior to the IPO Closing Date and will
use their best efforts to complete such Return within 45 days after the Closing.
In the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. Subject to the provisions of Section 11.20, the following table sets
forth the ownership of the Company's Capital Stock:
NUMBER OF
NAME CLASS SHARES OWNED
----- ----- ------------
The Stephen M. Sparks Revocable Trust Common 46
created under Revocable Trust
Agreement dated July 7, 1995
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Sparks Associates
Customer Care
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C>
Common $1.00 500 46 454 None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the IPO Closing Date, the Company
may make AAA Distributions up to the amount equal to the sum of the
Accumulated Adjustment Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the Initial
Calculation Date and the date of IPO Closing. In addition, the Company
shall make distributions of cash basis accounts and notes receivable as
contemplated by Section 2.07.
The marketable securities referred to in Schedule 6.10 may be distributed
to the Stockholder.
C. The Company may amend its Charter Documents to authorize the issuance
of additional Company Capital Stock for distribution to the Prospective
Stockholder in accordance with Section 11.20 hereof.
D. The Company may issue Company Common Stock to the Prospective
Stockholder in accordance with Section 11.20 hereof.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
The cash basis accounts and notes receivable are to be distributed
pursuant to Section 2.07.
The Company may distribute marketable securities currently owned by
the Company with a market value equal to approximately $171,000.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SPS Acquisition, Inc.
Sparks Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.17
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
dated as of July 10, 1998
among
WORK INTERNATIONAL CORPORATION,
SAI ACQUISITION, INC.,
SPARKS ASSOCIATES, INC.,
and
ITS SOLE STOCKHOLDER
================================================================================
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), SAI ACQUISITION, INC., a Maryland corporation and a wholly owned
subsidiary of WORK ("Newco"), SPARKS ASSOCIATES, INC., a Maryland corporation
(the "Company"), and the persons listed on the signature pages of this Agreement
under the caption "Stockholders" (collectively, the "Stockholders," and each of
them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Maryland General Corporation Law.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $32,615,740.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the capital stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Lerch, Early &
Brewer, Chartered.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company, Sparks Personnel, and Customer Care at March 31, 1998, which
is included in the Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Customer Care" means Customer Care Solutions, LLC, a Maryland limited
liability company and an Affiliate of the Company.
<PAGE>
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $48,649, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $165,066, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company, Sparks Personnel, and Customer Care at December 31,
1997 and 1996 and the related audited combined statements of operations,
stockholders' equity and cash flows for each of the Company's three fiscal
years in the three-year period ended December 31, 1997, together with the
related audit report of KPMG Peat Marwick LLP, and (b) the Current Balance
Sheet and the related unaudited statements of operations, stockholders'
equity and cash flows for the three-month period ended on the Current
Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means SAI Acquisition, Inc., a Maryland corporation.
"Parties" means the parties to this Agreement.
<PAGE>
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Stephen M. Sparks.
"Restricted Period" has the meaning specified in Section 11.02.
"Section 11.18 Pro Rata Share" means, with respect to each
Stockholder, the percentage set forth below opposite the name of such
Stockholder:
Section 11.18
Name Pro Rata Share
---- --------------
Stephen M. Sparks 3.2193%
"Sparks Personnel" means Sparks Personnel Services, Inc., a Maryland
corporation and an Affiliate of the Company.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
<PAGE>
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Maryland State Department of Assessments and Taxation.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of Maryland, (e) the Charter Documents of the
Company then in effect (after giving effect to the amendment of the Company's
certificate or articles of incorporation specified in clause (c) of this
sentence) will become and thereafter remain (until changed in accordance with
(i) applicable law, in the case of the certificate or articles of incorporation
or (ii) their terms, in the case of the bylaws) the Charter Documents of the
Surviving Corporation, (f) the initial board of directors of the Surviving
Corporation will be the Persons named in Schedule 2.03, who will hold the office
of director of the Surviving Corporation subject to the provisions of the
applicable laws of the State of Maryland and the Charter Documents of the
Surviving Corporation, and (g) the officers of the Surviving Corporation
immediately following the Merger will be as set forth in Schedule 2.03, and each
of the Persons so designated in Schedule 2.03 will serve in each office
specified for that Person in Schedule 2.03, subject to the provisions of the
Charter Documents of the Surviving Corporation, until his or her successor is
duly elected to, and, if necessary, qualified for, that office.
<PAGE>
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
-------------------------------------
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be deemed
for all purposes to have been issued by WORK at the Effective Time. All
cash included in the Merger Consideration shall be paid, at WORK's option,
by (a) WORK's company check or checks, (b) one or more wire transfers to
accounts designated by the respective Stockholders at least five Business
Days before the IPO Closing Date, or (c) certified or official bank check
or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may
be appointed by WORK for purposes of this Section 2.05), on or before the
IPO Closing Date, the
<PAGE>
certificates representing Company Common Stock owned by the Stockholder,
duly endorsed in blank by him, or accompanied by stock powers duly executed
by him in blank, and with all necessary transfer tax and other revenue
stamps, acquired at his expense, affixed and canceled. Each Stockholder
shall cure any deficiencies in the endorsement of the certificates or other
documents of conveyance respecting, or in the stock powers accompanying,
the certificates representing Company Common Stock delivered by him.
(c) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
----------------------------------------------
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholder, in accordance with his Pro Rata Share, cash basis
accounts and notes receivable outstanding at such time which have a value equal
to the net adjustment that would be required under Section 481(a) of the Code
if, as of the IPO Closing Date, the Company changed its method of accounting for
tax purposes from the cash basis to the accrual basis. In the event that,
notwithstanding such distribution, the Company receives any payment with respect
to any such receivables, the Company will promptly pay the amount so received
over to the Stockholder in accordance with his Pro Rata Share. The aggregate
amount of accounts and notes receivable to be distributed pursuant to this
Section 2.07 is herein referred to as the "Cash Basis Accounts Receivable
Distribution Amount."
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the Parties
-----------
will take all actions necessary to (i) effect the Merger on the IPO Closing
Date (including, as permitted
<PAGE>
by the Business Corporation Act, (A) the execution of a Certificate of
Merger meeting the requirements of the Business Corporation Act and
providing that the Merger will become effective on the IPO Closing Date and
(B) the filing of the Certificate of Merger with the Maryland State
Department of Assessments and Taxation), (ii) verify the existence and
ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to Stephen M. Sparks. The actions taken at
the Closing will not include the completion of either the Merger or the
delivery of the Company Common Stock or the Merger Consideration pursuant
to Section 2.05. Instead, on the IPO Closing Date, the Certificate of
Merger will become effective pursuant to Section 2.02, and all transactions
contemplated by this Agreement to be closed or completed on or before the
IPO Closing Date, including the surrender of the Company Common Stock in
exchange for the Merger Consideration will be closed or completed, as the
case may be. During the period from the Closing to the IPO Closing Date,
this Agreement may be terminated by the parties only pursuant to Section
12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
<PAGE>
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
---------------------
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within
one year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of
that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
<PAGE>
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
-----------
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of the
Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public
<PAGE>
generally through no fault of any Stockholder, (ii) information required to
be disclosed by law or the order of any governmental authority under color
of law, provided, that prior to disclosing any information pursuant to this
clause (ii), each Stockholder shall, if possible, give prior written notice
thereof to WORK and provide WORK with the opportunity to contest such
disclosure, or (iii) information with respect to which the disclosing party
reasonably believes disclosure is required in connection with the defense
of a lawsuit against the disclosing party. In the event of a breach or
threatened breach by any Stockholder of the provisions of this Section
11.01 with respect to any Confidential Information, WORK shall be entitled
to an injunction restraining such Stockholder from disclosing, in whole or
in part, that Confidential Information. Nothing herein shall be construed
as prohibiting WORK from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
<PAGE>
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY
OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT IS THE
FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE "RESTRICTED
PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER OF THIS
CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND
OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage
<PAGE>
Claims arising out of claims for any and all fees and commissions of brokers or
similar agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex,
<PAGE>
telegram, facsimile or courier service, when actually received by the Party to
whom notice is sent or (b) if delivered by mail (whether actually received or
not), at the close of business on the third Business Day next following the day
when placed in the mail, postage prepaid, certified or registered, addressed to
the appropriate Party or Parties, at the address of such Party set forth below
(or at such other address as such party may designate by written notice to all
other Parties in accordance herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
15825 Shady Grove Rd.
Suite 150
Rockville, MD 20850
Attn: President
Telecopy No.: (301) 948-5890
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Lerch, Early & Brewer, Chartered
3 Bethesda Metro Center, Suite 380
Bethesda, Maryland 20814-5367
Attn: Paul DiPiazza
Telecopy No.: (301) 986-0332
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE
<PAGE>
LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X AND THE RIGHTS AND OBLIGATIONS
THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B) MATTERS PERTAINING SOLELY TO THE
LEGALITY AND EFFECTUATION OF THE MERGER SHALL BE GOVERNED BY THE BUSINESS
CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
------------------
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
<PAGE>
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
--------
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 2-505 and 3-
105 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 2-505 and 3-105
of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Special Conditions. The obligation of the Company and the
------------------
Stockholders to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready, willing and able to acquire Customer Care and
Sparks Personnel on the IPO Closing Date pursuant to the Other Agreements among
WORK, Customer Care, and Sparks Personnel and the other parties identified
therein, and the obligation of WORK and Newco to take the actions to be taken by
them on the IPO Closing Date are subject to Customer Care and Sparks Personnel
and the stockholders or members thereof being ready, willing and able to perform
their obligations on the IPO Closing Date pursuant to such Other Agreements.
Section 11.18. Special Indemnity Limitations. Notwithstanding any
-----------------------------
provision hereof to the contrary, in no event shall (a) the aggregate liability
of the Company and the Stockholders under Article IX of this Agreement plus the
aggregate liability of the Company and the stockholders or members under Article
IX of the Other Agreements to which Customer Care and Sparks Personnel are a
party exceed the Ceiling Amount or (b) the sum of the aggregate liability of
each Stockholder under Article IX of this Agreement plus the aggregate liability
of that Stockholder under Article IX of such Other Agreements exceed such
Stockholder's Section 11.18 Pro Rata Share of the Ceiling Amount.
Section 11.19. Consent to Transfer. The Stockholder (a) consents to the
-------------------
transfer to WORK of Company Common Stock contemplated by this Agreement and (b)
waives the restrictions upon transfer and sale of Company Common Stock contained
in Section 22 of the by-laws of the Company.
<PAGE>
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if the transactions
contemplated by this Agreement to take place at the Closing shall
not have been consummated by September 30, 1998, unless the failure
of such transactions to be consummated results from the willful
failure of the Party (or in the case of the Stockholders and the
Company, any of them) seeking to terminate this Agreement to perform
or adhere to any agreement required hereby to be performed or
adhered to by that Party prior to or at the Closing or thereafter on
the IPO Closing Date; provided, however, that the date September 30,
1998, set forth above shall be extended to October 31, 1998, unless,
on or before September 15, 1998, Founding Companies which are to
receive a majority of the initial merger consideration (valuing
shares of WORK Common Stock at $12 per share) to be received by all
the Founding Companies on the IPO Closing Date notify WORK that they
have elected not to extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the
one hand, or by WORK, on the other hand, if a material breach or
default shall be made by the other Party (or in the case of the
Stockholders and the Company, any of them) in the observance or in
the due and timely performance of any of the covenants, agreements
or conditions contained herein and such breach or default continues
for fifteen days after written notice from the Majority Stockholders
or the Company, on the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement
is terminated pursuant to its terms after the Closing and prior to
the consummation of the IPO; or
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
<PAGE>
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this Agreement is terminated pursuant to this
Section 12.01 after the Certificate of Merger has been filed with the
Maryland State Department of Assessments and Taxation, but before the IPO
has been consummated, WORK (at WORK's expense) will take all actions that
Counsel for the Company and the Stockholders advises WORK are required by
the applicable laws of the State of Maryland to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-----------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
SAI ACQUISITION, INC.
By: /s/ Monte R. Stephens
-----------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
SPARKS ASSOCIATES, INC.
By: /s/ Stephen M. Sparks
-----------------------------------------------
Stephen M. Sparks, President
STOCKHOLDER:
/s/ Stephen M. Sparks
--------------------------------------------------
Stephen M. Sparks
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Stephen M. Sparks
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Stephen M. Sparks
Chief Operating Officer Scott Newlin
Vice President Bonnie M. Kamm
Secretary Phyllis Miller
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
---- -------
Stephen M. Sparks 12021 Wetherfield Lane
Potomac, MD 20854
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $4, as adjusted pursuant to paragraph D below, and (ii) 33,333
shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- -----
Stephen M. Sparks 90 100%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv)
<PAGE>
increased by the amount, if any, by which (x) the estimated amount of the net
adjustment that would be required under Section 481(a) of the Code if, as of the
Adjustment Date, the Company changed its method of accounting for tax purposes
from the cash basis to the accrual basis is less than (y) the Estimated Cash
Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Stephen M. Sparks Common 90
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Sparks Personnel
Customer Care
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- ----- --------- ---------- ----------- ------ -----------
<S> <C> <C> <C> <C> <C>
Common None 1,000 90 910 None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
None.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the IPO Closing Date, the Company
may make AAA Distributions up to the amount equal to the sum of the
Accumulated Adjustment Account as of the Initial Calculation Date plus any
additions to the Accumulated Adjustment Account between the Initial
Calculation Date and the IPO Closing Date. In addition, the Company shall
make distributions of cash basis accounts and notes receivable as
contemplated by Section 2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
SAI Acquisition, Inc.
Sparks Associates, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.18
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
CCS ACQUISITION, L.L.C.,
CUSTOMER CARE SOLUTIONS, LLC
AND
ITS MEMBERS
________________________________________________________________________________
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), CCS ACQUISITION, L.L.C., a Maryland limited liability company and a
wholly owned subsidiary of WORK ("Newco"), CUSTOMER CARE SOLUTIONS, LLC, a
Maryland limited liability company (the "Company"), and the persons listed on
the signature pages of this Agreement under the caption "Members" (collectively,
the "Members," and each of them, individually, a "Member").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Members will receive the Merger Consideration (as such
term is hereinafter defined).
The boards of directors of WORK and the respective Members of Newco and the
Company have approved and adopted this Agreement to effect a transaction
involving a transfer of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
---------------------
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Capital Account" means the Capital Account maintained by the Company
for each of the Stockholders pursuant to the Operating Agreement.
"Ceiling Amount" means $32,615,740.
"Charles Sparks Trust" means the Trust F/B/O Charles Sparks created
pursuant to the Trust Agreement entered into between Stephen M. Sparks, as
grantor, and Leigh Taylor, as trustee, dated as of September 3, 1996.
"Closing" has the meaning specified in Section 7.01(a).
"Company Membership Interest" means each Member's ownership interest
in the Company.
"Counsel for the Company and the Members" means Lerch, Early & Brewer,
Chartered.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited combined balance sheet of
the Company, Sparks Associates and Sparks Personnel at March 31, 1998,
which is included in the Initial Financial Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes.
"Disclosure Statement" means the written statement executed by the
Company and each of the Members and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and
<PAGE>
warranties made by the Company and the Members in this Agreement or (b) it
is confirmed that no exception is taken to that representation and
warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated Capital Account Amount" means $124,493, the estimated
amount, as of the Initial Calculation Date, of the Members' Capital
Accounts.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited combined balance
sheets of the Company, Sparks Associates and Sparks Personnel at December
31, 1997 and 1996 and the related audited combined statements of
operations, stockholders' equity and cash flows for each of the three
fiscal years of the Company, Sparks Associates and Sparks Personnel in the
three-year period ended December 31, 1997, together with the related audit
report of KPMG Peat Marwick LLP, and (b) the Current Balance Sheet and the
related unaudited combined statements of operations, stockholders' equity
and cash flows for the three-month period ended on the Current Balance
Sheet Date.
"Joseph Sparks Trust" means the Trust F/B/O Joseph Sparks created
pursuant to the Trust Agreement entered into between Stephen M. Sparks, as
grantor, and Leigh Taylor, as trustee, dated as of September 3, 1996.
"Limited Liability Company Act" means the Maryland Limited Liability
Company Act.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Members" means any Member or combination of Members who at
the date of this Agreement own Company Membership Interests representing
more than two-thirds of the total ownership of the Company at the date of
this Agreement.
"Matthew Sparks Trust" means the Trust F/B/O Matthew Sparks created
pursuant to the Trust Agreement entered into between Stephen M. Sparks, as
grantor, and Leigh Taylor, as trustee, dated as of September 3, 1996.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means CCS Acquisition, L.L.C., a Maryland limited liability
company.
"Operating Agreement" means the Operating Agreement of the Company
dated September 3, 1996, pursuant to which the Company was organized as a
Maryland limited liability company.
<PAGE>
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Member the fraction expressed as a
percentage and set forth in Schedule 2.04, representing that Member's
ownership interest in the Company.
"Responsible Officer" means Stephen M. Sparks.
"Restricted Period" has the meaning specified in Section 11.02.
"Section 11.18 Pro Rata Share" means, with respect to each Member, the
percentage set forth below opposite the name of such Member:
Section 11.18
Name Pro Rata Share
---- --------------
Stephen M. Sparks 3.2193%
Joseph Sparks Trust 5.9787%
Matthew Sparks Trust 5.9787%
Charles Sparks Trust 5.9787%
"Sparks Associates" means Sparks Associates, Inc., a Maryland
corporation and an Affiliate of the Company.
"Sparks Personnel" means Sparks Personnel Services, Inc, a Maryland
corporation and an Affiliate of the Company.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Stockholders" means the Members.
"Surviving Company" means the Company, which is to be designated in
the Certificate of Merger as the surviving company of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
<PAGE>
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
---------------------------------
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
---------------------
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Maryland State Department of Assessments and Taxation.
Section 2.02. The Effective Time. The effective time of the Merger (the
------------------
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
-----------------------------
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Limited Liability Company Act, (b) Newco will cease to exist
as a separate legal entity, (c) the Company will be the Surviving Company and,
as such, will, all with the effect provided by the Limited Liability Company
Act, (i) possess all the properties and rights, and be subject to all the
restrictions and duties, of the Company and Newco and (ii) be governed by the
laws of the State of Maryland, (d) the Charter Documents of the Company then in
effect will become and thereafter remain (until changed in accordance with (i)
applicable law, in the case of the articles of organization or (ii) [their
terms, in the case of the regulations)] Charter Documents of the Surviving
Company, (e) the initial managers of the Surviving Company will be the Persons
named in Schedule 2.03, who will hold the position of managers of the Surviving
Company subject to the provisions of the applicable laws of the State of
Maryland and the Charter Documents of the Surviving Company, and (f) the
officers of the Surviving Corporation immediately following the Merger will be
as set forth in Schedule 2.03, and each of the Persons so designated in Schedule
2.03 will serve in each office specified for that Person in Schedule 2.03,
subject to the provisions of the Charter Documents of the Surviving Company,
until his or her successor is duly elected to, and, if necessary, qualified for,
that office.
<PAGE>
Section 2.04. Effect of the Merger on Membership Certificates. As of the
-----------------------------------------------
Effective Time, as a result of the Merger and without any action on the part of
any holder thereof:
(a) the Company Membership Interests outstanding immediately
prior to the Effective Time will (i) be converted into the right to
receive, without interest, on surrender of the certificate evidencing those
rights, the amount of cash and the number of whole and fractional shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each Company Membership Interests held in the treasury of
the Company or by any Company Subsidiary will (i) cease to be outstanding
and to exist and (ii) be canceled and retired; and
(c) the Company Membership Interests issued and outstanding
immediately prior to the Effective Time will be converted into Membership
Interests in the Surviving Company, and the Company Membership Interests of
the Surviving Company issued on such conversion will constitute all the
issued and outstanding Company Membership Interests of the Surviving
Company.
Each holder of a certificate representing Company Membership Interests
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those interests other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
------------------------------
(a) At or after the Effective Time: (i) each Member, as the
holder of certificates representing a Company Membership Interest, will, on
surrender of his certificates to WORK (or any agent which may be appointed
by WORK for purposes of this Section 2.05), receive, and WORK will pay and
issue to each Member, in each case subject to the provisions of Section
2.06, the Merger Consideration; and (ii) until any certificate representing
Company Membership Interests has been surrendered and replaced pursuant to
this Section 2.05, that certificate will, for all purposes, be deemed to
evidence ownership of the number of whole shares of WORK Common Stock, and
the right to receive cash, included in the Merger Consideration payable in
respect of that certificate pursuant to Section 2.04. All shares of WORK
Common Stock issuable in the Merger will be deemed for all purposes to have
been issued by WORK at the Effective Time. All cash included in the Merger
Consideration shall be paid, at WORK's option, by (a) WORK's company check
or checks, (b) one or more wire transfers to accounts designated by the
respective Members at least five Business Days before the IPO Closing Date,
or (c) certified or official bank check or checks.
(b) Each Member will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing a Company Membership Interest
owned by the Member, duly endorsed in blank
<PAGE>
by him, or accompanied by stock powers duly executed by him in blank, and
with all necessary transfer tax and other revenue stamps, acquired at his
expense, affixed and canceled. Each Member shall cure any deficiencies in
the endorsement of the certificates or other documents of conveyance
respecting, or in the powers accompanying, the certificates representing a
Company Membership Interest delivered by him.
(c) No dividends (or interest) or other distributions declared
or earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing a Company
Membership Interest for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
-----------------
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Member otherwise entitled to receive a fractional share of WORK Common Stock
but for this Section 2.06 will instead be entitled to receive a cash payment for
and in lieu thereof in the amount (rounded to the nearest whole dollar) equal to
that Person's fractional interest in a share of WORK Common Stock multiplied by
$12.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH MEMBER
Each Member, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE MEMBERS
The Company and each Member jointly and severally represent and warrant to,
and agree with, WORK that the representations and warranties contained in
Article IV of the Uniform Provisions (the text of which Article hereby is
incorporated herein by this reference) are true and correct, and the agreements
set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Member that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
-------------------------------------
(a) The Closing. On or before the IPO Pricing Date, the
-----------
Parties will take all actions necessary to (i) effect the Merger on the IPO
Closing Date (including, as permitted by the Limited Liability Company Act,
(A) the execution of a Certificate of Merger meeting the requirements of
the Limited Liability Company Act and providing that the Merger will become
effective on the IPO Closing Date and (B) the filing of the Certificate of
Merger with the Maryland State Department of Assessments and Taxation),
(ii) verify the existence and ownership of the certificates evidencing the
Company Membership Interests to be exchanged for the Merger Consideration
pursuant to Section 2.05, and (iii) satisfy the document delivery
requirements to which the obligations of the Parties to effect the Merger
and the other transactions contemplated hereby are conditioned by the
provisions of this Article VII (all those actions collectively being the
"Closing"). The Closing will take place at the offices
<PAGE>
of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00 a.m.,
Houston time, or at such later time on the IPO Pricing Date as WORK shall
specify by written notice to Stephen M. Sparks. The actions taken at the
Closing will not include the completion of either the Merger or the
delivery of the Company Membership Certificates or the Merger Consideration
pursuant to Section 2.05. Instead, on the IPO Closing Date, the Certificate
of Merger will become effective pursuant to Section 2.02, and all
transactions contemplated by this Agreement to be closed or completed on or
before the IPO Closing Date, including the surrender of the Company
Membership Certificates in exchange for the Merger Consideration will be
closed or completed, as the case may be. During the period from the Closing
to the IPO Closing Date, this Agreement may be terminated by the parties
only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
--------------------------
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Member severally agrees that he
---------------------
will not during the period beginning on the date hereof and ending on the second
anniversary of the IPO Closing Date, directly or indirectly, for any reason, for
his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial
capacity or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
<PAGE>
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by
the Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Member may call on and hire any of his
Immediate Family Members;
(c) call on any Person that at that time is, or at any time
within one year prior to that time was, a customer of the Company, any
Company Subsidiary or WORK within the Territory, (i) for the purpose of
soliciting or selling any product or service in competition with the
Company, any Company Subsidiary or WORK within the Territory and (ii) with
the knowledge of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge
of that Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Member may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
-------
losses to WORK as a result of any breach by a Member of his covenants in Section
10.01, and because of the immediate and irreparable damage that could be caused
to WORK for which it would have no other adequate remedy, each Member agrees
that WORK may enforce the provisions of Section 10.01 by injunctions and
restraining orders against the Member if he breaches any of those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
--------------------
10.01 and 10.02 impose a reasonable restraint on the Members in light of the
activities and business of WORK on the date hereof, the current business plans
of WORK and the investment by each Member in WORK as a result of the Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
-------------------------
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Member, the Parties,
including the Member in question, acknowledge their mutual intention and
agreement that those restrictions be enforced to the fullest extent the court
deems reasonable, and thereby shall be reformed to that extent as applied to
that Member and any other Member similarly situated.
<PAGE>
Section 10.05. Independent Covenant. All the covenants in this Article X
--------------------
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Member against WORK, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each Member
by excluding from that computation any time during which that Member is in
violation of any provision of Section 10.01. The covenants contained in this
Article X shall not be affected by any breach of any other provision of this
Agreement by any Party.
Section 10.06. Materiality. The Company and each Member, severally and not
-----------
jointly with any other Person, hereby agree that this Article X is a material
and substantial part of the transactions contemplated by this Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
-------------------------------------
(a) Each of the Company and the Members, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of the
Company and the Members, severally and not jointly with any other Person,
agrees that it will keep confidential all such Confidential Information
furnished to it and, except with the specific prior written consent of WORK
will not disclose such Confidential Information to any Person except (a)
Representatives of WORK, (b) its own Representatives, provided that these
Representatives (other than counsel) agree to the confidentiality
provisions of this Section 11.01; and provided, further, that Confidential
Information shall not include (i) such information which becomes known to
the public generally through no fault of any Member, (ii) information
required to be disclosed by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), each Member shall, if possible, give prior
written notice thereof to WORK and provide WORK with the opportunity to
contest such disclosure, or (iii) information with respect to which the
disclosing party reasonably believes disclosure is required in connection
with the defense of a lawsuit against the disclosing party. In the event of
a breach or threatened breach by any Member of the provisions of this
Section 11.01 with respect to any Confidential Information, WORK shall be
entitled to an injunction restraining such Member from disclosing, in whole
or in part, that Confidential Information. Nothing herein shall be
construed as prohibiting WORK from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
Notwithstanding anything to the contrary set forth herein, the obligations
imposed herein upon the Company and the Members shall be in addition to,
and
<PAGE>
not in lieu or limitation of, the obligations of confidentiality set
forth in the Nondisclosure Agreement.
(b) Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants in Section 11.01(a), and
because of the immediate and irreparable damage that would be caused to
WORK for which it would have no other adequate remedy, each of the Company
and the Members agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01
shall survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
----------------------------------------------
(a) During the one-year period ending on the first anniversary
of the IPO Closing Date (the "Restricted Period"), no Member voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Member in the Merger or (B) any interest in (including any
option to buy or sell) any such shares of WORK Common Stock, in whole or in
part, and WORK will have no obligation to, and shall not, treat any such
attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a Member
pursuant to Section 2.04 to any of that Member's Related Persons who agree
in writing to be bound by the provisions of Section 11.01 and this Section
11.02. The certificates evidencing the WORK Common Stock delivered to each
Member pursuant to Section 2.05 will bear a legend substantially in the
form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN
OF REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS
CERTIFICATE AND THE OTHER PARTIES THERETO, THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE VOLUNTARILY SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED,
DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE,
PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF
ANY OF THOSE SHARES, DURING THE PERIOD ENDING ON [DATE THAT
IS THE FIRST ANNIVERSARY OF THE IPO CLOSING DATE] (THE
"RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE HOLDER
OF
<PAGE>
THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE
TRANSFER AGENT) AFTER THE EXPIRATION OF THE RESTRICTED
PERIOD.
(b) Each Member, severally and not jointly with any other
Person, (i) acknowledges that the shares of WORK Common Stock to be
delivered to him pursuant to Section 2.04 (A) have not been and, except
pursuant to the Registration Rights Agreement, if applicable, will not be
registered under the Securities Act and therefore may not be resold by him
without compliance with the Securities Act and (B) will, as a result of
their restrictions on transferability which are imposed by this Agreement
during the Restricted Period, have a value materially less at the Effective
Time than the value of then freely tradeable shares of WORK Common Stock,
and (ii) covenants that none of the shares of WORK Common Stock issued to
him pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock issued
pursuant to Section 2.04 will bear the following legend in addition to the
legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR
OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH
THAT ACT AND OTHER APPLICABLE SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Member pursuant to Section 2.04 will bear any legend required by (i)
the securities or blue sky laws of the state in which that Member resides
or (ii) the Underwriter in connection with any agreement of that Member
with the Underwriter to the effect set forth in Section 11.02(a).
Section 11.03. Brokers and Agents. The Members jointly and severally
------------------
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
----------------------------------------
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Members (and, in the
case of any trust, the successor trustees of the trust). Neither this Agreement
nor any other Transaction Document is intended, or shall be construed, deemed or
interpreted, to confer on any Person not a party hereto or thereto any rights or
remedies hereunder or thereunder, except as provided in Section 6.05(b) or
11.14, in Article IX, or as otherwise provided expressly herein or therein.
<PAGE>
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
------------------------------------
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Members, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
--------
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Members will pay from personal funds, and not from funds of the Company
or any Company Subsidiary, (i) all sales, use, transfer and other similar taxes
and fees (collectively, "Transfer Taxes") incurred in connection with the
transactions contemplated hereby, and (ii) the fees, expenses and disbursements
of Counsel for the Company and the Members incurred in connection with the
subject matter of this Agreement and the Registration Statement on or before the
IPO Closing Date. The Members will file all necessary documentation and Returns
with respect to all Transfer Taxes. In addition, each Member acknowledges that
he, and not the Company, WORK or the Surviving Company, will pay all Taxes due
upon receipt of the consideration payable to the Member pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
-------
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
<PAGE>
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Members, addressed to them at their respective
addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
15825 Shady Grove Road
Suite 150
Rockville, MD 20850
Attn: Stephen M. Sparks
Telecopy No.: (301) 948-5890
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Lerch, Early & Brewer, Chartered
Suite 380, 3 Bethesda Metro Center
Bethesda, Maryland 20814-5367
Attn: Paul J. DiPiazza
Telecopy No.: (301) 986-0332
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
-------------
OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE,
WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO THE CONFLICTS
OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X AND THE
RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
MARYLAND WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE LIMITED LIABILITY COMPANY ACT.
<PAGE>
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
-------------------------------
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
----
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
----------------------------
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
-------------------
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the Members
------------------
acknowledges and agrees that: (a) no firm commitment, binding agreement or
promise or other assurance of any kind, whether express or implied, oral or
written, exists at the date hereof that the Registration Statement will become
effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Members or any of their respective Affiliates or
associates for any failure of (i) the Registration Statement to become effective
(provided, however, that WORK will use its reasonable best efforts to cause the
Registration Statement to become effective prior to September 30, 1998) or (ii)
the IPO to occur at a particular price or within a particular range of prices or
to occur at all; and (c) the decision of Members to enter into this Agreement,
or to vote in favor of or consent to the Merger, has been or will be made
independent of, and without reliance on, any statements, opinions or other
communications of, or due diligence investigations that have been or will be
made or performed by, any prospective underwriter relative to WORK or the IPO.
The Underwriter shall have no obligation to any of the Company and the Members
with respect to any disclosure contained in the Registration Statement except
for written information concerning the Underwriter furnished to the Company by
or on behalf of the Underwriter specifically for inclusion in the Registration
Statement.
Section 11.15. Consents.
--------
(a) The Members, as the owners and holders of all the Membership
Interests of the Company, hereby consent to and approve the Merger and the
plan of merger
<PAGE>
contemplated by this Agreement pursuant to Sections 4A-402 and 4A-702 of
the Limited Liability Company Act.
(b) WORK hereby consents to and approves the Merger and plan of
merger contemplated by this Agreement pursuant to Sections 4A-402 and 4A-
702 of the Limited Liability Company Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
------------------------
Date, each of the Members shall repay the entire unpaid amount of all notes,
advances and other payment obligations owed by such Members to the Company.
Section 11.17. Special Conditions. The obligation of the Company and the
------------------
Members to take the actions to be taken by them on the IPO Closing Date are
subject to WORK being ready, willing and able to acquire Sparks Associates and
Sparks Personnel on the IPO Closing Date pursuant to the Other Agreements among
WORK, Sparks Associates and Sparks Personnel and the other parties identified
therein, and the obligation of WORK and Newco to take the actions to be taken by
them on the IPO Closing Date are subject to Sparks Associates and Sparks
Personnel and the stockholders thereof being ready, willing and able to perform
their obligations on the IPO Closing Date pursuant to such Other Agreements.
Section 11.18. Special Indemnity Limitations. Notwithstanding any provision
-----------------------------
hereof to the contrary, in no event shall (a) the aggregate liability of the
Company and the Members under Article IX of this Agreement plus the aggregate
liability of the Company and the Stockholders under Article IX of the Other
Agreements to which Sparks Associates and Sparks Personnel are parties exceed
the Ceiling Amount or (b) the sum of the aggregate liability of each Member
under Article IX of this Agreement plus the aggregate liability of that Member
under Article IX of such Other Agreements exceed such Member's Section 11.18 Pro
Rata Share of the Ceiling Amount.
Section 11.19. Authority of Trustees. Leigh Taylor, as trustee of the
---------------------
Joseph Sparks Trust, the Matthew Sparks Trust and the Charles Sparks Trust
hereby represents and warrants to WORK and Newco that she is the duly named and
serving trustee of each such trust, the execution and delivery by her of this
Agreement is within her power, and the performance by her of this Agreement is
within the powers and purposes of such trusts under the terms of all documents
creating, evidencing or governing them, true and correct copies of all of which
have been delivered to WORK, and neither the execution, delivery nor performance
by such trusts of this Agreement will violate, constitute a breach of, or
conflict with any documents creating, evidencing or governing such trusts.
Section 11.20. Certain Obligations. Stephen M. Sparks hereby agrees that he
-------------------
shall be liable for, and obligated to perform, each representation, warranty,
covenant, indemnity obligation and each other agreement and undertaking of the
Joseph Sparks Trust, the Matthew Sparks Trust and the Charles Sparks Trust to
the same extent, and subject to the same qualifications and limitations, as if
he were named in this Agreement as a Stockholder in the place and stead of such
trusts. The obligations of Mr. Sparks and of such trusts shall in all respects
be joint and several, and any right or obligation which any Party would be
entitled to enforce against such trusts may be enforced directly against Mr.
Sparks as his direct and primary obligation.
<PAGE>
Section 11.21. Restrictions on Transfer. Each Member hereby consents to the
------------------------
transfer of Company Membership Interests to WORK contemplated hereby and waives
any provisions of the Operating Agreement (including Section VIII thereof) which
otherwise would restrict or prohibit such transfer.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
-----------------------------
(a) This Agreement may be terminated at any time prior to the
Closing solely:
(i) by the mutual written consent of WORK and the
Company;
(ii) by the Majority Members or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Members and the Company, any of them)
seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Members or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Members and
the Company, any of them) in the observance or in the due and timely
performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Members or the Company, on the
one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in
Section 6.07.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement
is terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
<PAGE>
(ii) automatically and without action on the part of any
party hereto if the IPO is not consummated within 15 Business Days
after the date of the Closing.
(c) If this Agreement is terminated pursuant to this Section
12.01, the Merger will be deemed for all purposes to have been abandoned
and of no force or effect. If this Agreement is terminated pursuant to this
Section 12.01 after the Certificate of Merger has been filed with the
Maryland State Department of Assessments and Taxation, but before the IPO
has been consummated, WORK (at WORK's expense) will take all actions that
Counsel for the Company and the Members advises WORK are required by the
applicable laws of the State of Maryland to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
-----------------------------------
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
---------------------------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
CCS ACQUISITION, L.L.C.
By: /s/ Monte R. Stephens
---------------------------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
CUSTOMER CARE SOLUTIONS, LLC
By: /s/ Stephen M. Sparks
---------------------------------------------
Stephen M. Sparks, Manager
MEMBERS:
/s/ Stephen M. Sparks
------------------------------------------------
Stephen M. Sparks
TRUST F/B/O JOSEPH SPARKS created under Trust
Agreement dated September 3, 1996
/s/ Leigh Taylor
------------------------------------------------
Leigh Taylor, Trustee
TRUST F/B/O MATTHEW SPARKS created under Trust
Agreement dated September 3, 1996
/s/ Leigh Taylor
------------------------------------------------
Leigh Taylor, Trustee
TRUST F/B/O CHARLES SPARKS created under Trust
Agreement dated September 3, 1996
/s/ Leigh Taylor
------------------------------------------------
Leigh Taylor, Trustee
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The Managers of the Surviving Company immediately after the Effective
Time are as follows:
Samuel Sacco
B. Garfield French
Stephen M. Sparks
C. The officers of the Surviving Company immediately following the
Effective Time are as follows:
President Paul Scott Newlin
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Member are as follows:
Name Address
---- -------
Stephen M. Sparks 12021 Wetherfield Lane
Potomac, MD 20854
Joseph Sparks Trust 12021 Wetherfield Lane
Potomac, MD 20854
Matthew Sparks Trust 12021 Wetherfield Lane
Potomac, MD 20854
Charles Sparks Trust 12021 Wetherfield Lane
Potomac, MD 20854
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $650,000, as adjusted pursuant to paragraph D below, and (ii)
487,500 shares of WORK Common Stock, which shall be payable and issuable to the
Members pro rata in accordance with their respective Company Membership
Interests. The Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Membership Interests Share
---- ---------------------------- -----
Stephen M. Sparks 10 10%
Joseph Sparks Trust 30 30%
Matthew Sparks Trust 30 30%
Charles Sparks Trust 30 30%
--- ---
100 100%
D. The cash portion of the Merger Consideration will be adjustment based
upon changes in Working Capital and Long Term Debt between the Initial
Calculation Date and the Adjustment Date as follows: (i) the cash portion of the
Merger Consideration will be increased for
<PAGE>
any positive change, and decreased for any negative change, in the Company's
Working Capital between the Initial Calculation Date and the Adjustment Date and
(ii) the cash portion of the Merger Consideration will be increased for any
decrease, and decreased for any increase, in the amount of Long Term Debt,
between the Initial Calculation Date and the Adjustment Date. In addition, the
cash portion of the Merger Consideration will be (i) reduced by the amount, if
any, by which (x) the estimated undistributed balance in the Accumulated
Adjustment Account as of the Adjustment Date exceeds (y) the Estimated AAA
Amount, (ii) increased by the amount, if any, by which (x) the estimated
undistributed balance in the Accumulated Adjustment Account as of the Adjustment
Date is less than (y) the Estimated AAA Amount, (iii) reduced by the amount, if
any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis exceeds (y) the Estimated Cash Basis Adjustment Amount and
(iv) increased by the amount, if any, by which (x) the estimated amount of the
net adjustment that would be required under Section 481(a) of the Code if, as of
the Adjustment Date, the Company changed its method of accounting for tax
purposes from the cash basis to the accrual basis is less than (y) the Estimated
Cash Basis Adjustment Amount.
E. The Members will promptly prepare a final Return for the Company for
the period ending on the day prior to the IPO Closing Date and will use their
best efforts to complete such Return within 45 days after the Closing. In the
event such final Return and the accounting records of the Company reflect that,
between the Adjustment Date and the IPO Closing Date, the Company shall have
made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Member is an "accredited investor" as defined in Securities Act
Rule 501(a), except for:
Joseph Sparks Trust
Mathew Sparks Trust
Charles Sparks Trust
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership interests in the Company:
MEMBERSHIP
NAME INTEREST
---- ----------
Stephen M. Sparks 10%
Joseph Sparks Trust 30%
Matthew Sparks Trust 30%
Charles Sparks Trust 30%
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Members are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Member is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
Sparks Personnel Services, Inc.
Sparks Associates, Inc.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the outstanding membership interests of the
Company:
Stephen M. Sparks 10%
Joseph Sparks Trust 30%
Matthew Sparks Trust 30%
Charles Sparks Trust 30%
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
None.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has not made, and there is not now in effect, an election
with the IRS to be taxed as an S corporation within the meaning of Section 1361
of the Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
None.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None.
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
CCS Acquisition, L.L.C.
Customer Care Solutions, LLC
and
the Members Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Member Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.19
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
TMI ACQUISITION, INC.,
TASK MANAGEMENT, INC.
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), TMI ACQUISITION, INC., a Connecticut corporation and a wholly owned
subsidiary of WORK ("Newco"), TASK MANAGEMENT, INC., a Connecticut corporation
(the "Company"), and the persons listed on the signature pages of this Agreement
under the caption "Stockholders" (collectively, the "Stockholders," and each of
them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its
common stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Connecticut Business Corporation
Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means at any time (a) $10,714,960 plus (b) the
aggregate amount of Contingent Merger Consideration which the Stockholders
have been paid, or are entitled to be paid, at such time.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, $1.00 par value, of the
Company.
"Contingent Merger Consideration" means the consideration payable to
the Stockholders pursuant to Sections 2.08(a) and 2.08(b).
"Counsel for the Company and the Stockholders" means Warshaw Burstein
Cohen Schlesinger & Kuh, LLP.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
<PAGE>
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities (including short term bank loans) of the Company
with respect to indebtedness incurred by the Company to enable the Company
to make AAA Distributions after the Initial Calculation Date.
"Designated Plan" has the meaning specified in Section 11.18.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Earn-Out EBIT" means, for any period, earnings of the Company for
such period before interest expense and federal and state income taxes, all
determined in accordance with GAAP, adjusted to: (a) exclude investment
income and gains and losses from dispositions of capital assets, (b)
exclude all extraordinary items of gain or loss, as defined by GAAP, and
(c) eliminate any management fees or administrative costs (including audit
fees) charged by WORK to the Company, and any charges to the Company's
earnings with respect of allocations of indirect corporate overhead
expenses, including amortization of goodwill, but not eliminating expenses
directly attributable to the Company or its operations, such as charges for
insurance coverage, charges for employee benefit plans and charges
associated with obtaining the Company's accounting and financial
information in an accurate and timely manner; provided, however, that any
such insurance costs shall not be greater than the Company's insurance
costs at the time that WORK assumes responsibility for the insurance
coverage, and any employee benefit plan charges per employee will not
increase.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $58,425, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $317,889, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997 and 1996, and the related audited
statements of operations, stockholders' equity and cash flows for each of
the Company's two fiscal years in the two-year period ended December 31,
1997, together with the related audit report of KPMG Peat
<PAGE>
Marwick LLP, and (b) the Current Balance Sheet and the related unaudited
statements of operations, stockholders' equity and cash flows for the
three-month period ended on the Company Current Balance Sheet Date.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means TMI Acquisition, Inc., a Connecticut corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and John
Matijevic and Deborah Faruggio, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means either of John Matijevic or Deborah
Faruggio.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
<PAGE>
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of Connecticut.
Section 2.02. The Effective Time. The effective time of the Merger (the
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of organization of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of Connecticut (e) the Charter Documents of
the Company then in effect (after giving effect to the amendment of the
Company's certificate or articles of organization specified in clause (c) of
this sentence) will become and thereafter remain (until changed in accordance
with (i) applicable law, in the case of the certificate or articles of
incorporation or (ii) their terms, in the case of the bylaws) the Charter
Documents of the Surviving Corporation, (f) the initial board of directors of
the Surviving Corporation will be the Persons named
<PAGE>
in Schedule 2.03, who will hold the office of director of the Surviving
Corporation subject to the provisions of the applicable laws of the State of
Connecticut and the Charter Documents of the Surviving Corporation, and (g) the
officers of the Surviving Corporation immediately following the Merger will be
as set forth in Schedule 2.03, and each of the Persons so designated in Schedule
2.03 will serve in each office specified for that Person in Schedule 2.03,
subject to the provisions of the Charter Documents of the Surviving Corporation,
until his or her successor is duly elected to, and, if necessary, qualified for,
that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration") and the Contingent Merger Consideration, (ii) cease
to be outstanding and to exist, and (iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in
<PAGE>
the Merger Consideration shall be paid, at WORK's option, by (a) WORK's
company check or checks, (b) one or more wire transfers to accounts
designated by the respective Stockholders at least five Business Days
before the IPO Closing Date, or (c) certified or official bank check or
checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable (including receivables from
Stockholders) outstanding at such time which have a value equal to the net
adjustment that would be required under Section 481(a) of the Code if, as of the
IPO Closing Date, the Company changed its method of accounting for tax purposes
from the cash basis to the accrual
<PAGE>
basis. In the event that, notwithstanding such distribution, the Company
receives any payment with respect to any such receivables, the Company will
promptly pay the amount so received over to the Stockholders in accordance with
their respective Pro Rata Shares. The aggregate amount of accounts and notes
receivable to be distributed pursuant to this Section 2.07 is herein referred to
as the "Cash Basis Accounts Receivable Distribution Amount."
Section 2.08. Contingent Merger Consideration.
(a) On April 1, 1999, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, an amount equal to (i)
five times the amount by which the Earn-out EBIT for the twelve-month
period ended December 31, 1998 exceeds $1,262,508 minus (ii) the amount of
all AAA Distributions with respect to amounts which accumulated in the
Accumulated Adjustment Account for all taxable periods commencing on or
after January 1, 1998, and ending on or before the date of the Closing.
(b) On April 1, 2000, WORK will pay to the Stockholders, pro rata in
accordance with their respective Pro Rata Shares, an amount equal to four
times the amount by which the Earn-out EBIT for the twelve-month period
ended December 31, 1999 exceeds the Earn-out EBIT for the twelve-month
period ended December 31, 1998.
(c) The obligation of WORK to pay Contingent Merger Consideration to
any Stockholder will not be affected by the termination of such
Stockholder's employment by the Company as the result of such Stockholder's
death, disability or for any other reason including, without limitation,
termination for Cause (as such term is defined in the New Employment
Agreements).
(d) During the period from the date of Closing until December 31,
1999, the Stockholders will be given sufficient autonomy, working capital
and other reasonable support to manage the daily operations of the Company,
consistent with prior practices and reasonable business judgment. In
addition, the Company will not terminate the Stockholders' employment by
the Company during such period except for death, disability or Cause (as
such term is defined in the New Employment Agreement).
(e) The Stockholders may grant or assign to one or more employees of
the Company the right to receive a part of the Contingent Merger
Consideration upon its distribution.
(f) WORK agrees that, without the consent of the Stockholders, from
the Effective Time through December 31, 1999, WORK will not cause the
Company to:
(i) be liquidated or dissolved;
(ii) sell all or substantially all of its assets;
(iii) relocate the Company's principal office from its present
location or open any new offices or locations;
<PAGE>
(iv) acquire another business entity or the assets or operations
of another business entity or form any Subsidiary;
(v) increase or decrease the number of employees;
(vi) make any expenditures outside the normal course of the
Company's business; or
(vii) change, in any material respect, the business or
operations of the Company.
Except as specifically prohibited above in this Section 2.08(f), the
Company may at any time change or discontinue any of its present or future
assets or operations, or may close any of its present or future offices, or
undertake new operations, or may take any and all steps which the Company's
Board of Directors, in its unanimous reasonable business judgment, shall
deem advisable and in the best interest of the Company, and if any such
action adversely affects the Earn-Out EBIT, the Stockholders shall have no
claim or recourse by reason of such action.
(g) The calculation of Earn-out EBIT will be performed by the Company
based on the Company's financial statements as audited by WORK's
independent public accountants. If a dispute arises as to the amount of the
Contingent Merger Consideration, an independent party mutually acceptable
to WORK and the Stockholders will calculate the Contingent Merger
Consideration. If WORK and the Stockholders cannot agree on an independent
party, the calculation will be performed by KPMG Peat Marwick LLP, and WORK
and the Stockholders will be bound by the calculation performed by the
independent party or KPMG Peat Marwick LLP, as the case may be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
(a) The Closing. On or before the IPO Pricing Date, the Parties will
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Connecticut), (ii) verify the existence
and ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger Consideration pursuant to Section 2.05, and (iii)
satisfy the document delivery requirements to which the obligations of the
Parties to effect the Merger and the other transactions contemplated hereby
are conditioned by the provisions of this Article VII (all those actions
collectively being the "Closing"). The Closing will take place at the
offices of Porter & Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00
a.m., Houston time, or at such later time on the IPO Pricing Date as WORK
shall specify by written notice to either of Deborah Faruggio or John
Matijevic. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Company Common Stock
or the Merger Consideration pursuant to Section 2.05. Instead, on the IPO
Closing Date, the Certificate of Merger will become effective pursuant to
Section 2.02, and all transactions contemplated by this Agreement to be
closed or completed on or before the IPO Closing Date, including the
surrender of the Company Common Stock in exchange for the Merger
Consideration will be closed or completed, as the case may be. During the
period from the Closing to the IPO Closing Date, this Agreement may be
terminated by the parties only pursuant to Section 12.01 (b).
<PAGE>
(b) Incorporation by Reference. The text of Article VII of the
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within
<PAGE>
the Territory, (i) for the purpose of soliciting or selling any product or
service in competition with the Company, any Company Subsidiary or WORK
within the Territory and (ii) with the knowledge of the customer
relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that
Sections 10.01 and 10.02 impose a reasonable restraint on the Stockholders in
light of the activities and business of WORK on the date hereof, the current
business plans of WORK and the investment by each Stockholder in WORK as a
result of the Merger.
Section 10.04. Severability; Reformation. The covenants in this Article
X are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
<PAGE>
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
<PAGE>
Section 11.02. Restrictions on Transfers of WORK Common Stock.
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to (i) any of that Stockholder's
Related Persons who agree in writing to be bound by the provisions of
Section 11.01 and this Section 11.02 or (ii) Bernard Zimmerman & Co., Inc.,
financial advisor to the Stockholders of not more than 5% of the shares of
WORK Common Stock received by the Stockholders so long as Bernard Zimmerman
& Co., Inc. agrees in writing to be bound by the provisions of Section
11.01 and this Section 11.02. The certificates evidencing the WORK Common
Stock delivered to each Stockholder pursuant to Section 2.05 will bear a
legend substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
<PAGE>
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock
issued pursuant to Section 2.04 will bear the following legend in addition
to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
<PAGE>
Section 11.07. Expenses. Whether or not the transactions contemplated
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below (or at such other address
as such party may designate by written notice to all other Parties in accordance
herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
<PAGE>
(iii) if to the Company, addressed to it at:
Task Management, Inc.
99 Danbury Road
Ridgefield, CT 06877
Attn: President
Telecopy No.: (203) 438-5735
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Warshaw Burstein Cohen Schlesinger & Kuh, LLP
555 Fifth Avenue
New York, NY 10017
Attn: Michael D. Schwamm
Telecopy No.: (212) 972-9150
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
CONNECTICUT WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
<PAGE>
Section 11.14. Respecting the IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 33-698 and
33-817 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 33-698 and 33-
817 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
Date, each of the Stockholders shall repay (or distribute pursuant to Section
2.07 or as an AAA Distribution) the entire unpaid amount of all notes, advances
and other payment obligations owed by such Stockholder to the Company.
Section 11.17. Special Indemnity Matters. The Stockholders covenant and
agree that they, jointly and severally, will indemnify each WORK Indemnified
Party against, and hold each WORK Indemnified Party harmless from and in respect
of, all Damages that arise from, are based on or relate or otherwise are
attributable to (i) the litigation described in Section 4.12 of the Disclosure
Statement, or (ii) any Taxes payable with respect to any period prior to the IPO
Closing Date, or any breach of the representations and warranties contained in
Section 4.28 of the Reorganization Agreement to the same extent, in the case of
any matter referred to in either clause (i) or clause (ii) above, as if such
matters were WORK Indemnified Losses except that such indemnification shall be
without regard to the Threshold Amount limitation on indemnification contained
in the first sentence of Section 9.06(a).
Until December 31, 2001, WORK shall withhold from the Stockholders in
accordance with their respective Pro Rata Shares an aggregate of $1,050,000 in
cash from the Merger Consideration
<PAGE>
to insure performance by the Stockholders of their obligations to indemnify and
hold harmless the WORK Indemnified Parties with respect to the tax matters
referred to in clause (ii) of the preceding paragraph. In the event that,
notwithstanding such indemnity, any WORK Indemnified Party (including the
Company) sustains any Damages, the Company may transfer to such WORK Indemnified
Party (or may retain if such WORK Indemnified Party is the Company) the amount
of such Damages. Any amount retained hereunder which remains in the possession
of WORK at December 31, 2001, shall be transferred to the Stockholders in
accordance with their respective Pro Rata Shares; provided, however, that if any
claim for indemnification is then pending, no disbursement shall be made until
all such claims are resolved, and the Stockholders shall have fully performed
their obligations with respect to such matters as set forth in Article IX and
this Section 11.17. In lieu of the cash to be withheld by WORK pursuant to this
paragraph, at or prior to the date of Closing, the Stockholders may deliver to
WORK a stand-by letter of credit in substantially the form of Exhibit 11.17 or
in such other form as may be reasonably acceptable to WORK. Such stand-by letter
of credit shall be in the amount set forth above in this paragraph, shall be
issued by a bank reasonably acceptable to WORK and shall expire December 31,
2001, provided, however, that to the extent the period during which WORK would
be entitled to withhold cash as hereinabove provided is extended beyond December
31, 2001, the expiration date of such letter of credit shall likewise be
extended.
Prior to the date hereof, the Stockholders and the Company have disclosed
to WORK and to KPMG Peat Marwick LLP facts and information which render certain
of the representations contained in Section 4.28 inaccurate. WORK and Newco
hereby waive (i) the conditions contained in Section 7.04(a)(i) and Section
7.04(b)(i) to the extent, but only to the extent, such conditions relate solely
to the inaccuracy of such representations occasioned by the failure of the
Company and the Stockholders to disclose in Section 4.28 the facts and
information previously disclosed by the Company and the Stockholders to KPMG
Peat Marwick LLP and WORK and (ii) their right to recover damages from the
Company or the Stockholders (other than as contemplated by the indemnification
provisions of Article IX and this Section 11.17) on account of such inaccuracy.
The certificate to be given pursuant to Section 7.04(a)(ii)(A) may be given
subject to the provisions of this paragraph of this Section 11.17. For purposes
of indemnification under Article IX or under this Section 11.17, all of the
representations and warranties in Section 4.28 will be construed without taking
into account the information disclosed to KPMG Peat Marwick LLP and WORK so
that, if any Taxes are payable, or other Damages sustained, as a result of the
matters previously disclosed to KPMG Peat Marwick LLP or WORK, all such Taxes
and Other Damages will be subject to the indemnity provided in Article IX and
this Section 11.17.
Section 11.18. Termination of Money Purchase Pension Plan.
(a) The Company hereby covenants and agrees to amend and terminate The
Task Management Inc. Money Purchase Pension Plan (the "Designated Plan")
prior to the IPO Closing Date by adoption of board resolutions and an
agreement for amendment and termination of the Designated Plan. After the
effective date of termination of the Designated Plan, the Designated Plan
shall be "frozen" pending distribution of its assets to participants and
their beneficiaries. No persons who are not participants as of the
termination date shall be eligible to participate in the Designated Plan or
receive benefits thereunder, and no distributions shall be made by the
Designated Plan except normal distributions in the
<PAGE>
ordinary course of business to or on behalf of employees who have separated
service with the Company.
(b) Within 90 days after the IPO Closing Date, WORK agrees to file a
submission to formally request a determination letter from the IRS to the
effect that the Designated Plan is a qualified plan under Section 401(a) of
the Code upon its termination and that the Designated Plan is tax exempt
under Section 501(a) of the Code. As soon as administratively practicable
following receipt of a favorable IRS determination letter, the trustee of
the Designated Plan shall effectuate distributions of all remaining assets
from the Designated Plan and, thereafter, it shall be liquidated. After
liquidation of the Designated Plan, WORK agrees to file a final IRS form
5500 for the Plan with the IRS.
(c) WORK assumes no liability or obligation with respect to the
Designated Plan that results from, relates to, or arises out of, any act or
omission by any person or entity occurring on or prior to the IPO Closing
Date or by the Trustee at any time other than as a result of the breach by
WORK of its obligations contained in Section 11.18(b). The Stockholders
covenant and agree that they, jointly and severally, will indemnify each
WORK Indemnified Party against, and hold each WORK Indemnified Party
harmless from and in respect of, all Damages that arise from, are based on
or relate or otherwise are attributable to any such liability or
obligation, to the same extent as if such matters were WORK Indemnified
Losses except that such indemnification shall be without regard to the
Threshold Amount limitation on indemnification contained in the first
sentence of Section 9.06(a).
Section 11.19. Certain Returns. WORK hereby agrees that, after the
Effective Time, neither WORK nor the Company will amend any income tax Return of
the Company with respect to any period ended on or before the day prior to the
IPO Closing Date without the written consent of the Stockholders. The
Stockholders shall have the right and obligation, at their expense, to defend
and control any tax audit that may arise relating to any such period; provided,
however, that the Stockholders shall keep the Company fully advised of the
progress of any such audit and shall permit the Company, at its expense, to
participate therein.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
<PAGE>
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of Connecticut, but before the IPO has been consummated,
WORK (at WORK's expense) will take all actions that Counsel for the Company
and the Stockholders advises WORK are required by the applicable laws of
the State of Connecticut to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
--------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
TMI ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
TASK MANAGEMENT, INC.
By: /s/ Deborah Faruggio
-------------------------
Deborah Faruggio, President
STOCKHOLDERS:
/s/ Deborah Faruggio
-----------------------------
Deborah Faruggio
/s/ John Matijevic
-----------------------------
John Matijevic
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Deborah Faruggio
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Deborah Faruggio
Senior Vice President John Matijevic
Vice President and
Assistant Secretary Monte R. Stephens
Vice President and
Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
------ ---------
Deborah Faruggio 64 Hillspoint Road
Westport, CT 06880
John Matijevic 27 Acre Lane
Ridgefield, CT 06877
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $5,357,488, as adjusted pursuant to paragraph D below, and (ii)
446,456 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- --------
Deborah Faruggio 500 50%
John Matijevic 500 50%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
<PAGE>
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis exceeds
(y) the Estimated Cash Basis Adjustment Amount and (iv) increased by the amount,
if any, by which (x) the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis is less than (y) the Estimated Cash Basis Adjustment Amount.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Deborah Faruggio Common 500
John Matijevic Common 500
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- --------- --------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Common $1.00 1,000 1,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 5.08
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 5.08 are used
herein as therein defined.
B. Notwithstanding the provisions of Section 5.08 to the contrary, the
Company and the Stockholders acknowledge that WORK has engaged the services of
Bruce Grant as a broker with respect to the transaction contemplated hereby.
WORK is solely responsible for payment of any fees and expenses owed by WORK as
a result of its agreement with such broker.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
Between the Initial Calculation Date and the date of the Closing, the
Company may make AAA Distributions up to the amount equal to the sum
of the Accumulated Adjustment Account as of the Initial Calculation
Date plus any additions to the Accumulated Adjustment Account between
the Initial Calculation Date and the date of Closing. In addition, the
Company shall make distributions of cash basis accounts and notes
receivable as contemplated by Section 2.07.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
TMI Acquisition, Inc.
Task Management, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
Line of credit in the maximum principal amount at any time outstanding
of not to exceed $1 million payable to Fleet Bank.
<PAGE>
EXHIBIT 2.20
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
1296209 ONTARIO INC.,
TOSI PLACEMENT SERVICES INC.
AND
THE STOCKHOLDERS OF
1165091 ONTARIO LIMITED
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), 1296209 ONTARIO INC., an Ontario corporation and a wholly owned
subsidiary of WORK ("Newco"), TOSI PLACEMENT SERVICES INC., an Ontario
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) the Stockholders, who own 100% of the Capital Stock (as such
term is hereinafter defined) of 1165091 Ontario Limited, an Ontario
corporation which owns all the Capital Stock of the Company ("116
Limited"), will cause 116 Limited to amalgamate with the Company;
(ii) Newco will amalgamate with the Company on the terms and
subject to the conditions of this Agreement;
(iii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iv) WORK will effect a public offering of shares of its common
stock; and
(v) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01:
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Amalgamation" means the amalgamation of Newco and the Company
pursuant to the provisions of the Business Corporation Act on the terms
contained in this Agreement. References in this Agreement and in the
Uniform Provisions to the "Merger" shall be deemed to be references to the
Amalgamation.
"Amalco" has the meaning specified in Section 2.03(b).
"Business Corporation Act" means the Ontario Business Corporation Act
and the Regulations thereto.
"CDN$" means dollars payable in the national currency of Canada.
"Ceiling Amount" means at any time CDN$8,554,667.
"Certificate of Amalgamation" means the articles or certificate of the
amalgamated Company, and references in this Agreement or in the Uniform
Provisions to the "Certificate of Merger" shall be deemed to be references
to the Certificate of Amalgamation.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Competition Act" means the Competition Act, R.S.C. C-34, and any
references in this Agreement or the Uniform Provisions to the HSR Act shall
be deemed to be a reference to the Competition Act.
"Counsel for the Company and the Stockholders" means Lipman, Zener &
Waxman.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
<PAGE>
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 28, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 28, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes.
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"GAAP" means generally accepted accounting principles as set forth
from time to time in the handbook of the Canadian Institute of Chartered
Accountants and any references to GAAP in this Agreement or the Uniform
Provisions shall be deemed to be references to Canadian GAAP.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 27, 1997, December 28, 1996, and December 30, 1995,
and the related audited statements of income, shareholder's equity and
changes in financial position for each of the fifty-two week periods ended
on such dates, together with the related audit report of KPMG, and (b) the
Current Balance Sheet and the related unaudited statements of income,
shareholder's equity and changes in financial position for the thirteen-
week period ended on the Current Balance Sheet Date.
"Initial Calculation Date" means March 28, 1998.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger" means the Amalgamation, and references to the "Merger" in
this Agreement and in the Uniform Provisions shall be deemed to be
references to the Amalgamation.
<PAGE>
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means 1296209 Ontario, Inc., an Ontario corporation.
"New Employment Agreements" means the Employment Agreements entered
into as of the date of this Agreement, between the Company and Gilbert
Rosen and Harriet Rosen, respectively.
"Parties" means the parties to this Agreement.
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Gilbert Rosen.
"Restricted Period" has the meaning specified in Section 11.02.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means Amalco.
"Tax Act" means the Income Tax Act (Canada) as amended from time to
time.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current
<PAGE>
Liabilities) multiplied by 1.25 and (ii) the product of the Designated
Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary Statements or in Article I of the Uniform
Provisions (the text of which is by this reference incorporated in this
Agreement), as the case may be. For purposes hereof, the words "United States"
used in the definition of the term "GAAP" in Article I of the Uniform Provisions
shall be deemed to say "Canada."
ARTICLE II
THE AMALGAMATION AND RELATED MATTERS
Section 2.01. Certificate of Amalgamation. On the terms and subject to
the conditions of this Agreement and the Amalgamation Agreement, Newco and the
Company will cause a Certificate of Amalgamation to be duly executed and
delivered on or promptly after the date of the Closing to the Ministry of
Consumer and Commercial Relations.
Section 2.02. The Effective Time. The effective time of the Merger (the
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Amalgamation. At and as of the
Effective Time:
(a) Newco and TOSI hereby agreed to amalgamate and continue as one
corporation under the provisions of the Business Corporation Act upon the
terms and conditions hereinafter set out.
(b) The name of the corporation continuing as a result of the
Amalgamation ("Amalco") shall be TOSI Placement Services Inc.
(c) The registered office of Amalco is 10 King Street East, Suite
1500, Toronto, Ontario, M5C 1C3.
(d) The authorized capital of Amalco shall consist of an unlimited
number of common shares.
(e) After the Amalgamation, but subject to the rights of Dissenting
Shareholders, if any, under section 185 of the Business Corporation Act, no
share of Amalco shall be transferred without either:
(i) the consent of the directors of Amalco expressed by a
resolution passed at a meeting of the directors or by an instrument or
instruments in writing signed by all of the directors; or
<PAGE>
(ii) the consent of the holders of the issued and outstanding
common shares of Amalco entitled to vote expressed by a resolution
passed at a meeting of the shareholders of Amalco or by an instrument
or instruments in writing signed by all of the holders of all such
shares.
(f) There shall be no restrictions on the business which Amalco is
authorized to carry on.
(g) The by-laws of Amalco shall, so far as applicable, be the by-laws
of Newco until repealed, amended, altered or added to.
(h) Subject to the provisions of the Business Corporation Act, without
limiting the borrowing powers of Amalco as set forth in the Business
Corporation Act, the directors of Amalco may, from time to time, with or
without the authority of any by-law or the authorization of the
shareholders:
(i) borrow money upon the credit of Amalco, including by way of
overdraft;
(ii) issue, reissue, sell or pledge bonds, debentures, notes or
other evidences of indebtedness or guarantees of Amalco whether
secured or unsecured; and
(iii) charge, mortgage, hypothecate, pledge or otherwise create
a security interest in the undertaking or in all or any currently
owned or subsequently acquired real or personal, movable or immovable
property of Amalco, including book debts, rights, powers and
franchises, to secure any such bonds, debentures, notes or other
evidences of indebtedness or guarantees of any other present or future
indebtedness or liability of Amalco.
The foregoing powers or any of them may be exercised time to time by the
directors of Amalco and, subject to the Business Corporation Act, may be
delegated from time to time by them to any one or more persons whether or
not directors or officers of Amalco with or without the authority of any
by-law to that effect.
(i) The number of directors of Amalco shall be not less than one (1)
and note more than ten (10). The number of the first directors, until
changed in accordance with the Act, shall be three.
(j) The first directors of Amalco shall be as set forth on Schedule
2.03 and shall hold office until the first annual meeting of Amalco or
until their successors are elected or appointed.
(k) The amount to be added to the stated capital account maintained in
respect of the common shares of Amalco in connection with the issue of the
common shares of
<PAGE>
Amalco pursuant to Section 2.04(b) shall be equal to the stated capital of
the issued and outstanding shares of Newco.
Section 2.04. Effect of the Amalgamation on Capital Stock. As of the
Effective Time, as a result of the Amalgamation and without any action on the
part of any holder thereof:
(a) the shares of Capital Stock of the Company issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares the amount of cash and the number of shares of WORK
Common Stock set forth or determined as provided in Schedule 2.04 (the
"Merger Consideration"); (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired; and
(b) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock of Amalco, and the shares of Common Stock of Amalco issued on
such conversion will constitute all the issued and outstanding shares of
Capital Stock of Amalco.
Each holder of a certificate representing shares of Capital Stock of the Company
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Capital Stock of the Company,
will, on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Capital Stock of the Company has been surrendered
and replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Capital Stock of the Company
owned by the Stockholder, duly endorsed in blank by him, or accompanied by
stock powers duly executed by him in blank, and with all necessary transfer
tax and other revenue stamps, acquired at his expense, affixed
<PAGE>
and canceled. Each Stockholder shall cure any deficiencies in the
endorsement of the certificates or other documents of conveyance
respecting, or in the stock powers accompanying, the certificates
representing Capital Stock of the Company delivered by him.
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Capital Stock of the Company for which shares of WORK Common Stock have
been issued in the Merger until the unsurrendered certificates are
surrendered as provided herein, but (i) on such surrender, WORK will cause
to be paid, to the Person in whose name the certificates representing such
shares of WORK Common Stock shall then be issued, the amount of dividends
or other distributions previously paid with respect to such whole shares of
WORK Common Stock with a record date, or which have accrued, subsequent to
the Effective Time, but prior to surrender, and the amount of any cash
payable to such Person for and in lieu of fractional shares pursuant to
Section 2.06 and (ii) at the appropriate payment date or as soon as
practicable thereafter, WORK will cause to be paid to that Person the
amount of dividends or other distributions with a record date, or which
have been accrued, subsequent to the Effective Time, but which are not
payable until a date subsequent to surrender, which are payable with
respect to such number of whole shares of WORK Common Stock, subject in all
cases to any applicable escheat laws. No interest will be payable with
respect to the payment of such dividends or other distributions (or cash
for and in lieu of fractional shares) on surrender of outstanding
certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform
<PAGE>
Provisions (the text of which Article hereby is incorporated herein by this
reference) are true and correct, and the agreements set forth therein are hereby
agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
(a) The Closing. On or before the IPO Pricing Date, the Parties will
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Amalgamation meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Amalgamation with
the Ministry of Consumer and Commercial Relations, (ii) verify the
existence and ownership of the certificates evidencing the Capital Stock of
the Company to be exchanged for the Merger Consideration pursuant to
Section 2.05, and (iii) satisfy the document delivery requirements to which
the obligations of the Parties to effect the Merger and the other
transactions contemplated hereby are conditioned by the provisions of this
Article VII (all those actions collectively being the "Closing"). The
Closing will take place at the offices of Porter & Hedges, L.L.P., 700
Louisiana, Houston, Texas at 10:00 a.m., Houston time, or at such later
time on the IPO Pricing Date as WORK shall specify by written notice to
Gilbert Rosen. The actions taken at the Closing will not include the
completion of either the Merger or the delivery of the Capital Stock of the
Company or the Merger Consideration pursuant to Section 2.05. Instead, on
the IPO Closing Date, the Certificate of Amalgamation will become effective
pursuant to Section 2.02, and all transactions contemplated by this
Agreement to be closed or completed on or before the IPO Closing Date,
including the surrender of the Capital Stock of the Company in exchange for
<PAGE>
the Merger Consideration will be closed or completed, as the case may be.
During the period from the Closing to the IPO Closing Date, this Agreement
may be terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
<PAGE>
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
<PAGE>
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of competent
jurisdiction determines that the scope, time or territorial restrictions set
forth in Section 10.01 are unreasonable as applied to any Stockholder, the
Parties, including the Stockholder in question, acknowledge their mutual
intention and agreement that those restrictions be enforced to the fullest
extent the court deems reasonable, and thereby shall be reformed to that extent
as applied to that Stockholder and any other Stockholder similarly situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by
<PAGE>
law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(ii), each Stockholder shall, if possible, give prior written notice
thereof to WORK and provide WORK with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against
the disclosing party. In the event of a breach or threatened breach by any
Stockholder of the provisions of this Section 11.01 with respect to any
Confidential Information, WORK shall be entitled to an injunction
restraining such Stockholder from disclosing, in whole or in part, that
Confidential Information. Nothing herein shall be construed as prohibiting
WORK from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE
<PAGE>
OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED VOLUNTARY
SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES,
DURING THE PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE
IPO CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock
issued pursuant to Section 2.04 will bear the following legend in addition
to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
<PAGE>
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the Stockholders (and, in
the case of any trust, the successor trustees of the trust). Neither this
Agreement nor any other Transaction Document is intended, or shall be construed,
deemed or interpreted, to confer on any Person not a party hereto or thereto any
rights or remedies hereunder or thereunder, except as provided in Section
6.05(b) or 11.14, in Article IX, or as otherwise provided expressly herein or
therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
Amalco, will pay all Taxes due upon receipt of the consideration payable to the
Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below
<PAGE>
(or at such other address as such party may designate by written notice to all
other Parties in accordance herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
10 King Street East, Suite 1500
Toronto, Ontario M5C 1C3
CANADA
Attn: President
Telecopy No.: (416) 362-7414
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Lipman, Zener & Waxman
1220 Eglinton Ave. W.
Toronto, Ontario M6C 2E3
CANADA
Attn: Allan Lipman
Telecopy No.: (416) 789-9015
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE [PROVINCE
OF ONTARIO] WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS
<PAGE>
PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL BE
GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
Section 11.15. Consents.
<PAGE>
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 174, 175,
and 176 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 174, 175, and
176 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Litigation Matters. The Stockholders covenant and agree
that they, jointly and severally, will indemnify each WORK Indemnified Party
against, and hold each WORK Indemnified Party harmless from and in respect of,
all Damages that arise from, are based on or relate or otherwise are
attributable to the litigation described in Section 4.12 of the Disclosure
Statement, to the same extent as if such matters were WORK Indemnified Losses
except that such indemnification shall be without regard to the Threshold Amount
limitation on indemnification contained in the first sentence of Section
9.06(a).
Section 11.18. Guaranty of Certain Obligations. Gilbert Rosen and
Harriet Rosen hereby agree that they shall be liable for, and obligated to
perform, each representation, warranty, covenant, indemnity obligation and each
other agreement and undertaking hereunder of Deborah Gilbert and Rachel Rosen.
The obligations hereunder of Gilbert Rosen and Harriet Rosen shall in all
respects be joint and several, and any right or obligation which any Party would
be entitled to enforce against either such Person may be enforced directly
against the other.
Section 11.19. 116 Limited Amalgamation. The Stockholders own 100% of the
Capital Stock of 116 Limited. 116 Limited is a holding company which owns 100%
of the Capital Stock of the Company but has no other assets or operations and
has no liabilities. On or before the date of the Closing, the Stockholders
covenant and agree to cause 116 Limited to amalgamate with the Company with the
result that the Stockholders will own 100% of the Capital Stock of the Company
in accordance with the information contained in Schedules 2.04 and 3.02. All
the representations, warranties, covenants and agreements contained herein, in
the Uniform Provisions, the Schedules and the Disclosure Statement have been
made on the basis that the amalgamation by 116 Limited with the Company, has
been accomplished, and the Stockholders undertake and agree to cause that
amalgamation to occur as herein set forth.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
solely:
<PAGE>
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a majority of the
initial merger consideration (valuing shares of WORK Common Stock at
$12 per share) to be received by all the Founding Companies on the IPO
Closing Date notify WORK that they have elected not to extend such
date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
1296209 ONTARIO INC.
By: /s/ Monte R. Stephens
-------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
TOSI PLACEMENT SERVICES INC.
By: /s/ Gilbert Rosen
-------------------------
Gilbert Rosen, President
STOCKHOLDERS:
/s/ Gilbert Rosen
-----------------------------
Gilbert Rosen
/s/ Harriet Rosen
-----------------------------
Harriet Rosen
/s/ Deborah Gilbert
-----------------------------
Deborah Gilbert
/s/ Rachel Rosen
-----------------------------
Rachel Rosen
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of Amalco immediately after the Effective Time are as
follows:
Samuel Sacco
B. Garfield French
Gilbert Rosen
C. The officers of Amalco immediately following the Effective Time are as
follows:
President Gilbert Rosen
Vice President Harriet Rosen
Vice President Ramona Baillie
Controller Barbara Allen
Vice President and Assistant Secretary Monte R. Stephens
Vice President and Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
------ ---------
Gilbert Rosen 34 Montclair Avenue
Toronto, Ontario M4V 1W1
CANADA
Harriet Rosen 34 Montclair Avenue
Toronto, Ontario M4V 1W1
CANADA
Deborah Gilbert 5928 East Sandra Terrace
Scottsdale, AZ USA 85254
Rachel Rosen 135 West 16 Street, No. 28
New York, NY 10011
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to CDN$2,000,000, as adjusted pursuant to paragraph D below, and
(ii) 382,356 shares of WORK Common Stock, which shall be payable and issuable to
the Stockholders as follows:
(a) the 500 Company Class A Special Shares and 1,000 Class B Special
Shares held by Harriet Rosen immediately prior to the Effective Time will
be converted into the right to receive, without interest, on surrender of
the certificate evidencing those shares the amount of cash equal to CDN
$1,000,000, plus 50% of any positive adjustment, and minus 50% of any
negative adjustment, to the cash portion of the Merger Consideration to be
made pursuant to paragraph D below;
(b) the 500 Company Class A Special Shares and 1,000 Class B Special
Shares held by Gilbert Rosen immediately prior to the Effective Time will
be converted into the right to receive, without interest, on surrender of
the certificate evidencing those shares the amount of cash equal to CDN
$1,000,000, plus 50% of any positive adjustment, and minus 50% of any
negative adjustment, to the cash portion of the Merger Consideration to be
made pursuant to paragraph D below; and
<PAGE>
(c) the 50 shares of Capital Stock of the Company held by each of
Deborah Gilbert and Rachel Rosen immediately prior to the Effective Time
will be converted into the right to receive, without interest, on surrender
of the certificate evidencing those shares, 191,178 shares of WORK Common
Stock, being 50% each of the WORK Common Stock which constitutes a portion
of the Merger Consideration.
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date.
E. The Pro Rata Shares of the Stockholders are as follows:
Pro Rata
Name Share
---- --------
Gilbert Rosen 25%
Hamet Rosen 25%
Deborah Gilbert 25%
Rachel Rosen 25%
----
100%
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Deborah Gilbert Common 50
Rachel Rosen Common 50
Gilbert Rosen Class A Special Shares 500
Harriet Rosen Class A Special Shares 500
Gilbert Rosen Class B Special Shares 1,000
Harriet Rosen Class B Special Shares 1,000
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None.
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Authorized Outstanding Shares Outstanding
- ----- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Common Shares 1,000,000 100 None None
Class A Special Shares 1,000,000 1,000 None None
Class B Special Shares 1,000,000 2,000 None None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
The New Employment Agreements.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has not made, and there is not now in effect, an election
with the IRS to be taxed as an S corporation within the meaning of Section 1361
of the Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
None.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
1296209 Ontario Inc.
TOSI Placement Services Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
None.
<PAGE>
EXHIBIT 2.21
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF JULY 10, 1998
AMONG
WORK INTERNATIONAL CORPORATION,
WSI ACQUISITION, INC.,
WSI PERSONNEL SERVICES, INC.
AND
ITS STOCKHOLDERS
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
July 10, 1998, among WORK INTERNATIONAL CORPORATION, a Texas corporation
("WORK"), WSI ACQUISITION, INC., a Colorado corporation and a wholly-owned
subsidiary of WORK ("Newco"), WSi PERSONNEL SERVICES, INC., a Colorado
corporation (the "Company"), and the persons listed on the signature pages of
this Agreement under the caption "Stockholders" (collectively, the
"Stockholders," and each of them, individually, a "Stockholder").
PRELIMINARY STATEMENTS
The parties to this Agreement wish to effect a business combination
pursuant to which:
(i) Newco will merge into the Company (the "Merger") on the
terms and subject to the conditions of this Agreement;
(ii) WORK, via mergers involving other WORK subsidiaries, will
acquire the stock of all or some of the entities other than the
Company identified in the accompanying Addendum I (each an "Other
Founding Company" and, collectively with the Company, the "Founding
Companies") under agreements similar to this Agreement entered into
among the Other Founding Companies, their stockholders, WORK and other
subsidiaries of WORK (collectively, the "Other Agreements");
(iii) WORK will effect a public offering of shares of its common
stock; and
(iv) the Stockholders will receive the Merger Consideration (as
such term is hereinafter defined).
The respective boards of directors of WORK, Newco and the Company have
approved and adopted this Agreement to effect a transaction involving a transfer
of the nature described in Section 351 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
representations and undertakings contained in this Agreement, the parties to
this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below in this Section 1.01:
<PAGE>
"AAA Distributions" means distributions before the IPO Closing Date of
amounts which shall have accumulated in the Accumulated Adjustment Account
for all taxable periods ending prior to the date of the IPO Closing Date.
"Accumulated Adjustment Account" means the accumulated adjustment
account maintained by the Company under Section 1368(e)(1) of the Code.
"Adjustment Date" means (a) if the Closing occurs on or before the
twentieth day of a month, the last day of the second month preceding the
date of the Closing and (b) if the Closing occurs after the twentieth day,
and on or before the last day, of a month, the last day of the month
preceding the date of the Closing.
"Agreement" means this Agreement, including the Disclosure Statement
relating to this Agreement and all attached Schedules, Annexes and
Exhibits, as each of them may be amended, modified or supplemented from
time to time under their provisions or the provisions of this Agreement.
"Business Corporation Act" means the Colorado Business Corporation
Act.
"Cash Basis Accounts Receivable Distribution Amount" has the meaning
specified in Section 2.07.
"Ceiling Amount" means $5,142,216.
"Closing" has the meaning specified in Section 7.01(a).
"Company Common Stock" means the common stock, no par value, of the
Company.
"Counsel for the Company and the Stockholders" means Cohen, Brame &
Smith.
"Counsel for WORK and Newco" means Porter & Hedges, L.L.P.
"Current Balance Sheet" means the unaudited balance sheet of the
Company at March 31, 1998, which is included in the Initial Financial
Statements.
"Current Balance Sheet Date" means March 31, 1998.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Designated Current Liabilities" means current liabilities of the
Company with respect to current accrued and current deferred income taxes
and current liabilities of the Company with respect to indebtedness
incurred by the Company to enable the Company to make AAA Distributions
after the Initial Calculation Date.
<PAGE>
"Disclosure Statement" means the written statement executed by the
Company and each of the Stockholders and delivered to WORK prior to the
execution and delivery of this Agreement, in which either (a) exceptions
are taken to certain of the representations and warranties made by the
Company and the Stockholders in this Agreement or (b) it is confirmed that
no exception is taken to that representation and warranty.
"Effective Time" has the meaning specified in Section 2.02.
"Estimated AAA Amount" means $158,748, the estimated amount, as of the
Initial Calculation Date, of the Accumulated Adjustment Account.
"Estimated Cash Basis Adjustment Amount" means $841,126, the estimated
amount, as of the Initial Calculation Date, of the net adjustment that
would be required under Section 481(a) of the Code if the Company changed
its method of accounting for tax purposes from the cash basis to the
accrual basis.
"Initial Calculation Date" means March 31, 1998.
"Initial Financial Statements" means (a) the audited balance sheets of
the Company at December 31, 1997, and 1996 and the related audited
statements of operations, stockholders' equity and cash flows for each of
the Company's three fiscal years in the three-year period ended December
31, 1997, together with the related audit report of KPMG Peat Marwick LLP,
and (b) the Current Balance Sheet and the related unaudited statements of
operations, stockholders' equity and cash flows for the three-month period
ended on the Current Balance Sheet Date.
"Limitation Period" has the meaning specified in Section 11.18.
"Long Term Debt" means indebtedness for borrowed money of the Company
with a maturity of one year or more and includes indebtedness incurred
under Capital Leases.
"Majority Stockholders" means any Stockholder or combination of
Stockholders who at the date of this Agreement own shares of Company Common
Stock representing more than two-thirds of the total number of shares of
Company Common Stock outstanding at the date of this Agreement.
"Merger Consideration" has the meaning specified in Section 2.04.
"Newco" means WSI Acquisition, Inc., a Colorado corporation.
"New Employment Agreement"-- Intentionally Omitted.
"Parties" means the parties to this Agreement.
<PAGE>
"Pro Rata Share" means for each Stockholder the fraction expressed as
a percentage and set forth in Schedule 2.04, (a) the numerator of which is
the number of shares of outstanding Company Common Stock owned by that
Stockholder, as set forth in Schedule 2.04, and (b) the denominator of
which is the total number of shares of outstanding Company Common Stock
owned by all Stockholders, as set forth in Schedule 2.04.
"Responsible Officer" means Shari J. Donnelly.
"Restricted Period" has the meaning specified in Section 11.02.
"Shareholders Agreement" means the Shareholders Agreement dated May 8,
1995, among the Company and the Stockholders.
"Staffing Industry" means the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional
employer organization and training and business solutions.
"Surviving Corporation" means the Company, which is to be designated
in the Certificate of Merger as the surviving corporation of the Merger.
"Territory" has the meaning specified in Section 10.01.
"Threshold Amount" means 2% of the Ceiling Amount.
"Transfer Taxes" has the meaning specified in Section 11.07.
"Uniform Provisions" means the Uniform Provisions for the Acquisition
of Founding Companies attached as Annex 1 to this Agreement.
"WORK" means Work International Corporation, a Texas corporation.
"WORK Acquisition Candidate" means any Entity engaged in the Staffing
Industry and which shall have been called on by any of the Company, WORK or
a Subsidiary of the Company or WORK in connection with the possible
acquisition by any of them of that Entity or with respect to which any of
them has made an acquisition analysis.
"Working Capital" means (a) current assets of the Company minus (b)
the sum of (i) the product of current liabilities of the Company (other
than Designated Current Liabilities) multiplied by 1.25 and (ii) the
product of the Designated Current Liabilities multiplied by 1.00.
Section 1.02. Definitions in Uniform Provisions. Capitalized terms used
in this Agreement but not defined in this Section 1.01 have the meanings
assigned to them in the Preliminary
<PAGE>
Statements or in Article I of the Uniform Provisions (the text of which is by
this reference incorporated in this Agreement), as the case may be.
ARTICLE II
THE MERGER AND RELATED MATTERS
Section 2.01. Certificate of Merger. On the terms and subject to the
conditions of this Agreement, the Company will cause a Certificate of Merger to
be duly executed and delivered on or promptly after the date of the Closing to
the Secretary of State of the State of Colorado.
Section 2.02. The Effective Time. The effective time of the Merger (the
"Effective Time") will be the time on the IPO Closing Date which the Certificate
of Merger specifies or, if the Certificate of Merger does not specify another
time, 8:00 a.m., central time, on the IPO Closing Date.
Section 2.03. Certain Effects of the Merger. At and as of the Effective
Time, (a) Newco will be merged with and into the Company in accordance with the
provisions of the Business Corporation Act, (b) Newco will cease to exist as a
separate legal entity, (c) the certificate or articles of incorporation of the
Company will be amended to change its authorized capital stock to 1,000 shares,
par value $1.00 per share, of Common Stock, (d) the Company will be the
Surviving Corporation and, as such, will, all with the effect provided by the
Business Corporation Act, (i) possess all the properties and rights, and be
subject to all the restrictions and duties, of the Company and Newco and (ii) be
governed by the laws of the State of Colorado, (e) the Charter Documents of the
Company then in effect (after giving effect to the amendment of the Company's
certificate or articles of incorporation specified in clause (c) of this
sentence) will become and thereafter remain (until changed in accordance with
(i) applicable law, in the case of the certificate or articles of incorporation
or (ii) their terms, in the case of the bylaws) the Charter Documents of the
Surviving Corporation, (f) the initial board of directors of the Surviving
Corporation will be the Persons named in Schedule 2.03, who will hold the office
of director of the Surviving Corporation subject to the provisions of the
applicable laws of the State of Colorado and the Charter Documents of the
Surviving Corporation, and (g) the officers of the Surviving Corporation
immediately following the Merger will be as set forth in Schedule 2.03, and each
of the Persons so designated in Schedule 2.03 will serve in each office
specified for that Person in Schedule 2.03, subject to the provisions of the
Charter Documents of the Surviving Corporation, until his or her successor is
duly elected to, and, if necessary, qualified for, that office.
Section 2.04. Effect of the Merger on Capital Stock. As of the Effective
Time, as a result of the Merger and without any action on the part of any holder
thereof:
(a) the shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time will (i) be converted into the
right to receive, without interest, on surrender of the certificate
evidencing those shares, the amount of cash and the number of shares of
WORK Common Stock set forth or determined as provided in Schedule 2.04 (the
<PAGE>
"Merger Consideration"), (ii) cease to be outstanding and to exist, and
(iii) be canceled and retired;
(b) each share of Company Common Stock held in the treasury of the
Company or by any Company Subsidiary will (i) cease to be outstanding and
to exist and (ii) be canceled and retired; and
(c) each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time will be converted into one share of
Common Stock, par value $1.00 per share, of the Surviving Corporation, and
the shares of Common Stock of the Surviving Corporation issued on such
conversion will constitute all the issued and outstanding shares of Capital
Stock of the Surviving Corporation.
Each holder of a certificate representing shares of Company Common Stock
immediately prior to the Effective Time will, as of the Effective Time and
thereafter, cease to have any rights respecting those shares other than the
right to receive, without interest, the Merger Consideration and the additional
cash, if any, owing with respect to those shares as provided in Section 2.06.
Section 2.05. Delivery, Exchange and Payment.
(a) At or after the Effective Time: (i) each Stockholder, as the
holder of certificates representing shares of Company Common Stock, will,
on surrender of his certificates to WORK (or any agent which may be
appointed by WORK for purposes of this Section 2.05), receive, and WORK
will pay and issue to each Stockholder, in each case subject to the
provisions of Section 2.06, the Merger Consideration; and (ii) until any
certificate representing Company Common Stock has been surrendered and
replaced pursuant to this Section 2.05, that certificate will, for all
purposes, be deemed to evidence ownership of the number of whole shares of
WORK Common Stock, and the right to receive cash, included in the Merger
Consideration payable in respect of that certificate pursuant to Section
2.04. All shares of WORK Common Stock issuable in the Merger will be
deemed for all purposes to have been issued by WORK at the Effective Time.
All cash included in the Merger Consideration shall be paid, at WORK's
option, by (a) WORK's company check or checks, (b) one or more wire
transfers to accounts designated by the respective Stockholders at least
five Business Days before the IPO Closing Date, or (c) certified or
official bank check or checks.
(b) Each Stockholder will deliver to WORK (or any agent that may be
appointed by WORK for purposes of this Section 2.05), on or before the IPO
Closing Date, the certificates representing Company Common Stock owned by
the Stockholder, duly endorsed in blank by him, or accompanied by stock
powers duly executed by him in blank, and with all necessary transfer tax
and other revenue stamps, acquired at his expense, affixed and canceled.
Each Stockholder shall cure any deficiencies in the endorsement of the
certificates or other documents of conveyance respecting, or in the stock
powers accompanying, the certificates representing Company Common Stock
delivered by him.
<PAGE>
(c) No dividends (or interest) or other distributions declared or
earned after the Effective Time with respect to WORK Common Stock and
payable to the holders of record thereof after the Effective Time will be
paid to the holder of any unsurrendered certificates representing shares of
Company Common Stock for which shares of WORK Common Stock have been issued
in the Merger until the unsurrendered certificates are surrendered as
provided herein, but (i) on such surrender, WORK will cause to be paid, to
the Person in whose name the certificates representing such shares of WORK
Common Stock shall then be issued, the amount of dividends or other
distributions previously paid with respect to such whole shares of WORK
Common Stock with a record date, or which have accrued, subsequent to the
Effective Time, but prior to surrender, and the amount of any cash payable
to such Person for and in lieu of fractional shares pursuant to Section
2.06 and (ii) at the appropriate payment date or as soon as practicable
thereafter, WORK will cause to be paid to that Person the amount of
dividends or other distributions with a record date, or which have been
accrued, subsequent to the Effective Time, but which are not payable until
a date subsequent to surrender, which are payable with respect to such
number of whole shares of WORK Common Stock, subject in all cases to any
applicable escheat laws. No interest will be payable with respect to the
payment of such dividends or other distributions (or cash for and in lieu
of fractional shares) on surrender of outstanding certificates.
Section 2.06. Fractional Shares. Notwithstanding any other provision of
this Article II, no fractional shares of WORK Common Stock will be issued, and
any Stockholder otherwise entitled to receive a fractional share of WORK Common
Stock but for this Section 2.06 will instead be entitled to receive a cash
payment for and in lieu thereof in the amount (rounded to the nearest whole
dollar) equal to that Person's fractional interest in a share of WORK Common
Stock multiplied by $12.
Section 2.07. Distribution of Cash Basis Accounts Receivable. On or
before the day preceding the IPO Closing Date, the Company shall distribute in
kind to the Stockholders, in accordance with their respective Pro Rata Shares,
cash basis accounts and notes receivable outstanding at such time which have a
value equal to the net adjustment that would be required under Section 481(a) of
the Code if, as of the IPO Closing Date, the Company changed its method of
accounting for tax purposes from the cash basis to the accrual basis. In the
event that, notwithstanding such distribution, the Company receives any payment
with respect to any such receivables, the Company will promptly pay the amount
so received over to the Stockholders in accordance with their respective Pro
Rata Shares. The aggregate amount of accounts and notes receivable to be
distributed pursuant to this Section 2.07 is herein referred to as the "Cash
Basis Accounts Receivable Distribution Amount."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder, severally as to himself or herself only, represents and
warrants to, and agrees with, WORK that the representations and warranties
contained in Article III of the Uniform
<PAGE>
Provisions (the text of which Article hereby is incorporated herein by this
reference) are true and correct, and the agreements set forth therein are hereby
agreed to.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
The Company and each Stockholder jointly and severally represent and
warrant to, and agree with, WORK that the representations and warranties
contained in Article IV of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
WORK and Newco jointly and severally represent and warrant to, and agree
with, the Company and each Stockholder that the representations and warranties
contained in Article V of the Uniform Provisions (the text of which Article
hereby is incorporated herein by this reference) are true and correct, and the
agreements set forth therein are hereby agreed to.
ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Until the Effective Time, subject to the waiver provisions of Section
11.05, each Party will comply with each covenant for which provision is made in
Article VI of the Uniform Provisions (the text of which Article VI is hereby
incorporated herein by this reference) to be performed or observed by that
Party.
ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.01. The Closing and Conditions to Closing.
(a) The Closing. On or before the IPO Pricing Date, the Parties will
take all actions necessary to (i) effect the Merger on the IPO Closing Date
(including, as permitted by the Business Corporation Act, (A) the execution
of a Certificate of Merger meeting the requirements of the Business
Corporation Act and providing that the Merger will become effective on the
IPO Closing Date and (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Colorado, (ii) verify the existence and
ownership of the certificates evidencing the Company Common Stock to be
exchanged for the Merger
<PAGE>
Consideration pursuant to Section 2.05, and (iii) satisfy the document
delivery requirements to which the obligations of the Parties to effect the
Merger and the other transactions contemplated hereby are conditioned by
the provisions of this Article VII (all those actions collectively being
the "Closing"). The Closing will take place at the offices of Porter &
Hedges, L.L.P., 700 Louisiana, Houston, Texas at 10:00 a.m., Houston time,
or at such later time on the IPO Pricing Date as WORK shall specify by
written notice to Shari J. Donnelly. The actions taken at the Closing will
not include the completion of either the Merger or the delivery of the
Company Common Stock or the Merger Consideration pursuant to Section 2.05.
Instead, on the IPO Closing Date, the Certificate of Merger will become
effective pursuant to Section 2.02, and all transactions contemplated by
this Agreement to be closed or completed on or before the IPO Closing Date,
including the surrender of the Company Common Stock in exchange for the
Merger Consideration will be closed or completed, as the case may be.
During the period from the Closing to the IPO Closing Date, this Agreement
may be terminated by the parties only pursuant to Section 12.01 (b).
(b) Incorporation by Reference. The text of Article VII of the
Uniform Provisions hereby is incorporated herein by this reference.
ARTICLE VII
COVENANTS FOLLOWING THE EFFECTIVE TIME
From and after the Effective Time, subject to the waiver provisions of
Section 11.05, each Party (other than the Company) will comply with each
covenant for which provision is made in Article VIII of the Uniform Provisions
(the text of which Article hereby is incorporated herein by this reference) to
be performed or observed by that Party.
ARTICLE IX
INDEMNIFICATION
The text of Article IX of the Uniform Provisions hereby is incorporated
herein by this reference.
ARTICLE X
LIMITATIONS ON COMPETITION
Section 10.01. Prohibited Activities. Each Stockholder severally agrees
that he will not during the period beginning on the date hereof and ending on
the second anniversary of the IPO Closing Date, directly or indirectly, for any
reason, for his own account or on behalf of or together with any other Person:
<PAGE>
(a) engage as an officer, director or in any other managerial capacity
or as an owner, co-owner or other investor of or in, whether as an
employee, independent contractor, consultant or advisor, in any business in
the Staffing Industry in competition with the Company, any Company
Subsidiary or WORK or any Subsidiary of WORK (WORK and its Subsidiaries
collectively being called "WORK" for purposes of this Article X) within any
territory surrounding any office or facility (each a "facility") in which
any of the Company or the Company Subsidiaries was engaged in business on
the date hereof or immediately prior to the Effective Time (for purposes of
this Article X, the territory surrounding a facility shall be the area
located within 50 miles of the facility, all of such locations being herein
collectively called the "Territory");
(b) call on any natural Person who is at that time employed by the
Company, any Company Subsidiary or WORK with the purpose or intent of
attracting that person from the employ of the Company, any Company
Subsidiary or WORK, provided that a Stockholder may call on and hire any of
his Immediate Family Members;
(c) call on any Person that at that time is, or at any time within one
year prior to that time was, a customer of the Company, any Company
Subsidiary or WORK within the Territory, (i) for the purpose of soliciting
or selling any product or service in competition with the Company, any
Company Subsidiary or WORK within the Territory and (ii) with the knowledge
of the customer relationship; or
(d) call on any WORK Acquisition Candidate, with the knowledge of that
Person's status as a WORK Acquisition Candidate, for the purpose of
acquiring that Person or arranging the acquisition of that Person by any
Person other than WORK.
Notwithstanding the foregoing, any Stockholder may own and hold as a passive
investment up to 1% of a class of the outstanding Capital Stock of a competing
Entity if that class of Capital Stock is publicly traded.
Section 10.02. Damages. Because of the difficulty of measuring economic
losses to WORK as a result of any breach by a Stockholder of his covenants in
Section 10.01, and because of the immediate and irreparable damage that could be
caused to WORK for which it would have no other adequate remedy, each
Stockholder agrees that WORK may enforce the provisions of Section 10.01 by
injunctions and restraining orders against the Stockholder if he breaches any of
those provisions.
Section 10.03. Reasonable Restraint. The Parties each agree that Sections
10.01 and 10.02 impose a reasonable restraint on the Stockholders in light of
the activities and business of WORK on the date hereof, the current business
plans of WORK and the investment by each Stockholder in WORK as a result of the
Merger.
Section 10.04. Severability; Reformation. The covenants in this Article X
are severable and separate. The unenforceability of any specific covenant in
this Article X is not intended by any Party to, and shall not, affect the
provisions of any other covenant in this Article X. If any court of
<PAGE>
competent jurisdiction determines that the scope, time or territorial
restrictions set forth in Section 10.01 are unreasonable as applied to any
Stockholder, the Parties, including the Stockholder in question, acknowledge
their mutual intention and agreement that those restrictions be enforced to the
fullest extent the court deems reasonable, and thereby shall be reformed to that
extent as applied to that Stockholder and any other Stockholder similarly
situated.
Section 10.05. Independent Covenant. All the covenants in this Article X
are intended by each Party to, and shall, be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of any Stockholder against WORK, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
by WORK of any covenant in this Article X. It is specifically agreed that the
period specified in Section 10.01 shall be computed in the case of each
Stockholder by excluding from that computation any time during which that
Stockholder is in violation of any provision of Section 10.01. The covenants
contained in this Article X shall not be affected by any breach of any other
provision of this Agreement by any Party.
Section 10.06. Materiality. The Company and each Stockholder, severally
and not jointly with any other Person, hereby agree that this Article X is a
material and substantial part of the transactions contemplated by this
Agreement.
ARTICLE XI
GENERAL PROVISIONS
Section 11.01. Treatment of Confidential Information.
(a) Each of the Company and the Stockholders, severally and not
jointly with any other Person, acknowledges that it has or may have had in
the past, currently has and in the future may have access to Confidential
Information of the Company and the Company Subsidiaries, the Other Founding
Companies and their Subsidiaries and WORK and its Subsidiaries. Each of
the Company and the Stockholders, severally and not jointly with any other
Person, agrees that it will keep confidential all such Confidential
Information furnished to it and, except with the specific prior written
consent of WORK will not disclose such Confidential Information to any
Person except (a) Representatives of WORK, (b) its own Representatives,
provided that these Representatives (other than counsel) agree to the
confidentiality provisions of this Section 11.01; and provided, further,
that Confidential Information shall not include (i) such information which
becomes known to the public generally through no fault of any Stockholder,
(ii) information required to be disclosed by law or the order of any
governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), each Stockholder
shall, if possible, give prior written notice thereof to WORK and provide
WORK with the opportunity to contest such disclosure, or (iii) information
with respect to which the disclosing party reasonably believes disclosure
is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by any
Stockholder of the
<PAGE>
provisions of this Section 11.01 with respect to any Confidential
Information, WORK shall be entitled to an injunction restraining such
Stockholder from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting WORK from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
(b) Because of the difficulty of measuring economic losses as a result
of the breach of the foregoing covenants in Section 11.01(a), and because
of the immediate and irreparable damage that would be caused to WORK for
which it would have no other adequate remedy, each of the Company and the
Stockholders agrees that WORK may enforce the provisions of Section
11.01(a) by injunctions and restraining orders against each of them who
breaches any of those provisions.
(c) The obligations of WORK set forth in Section 6.01(d) are
incorporated in this Section 11.01 by this reference.
(d) The obligations of the parties under this Section 11.01 shall
survive the termination of this Agreement.
Section 11.02. Restrictions on Transfers of WORK Common Stock.
(a) During the one-year period ending on the first anniversary of the
IPO Closing Date (the "Restricted Period"), no Stockholder voluntarily
will: (i) sell, assign, exchange, transfer, encumber, pledge, distribute,
appoint or otherwise dispose of (A) any shares of WORK Common Stock
received by any Stockholder in the Merger or (B) any interest in (including
any option to buy or sell) any such shares of WORK Common Stock, in whole
or in part, and WORK will have no obligation to, and shall not, treat any
such attempted transfer as effective for any purpose; or (ii) engage in any
transaction, whether or not with respect to any shares of WORK Common Stock
or any interest therein, the intent or effect of which is to reduce the
risk of owning the shares of WORK Common Stock acquired pursuant to Section
2.04 (including, for example engaging in put, call, short-sale, straddle or
similar market transactions); provided, however, that this Section 11.02
shall not restrict any transfer of WORK Common Stock acquired by a
Stockholder pursuant to Section 2.04 to any of that Stockholder's Related
Persons who agree in writing to be bound by the provisions of Section 11.01
and this Section 11.02. The certificates evidencing the WORK Common Stock
delivered to each Stockholder pursuant to Section 2.05 will bear a legend
substantially in the form set forth below:
EXCEPT PURSUANT TO THE TERMS OF THE AGREEMENT AND PLAN OF
REORGANIZATION AMONG THE ISSUER, THE HOLDER OF THIS CERTIFICATE AND
THE OTHER PARTIES THERETO, THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE VOLUNTARILY SOLD, ASSIGNED, EXCHANGED, TRANSFERRED,
ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF,
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED
VOLUNTARY SALE,
<PAGE>
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION OF ANY OF THOSE SHARES, DURING THE
PERIOD ENDING ON [DATE THAT IS THE FIRST ANNIVERSARY OF THE IPO
CLOSING DATE] (THE "RESTRICTED PERIOD"). ON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE EXPIRATION OF THE RESTRICTED PERIOD.
(b) Each Stockholder, severally and not jointly with any other Person,
(i) acknowledges that the shares of WORK Common Stock to be delivered to
him pursuant to Section 2.04 (A) have not been and, except pursuant to the
Registration Rights Agreement, if applicable, will not be registered under
the Securities Act and therefore may not be resold by him without
compliance with the Securities Act and (B) will, as a result of their
restrictions on transferability which are imposed by this Agreement during
the Restricted Period, have a value materially less at the Effective Time
than the value of then freely tradeable shares of WORK Common Stock, and
(ii) covenants that none of the shares of WORK Common Stock issued to him
pursuant to Section 2.04 will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full
compliance with all the applicable provisions of the Securities Act and the
rules and regulations of the SEC and applicable state securities laws and
regulations. All certificates evidencing shares of WORK Common Stock
issued pursuant to Section 2.04 will bear the following legend in addition
to the legend prescribed by Section 11.02(a):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED
IF THE HOLDER HEREOF COMPLIES WITH THAT ACT AND OTHER APPLICABLE
SECURITIES LAWS.
In addition, certificates evidencing shares of WORK Common Stock issued to
each Stockholder pursuant to Section 2.04 will bear any legend required by
(i) the securities or blue sky laws of the state in which that Stockholder
resides or (ii) the Underwriter in connection with any agreement of that
Stockholder with the Underwriter to the effect set forth in Section
11.02(a).
Section 11.03. Brokers and Agents. The Stockholders jointly and severally
represent and warrant to WORK that the Company is not directly or indirectly
obligated to pay any broker or similar agent in connection with the transactions
contemplated hereby and agree, without regard to the Threshold Amount
limitations set forth in Article IX, to indemnify WORK against all Damage Claims
arising out of claims for any and all fees and commissions of brokers or similar
agents employed or promised payment by the Company.
Section 11.04. Assignment; No Third Party Beneficiaries. This Agreement
and the rights of its Parties may not be assigned (except by operation of law)
and shall be binding on and inure to the benefit of the Parties, the successors
of WORK, and the heirs and legal representatives of the
<PAGE>
Stockholders (and, in the case of any trust, the successor trustees of the
trust). Neither this Agreement nor any other Transaction Document is intended,
or shall be construed, deemed or interpreted, to confer on any Person not a
party hereto or thereto any rights or remedies hereunder or thereunder, except
as provided in Section 6.05(b) or 11.14, in Article IX, or as otherwise provided
expressly herein or therein.
Section 11.05. Entire Agreement; Amendment; Waivers. This Agreement and
the documents delivered pursuant to it constitute the entire agreement and
understanding among the Parties and supersede all prior agreements and
understandings, both written and oral, relating to the subject matter of this
Agreement. This Agreement may be amended, modified or supplemented, and any
right hereunder may be waived, if, but only if, the amendment, modification,
supplement or waiver is in writing and signed by the Majority Stockholders, the
Company and WORK. The waiver of any of the terms and conditions of this
Agreement shall not be construed or interpreted as, or deemed to be, a waiver of
any of its other term or conditions.
Section 11.06. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same instrument.
Section 11.07. Expenses. Whether or not the transactions contemplated
hereby are consummated, (a) WORK will pay the fees, expenses and disbursements
of WORK and Newco and their Representatives which are incurred in connection
with the subject matter of this Agreement and any amendments to this Agreement
including all costs and expenses incurred in the performance of and compliance
with all conditions to be performed by WORK and Newco under this Agreement,
including the costs of preparing the Registration Statement, (b) WORK will pay
up to a maximum of $25,000 in the aggregate of the fees, expenses and
disbursements of Bracewell and Patterson, L.L.P., counsel to the Founding
Companies, incurred in connection with the subject matter of this Agreement, and
(c) the Stockholders will pay from personal funds, and not from funds of the
Company or any Company Subsidiary, (i) all sales, use, transfer and other
similar taxes and fees (collectively, "Transfer Taxes") incurred in connection
with the transactions contemplated hereby, and (ii) the fees, expenses and
disbursements of Counsel for the Company and the Stockholders incurred in
connection with the subject matter of this Agreement and the Registration
Statement on or before the IPO Closing Date. The Stockholders will file all
necessary documentation and Returns with respect to all Transfer Taxes. In
addition, each Stockholder acknowledges that he, and not the Company, WORK or
the Surviving Corporation, will pay all Taxes due upon receipt of the
consideration payable to the Stockholder pursuant to Article II.
Section 11.08. Notices. All notices required or permitted hereunder shall
be in writing, and shall be deemed to be delivered and received (a) if
personally delivered or if delivered by telex, telegram, facsimile or courier
service, when actually received by the Party to whom notice is sent or (b) if
delivered by mail (whether actually received or not), at the close of business
on the third Business Day next following the day when placed in the mail,
postage prepaid, certified or registered, addressed to the appropriate Party or
Parties, at the address of such Party set forth below
<PAGE>
(or at such other address as such party may designate by written notice to all
other Parties in accordance herewith):
(i) if to WORK or Newco, addressed to it at:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy No.: (713) 228-4935
(ii) if to the Stockholders, addressed to them at their
respective addresses set forth in Schedule 2.04; and
(iii) if to the Company, addressed to it at:
WSi Personnel Services, Inc.
3400 E. Bayaud Avenue, Suite 290
Denver, CO 80209
Attn: President
Telecopy No.: (303) 322-0233
with copies (which shall not constitute notice for purposes of this
Agreement) to:
Cohen, Brame & Smith
1700 Lincoln, Suite 1800
Denver, CO 80203
Attn: Jeff Davine
Telecopy No.: (303) 894-0475
SECTION 11.09. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE, WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE CONFLICTS OF LAW PROVISIONS THEREOF: PROVIDED, HOWEVER, THAT: (A) ARTICLE X
AND THE RIGHTS AND OBLIGATIONS THEREUNDER OF THE PARTIES WILL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE
<PAGE>
OF COLORADO WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF AND (B)
MATTERS PERTAINING SOLELY TO THE LEGALITY AND EFFECTUATION OF THE MERGER SHALL
BE GOVERNED BY THE BUSINESS CORPORATION ACT.
Section 11.10. Exercise of Rights and Remedies. Except as otherwise
provided herein, no delay or omission in the exercise of any right, power or
remedy accruing to any Party as a result of any breach or default hereunder by
any other Party shall impair any such right, power or remedy, nor shall it be
construed, deemed or interpreted 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 construed, deemed or
interpreted as a waiver of any other breach or default hereunder occurring
before or after that waiver.
Section 11.11. Time. Time is of the essence in the performance of this
Agreement in all respects.
Section 11.12. Reformation and Severability. If any provision of this
Agreement is invalid, illegal or unenforceable, that provision 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 as
expressed herein, and if such a modification is not possible, that 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.
Section 11.13. Remedies Cumulative. Except as otherwise provided in
Section 9.06, no right, remedy or election given by any term of this Agreement
shall be deemed exclusive, but each shall be cumulative with all other rights,
remedies and elections available at law or in equity.
Section 11.14. Respecting the IPO. Each of the Company and the
Stockholders acknowledges and agrees that: (a) no firm commitment, binding
agreement or promise or other assurance of any kind, whether express or implied,
oral or written, exists at the date hereof that the Registration Statement will
become effective or that the IPO will occur at a particular price or within a
particular range of prices or occur at all; (b) neither WORK or any of its
Representatives nor any prospective underwriters in the IPO will have any
liability to the Company, the Stockholders or any of their respective Affiliates
or associates for any failure of (i) the Registration Statement to become
effective (provided, however, that WORK will use its reasonable best efforts to
cause the Registration Statement to become effective prior to September 30,
1998) or (ii) the IPO to occur at a particular price or within a particular
range of prices or to occur at all; and (c) the decision of Stockholders to
enter into this Agreement, or to vote in favor of or consent to the Merger, has
been or will be made independent of, and without reliance on, any statements,
opinions or other communications of, or due diligence investigations that have
been or will be made or performed by, any prospective underwriter relative to
WORK or the IPO. The Underwriter shall have no obligation to any of the Company
and the Stockholders with respect to any disclosure contained in the
Registration Statement except for written information concerning the Underwriter
furnished to the Company by or on behalf of the Underwriter specifically for
inclusion in the Registration Statement.
<PAGE>
Section 11.15. Consents.
(a) The Stockholders, as the owners and holders of all the Capital
Stock of the Company, hereby consent to and approve the Merger and the plan
of merger contemplated by this Agreement pursuant to Sections 7-107-104
and 7-111-103 of the Business Corporation Act.
(b) WORK hereby consents to and approves the Merger and the plan of
merger contemplated by this Agreement pursuant to Sections 7-107-104 and
7-111-103 of the Business Corporation Act.
Section 11.16. Repayment of Obligations. On or before the IPO Closing
Date, each of the Stockholders shall repay the entire unpaid amount of all
notes, advances and other payment obligations owed by such Stockholder to the
Company.
Section 11.17. Litigation Matters. The Stockholders covenant and agree
that they, jointly and severally, will indemnify each WORK Indemnified Party
against, and hold each WORK Indemnified Party harmless from and in respect of,
all Damages that arise from, are based on or relate or otherwise are
attributable to the litigation described in Section 4.12 of the Disclosure
Statement, to the same extent as if such matters were WORK Indemnified Losses
except that such indemnification shall be without regard to the Threshold Amount
limitation on indemnification contained in the first sentence of Section
9.06(a).
Section 11.18. Suspension and Termination of Shareholders Agreement. The
Company Common Stock is subject to the Shareholders Agreements which, inter
alia, provides options to purchase and to sell shares of the Company Common
Stock upon the occurrence of certain events specified therein. The Company and
the Stockholders agree that:
(a) at the Effective Time, the Shareholders Agreements shall be
terminated without any further action on the part of any party thereto;
(b) the execution and delivery of this Agreement by the Company and
the Stockholders shall not be affected by, or constitute a breach of or
default under, the Shareholders Agreement;
(c) if at the date hereof there has began to run, or if after the date
hereof and prior to the Effective Time there shall begin to run, any period
of time (herein called a "Limitation Period") within which any party bound
by or entitled to the benefits of, or whose shares of the Company Common
Stock are subject to, the Shareholders Agreement must, under the terms of
the Shareholders Agreement, give any notice, offer such shares for sale,
accept any offer to purchase any such shares, purchase shares, make any
election or take any other action in order to preserve or maintain any
right or benefit of such party, then such Limitation Period shall cease to
run and shall be tolled as of the date of this Agreement, or, in the case
of any Limitation Period beginning after the date hereof, shall not begin
to run,
<PAGE>
unless and until such Limitation Period shall be resumed and reinstated as
provided in the following Section 11.18 (e);
(d) so long as any Limitation Period is tolled pursuant to Section
11.18(c), no party to the Shareholders Agreement may exercise any right or
option such party would otherwise have but for the provisions of this
Section 11.18; and
(e) if this Agreement is terminated pursuant to Article XII, then as
of the close of business on the date this Agreement is so terminated, the
provisions of this Section 11.18 shall terminate and any Limitation Period
shall resume and be reinstated or shall commence, as the case may be, ten
days following such termination, and promptly thereafter, the Company shall
notify each of the parties to the Shareholders Agreement that the
provisions of this Section 11.18 have terminated.
By their execution and delivery of this Agreement, the Company and the
Stockholders (who hold 100% of the shares of Capital Stock subject to the
Shareholders Agreements) hereby amend the Shareholders Agreements as set forth
in this Section 11.18.
Section 11.19. Built-In Gains Tax. Notwithstanding the provisions of
Section 4.28(e), the distribution of accounts and notes receivable pursuant to
Section 2.07 may cause the recognition by the Company of up to $194,57 in Taxes
on built-in gains pursuant to Section 1374 of the Code. In the event such Taxes
exceed $194,527, the amount of such excess will be deducted from the cash
portion of the Merger Consideration.
ARTICLE XII
TERMINATION
Section 12.01. Termination of This Agreement.
(a) This Agreement may be terminated at any time prior to the Closing
solely:
(i) by the mutual written consent of WORK and the Company;
(ii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if the transactions contemplated
by this Agreement to take place at the Closing shall not have been
consummated by September 30, 1998, unless the failure of such
transactions to be consummated results from the willful failure of the
Party (or in the case of the Stockholders and the Company, any of
them) seeking to terminate this Agreement to perform or adhere to any
agreement required hereby to be performed or adhered to by that Party
prior to or at the Closing or thereafter on the IPO Closing Date;
provided, however, that the date September 30, 1998, set forth above
shall be extended to October 31, 1998, unless, on or before September
15, 1998, Founding Companies which are to receive a
<PAGE>
majority of the initial merger consideration (valuing shares of WORK
Common Stock at $12 per share) to be received by all the Founding
Companies on the IPO Closing Date notify WORK that they have elected
not to extend such date beyond September 30, 1998;
(iii) by the Majority Stockholders or the Company, on the one
hand, or by WORK, on the other hand, if a material breach or default
shall be made by the other Party (or in the case of the Stockholders
and the Company, any of them) in the observance or in the due and
timely performance of any of the covenants, agreements or conditions
contained herein and such breach or default continues for fifteen days
after written notice from the Majority Stockholders or the Company, on
the one hand, or from WORK on the other hand; or
(iv) by WORK if it is entitled to do so as provided in Section
6.06.
(b) This Agreement may be terminated after the Closing solely:
(i) by WORK or the Company if the Underwriting Agreement is
terminated pursuant to its terms after the Closing and prior to the
consummation of the IPO; or
(ii) automatically and without action on the part of any party
hereto if the IPO is not consummated within 15 Business Days after the
date of the Closing.
(c) If this Agreement is terminated pursuant to this Section 12.01,
the Merger will be deemed for all purposes to have been abandoned and of no
force or effect. If this Agreement is terminated pursuant to this Section
12.01 after the Certificate of Merger has been filed with the Secretary of
State of the State of New Hampshire, but before the IPO has been
consummated, WORK (at WORK's expense) will take all actions that Counsel
for the Company and the Stockholders advises WORK are required by the
applicable laws of the State of New Hampshire to rescind the Merger.
Section 12.02. Liabilities in Event of Termination. If this Agreement is
terminated pursuant to Section 12.01, there shall be no liability or obligation
on the part of any Party except (a) as provided in Section 11.07, or (b) to the
extent that such liability is based on the breach by that Party of any of its or
his representations, warranties or covenants set forth in of this Agreement.
[SIGNATURE PAGE FOLLOWS.]
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Monte R. Stephens
-------------------------
Monte R. Stephens, Vice President and
Chief Acquisitions Officer
WSI ACQUISITION, INC.
By: /s/ Monte R. Stephens
-------------------------
Monte R. Stephens, President and
Chief Acquisitions Officer
WSi PERSONNEL SERVICES, INC.
By: /s/ Shari J. Donnelly
-------------------------
Shari J. Donnelly, President
STOCKHOLDERS:
/s/ Shari Donnelly
-----------------------------
Shari Donnelly
/s/ John G. McWilliams
-----------------------------
John G. McWilliams
<PAGE>
ADDENDUM 1
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Addendum which are defined in the
captioned Agreement to which this is an Addendum are used herein as therein
defined.
B. The Founding Companies are:
1. Absolutely Professional Staffing, Inc.
2. Botal Associates, Inc.
3. AIM Staffing, Inc.
4. Access Staffing, Inc.
5. Benetemps, Inc.
6. The Burnett Companies Consolidated, Inc.
7. Contract Health Professionals Inc.
8. Core Personnel, Inc.
9. Core Personnel of Arlington, Inc.
10. CoreLink Staffing Services, Inc.
11. Law Pros Legal Placement Services, Inc.
12. Law Resources, Inc.
13. Professional Consulting Network, Inc.
14. Smith Hanley Associates, Inc.
15. Smith Hanley Consulting Group, Inc.
16. Sparks Personnel Services, Inc.
17. Sparks Associates, Inc.
18. Customer Care Solutions, LLC
19. Task Management, Inc.
20. TOSI Placement Services Inc.
21. WSi Personnel Services, Inc.
<PAGE>
SCHEDULE 2.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.03 are used
herein as therein defined.
B. The directors of the Surviving Corporation immediately after the
Effective Time are as follows:
Samuel Sacco
B. Garfield French
Alicia Wellington
C. The officers of the Surviving Corporation immediately following the
Effective Time are as follows:
President Alicia Wellington
Vice President Meredith L. Bane
Vice President and
Assistant Secretary Monte R. Stephens
Vice President and
Assistant Secretary Mark F. Walz
<PAGE>
SCHEDULE 2.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 2.04 are used
herein as therein defined.
B. The name and address of each Stockholder are as follows:
Name Address
------ ---------
Shari J. Donnelly 2701 East Vassar Avenue
Denver, CO 80210
John G. McWilliams 1027 Dogwood Drive
Golden, CO 80401
C. The aggregate Merger Consideration shall be comprised of (i) an amount
of cash equal to $2,571,108, as adjusted pursuant to paragraph D below, and (ii)
214,259 shares of WORK Common Stock, which shall be payable and issuable to the
Stockholders pro rata in accordance with their respective Pro Rata Shares. The
Pro Rata Shares of the Stockholders are as follows:
Shares of Pre-Merger Pro Rata
Name Company Common Stock Share
---- -------------------- --------
Shari J. Donnelly 900 50%
John G. McWilliams 900 50%
1,800 100%
D. The cash portion of the Merger Consideration will be subject to
adjustment based upon changes in Working Capital and Long Term Debt between the
Initial Calculation Date and the Adjustment Date as follows: (i) the cash
portion of the Merger Consideration will be increased for any positive change,
and decreased for any negative change, in the Company's Working Capital between
the Initial Calculation Date and the Adjustment Date and (ii) the cash portion
of the Merger Consideration will be increased for any decrease, and decreased
for any increase, in the amount of Long Term Debt, between the Initial
Calculation Date and the Adjustment Date. In addition, the cash portion of the
Merger Consideration will be (i) reduced by the amount, if any, by which (x) the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date exceeds (y) the Estimated AAA Amount, (ii) increased by the
amount, if any, by which (x) the estimated undistributed balance in the
Accumulated Adjustment Account as of the Adjustment Date is less than (y) the
Estimated AAA Amount, (iii) reduced by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if,
<PAGE>
as of the Adjustment Date, the Company changed its method of accounting for tax
purposes from the cash basis to the accrual basis exceeds (y) the Estimated Cash
Basis Adjustment Amount, (iv) increased by the amount, if any, by which (x) the
estimated amount of the net adjustment that would be required under Section
481(a) of the Code if, as of the Adjustment Date, the Company changed its method
of accounting for tax purposes from the cash basis to the accrual basis is less
than (y) the Estimated Cash Basis Adjustment Amount and (v) reduced by the
amount of any bonuses paid after the Adjustment Date pursuant to paragraph 2 of
Schedule 6.03.
E. The Stockholders will promptly prepare a final Return for the Company
for the period ending on the day prior to the IPO Closing Date and will use
their best efforts to complete such Return within 45 days after the Closing. In
the event such final Return and the accounting records of the Company reflect
that, between the Adjustment Date and the IPO Closing Date, the Company shall
have made distributions pursuant to Schedule 6.03 in excess of the sum of the
estimated undistributed balance in the Accumulated Adjustment Account as of the
Adjustment Date and the estimated amount of the net adjustment that would be
required under Section 481(a) of the Code if, as of the Adjustment Date, the
Company changed its method of accounting for tax purposes from the cash basis to
the accrual basis, the Stockholders shall repay to the Company the amount of
such excess in accordance with their respective Pro Rata Shares, and the
Stockholders' obligation to repay such amount (and their indemnification with
respect thereto) shall not be subject to the Threshold Amount limitation on
indemnification contained in the first sentence of Section 9.06(a).
<PAGE>
SCHEDULE 3.01
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.01 are used
herein as therein defined.
B. Each Stockholder is an "accredited investor" as defined in Securities
Act Rule 501(a).
<PAGE>
SCHEDULE 3.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.02 are used
herein as therein defined.
B. The following table sets forth the ownership of the Company's Capital
Stock:
NUMBER OF
NAME CLASS SHARES OWNED
---- ----- ------------
Shari J. Donnelly Common 900
John G. McWilliams Common 900
C. No exception is taken to the representations and warranties made in
Section 3.02 of the captioned Agreement.
<PAGE>
SCHEDULE 3.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 3.07 are used
herein as therein defined.
B. The Stockholders are, alone or with one or more other Persons, the
controlling Affiliate of the following Entity, business or trade (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of the
Company) that is (a) engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three year period ending on the date of
the captioned Agreement, engaged in any transaction with the Company or any
Company Subsidiary except for (i) transactions in the ordinary course of
business of the Company or that Company Subsidiary and (ii) any single
transaction (or series of related transactions) involving property or services
having a value, or the payment of money, of less than $10,000:
None
<PAGE>
SCHEDULE 4.07
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.07 are used
herein as therein defined.
B. Set forth below are the authorized Capital Stock of the Company, the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding:
<TABLE>
<CAPTION>
No. of Shares No. of Derivative
No. of Shares Issued and No. of Treasury Shares
Class Par Value Authorized Outstanding Shares Outstanding
- --------------- --------- ------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Common Stock None 100,000 1,800 200 None
</TABLE>
<PAGE>
SCHEDULE 4.11
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.11 are used
herein as therein defined.
B. The following Related Party Agreements will be permitted to continue
in effect past the date of the Closing in accordance with their terms, subject
to the following provisions of this Schedule:
None.
<PAGE>
SCHEDULE 4.28
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 4.28 are used
herein as therein defined.
B. The Company has made, and there is now in effect, an election with the
IRS to be taxed as an S corporation within the meaning of Section 1361 of the
Code.
<PAGE>
SCHEDULE 6.02
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.02 are used
herein as therein defined.
B. No exception is taken to the covenants contained in Section 6.02.
<PAGE>
SCHEDULE 6.03
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.03 are used
herein as therein defined.
B. The Company and the Company Subsidiaries may make the following
Restricted Payments prior to the Effective Time:
1. Between the Initial Calculation Date and the date of the
Closing, the Company may make AAA Distributions up to the amount equal
to the sum of the Accumulated Adjustment Account as of the Initial
Calculation Date plus any additions to the Accumulated Adjustment
Account between the Initial Calculation Date and the date of Closing.
In addition, the Company shall make distributions of cash basis
accounts and notes receivable as contemplated by Section 2.07.
2. For clarification only, the Company may pay to its officers
year-end compensation from its then available cash accounts consistent
with prior practices so long as such bonuses do not create or increase
a loss (computed using the cash method of accounting) for the period
commencing January 1, 1998, and ending on the day prior to the IPO
Closing Date. Any such bonuses paid or to be paid after the
Adjustment Date shall reduce the cash portion of the Merger
Consideration as set forth in Schedule 2.04.
<PAGE>
SCHEDULE 6.10
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 6.10 are used
herein as therein defined.
B. The Company will make all arrangements and take all such actions as
are necessary and satisfactory to WORK to dispose, prior to the Effective Time,
of the following assets in the manner indicated below:
None (other than cash basis accounts and notes receivable to be
distributed pursuant to Section 2.07).
<PAGE>
SCHEDULE 8.04
to the
Agreement and Plan of Reorganization
dated as of July 10, 1998
among
Work International Corporation
WSI Acquisition, Inc.
WSi Personnel Services, Inc.
and
the Stockholders Named Therein
A. Words and terms used in this Schedule which are defined in the
captioned Agreement to which this Schedule is attached as Schedule 8.04 are used
herein as therein defined.
B. At or within 120 days following the Effective Time, WORK will cause
the following Stockholder Guarantees to be terminated:
Guaranty of line of credit in favor of Guaranty Bank & Trust Company
in the maximum amount of not to exceed $200,000.
<PAGE>
EXHIBIT 2.22
ANNEX 1
WORK INTERNATIONAL CORPORATION
UNIFORM PROVISIONS
FOR THE
ACQUISITION
OF
FOUNDING COMPANIES
Words and terms used in these Uniform Provisions which are defined in
the Agreement and Plan of Reorganization among Work International Corporation,
[Newco], [Name of Acquisition Candidate] and its Stockholders (called therein
and herein "this Agreement") to which these Uniform Provisions are attached as
Annex I, are used herein as defined therein.
<PAGE>
THE UNIFORM PROVISIONS
ARTICLE I
ADDITIONAL DEFINITIONS
Section 1.02. Additional Defined Terms. As used in this Agreement, the
following terms have the meanings assigned to them below:
"Acquisition Proposal" has the meaning specified in Section 6.04.
"Affiliate" means, as to any specified Person, any other Person who,
directly or indirectly through one or more intermediaries or otherwise,
controls, is controlled by or is under common control with the specified
Person. As used in this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person (whether through ownership of
Capital Stock of the Person, by contract, or otherwise).
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in New York, New York or Houston, Texas are authorized
or obligated to close.
"Capital Lease" means a lease of (or other agreement conveying the
right to use) real or personal property that is required to be classified
and accounted for as a capital lease under GAAP as in effect on the date of
this Agreement.
"Capital Stock" means, with respect to: (a) any corporation, any
share, or any depositary receipt or other certificate representing any
share, of an equity ownership interest in the corporation; and (b) any
other Entity, any share, membership or other percentage interest, unit of
participation or other equivalent (however designated) of an equity
interest in the Entity.
"Cash Compensation" means, as applied to any employee, nonemployee
director or officer of, or any natural person who performs consulting or
other independent contractor services for, the Company or any Company
Subsidiary, the wages, salaries, bonuses (discretionary and formula), fees
and other cash compensation paid or payable by the Company and each Company
Subsidiary to that employee or other natural person.
"CERCLA" means the Comprehensive Environmental Response, Conservation,
and Liability Act of 1980.
"Certificate of Merger" means the articles or certificate of merger
respecting the Merger which contains the information required by the laws
of the Company's Organization State to effect the Merger.
1
<PAGE>
"Charter Documents" means, with respect to any Entity at any time, in
each case as amended, modified and supplemented at that time, the articles
or certificate of formation, incorporation or organization (or the
equivalent organizational documents) of the Entity, (b) the bylaws or
limited liability company agreement or regulations (or the equivalent
governing documents) of the Entity, and (c) each document setting forth the
designation, amount and relative rights, limitations and preferences of any
class or series of the Entity's Capital Stock or of any rights in respect
of the Entity's Capital Stock.
"Claim Notice" has the meaning specified in Section 9.04.
"Closing Memorandum" means the form of closing memorandum to be
prepared by WORK for the Closing, in which there shall be included the
forms of certificates of officers, the opinions of counsel and certain
other documents to be delivered at the Closing as provided in Article VII.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Commitment" has the meaning specified in Section 4.22.
"Company ERISA Benefit Plan" has the meaning specified in Section
4.26(d).
"Company ERISA Group" means any "group of organizations" within the
meaning of Section 414(b), (c), (m) or (o) of the Code, or any "controlled
group" as defined in Section 4001 (a)(14) of ERISA, of which the Company is
a member.
"Company ERISA Pension Plan" has the meaning specified in Section
4.26(d).
"Company Subsidiary" means at any time any Entity that is a Subsidiary
of the Company at that time.
"Confidential Information" means, with respect to any Person, all
trade secrets and other confidential, nonpublic and/or proprietary
information of that Person, including information derived from designs,
reports, investigations, research, testing, development, work-in-progress,
codes, marketing and sales programs, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, confidential filings with any Governmental Authority and any
other confidential, nonpublic concepts, methods of doing business, ideas,
materials or information prepared or performed for, by or on behalf of that
Person.
"Current Date" means any day during the 20-day period ending on the
date of the Closing.
"Damage" to any specified Person means any cost, damage (including any
consequential, exemplary, punitive or treble damage) or expense (including
reasonable and necessary or appropriate fees and actual expenses of and
disbursements by attorneys,
2
<PAGE>
consultants, experts or other Representatives and Litigation costs) to, any
fine of or penalty on, or any liability (including loss of earnings or
profits) of, any other nature of that Person.
"Damage Claim" means, as asserted (a) against any specified Person,
any claim, demand or Litigation made or pending against that Person for
Damages to any other Person, or (b) by the specified Person, any claim or
demand of the specified Person against any other Person for Damages to the
specified Person.
"Derivative Securities" of a specified Entity means any Capital Stock
or debt security or other Indebtedness of the specified Entity or any other
Person which is convertible into or exchangeable for, or any option,
warrant or other right to acquire, (a) any unissued Capital Stock of the
specified Entity or (b) any Capital Stock of the specified Entity which has
been issued and is being held by the Entity directly or indirectly as
treasury Capital Stock.
"Election Period" has the meaning specified in Section 9.04(b).
"Employee Policies and Procedures" means at any time all employee
manuals and all material policies, procedures and work-related rules that
apply at that time to any employee, nonemployee director or officer of, or
any other natural person performing consulting or other independent
contractor services for, the Company or any Company Subsidiary.
"Employment Agreement" means at any time (a) any agreement to which
the Company or any Company Subsidiary is a party which then relates to the
direct or indirect employment or engagement, or arises from the past
employment or engagement, of any natural person by the Company or any
Company Subsidiary, whether as an employee, a nonemployee officer or
director, a consultant or other independent contractor, a sales
representative or a distributor of any kind, including any employee leasing
or service agreement and any noncompetition agreement, and (b) any
agreement between the Company or any Company Subsidiary and any Person
which arises from the sale of a business by that Person to the Company or
any Company Subsidiary and limits that Person's competition with the
Company or any Company Subsidiary.
"Entity" means any sole proprietorship, corporation, partnership of
any kind having a separate legal status, limited liability company,
business trust, unincorporated organization or association, mutual company,
joint stock company or joint venture.
"Environmental Laws" means any and all Governmental Requirements
relating to the environment or worker health or safety, including ambient
air, surface water, land surface or subsurface strata, or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or wastes (including
Solid Wastes, Hazardous Wastes or Hazardous Substances) or noxious noise or
odor into the environment or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, recycling,
removal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes (including
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petroleum, petroleum distillates, asbestos or asbestos-containing material,
polychlorinated biphenyls, chlorofluorocarbons or
hydrochlorofluorocarbons).
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means, with respect to any specified Person at any
time, any other Person, including an Affiliate of the specified Person,
that is, or at any time within six years of that time was, a member of any
ERISA Group of which the specified Person is or was a member at the same
time.
"ERISA Affiliate Pension Plan" has the meaning specified in Section
4.26(d).
"ERISA Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA and includes any ERISA Pension Benefit
Plan.
"ERISA Pension Benefit Plan" means any "employee pension benefit
plan," as defined in Section 3(2) of ERISA, including any plan that is
covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code (excluding any Multiemployer Plan).
"Exchange Act" means the Securities Exchange Act of 1934.
"Final Prospectus" means the prospectus included in the Registration
Statement at the time it becomes effective, except that if the prospectus
first furnished to the Underwriter after the Registration Statement becomes
effective for use in connection with the IPO differs from the prospectus
included in the Registration Statement at the time it becomes effective
(whether or not the prospectus so furnished to the Underwriter is required
to be filed with the SEC pursuant to Securities Act Rule 424(b)), the
prospectus so furnished will be the "Final Prospectus."
"Financial Statements" means the Initial Financial Statements and the
other financial statements of the Company and the Company Subsidiaries, if
any, delivered to WORK prior to the Effective Time pursuant to Section
6.08.
"GAAP" means generally accepted accounting principles and practices in
the United States as in effect from time to time which (i) have been
concurred with by KPMG Peat Marwick, LLP and (ii) have been or are applied
on a basis consistent (except for changes concurred with by KPMG Peat
Marwick, LLP) with the most recent audited Financial Statements delivered
to WORK prior to the Effective Time.
"General Release" means the general release of the Company and the
Company Subsidiaries to be executed at or before, and delivered to WORK and
the Company at, the Closing, effective as of the Effective Time, by each
Stockholder, which general release shall be in the form of the attached
Exhibit 1.02-B, with its blanks appropriately completed.
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"Governmental Approval" means at any time any authorization, consent,
approval, permit, franchise, certificate, license, implementing order or
exemption of, or registration or filing with, any Governmental Authority.
"Governmental Authority" means any national, state, county, municipal
or other government, domestic or foreign, or any agency, board, bureau,
commission, court, department or other instrumentality of any such
government.
"Governmental Requirement" means at any time (a) any law, statute,
code, ordinance, order, rule, regulation, judgment, decree, injunction,
order, writ, edict, award, authorization or other requirement of any
Governmental Authority in effect at that time or (b) any obligation
included in any certificate, certification, franchise, permit or license
issued by any Governmental Authority or resulting from binding arbitration,
including any requirement under common law, at that time.
"Guaranty" means, for any specified Person, without duplication, any
liability, contingent or otherwise, of that Person guaranteeing or
otherwise representing liability for any obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any liability of the specified Person, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase or payment of)
the other Person's obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment of that obligation, (b)
to purchase property, securities or services for the purpose of assuring
the owner of that obligation of its payment, or (c) to maintain working
capital, equity capital or other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay that
obligation; provided, however, that the term "Guaranty" excludes
endorsements for collection or deposit in the ordinary course of the
endorser's business.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Immediate Family Member" of a Stockholder means at any time: (a) if
the Stockholder is a natural person, any child or grandchild (by blood or
legal adoption) or spouse of the Stockholder at that time, or any child of
the Stockholder's spouse; and (b) if the Stockholder is an Entity which has
as an ultimate beneficial owner one or more natural persons, or a natural
person and his spouse, any child or grandchild (by blood or legal adoption)
or spouse at that time (if not then an ultimate beneficial owner of the
Entity), or any child of the spouse, of the ultimate beneficial owner or
owners of the Entity.
"Indebtedness" of any Person means, without duplication, (a) any
liability of that Person (i) for borrowed money or arising out of any
extension of credit to or for the account of that Person (including
reimbursement or payment obligations with respect to surety bonds, letters
of credit, banker's acceptances and similar instruments), for the deferred
purchase price of property or services or arising under conditional sale or
other title retention agreements, other than trade payables arising in the
ordinary course of business, (ii) evidenced by notes, bonds, debentures or
similar instruments, (iii) in respect of Capital
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Leases, or (iv) in respect of Interest Rate Protection Agreements, (b) any
liability secured by any Lien upon any property or assets of that Person
(or upon any revenues, income or profits of that Person therefrom), whether
or not that Person has assumed the liability or otherwise become liable for
its payment, or (c) any liability of others of the type described in the
preceding clause (a) or (b) in respect of which that Person has incurred,
assumed or acquired a liability by means of a Guaranty.
"Indemnified Party" has the meaning specified in Section 9.04(b).
"Indemnifying Party" has the meaning specified in Section 9.04(b).
"Indemnity Notice" has the meaning specified in Section 9.04(e).
"Information" means written information, including (a) data,
certificates, reports and statements (excluding Financial Statements) and
(b) summaries of unwritten agreements, arrangements, contracts, plans,
policies, programs or practices or of unwritten amendments or modifications
of, supplements to or waivers under any of the foregoing documents.
"Interest Rate Protection Agreement" means, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement
providing for the transfer or mitigation of interest rate risks of that
Person, either generally or under specific contingencies, between that
Person and any other Person.
"IPO" means the first time after January 1, 1998 a registration
statement filed under the Securities Act and respecting a primary offering
by WORK of shares of WORK Common Stock is declared effective under the
Securities Act and the shares registered by that registration statement are
issued and sold by WORK.
"IPO Closing Date" means the date on which WORK first receives payment
for the shares of WORK Common Stock it sells to the Underwriter in the IPO.
"IPO Price" means the price per share of WORK Common Stock which is
set forth as the "price to public" on the cover page of the Final
Prospectus.
"IPO Pricing Date" means the date, if any, on which WORK and the
Underwriter agree in the Underwriting Agreement to the price per share of
Common Stock at which the Underwriter, subject to the terms and conditions
of the Underwriting Agreement, will purchase newly issued shares of WORK
Common Stock from WORK on the IPO Closing Date.
"IRS" means the Internal Revenue Service.
"Lien" means, with respect to any property or asset of any Person (or
any revenues, income or profits of that Person therefrom), in each case
whether the same is consensual or nonconsensual or arises by contract,
operation of law, legal process or otherwise, (a) any
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mortgage, lien, security interest, pledge, attachment, levy or other charge
or encumbrance of any kind thereupon or in respect thereof or (b) any other
arrangement under which the same is transferred, sequestered or otherwise
identified with the intention of subjecting the same to, or making the same
available for, the payment or performance of any liability in priority to
the payment of the ordinary, unsecured creditors of that Person, including
any "adverse claim" (as defined in Section 8-102 of each applicable Uniform
Commercial Code) in the case of any Capital Stock. For purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any asset that
Person has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, Capital Lease or other title
retention agreement relating to that asset.
"Litigation" means any action, case, proceeding, claim, grievance,
suit or investigation or other proceeding conducted by or pending before
any Governmental Authority or any arbitration proceeding.
"Material" means, as applied to any specified Entity, material to the
business, operations, property or assets, liabilities, financial condition
or results of operations of the specified Entity and its Subsidiaries
considered as a whole.
"Material Adverse Effect" means, with respect to the consequences of
any fact or circumstance (including the occurrence or non-occurrence of any
event) to the Company and the Company Subsidiaries considered as a whole
(or after the Effective Time the Surviving Corporation and the Company
Subsidiaries considered as a whole), that such fact or circumstance has
caused, is causing or can reasonably be expected to cause, directly or
indirectly, singly or in the aggregate with other facts and circumstances,
any Damages in excess of the Threshold Amount.
"Material Agreement" of an Entity means any contract or agreement (a)
to which the Entity or any of its Subsidiaries is a party, or by which the
Entity or any of its Subsidiaries is bound or to which any property or
assets of the Entity or any of its Subsidiaries is subject and (b) which is
Material to the Entity.
"Material Staffing Contract"has the meaning specified in Section
4.22(a).
"Minimum Cash Amount" has the meaning specified in Section
7.02(a)(iii).
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, Section 414 of the Code or Section 3(37) of
ERISA.
"Newco Common Stock" means the common stock, par value $1 per share,
of Newco.
"Organization State" means, as applied to (a) any corporation, its
state or other jurisdiction of incorporation, (b) any limited liability
company or limited partnership, the
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state or other jurisdiction under whose laws it is organized and existing
in that legal form, and (c) any other Entity, the state or other
jurisdiction whose laws govern that Entity's internal affairs.
"Other Agreements" has the meaning specified in the Preliminary
Statements in this Agreement.
"Other Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by the
Company or any Company Subsidiary, or to which the Company or any Company
Subsidiary contributes, on behalf of any of its employees, nonemployee
directors or officers or other natural persons performing consulting or
other independent contractor services for the Company or any Company
Subsidiary, including all such arrangements, plans, policies, practices or
programs providing for severance pay, deferred compensation, incentive,
bonus or performance awards or the actual or phantom ownership of any
Capital Stock or Derivative Securities of the Company or any Company
Subsidiary, but excluding all Company ERISA Pension Plans and Employment
Agreements.
"Other Financing Sources" has the meaning specified in Section
7.02(a)(iii).
"Other Transaction Documents" means the Other Agreements and the other
written agreements, documents, instruments and certificates at any time
executed pursuant to or in connection with the Other Agreements (other than
the Transaction Documents and the Underwriting Agreement), all as amended,
modified or supplemented from time to time.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Investments" means at the time of their purchase or other
acquisition by the Company or any Company Subsidiary (a) obligations issued
or guaranteed by the United States of America with a remaining maturity not
exceeding one year, (b) commercial paper with maturities of not more than
270 days and a published rating of not less than A-1 by S&P or P-1 by
Moody's, and (c) certificates of deposit and bankers' acceptances having
maturities of not more than one year of any commercial bank or trust
company if (A) the issuing bank or trust company has a combined capital and
surplus of at least $500 million and (B) its unsecured long-term debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A- by S&P or A3 by Moody's.
"Permitted Liens" means, as applied to the property or assets of any
Person (or any revenues, income or profits of that Person therefrom): (a)
Liens for Taxes if the same are not at the time due and delinquent; (b)
Liens of carriers, warehousemen, mechanics, laborers and materialmen for
sums not yet due; (c) Liens incurred in the ordinary course of that
Person's business in connection with worker's compensation, unemployment
insurance and other social security legislation (other than pursuant to
ERISA or Section 412(n) of the Code); (d) Liens incurred in the ordinary
course of that Person's business in connection with deposit accounts or to
secure the performance of bids, tenders, Staffing Contracts, trade
contracts,
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statutory obligations, surety and appeal bonds, performance and return-of-
money bonds and other obligations of like nature; (e) easements, rights-of-
way, reservations, restrictions and other similar encumbrances incurred in
the ordinary course of that Person's business or existing on property and
not materially interfering with the ordinary conduct of that Person's
business or the use of that property; (f) defects or irregularities in that
Person's title to its real properties which do not materially diminish the
value of the surface estate or interfere with the ordinary conduct of that
Person's business or the use of any of such properties; (g) any interest or
title of a lessor of assets being leased by any Person pursuant to any
Capital Lease disclosed in Section 4.19 of the Disclosure Statement or any
lease that, under GAAP, would be accounted for as an operating lease; and
(h) Liens securing purchase money Indebtedness disclosed in Section 4.18 or
4.19 of the Disclosure Statement so long as the Liens do not attach to any
property or assets other than the properties or assets purchased with the
proceeds of such Indebtedness.
"Person" means any natural person, Entity, estate, trust, union or
employee organization or Governmental Authority or, for the purpose of the
definition of "ERISA Affiliate," any trade or business.
"Plan" has the meaning specified in Section 4.27(a).
"Private Placement Memorandum" means the WORK Private Placement
Memorandum dated as of July 6, 1998, relating to the offer of WORK Common
Stock in connection with the Merger.
"Prohibited Transaction" means any transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"Property, Plant and Equipment" means at any time any property that
then would be included and classified as property, plant and equipment on a
consolidated balance sheet, prepared in accordance with GAAP, of the
Company and the Company Subsidiaries.
"Proprietary Rights" means (a) patents, applications for patents and
patent rights, (b) in each case, whether registered, unregistered or under
pending registration, trademark rights, trade names, trade name rights,
corporate names, business names, trade styles or dress, service marks and
logos and other trade designations and copyrights and (c), in the case of
the Company or any Company Subsidiary, all agreements relating to the
technology, know-how or processes used or marketed in any business of the
Company or any Company Subsidiary.
"Qualified Plans" has the meaning specified in Section 4.27(b).
"RCRA" means the Resource Conservation and Recovery Act of 1976.
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"Registration Rights Agreement" means the Registration Rights
Agreement to be executed and delivered at the Closing by WORK and the
Stockholders electing to be parties thereto, which shall be in the form of
Exhibit 1.02-A, with its blanks appropriately completed.
"Registration Statement" means the registration statement (including
(a) each preliminary prospectus included therein prior to the date on which
that registration statement is declared effective under the Securities Act
(including any prospectus filed with the SEC pursuant to Securities Act
Rule 424(b)), (b) the Final Prospectus and (c) any amendments thereof and
all supplements and exhibits thereto) filed by WORK with the SEC to
register shares of WORK Common Stock under the Securities Act for public
offering and sale in the IPO.
"Related Party Agreement" means any contract or other agreement,
written or oral, to which the Company or any Company Subsidiary is a party
or is bound or by which any property of the Company or any Company
Subsidiary is bound or may be subject and (a) to which any Stockholder or
any of that Stockholder's Related Persons or Affiliates also is a party,
(b) of which any Stockholder or any Stockholder's Related Persons or
Affiliates is a beneficiary, or (c) as to which any transaction
contemplated thereby properly would be characterized (without regard to the
amount involved) as a related party transaction for purposes of applying
the disclosure requirements of GAAP or the SEC applicable to the
Registration Statement.
"Related Person" of a Stockholder means: (a) if the Stockholder is a
natural person, (i) any Immediate Family Member of the Stockholder, (ii)
any Estate of the Stockholder or any Immediate Family Member of the
Stockholder, (iii) the trustee of any inter vivos or testamentary trust of
which all the beneficiaries are Immediate Family Members of the
Stockholder, and (iv) any Entity the entire equity interest in which is
owned by any one or more of the Stockholder and Immediate Family Members of
the Stockholder; and (b) if the Stockholder is an Entity, Estate or trust,
(i) any Person who owns an equity interest in the Stockholder on the date
hereof, (ii) any Person who would be a Related Person under clause (a) of
this definition of a natural person who is an ultimate beneficial owner of
the Stockholder, or (iii) any other Entity the entire equity interest in
which is owned by any one or more of the Stockholder and Immediate Family
Members of the Stockholder. As used in this definition, "Estate" means, as
to any natural person who has died or been adjudicated mentally incompetent
by a court of competent jurisdiction, (i) that person's estate or (ii) the
administrator, conservator, executor, guardian or representative of that
person's estate.
"Reportable Event" means, with respect to any Company ERISA Pension
Plan, (a) the occurrence of any of the events set forth in Section 4043(b)
or 4043(c) (other than a Reportable Event as to which the provision of 30
days' notice to the PBGC is waived under applicable regulations), 4062(e)
or 4063(a) of ERISA with respect to that plan, (b) any event requiring the
Company or any ERISA Affiliate to provide security to that plan under
Section 401 (a)(29) of the Code, or (c) any failure to make a payment
required by Section 412(m) of the Code with respect to that plan.
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"Representatives" means, with respect to any Person, the directors,
officers, employees, Affiliates, accountants (including independent
certified public accountants), advisors, attorneys, consultants or other
agents of that Person, or any other representatives of that Person or of
any of that Person's directors, officers, employees, Affiliates,
accountants (including independent certified public accountants), advisors,
attorneys, consultants or other agents.
"Restricted Payment" means, with respect to any Entity at any time,
any of the following effected by the Entity: (a) any declaration or payment
of any dividend or other distribution, direct or indirect, on account of
any Capital Stock of that Entity or any Affiliate of the Entity or (b) any
direct or indirect redemption, retirement, purchase or other acquisition
for value of, or any direct or indirect purchase, payment or sinking fund
or similar deposit for the redemption, retirement, purchase or other
acquisition for value of, or to obtain the surrender of, any then
outstanding Capital Stock of the Entity or any Affiliate of the Entity or
any then outstanding warrants, options or other rights to acquire or
subscribe for or purchase unissued or treasury Capital Stock of the Entity
or any of its Affiliates.
"Returns" means the returns, reports or statements (including any
information returns) any Governmental Requirement requires to be filed for
purposes of any Tax.
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"Solid Wastes, Hazardous Wastes or Hazardous Substances" have the
meanings ascribed to those terms in CERCLA, RCRA or any other Environmental
Law applicable to the business or operations of the Company or any Company
Subsidiary which imparts a broader meaning to any of those terms than does
CERCLA or RCRA.
"Staffing Contract" means any written or oral contract, subcontract or
other agreement under which the Company or a Company Subsidiary is or may
become obligated to provide to or for any Person temporary personnel
staffing, personnel placement, staff leasing, professional employer
organization, training and business solutions or other consulting services.
"Stockholder Indemnified Loss" has the meaning specified in Section
9.03.
"Stockholder Indemnified Party" means (a) each Stockholder and each of
that Stockholder's Affiliates (other than the Company or, following the
Effective Time, the Surviving Corporation or WORK or any of its
Subsidiaries, if the Stockholder is an Affiliate of WORK), agents and
counsel and (b) prior to the Effective Time, the Company and each of its
officers, directors, employees, agents and counsel who are not Stockholder
Indemnified Parties within the meaning of clause (a) of this definition.
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"Subsidiary" of any specified Person means at any time, any Entity a
majority of the Capital Stock of which is at that time owned or controlled,
directly or indirectly, by the specified Person.
"Supplemental Information" has the meaning specified in Section 6.06.
"Tax" or "Taxes" means all net or gross income, gross receipts, net
proceeds, sales, use, ad valorem, value added, franchise, withholding,
payroll, employment, excise, property, deed, stamp, alternative or add-on
minimum, environmental or other taxes, assessments, duties, fees, levies or
other governmental charges or assessments of any nature imposed by any
Governmental Requirement, whether disputed or not, together with any
interest, penalties, additions to tax or additional amounts with respect
thereto.
"Taxing Authority" means any Governmental Authority having or
exercising jurisdiction with respect to any Tax.
"TBCA" means the Business Corporation Act of the State of Texas.
"Termination Event" means, with respect to any Company ERISA Pension
Plan, (a) any Reportable Event with respect to that plan which is likely to
result in the termination of that plan, (b) the termination of, or the
filing of a notice of intent to terminate, that plan or the treatment of
any amendment to that plan as a termination under Section 4041(c) of ERISA,
or (c) the institution of proceedings to terminate, or the appointment of a
trustee to administer, that plan under Section 4042 of ERISA.
"Third Party Claim" has the meaning specified in Section 9.04(b).
"Transaction Documents" means this Agreement, the Certificate of
Merger, the General Release, the Registration Rights Agreement, the
Transferors' Agreement, the New Employment Agreements and the other written
agreements, documents, instruments and certificates executed pursuant to or
in connection with this Agreement (other than the Other Transaction
Documents and the Underwriting Agreement), including those specified in
Article VII to be delivered at or before the Closing, all as amended,
modified or supplemented from time to time.
"Transferors' Agreement" means the Transferors' Agreement and Plan of
Transfer entered into as of the date of this Agreement, among WORK, the
Stockholders and the other Persons party thereto.
"Underwriter" means, collectively, (a) the investment banking firms
that prospectively may enter into the Underwriting Agreement and (b) from
and after the IPO Pricing Date, the investment banking firms parties to the
Underwriting Agreement.
"Underwriting Agreement" has the meaning specified in Section
7.02(a)(iii).
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"Welfare Plan" means an "employee welfare benefit plan" as defined in
Section 3(1) of ERISA.
"Wholly Owned Subsidiary" means any corporation or other Entity all of
the outstanding Capital Stock of which, on a fully diluted basis, is owned
and controlled, directly or indirectly through another Wholly Owned
Subsidiary, by the Company.
"WORK Common Stock" means the common stock, par value $.001 per share,
of WORK.
"WORK Indemnified Loss" has the meaning specified in Section 9.02(a).
"WORK Indemnified Party" means WORK and its Affiliates and each of
their respective officers, directors, employees, agents and counsel;
provided, however, that no Person who indemnifies any WORK Indemnified
Parties under this Agreement in his capacity as a Stockholder will be a
WORK Indemnified Party for purposes of this Agreement, notwithstanding that
the Person is a WORK Indemnified Party for purposes of one or more of the
Other Agreements.
"WORK Preferred Stock" means the preferred stock, $.001 par value per
share, of WORK.
Section 1.03. Other Definitional Provisions.
(a) Except as otherwise specified herein, all references herein to any
Governmental Requirement defined or referred to herein, including the Code,
CERCLA, ERISA, the Exchange Act, RCRA and the Securities Act, shall be
deemed references to that Governmental Requirement or any successor
Governmental Requirement, as the same may have been amended or supplemented
from time to time, and any rules or regulations promulgated thereunder.
(b) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any specific provision of this Agreement, and the words
"Article," "Section," "Annex," "Schedule" and "Exhibit" refer to Articles
and Sections of, and Annexes, Schedules and Exhibits to, this Agreement,
unless otherwise specified.
(c) Whenever the context so requires, the singular number includes the
plural and vice versa, and a reference to one gender includes the other
gender and the neuter.
(d) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any
description preceding such word, and the words "shall" and "will" are used
interchangeably and have the same meaning.
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Section 1.04. Captions. Captions to Articles, Sections and subsections of
this Agreement and its Annexes, Schedules and Exhibits are included for
convenience of reference only, and shall not constitute a part of this Agreement
or any other Transaction Document for any other purpose, nor shall they in any
way affect the meaning or construction of any provision of this Agreement or any
other Transaction Document.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Section 3.01. Investment Representations. (a) The Stockholder will be
acquiring the shares of WORK Common Stock to be issued to him pursuant to
Section 2.04 solely for the Stockholder's account, for investment purposes only
and with no current intention or plan to distribute, sell or otherwise dispose
of any of those shares in connection with any distribution; (b) the Stockholder
is not a party to any agreement or other arrangement for the disposition of any
shares of WORK Common Stock other than this Agreement, the Transferors'
Agreement and the Registration Rights Agreement; (c) unless otherwise specified
on Schedule 3.01, the Stockholder is an "accredited investor" as defined in
Securities Act Rule 501 (a); (d) the Stockholder (i) is able to bear the
economic risk of an investment in the WORK Common Stock to be acquired by him
pursuant to this Agreement, (ii) can afford to sustain a total loss of that
investment, (iii) has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of the proposed
investment in the WORK Common Stock, (iv) has had an adequate opportunity to ask
questions and receive answers from the officers of WORK concerning any and all
matters relating to the transactions contemplated by this Agreement, including
the background and experience of the current and proposed officers and directors
of WORK, the plans for the operations of the business of WORK, the business,
operations and financial condition of the Other Founding Companies and any plans
of WORK for additional acquisitions, and (v) has asked all questions of the
nature described in preceding clause (iv), and all those questions have been
answered to his satisfaction.
Section 3.02. Ownership and Status of Company Capital Stock. The
Stockholder is the record and beneficial owner (or, if the Stockholder is a
trust or the estate of a deceased natural person, the legal owner) of the number
of shares of Company Capital Stock set forth, by class, and by each series in
each class, opposite the Stockholder's name in Schedule 3.02, free and clear of
all Liens, except for the Liens accurately set forth in Schedule 3.02, all of
which will be released at or before the Effective Time.
Section 3.03. Power of the Stockholder; Approval of the Merger.
(a) The Stockholder has the full power, legal capacity and authority
to execute and deliver this Agreement and each other Transaction Document
to which the Stockholder is a party and to perform the Stockholder's
obligations in this Agreement and in all other Transaction Documents to
which the Stockholder is a party. This Agreement constitutes, and each
such other Transaction Document, when executed in the Stockholder's
individual capacity and delivered by the Stockholder, will constitute, the
legal, valid and binding obligation of the Stockholder, enforceable against
the Stockholder in accordance with its terms, except as their
enforceability may be (i) limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and (ii) subject to general principles of
equity (regardless of whether enforceability is considered in a proceeding
in equity or at law). If the Stockholder is an Entity, the Stockholder
has, in accordance with all applicable Governmental Requirements and its
Charter Documents, obtained all approvals and taken all actions
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necessary for the authorization, execution, delivery and performance by the
Stockholder of this Agreement and the other Transaction Documents to which
the Stockholder is a party. If the Stockholder is acting otherwise than in
his individual capacity (whether as an executor or a guardian or in any
other fiduciary or representative capacity), all actions on the part of the
Stockholder and all other Persons (including any court) necessary for the
authorization, execution, delivery and performance by the Stockholder of
this Agreement and the other Transaction Documents to which the Stockholder
is a party have been duly taken.
(b) The Stockholder, acting in each capacity in which he is entitled,
by reason of the Company's Charter Documents or the Governmental
Requirements of the Company's Organization State or for any other reason,
to vote to approve or disapprove the consummation of the Merger, has voted
all the shares of Company Capital Stock owned by him and entitled to a vote
or votes on that matter, in any one or more of the manners prescribed or
permitted by the Company's Charter Documents or the Governmental
Requirements of the Company's Organization State, whichever are
controlling, to approve this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement.
Section 3.04. No Conflicts or Litigation. The execution, delivery and
performance in accordance with their respective terms by the Stockholder of this
Agreement and the other Transaction Documents to which the Stockholder is or
will be a party do not and will not (a) violate any Governmental Requirement,
(b) breach or constitute a default under any agreement or instrument to which
the Stockholder is a party or by which the Stockholder or any of the shares of
Company Capital Stock owned by the Stockholder is bound, (c) result in the
creation or imposition of, or afford any Person the right to obtain, any Lien
upon any of the shares of Company Capital Stock owned by the Stockholder (or
upon any revenues, income or profits of the Stockholder therefrom) or (d) if the
Stockholder is an Entity, violate the Stockholder's Charter Documents. No
Litigation is pending or, to the knowledge of the Stockholder, threatened to
which the Stockholder is or may become a party which (a) questions or involves
the validity or enforceability of any of the Stockholder's obligations under any
Transaction Document or (b) seeks (or reasonably may be expected to seek) (i) to
prevent or delay the consummation by the Stockholder of the transactions
contemplated by this Agreement to be consummated by the Stockholder or (ii)
Damages in connection with any consummation by the Stockholder of the
transactions contemplated by this Agreement.
Section 3.05. No Brokers. The Stockholder has not, directly or indirectly,
in connection with this Agreement or the transactions contemplated hereby (a)
employed any broker, finder or agent or (b) agreed to pay or incurred any
obligation to pay any broker's or finder's fee, any sales commission or any
similar form of compensation.
Section 3.06. Preemptive and Other Rights; Waiver. Except for the right of
the Stockholder to receive shares of WORK Common Stock as a result of the Merger
or to acquire WORK Common Stock pursuant to any written option or warrant
granted by WORK to the Stockholder, the Stockholder either (a) does not have any
statutory or contractual preemptive or other right of any kind (including any
right of first offer or refusal) to acquire any shares of Company Capital Stock
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or WORK Common Stock or (b) hereby irrevocably waives each such right of that
type the Stockholder has or may have.
Section 3.07. Control of Related Businesses. Except as accurately set
forth in Schedule 3.07, the Stockholder is not, alone or with one or more other
Persons, the controlling Affiliate of any Entity, business or trade (other than
the Company and the Company Subsidiaries, if the Stockholder is an Affiliate of
the Company) that (a) is engaged in any line of business which is the same as or
similar to any line of business in which the Company or any Company Subsidiary
is engaged or (b) is, or has within the three-year period ending on the date of
this Agreement, engaged in any transaction or been a party to any agreement with
the Company or any Company Subsidiary.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF
THE COMPANY AND THE STOCKHOLDERS
Section 4.01. Organization and Authority. Section 4.01 of the Disclosure
Statement sets forth the Organization State of the Company and the Company (a)
is a corporation duly organized, validly existing and in good standing under the
laws of that State, (b) has all requisite corporate power and authority under
those laws and its Charter Documents to own or lease and to operate its
properties and to carry on its business as now conducted, and (c) is duly
qualified and in good standing as a foreign corporation in all jurisdictions
(other than its Organization State) in which it owns or leases property or in
which the carrying on of its business as now conducted so requires, except where
the failure to be so qualified, singly or in the aggregate, would not have a
Material Adverse Effect;
Section 4.02. Qualification. Section 4.02 of the Disclosure Statement
accurately lists all the jurisdictions in which the Company and the Company
Subsidiaries are authorized or qualified to own or lease and to operate their
properties or to carry on their business as now conducted. Neither the Company
nor any Company Subsidiary owns, leases or operates properties or carries on its
business in any jurisdiction not listed in Section 4.02 of the Disclosure
Statement.
Section 4.03. Authorization; Enforceability; Absence of Conflicts;
Required Consents.
(a) The execution, delivery and performance by the Company of this
Agreement and each other Transaction Document to which it is or will be a
party, and the effectuation of the Merger and the other transactions
contemplated hereby and thereby, are within its corporate or other power
under its Charter Documents and all applicable Governmental Requirements of
its Organization State and have been duly authorized by all proceedings,
including actions permitted to be taken in lieu of proceedings, required
under its Charter Documents and all applicable Governmental Requirements of
the Organization State.
(b) This Agreement has been, and each of the other Transaction
Documents to which the Company is or will be a party, when executed and
delivered to WORK (or, in the case of the Certificate of Merger, the
applicable Governmental Authorities) will have been, duly executed and
delivered by the Company and is, or when so executed and delivered will be,
the legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as enforceability may be
(i) limited by any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and (ii) subject to general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with their
respective terms by the Company of the Transaction Documents to which it is
a party do not and will not (i) violate, breach or constitute a default
under (A) the Charter Documents of the
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Company or any of the Company Subsidiaries, (B) any Governmental
Requirement applicable to the Company or any of the Company Subsidiaries or
(C) except as set forth in Section 4.03 of the Disclosure Statement, any
Material Agreement of the Company, (ii) except as set forth in Section 4.03
of the Disclosure Statement, result in the acceleration or mandatory
prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of any of the Company and the Company Subsidiaries or afford
any holder of any of that Indebtedness, or any beneficiary of any of those
Guaranties, the right to require any of the Company and the Company
Subsidiaries to redeem, purchase or otherwise acquire, reacquire or repay
any of that Indebtedness, or to perform any of those Guaranties, (iii)
cause or result in the imposition of, or afford any Person the right to
obtain, any Lien upon any property or assets of any of the Company and the
Company Subsidiaries (or upon revenues, income or profits of any of the
Company and the Company Subsidiaries therefrom), (iv) except as set forth
in Section 4.03 of the Disclosure Statement, result in the revocation,
cancellation, suspension or material modification, in any single case or in
the aggregate, of any Governmental Approval possessed by any of the Company
and the Company Subsidiaries at the date hereof and necessary for the
ownership or lease or the operation of its properties or the carrying on of
its business as now conducted, including any necessary Governmental
Approval under each applicable Environmental Law, or (v) except as set
forth in Section 4.03 of the Disclosure Statement, entitle any Person other
than the Company or a Company Subsidiary to revoke, cancel, suspend or
materially modify any Company Commitment.
(d) Except for (i) the filing of the Certificates of Merger with the
applicable Governmental Authorities, (ii) filings of the Registration
Statement under the Securities Act and the SEC order declaring the
Registration Statement effective under the Securities Act, and (iii) as may
be required by the HSR Act or the applicable state securities or blue sky
laws, no Governmental Approvals are required to be obtained, and no reports
or notices to or filings with any Governmental Authority are required to be
made, by any of the Company and the Company Subsidiaries for the execution,
delivery or performance by the Company of the Transaction Documents to
which it is a party, the enforcement against the Company of its obligations
thereunder or the effectuation of the Merger and the other transactions
contemplated thereby.
Section 4.04. Charter Documents and Records; No Violation. The Company
has caused true, complete and correct copies of the Charter Documents, each as
in effect on the date hereof, and the minute books and similar corporate or
other Entity records of each of the Company and the Company Subsidiaries to be
delivered or otherwise made available to WORK. No breach or violation of any
Charter Document of any of the Company and the Company Subsidiaries has occurred
and is continuing.
Section 4.05. No Defaults. No act or omission by the Company or any of the
Company Subsidiaries has occurred, and to the knowledge of the Company, the
Company Subsidiaries and the Stockholders, no other condition or state of facts
exists, or, with the giving of notice or the lapse of time or both, would exist,
which (a) entitles any holder of any outstanding Indebtedness, or any Guaranty
not constituting Indebtedness, of any of the Company and the Company
Subsidiaries, or
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a representative of the holder, to accelerate the maturity, or require a
mandatory prepayment of that Indebtedness or Guaranty, or affords the holder or
its representative, or any beneficiary of that Guaranty, the right to require
any of the Company and the Company Subsidiaries to redeem, purchase or otherwise
acquire, reacquire or repay any of that Indebtedness, or to perform that
Guaranty in whole or in part, (b) entitles any Person to obtain any Lien (other
than a Permitted Lien) upon any properties or assets of any of the Company and
the Company Subsidiaries (or upon revenues, income or profits of any of the
Company and the Company Subsidiaries therefrom), or (c) constitutes a violation
or breach of, or a default under, any Material Agreement of the Company by the
Company or any of the Company Subsidiaries.
Section 4.06. Company Subsidiaries. Section 4.06 of the Disclosure
Statement either (a) accurately sets forth the form of organization, legal name,
each assumed name and Organization State of each Company Subsidiary or (b)
correctly states no Entity is a Company Subsidiary. Except as accurately
disclosed in Section 4.06 of the Disclosure Statement, each Company Subsidiary
is a Wholly Owned Subsidiary. In the case of any Company Subsidiary that is not
a Wholly Owned Subsidiary, Section 4.06 of the Disclosure Statement accurately
sets forth, by each class and each series within each class, the number of
outstanding shares of Capital Stock of the Company Subsidiary, (a) the Company's
aggregate direct and indirect ownership of those shares and (b) the name and
address of record and percentage ownership of those shares by each holder of
record thereof other than the Company or a Company Subsidiary. No Lien exists on
any outstanding share of Capital Stock of any Company Subsidiary which is owned
directly or indirectly by the Company other than (a) the Liens, if any,
described in Section 4.06 of the Disclosure Statement, all of which will be
released at or before the Effective Time, and (b) Permitted Liens. Except as
accurately set forth in Section 4.06 of the Disclosure Statement, the Company
does not own, of record or beneficially, directly or indirectly through any
Person, and does not control, directly or indirectly through any Person or
otherwise, any Capital Stock or Derivative Securities of any Entity other than a
Company Subsidiary.
Section 4.07. Capital Stock of the Company and the Company Subsidiaries.
Schedule 4.07 sets forth the authorized Capital Stock of the Company and the
number of shares of Capital Stock of each class or series which are issued and
now outstanding, whether any shares of Capital Stock of the Company are held by
the Company as treasury shares, and whether any Derivative Securities of the
Company are outstanding. All the issued and outstanding shares of Capital Stock
of each of the Company and the Company Subsidiaries have been duly authorized
and validly issued in accordance with the applicable Governmental Requirements
of their issuer's Organization State and Charter Documents and are fully paid
and nonassessable. Neither the Company nor any Company Subsidiary has issued or
sold any shares of its outstanding Capital Stock in breach or violation of (a)
any applicable statutory or contractual preemptive rights, or any other rights
of any kind (including any rights of first offer or refusal), of any Person or
(b) the terms of any of its Derivative Securities which then were outstanding.
No Person has, otherwise than solely by reason of that Person's right, if any,
to vote shares of the Capital Stock of the Company or any Company Subsidiary it
holds (to the extent those shares afford their holder any voting rights) any
right to vote on any matter with the holders of Capital Stock of the Company or
any Company Subsidiary.
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Section 4.08. Transactions in Capital Stock. Except as accurately set
forth in Section 4.08 of the Disclosure Statement: (a) the Company has no fixed
or contingent obligation to purchase, redeem or otherwise acquire or reacquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof, and (b) no transaction has been
effected, and no action has been taken, respecting the equity ownership of
either the Company or any Company Subsidiary, in either case in contemplation of
the transactions described in this Agreement.
Section 4.09. No Bonus Shares. Except as accurately set forth in Section
4.09 of the Disclosure Statement, no outstanding share of Capital Stock of the
Company was issued for less than its fair market value at the time of its
issuance or was issued in exchange for any consideration other than cash.
Section 4.10. Predecessor Status; etc. Section 4.10 of the Disclosure
Statement accurately lists all the legal and assumed names of all predecessor
companies for the past five years of the Company and each Company Subsidiary,
including the names of any Entities from which the Company previously acquired
material assets. Except as accurately disclosed in Section 4.10 of the
Disclosure Statement, the Company has not been a Subsidiary or division of
another corporation or a part of an acquisition that was later rescinded.
Section 4.11. Related Party Agreements. Except as accurately disclosed in
Schedule 4.11, each Related Party Agreement in effect on the date of this
Agreement will have been terminated as of the IPO Closing Date, and no Related
Party Agreement will then exist.
Section 4.12. Litigation. Except as accurately disclosed in Section 4.12
of the Disclosure Statement, no Litigation is pending or, to the knowledge of
the Company or any Stockholder, threatened to which the Company or any Company
Subsidiary is or may become a party.
Section 4.13. Financial Statements; Disclosure.
(a) Financial Statements. The Financial Statements (including in each
case the related schedules and notes) delivered to WORK by the Company
present fairly, in all material respects, the consolidated financial
position of the Company and the Company Subsidiaries at the respective
dates of the balance sheets included therein and the consolidated results
of their operations and their consolidated cash flows for the respective
periods set forth therein and have been prepared in accordance with GAAP.
As of the date of each balance sheet included in all previously delivered
Financial Statements, neither the Company nor any Company Subsidiary then
had any outstanding Indebtedness to any Person or any liabilities of any
kind (including contingent obligations, Tax assessments or forward or long-
term commitments), or any unrealized or anticipated loss, which in the
aggregate then were Material to the Company and required to be reflected in
those Financial Statements or in the notes related thereto in accordance
with GAAP which were not so reflected.
(b) Disclosure. To the knowledge of the Company and the Stockholders:
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(i) all Information (other than financial budgets and
projections) that (A) is set forth in the Disclosure Statement, (B)
has been delivered to WORK by or on behalf of the Company pursuant to
an express requirement of this Agreement, or (C) has been furnished to
WORK by or on behalf of the Company for inclusion in the Registration
Statement under the captions "The Company," "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
"Business," "Management," and "Certain Transactions" in any prospectus
forming a part of the Registration Statement is, taken together, true
and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not
materially misleading in light of the circumstances under which the
statements were made; and
(ii) all financial budgets and projections that have been or are
hereafter from time to time prepared by the Company or any of its
Representatives and made available prior to the Effective Time to WORK
pursuant to or in connection with this Agreement, any other
Transaction Document or the transactions contemplated hereby or
thereby have been and will be prepared and furnished to WORK in good
faith and were and will be based on facts and assumptions that are
believed by the management of the Company to be reasonable in light of
the then current and reasonably foreseeable business conditions of the
Company and the Company Subsidiaries and represented and will
represent management's good faith estimate of the consolidated
projected financial performance of the Company and the Company
Subsidiaries based on the information available to the Responsible
Officer at the time so furnished (it being acknowledged by WORK that
the budgets and projections referred to in this clause (ii) are
derived from judgments made by the Company's management and are only
estimates of future results based on assumptions made at the time of
their preparation, and that there can be no assurance that the budgets
or projections will be obtained or maintained or that actual results
will not be different from those budgeted or projected).
Section 4.14. Compliance With Laws.
(a) Except as accurately disclosed in Section 4.14 of the Disclosure
Statement, (i) each of the Company and the Company Subsidiaries possesses
all necessary licenses, registrations and qualifications required for the
conduct of its business, and (ii) to the knowledge of the Company, the
Company and each of the Company Subsidiaries are in compliance in all
material respects with the terms and conditions of all Governmental
Approvals necessary for the ownership or lease and the operation of its
properties (including all the facilities and sites it owns or holds under
any lease) and the carrying on of its business as now conducted. The
Company has identified in Section 4.14 of the Disclosure Statement all the
Governmental Approvals it possesses. To the knowledge of the Company, all
the Governmental Approvals identified in Section 4.14 of the Disclosure
Statement are valid. Except as accurately disclosed in Section 4.14 of the
Disclosure Statement, neither the Company nor any Company Subsidiary has
received any notice from any Governmental
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Authority of its intention to cancel, terminate or not renew any of those
Governmental Approvals.
(b) Except as accurately disclosed in Section 4.14 of the Disclosure
Statement, each of the Company and the Company Subsidiaries: (i) to the
knowledge of the Company, has been and continues to be in compliance with
all Governmental Requirements applicable to it or any of its presently or
previously owned or operated properties (including all the facilities and
sites now or previously owned or held by it under any lease), businesses or
operations, including all applicable Governmental Requirements under ERISA
and Environmental Laws; and (ii) (A) neither the Company nor any Company
Subsidiary has received any notice from any Governmental Authority which
asserts, or raises the possibility of assertion of, any noncompliance by
the Company or any Company Subsidiary with any Governmental Requirements
and (B) to the knowledge of the Company and the Stockholders, no condition
or state of facts exists which would provide a valid basis for any such
assertion.
Section 4.15. Certain Environmental Matters. Except as accurately
disclosed in Section 4.15 of the Disclosure Statement: (a) to the knowledge of
the Company, the Company and each Company Subsidiary have complied, and remain
in compliance, with the provisions of all Environmental Laws applicable to any
of them or any of their respective presently owned or operated facilities, sites
or other properties, businesses and operations and which relate to the reporting
by the Company and each Company Subsidiary of all sites presently owned or
operated by any of them where Solid Wastes, Hazardous Wastes or Hazardous
Substances have been treated, stored, disposed of or otherwise handled; (b) no
release (as defined in the applicable Environmental Laws) at, from, in or on any
site owned or operated by the Company or any Company Subsidiary has occurred
which, if all relevant facts were known to the relevant Governmental
Authorities, reasonably could be expected to require remediation to avoid deed
record notices, restrictions, liabilities or other consequences that would not
be applicable if the release had not occurred; (c) neither the Company nor any
Company Subsidiary has transported or arranged for the transportation of any
Solid Wastes, Hazardous Wastes or Hazardous Substances to, or disposed or
arranged for the disposition of any Solid Wastes, Hazardous Wastes or Hazardous
Substances at, any off-site location that could lead to any valid claim against
the Company, any Company Subsidiary, WORK or Newco, as a potentially responsible
party or otherwise, for any clean-up costs, remedial work, damage to natural
resources, personal injury or property damage, including any claim under CERCLA;
and (d) no storage tanks exist, or, to the knowledge of the Company, has
existed, on or under any of the properties owned or operated by the Company or
any Company Subsidiary from which any Solid Wastes, Hazardous Wastes or
Hazardous Substances have been released into the surrounding environment. The
Company has provided WORK with copies (or if not available, accurate written
summaries) of all environmental investigations, studies, audits, reviews and
other analyses conducted by or on behalf, or which otherwise are in the
possession, of the Company or any Company Subsidiary respecting any facility,
site or other property now or previously owned or operated by the Company or any
Company Subsidiary.
Section 4.16. Liabilities and Obligations. Section 4.16 of the Disclosure
Statement accurately lists all present liabilities, of every kind, character and
description and whether accrued,
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absolute, fixed, contingent or otherwise, of each of the Company and the Company
Subsidiaries which exceed or reasonably could be expected to exceed $10,000 and
which (a) had been incurred prior to the Current Balance Sheet Date, but are not
reflected on the Current Balance Sheet, or (b) were incurred after the Current
Balance Sheet otherwise than in the ordinary course of business, and consistent
with the past practice, of that Entity, in each case other than (i) obligations
and liabilities of the Company and the Company Subsidiaries in respect of the
Company Commitments, (ii) obligations and liabilities of the Company in respect
of each Company ERISA Benefit Plan, and (iii) obligations and liabilities of the
Company and the Company Subsidiaries set forth in the Disclosure Statement.
Section 4.16 of the Disclosure Statement also accurately lists and describes,
for each of the Company and the Company Subsidiaries: (a) each of its
outstanding secured and unsecured Guaranties not constituting its Indebtedness
and, for each of those Guaranties, whether any Stockholder or Related Person or
Affiliate of any Stockholder is a Person whose obligation is covered by that
Guaranty, and (b) for each of the items listed under clause (a) of this
sentence, (i) if that item is secured by any property or asset of the Company or
any Company Subsidiary, the nature of the security, and (ii) if that item is
covered in whole or in part by a Guaranty of any Stockholder or any Related
Person or Affiliate of any Stockholder, the name of the guarantor.
Section 4.17. Receivables. Except as accurately disclosed in Section 4.17
of the Disclosure Statement, all the accounts and notes or other advances
receivable of the Company and the Company Subsidiaries reflected on the Current
Balance Sheet were collected, or are, in the good faith belief of the Company's
management, collectible, in the respective amounts so reflected, net of the
reserves, if any, reflected in the Current Balance Sheet.
Section 4.18. Owned and Leased Real Properties.
(a) Section 4.18 of the Disclosure Statement accurately lists and
correctly describes in all material respects: (i) all real properties
owned by the Company or any of the Company Subsidiaries and, for each of
those properties, its address, the type and square footage of each
structure located thereon and the nature of its use in the business of the
Company and the Company Subsidiaries; (ii) all real properties of which any
of the Company and the Company Subsidiaries is the lessee and, for each of
those properties, its address, the type and square footage of each
structure located thereon which the Company or a Company Subsidiary is
leasing, the annual rental rate, the expiration date of its lease and the
use made of the leased property in the business of the Company and the
Company Subsidiaries; and (iii) in the case of each real property listed as
being owned, whether it was previously owned, and in the case of each real
property listed as being leased, whether it is presently owned, by any
Stockholder or any of his Related Persons or Affiliates (other than the
Company and the Company Subsidiaries, if the Stockholder is an Affiliate of
the Company).
(b) The Company has provided WORK with true, complete and correct
copies of all title reports and title insurance policies owned or in the
possession of any of the Company and the Company Subsidiaries and relating
to any of the real properties identified in Section 4.18 of the Disclosure
Statement as being owned. Except as accurately set forth in that Section
or those reports and policies, and except for Permitted Liens, the Company
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or a Company Subsidiary owns in fee, and has good, valid and indefeasible
title to, free and clear of all Liens, each property listed in that Section
as being owned.
(c) The Company has provided WORK with true, correct and complete
copies of all leases under which the Company or a Company Subsidiary is
leasing each of the real properties listed in Section 4.18 of the
Disclosure Statement as being leased, and, except as accurately set forth
in Section 4.18 of the Disclosure Statement, (i) each of the listed leases
is, to the knowledge of the Company, valid and binding on the lessor party
thereto, and (ii) the lessee party thereto has not sublet any of the leased
space to any Person other than the Company or a Company Subsidiary.
(d) The fixed assets of each of the Company and the Company
Subsidiaries are affixed only to one or more of the real properties listed
in Section 4.18 of the Disclosure Statement and, except as accurately set
forth in that Section, are well-maintained and adequate for the purposes
for which they presently are being used or held for use, ordinary wear and
tear excepted.
(e) The Company has accurately disclosed in all material respects in
writing to WORK all plans or projects involving the opening of new
operations, the expansion of any existing operations or the acquisition of
any real property or existing business, with respect to which management of
the Company or any Company Subsidiary has made any expenditure in the two-
year period prior to the date of the Agreement in excess of $25,000, or
which if pursued by the Company or any Company Subsidiary would require
additional capital expenditures in excess of $25,000.
Section 4.19. Owned and Leased Personal Property.
(a) The Company has provided WORK with a list accurate and complete in
all material respects of all machinery, equipment and other personal
property included in the Property, Plant and Equipment owned and leased by
any of the Company and the Company Subsidiaries, which list states, in the
case of each of those properties listed as being owned, whether it was
previously owned, and in the case of each of those properties listed as
being leased, whether it is presently owned, by any Stockholder or any of
his Related Persons or Affiliates (other than the Company and the Company
Subsidiaries, if the Stockholder is an Affiliate of the Company).
(b) Except as accurately disclosed in Section 4.19 of the Disclosure
Statement and except for Permitted Liens, the Company or a Company
Subsidiary has good, valid and indefeasible title, free and clear of all
Liens, to each asset described in the list referred to in Section 4.19(a)
above as being owned by the Company or a Company Subsidiary.
(c) The Company has provided WORK with true, correct and complete
copies of all leases under which the Company or a Company Subsidiary is
leasing each of the properties listed in Section 4.19 of the Disclosure
Statement as being leased and all leases referred to in Section 4.21 and,
except as accurately disclosed in Section 4.19 of the
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Disclosure Statement, (i) each of those leases is, to the knowledge of the
Company, valid and binding on the lessor party thereto, and (ii) the lessee
party thereto has not sublet any of the leased property to any Person other
than the Company or a Company Subsidiary.
(d) Except as accurately disclosed in Section 4.19 of the Disclosure
Statement, all items of machinery, equipment and other personal property
listed therein are in good working order and condition, ordinary wear and
tear excepted, and are adequate for the purposes for which they presently
are being used or held for use.
Section 4.20. Proprietary Rights. Except as accurately set forth in
Section 4.20 of the Disclosure Statement, each of the Company and the Company
Subsidiaries owns or has the legal right to use all Proprietary Rights that are
necessary to the conduct of its business as now conducted, in each case free of
any claims or infringements known to the Company or any Stockholder. Section
4.20 of the Disclosure Statement accurately (a) lists all such Proprietary
Rights, (b) indicates those owned by the Company or any Company Subsidiary and,
for those not listed as so owned, the agreement or other arrangement pursuant to
which they are possessed or used, (c) lists all consents of any Person which
will be required for the use of any of these Proprietary Rights by WORK or any
Subsidiary of WORK following the Effective Time and (d) lists all governmental
registrations of any of these Proprietary Rights which have lapsed or expired or
been canceled, abandoned, opposed or the subject of any reexamination request.
Section 4.21. Title to Other Properties. In each case, free and clear of
all Liens except for Permitted Liens and as accurately set forth in Section 4.21
of the Disclosure Statement, each of the Company and the Company Subsidiaries
has good and valid title to, or holds under a lease valid and binding on the
lessor party thereto, all its tangible personal properties and assets (other
than Property, Plant and Equipment) that individually is or in the aggregate are
Material to the Company.
Section 4.22. Commitments.
(a) In Section 4.22(a) of the Disclosure Statement, the Company has
completely and accurately listed each of the following (each a "Company
Commitment") to which the Company or any of the Company Subsidiaries is a
party or by which any of its properties is bound and which presently
remains executory in whole or in any part:
(i) each partnership, joint venture or cost-sharing agreement;
(ii) each guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iii) each instrument, agreement or other obligation evidencing
or relating to Indebtedness of any of the Company and the Company
Subsidiaries or to money lent or to be lent to another Person;
(iv) each contract to purchase or sell real property;
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(v) each Staffing Contract for which either the contract price or
the cost of performance will or could reasonably be expected to exceed
$100,000 (each a "Material Staffing Contract");
(vi) each Related Party Agreement involving total payments within
any 12-month period in excess of $10,000 and which is not terminable
without penalty on no more than 30 days' prior notice;
(vii) each agreement (other than Staffing Contracts and routine
purchase orders or purchase order acknowledgments issued or received
in the ordinary course of business) for the acquisition or provision
of services, supplies, equipment, inventory, fixtures or other
property involving more than $10,000 in the aggregate;
(viii) each contract containing any noncompetition agreement,
covenant or undertaking; or
(ix) each other agreement or commitment not made in the ordinary
course of business that is Material to the Company.
True, correct and complete copies of all written Company Commitments, and
true, correct and complete written descriptions of all oral Company
Commitments, have been delivered or made available to WORK. Except as
accurately disclosed in Section 4.22(a) of the Disclosure Statement: (i)
there are no existing or asserted defaults, events of default or events,
occurrences, acts or omissions that, with the giving of notice or lapse of
time or both, would constitute defaults or events of default under any
Company Commitment which is Material to the Company by the Company or any
of the Company Subsidiaries or, to the knowledge of the Company, any other
party thereto; and (ii) no penalties have been incurred, nor are amendments
pending, with respect to any Company Commitment which is Material to the
Company. The Company Commitments are in full force and effect and are
valid and enforceable obligations of the Company or the Company
Subsidiaries parties thereto and, to the knowledge of the Company and the
Stockholders, the other parties thereto, in accordance with their
respective terms, and no defenses, off-sets or counterclaims have been
asserted or, to the knowledge of the Company and the Stockholders, may be
made by any party thereto (other than by the Company or a Company
Subsidiary), nor has the Company or a Company Subsidiary, as the case may
be, waived any rights thereunder, except as accurately described in Section
4.22(a) of the Disclosure Statement.
(b) Section 4.22(b) of the Disclosure Statement accurately describes
each Material Staffing Contract by identifying its parties, the nature of
the project or services being or to be provided under the contract by the
Company or a Company Subsidiary and the contract price. Except as
disclosed in Section 4.22(b) of the Disclosure Statement, no Staffing
Contract contains terms, conditions or requirements which:
(i) exceed the current performance capabilities of the Company or
the applicable Company Subsidiary; or
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(ii) will or could reasonably be expected to result in a total
cost of performance which is in excess of the contract price.
(c) Except as accurately disclosed in Section 4.22(c) of the
Disclosure Statement or contemplated hereby or by any other Transaction
Document to which the Company or any Company Subsidiary or Stockholder is a
party: (i) neither the Company nor any Company Subsidiary or Stockholder
has received notice of any plan or intention of any other party to any
Company Commitment to exercise any right to cancel or terminate any Company
Commitment, and neither the Company nor any Company Subsidiary or
Stockholder knows of any condition or state of facts, including the
consummation of the Merger, which would justify the exercise of such a
right; and (ii) neither the Company nor any Company Subsidiary or
Stockholder currently contemplates, or has reason to believe any other
Person currently contemplates, any amendment or change to any Company
Commitment.
Section 4.23. Capital Expenditures. Section 4.23 of the Disclosure
Statement accurately sets forth the total amount of capital expenditures
currently budgeted to be incurred by the Company and the Company Subsidiaries
during the balance of the Company's current and next ensuing fiscal years.
Except as accurately set forth in Section 4.23 of the Disclosure Statement, to
the knowledge of the Company and the Stockholders, no condition or state of
facts exists which will cause the total capital expenditures of the Company and
the Company Subsidiaries which will be required to replace worn-out or obsolete
Property, Plant and Equipment in the Company's current and next ensuing fiscal
years to exceed the amount budgeted for capital expenditures by the Company and
the Company Subsidiaries for the current and next ensuing fiscal years in order
to maintain the types and levels of sales and services the Company and the
Company Subsidiaries presently make or provide.
Section 4.24. Inventories. Except as accurately set forth in Section 4.24
of the Disclosure Statement, neither the Company nor any Company Subsidiary
owned as of the Current Balance Sheet Date, or owns as of the date hereof, any
Material amount of inventories.
Section 4.25. Insurance. Except as accurately set forth in Section 4.25
of the Disclosure Statement: (a) the Company has provided WORK with: (i) a
list of all insurance policies carried by the Company and each of the Company
Subsidiaries; (ii) an accurate list of all insurance loss runs and worker's
compensation claims received for the most recently ended three policy years; and
(iii) true, complete and correct copies of all insurance policies carried by
each of the Company and the Company Subsidiaries which are in effect, all of
which have been issued by insurers of recognized responsibility and currently
are, and will remain without interruption through the IPO Closing Date, in full
force and effect; (b) no insurance carried by the Company or any Company
Subsidiary has been canceled by the insurer during the past five years, and
neither the Company nor any Company Subsidiary has ever been denied coverage;
(c) neither the Company, any Company Subsidiary nor any Stockholder has received
any notice or other communication from any issuer of any listed insurance policy
of any material increase in any deductibles, retained amounts or the premiums
payable thereunder, and, to the knowledge of the Company and the Stockholders,
no such increase in deductibles, retainages or premiums is threatened; and (d)
each policy of workers' compensation insurance carried by the Company and each
Company Subsidiaries carries a modifier of one or less.
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Section 4.26. Employee Matters.
(a) Cash Compensation. The Company has provided WORK with an
accurate, complete written list of the names, titles and rates of annual
Cash Compensation, at the Current Balance Sheet Date and at the date hereof
(and the portions thereof attributable to salary or the equivalent, fixed
bonuses, discretionary bonuses and other Cash Compensation, respectively)
of all key employees (including all employees who are officers or
directors), nonemployee officers, nonemployee directors and key consultants
and independent contractors of each of the Company and the Company
Subsidiaries. Notwithstanding the foregoing, the terms "key employees" and
"key consultants and independent contractors" shall not include persons who
are not permanent employees, consultants or contractors who are assigned to
work at customer facilities.
(b) Employment Agreements. Section 4.26(b) of the Disclosure
Statement accurately lists all Employment Agreements with permanent
employees, consultants or independent contractors who are not regularly
assigned to work at customer facilities remaining executory in whole or in
part on the date hereof, complete and correct copies of all of which have
been provided to WORK by the Company. Neither the Company nor any Company
Subsidiary is a party to any oral Employment Agreement with any such
employee, consultant or independent contractor.
(c) Other Compensation Plans. Section 4.26(c) of the Disclosure
Statement accurately lists all Other Compensation Plans either remaining
executory at the date of this Agreement or to later become effective. The
Company has provided WORK with a true, correct and complete copy of each of
the listed Other Compensation Plans that is in writing and an accurate
description of each of the listed Other Compensation Plans that is not
written. Except as accurately set forth in Section 4.26(c) of the
Disclosure Statement, each of the Other Compensation Plans, including each
that is a Welfare Plan, may be unilaterally amended or terminated by the
Company or any Company Subsidiary without liability to any of them, except
as to benefits accrued thereunder prior to amendment or termination.
(d) ERISA Benefit Plans. Section 4.26(d) of the Disclosure Statement
accurately (i) lists each ERISA Pension Benefit Plan (A) the funding
requirements of which (under Section 301 of ERISA or Section 412 of the
Code) are, or at any time during the six-year period ending on the date of
this Agreement were, in whole or in part, the responsibility of the Company
or any Company Subsidiary, or respecting which the Company or any Company
Subsidiary is, or at any time during that period was, a "contributing
sponsor" or an "employer" as defined in Sections 4001(a)(13) and 3(5),
respectively, of ERISA (each plan described in this clause (A) being a
"Company ERISA Pension Plan"), (B) each other ERISA Pension Benefit Plan
respecting which a Company ERISA Affiliate is, or at any time during that
period was, such a "contributing sponsor" or "employer" (each plan
described in this clause (B) being an "ERISA Affiliate Pension Plan"), and
(C) each other ERISA Employee Benefit Plan that is being, or at any time
during that period was, sponsored, maintained or contributed to by the
Company or any Company Subsidiary (each plan described in this clause (C)
and each Company ERISA Pension Plan being a "Company
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ERISA Benefit Plan"), (ii) states the termination date of each Company
ERISA Benefit Plan and ERISA Affiliate Pension Plan that has been
terminated, and (iii) identifies for each ERISA Affiliate Pension Plan the
relevant ERISA Affiliates. The Company has provided WORK with true,
complete and correct copies of (i) each Company ERISA Benefit Plan and
ERISA Affiliate Pension Plan, (ii) each trust agreement related thereto,
and (iii) all amendments to all such plans and trust agreements. Except
as accurately set forth in Section 4.26(d) of the Disclosure Statement, (i)
neither the Company nor any Company Subsidiary is, or at any time during
the six-year period ended on the date of this Agreement was, a member of
any ERISA Group that currently includes, or included when the Company or a
Company Subsidiary was a member, among its members any Person other than
the Company and the Company Subsidiaries, and (ii) no Person is an ERISA
Affiliate of the Company or any Company Subsidiary (other than the Company
or any Company Subsidiary in the case of any other Company Subsidiary or
any Company Subsidiary in the case of the Company, if the Company and the
Company Subsidiaries comprise an ERISA Group).
(e) Employee Policies and Procedures. Section 4.26(e) of the
Disclosure Statement accurately lists all Employee Policies and Procedures.
The Company has provided WORK with a copy of all written Employee Policies
and Procedures and a written description of all material unwritten Employee
Policies and Procedures the continuance or discontinuance of which could
reasonably be expected to have a Material Adverse Effect.
(f) Unwritten Amendments. Except as accurately described in Section
4.26(f) of the Disclosure Statement, no material unwritten amendments have
been made, whether by oral communication, pattern of conduct or otherwise,
with respect to any of the Employment Agreements, Other Compensation Plans
or Employee Policies and Procedures.
(g) Labor Compliance. To the knowledge of the Company, each of the
Company and the Company Subsidiaries has been and is in compliance with all
applicable Governmental Requirements respecting employment and employment
practices, terms and conditions of employment and wages and hours, and
neither the Company nor any Company Subsidiary is liable for any arrears of
wages or penalties for failure to comply with any of the foregoing.
Neither the Company nor any Company Subsidiary has engaged in any unfair
labor practice or discriminated on the basis of race, color, religion, sex,
national origin, age, disability or handicap in its employment conditions
or practices. Except as accurately set forth in Section 4.26(g) of the
Disclosure Statement, there are no (i) unfair labor practice charges or
complaints or racial, color, religious, sex, national origin, age,
disability or handicap discrimination charges or complaints pending or, to
the knowledge of the Company, threatened against the Company or any of the
Company Subsidiaries before any Governmental Authority (nor, to the
knowledge of the Company, does any valid basis therefor exist) or (ii)
existing or, to the knowledge of the Company, threatened labor strikes,
disputes, grievances, controversies or other labor troubles affecting the
Company or any of the Company Subsidiaries (nor, to the knowledge of the
Company, does any valid basis therefor exist).
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(h) Unions. Except as accurately set forth in Section 4.26(h) of the
Disclosure Statement, (i) neither the Company nor any Company Subsidiary or
ERISA Affiliate has ever been a party to any agreement with any union,
labor organization or collective bargaining unit, (ii) no employees of any
of the Company and the Company Subsidiaries are represented by any union,
labor organization or collective bargaining unit, and (iii) to the
knowledge of the Company, none of the employees of the Company and the
Company Subsidiaries has threatened to organize or join a union, labor
organization or collective bargaining unit.
(i) No Aliens. All employees of each of the Company and the Company
Subsidiaries are citizens of, or are authorized in accordance with federal
immigration laws to be employed in, the United States.
(j) Change of Control Benefits. Except as accurately set forth in
Section 4.26(j) of the Disclosure Statement, neither the Company nor any of
the Company Subsidiaries is a party to any agreement, or has established
any policy, practice or program, requiring it to make a payment or provide
any other form of compensation or benefit or vesting rights to any person
performing services for the Company or any of the Company Subsidiaries
which would not be payable or provided in the absence of this Agreement or
the consummation of the transactions contemplated by this Agreement,
including any parachute payment under Section 280G of the Code.
(k) Retirees. Neither the Company nor any of the Company
Subsidiaries has any obligation or commitment to provide medical, dental or
life insurance benefits to or on behalf of any of its employees who may
retire or any of its former employees who have retired except (i) as may be
required pursuant to the continuation of coverage provisions of Section
4980B of the Code, the applicable parallel provisions of ERISA and any
applicable state law, (ii) continuation of benefits in the event of
disability, and (iii) conversion privileges provided under any insured
Company ERISA Employee Benefit Plans.
Section 4.27. Compliance With ERISA, etc.
(a) Compliance. Each of the Company ERISA Benefit Plans and Other
Compensation Plans (each, a "Plan") (i) is in substantial compliance with
all applicable provisions of ERISA, as well as with all other applicable
Governmental Requirements, and (ii) has been administered, operated and
managed in accordance with its governing documents.
(b) Qualification. All Plans that are intended to qualify under
Section 401(a) of the Code (the "Qualified Plans") are so qualified and
have been determined by the IRS to be so qualified (or application for
determination letters have been timely submitted to the IRS). The Company
has provided WORK with true, complete and correct 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 Qualified Plan and most recent trustee or custodian report.
To the extent that any Qualified Plans have not been amended to comply with
applicable Governmental Requirements, the remedial amendment
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period permitting retroactive amendment of these Qualified Plans has not
expired and will not expire within 120 days after the Effective Time. All
reports and other documents required to be filed with any governmental
agency or distributed to plan participants or beneficiaries (including
annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or Returns) have been timely filed or distributed.
(c) No Prohibited Transactions, etc. None of the Stockholders, any
Plan or the Company or any Company Subsidiary has engaged in any Prohibited
Transaction. No Plan has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(a) of ERISA, and no
circumstances exist under which the Company or any Company Subsidiary 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 maintained or contributed to by the Company or any of
its ERISA Affiliates. Further:
(i) there have been no terminations, partial terminations or
discontinuances of contributions to any Qualified Plan without a
determination by the IRS that such action does not adversely affect
the tax-qualified status of that plan;
(ii) no Termination Event has occurred;
(iii) no Reportable Event has occurred with respect to any Plan
which was not properly reported;
(iv) the valuation of assets of each Qualified Plan, as of the
Effective Time, will equal or exceed the actuarial present value of
all "benefit liabilities" (within the meaning of Section 4001(a)(16)
of ERISA) under that plan in accordance with the assumptions contained
in the Regulations of the PBGC governing the funding of terminated
defined benefit plans;
(v) with respect to Plans qualifying as "group health plans"
under Section 4980B of the Code or Section 607(l) or 609 of ERISA and
related regulations (relating to the benefit continuation rights
imposed by "COBRA" or qualified medical child support orders), the
Company, each Company Subsidiary and the Stockholders have complied in
all material respects with all reporting, disclosure, notice, election
and other benefit continuation and coverage requirements imposed
thereunder as and when applicable to those plans, and neither the
Company nor any Company Subsidiary has incurred (or will incur) any
direct or indirect liability or is (or will be) subject to any 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, any Company Subsidiary or any
Stockholder, at any time prior to the Effective Time, to comply with
any such federal or state benefit continuation or coverage
requirement, which is capable of being assessed or asserted before or
after the Effective Time directly or indirectly against the Company,
any
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Company Subsidiary, any Stockholder, the Surviving Corporation or WORK
with respect to any of those group health plans;
(vi) the Financial Statements as of the Current Balance Sheet
Date reflect the approximate total pension, medical and other benefit
liability for all Plans, and no material funding changes or
irregularities are reflected thereon which would cause those Financial
Statements to be not representative of prior periods; and
(vii) neither the Company nor any Company Subsidiary has
incurred liability under Section 4062 of ERISA.
(d) Multiemployer Plans. Except as accurately disclosed in Section
4.27(d) of the Disclosure Statement, neither the Company nor any Company
Subsidiary, and no ERISA Affiliate of any of them, is, or at any time
during the six-year period ended on the date of this Agreement was,
obligated to contribute to a Multiemployer Plan. Neither the Company nor
any Company Subsidiary, and no ERISA Affiliate of any of them, has made a
complete or partial withdrawal from a Multiemployer Plan so as to incur
withdrawal liability as defined in Section 4201 of ERISA.
(e) Claims and Litigation. Except as accurately disclosed in Section
4.27(e) of the Disclosure Statement, no Litigation or claims (other than
routine claims for benefits) are pending or, to the knowledge of the
Company, threatened against, or with respect to, any of the Plans or with
respect to any fiduciary, administrator or sponsor thereof (in their
capacities as such), or any party-in-interest thereof.
(f) Excise Taxes, Damages and Penalties. No act, omission or
transaction has occurred which would result in the imposition on the
Company or any Company Subsidiary of (i) breach of fiduciary duty liability
damages under Section 409 of ERISA, (ii) a civil penalty assessed pursuant
to Section 502 of ERISA or (iii) any excise tax under applicable provisions
of the Code with respect to any Plan.
(g) VEBA Welfare Trust. Any trust funding a Plan which is intended to
be exempt from federal income taxation pursuant to Section 501(c)(9) of the
Code, satisfies the requirements of that section and has received a
favorable determination letter from the IRS regarding the Plan's exempt
status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way that would
adversely affect its exempt status.
Section 4.28. Taxes.
(a) Each of the following representations and warranties in this
Section 4.28 is qualified to the extent accurately disclosed in Section
4.28 of the Disclosure Statement.
(b) All Returns required to be filed with respect to any Tax for which
the Company or any of the Company Subsidiaries is liable have been duly and
timely filed with
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the appropriate Taxing Authority, each Tax shown to be payable on each such
Return has been paid, each Tax payable by the Company or a Company
Subsidiary by assessment has been timely paid in the amount assessed, and
adequate reserves have been established on the consolidated books of the
Company and the Company Subsidiaries for all Taxes for which the Company or
any of the Company Subsidiaries is liable, but the payment of which is not
yet due. Neither the Company nor any Company Subsidiary is, or ever has
been, liable for any Tax payable by reason of the income or property of a
Person other than the Company or a Company Subsidiary. Each of the Company
and the Company Subsidiaries has timely filed true, correct and complete
declarations of estimated Tax in each jurisdiction in which any such
declaration is required to be filed by it. No Liens for Taxes exist upon
the assets of the Company or any Company Subsidiary except Liens for Taxes
which are not yet due. Neither the Company nor any Company Subsidiary is,
or ever has been, subject to Tax in any jurisdiction outside of the United
States. No Litigation with respect to any Tax for which the Company or any
Company Subsidiary is asserted to be liable is pending or, to the knowledge
of the Company or any Stockholder, threatened, and no basis which the
Company or any Stockholder believes to be valid exists on which any claim
for any such Tax can be asserted against the Company or any Company
Subsidiary. There are no requests for rulings or determinations in respect
of any Taxes pending between the Company, or any Company Subsidiary, and
any Taxing Authority. No extension of any period during which any Tax may
be assessed or collected and for which the Company or any Company
Subsidiary is or may be liable has been granted to any Taxing Authority.
Neither the Company nor any Company Subsidiary is or has been a party to
any tax allocation or sharing agreement. All amounts required to be
withheld by any of the Company and the Company Subsidiaries and paid to
governmental agencies for income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid
to the proper Taxing Authority. The Company and each Company Subsidiary
have made all deposits required by law to be made with respect to
employees' withholding and other employment Taxes.
(c) Neither the Company nor any Stockholder is a "foreign person," as
that term is referred to in Section 1445(f)(3) of the Code.
(d) The Company has not filed a consent pursuant to Section 341 (f) of
the Code or any comparable provision of any other tax statute and has not
agreed to have Section 341 (f)(2) of the Code or any comparable provision
of any other Tax statute apply to any disposition of an asset. No asset of
the Company or of any Company Subsidiary is subject to any provision of
applicable law which eliminates or reduces the allowance for depreciation
or amortization in respect of that asset below the allowance generally
available to an asset of its type. No accounting method changes of the
Company or of any Company Subsidiary exist or are proposed or threatened
which could give rise to an adjustment under Section 481 of the Code.
(e) Schedule 4.28 discloses whether the Company has made, and there is
now in effect, an election with the IRS to be taxed as an S corporation
within the meaning of Section 1361 of the Code. If the Company has made an
election to be taxed as an S corporation, at all times since the effective
date of such election, the Company has qualified as an
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S corporation within the meaning of Section 1361(a) of the Code. The
Company (i) owns no assets the disposition of which would cause the Company
to have a net recognized built-in gain within the meaning of Section 1374
of the Code, (ii) has had no item of income that has not been taken into
account by the Company and that would be treated as a recognized built-in
gain under Section 1374(d)(5) of the Code, and (iii) will not be liable for
any federal, state, city or local Taxes as a result of any transfer of the
Company's assets pursuant to the Merger.
Section 4.29. Government Contracts. Except as accurately set forth in
Section 4.29 of the Disclosure Statement, neither the Company nor any Company
Subsidiary is a party to any governmental contract subject to price
redetermination or renegotiation.
Section 4.30. Absence of Change. Since the Current Balance Sheet Date,
except as accurately set forth in Section 4.30 of the Disclosure Statement, none
of the following has occurred with respect to the Company or any Company
Subsidiary:
(a) any circumstance, condition, event or state of facts (either
singly or in the aggregate), other than conditions affecting the economy
generally, which has caused, is causing or could reasonably be expected to
cause a Material Adverse Effect on the Company;
(b) any change in its authorized Capital Stock or in any of its
outstanding Capital Stock or Derivative Securities;
(c) any Restricted Payment, except any declaration or payment of
dividends by any Company Subsidiary solely to the Company;
(d) any increase in, or any commitment or promise to increase, the
rates of Cash Compensation as of the date hereof, or the amounts or other
benefits paid or payable under any Company ERISA Pension Plan or Other
Compensation Plan, except for ordinary and customary bonuses and salary
increases for employees (other than the Stockholders or their Immediate
Family Members) at the times and in the amounts consistent with its past
practice;
(e) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, that will have a Material
Adverse Effect on the Surviving Corporation following the Effective Time;
(f) any distribution, sale or transfer of, or any Company Commitment
to distribute, sell or transfer, any of its assets or properties of any
kind which singly is or in the aggregate are Material to the Company, other
than distributions, sales or transfers in the ordinary course of its
business and consistent with its past practices to Persons other than to
the Stockholders and their Immediate Family Members and Affiliates;
(g) any cancellation, or agreement to cancel, any Indebtedness,
obligation or other liability owing to it, including any Indebtedness,
obligation or other liability of any
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Stockholder or any Related Person or Affiliate thereof, provided that the
Company or a Company Subsidiary may negotiate and adjust bills in the
course of good faith disputes with customers in a manner consistent with
past practice, if the adjustments are (i) included in the Supplemental
Information provided WORK pursuant to Section 6.07 or (ii) do not exceed
$10,000 in the aggregate;
(h) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of its assets, property
or rights or requiring consent of any Person to the transfer and assignment
of any such assets, property or rights;
(i) 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 its business or not consistent with its past practices;
(j) any waiver of any of its rights or claims that singly is, or in
the aggregate are, Material to the Company;
(k) any transaction by it outside the ordinary course of its business
or not consistent with its past practices and which involves in excess of
$10,000;
(1) any incurrence by it of any Indebtedness or any Guaranty not
constituting its Indebtedness, or any Company Commitment to incur any
Indebtedness or any such Guaranty;
(m) any investment in the Capital Stock, Derivative Securities or
Indebtedness of any Person, other than a Permitted Investment;
(n) except in accordance with the Company's consolidated capital
expenditure budget for the Company's current fiscal year, any capital
expenditure or series of related capital expenditures by the Company and
the Company Subsidiaries collectively in excess of $25,000, or commitments
by the Company and the Company Subsidiaries collectively to make capital
expenditures totaling in excess of $25,000; or
(o) any cancellation or termination of a Material Agreement of the
Company.
Section 4.31. Bank Relations; Powers of Attorney. Section 4.31 of the
Disclosure Statement accurately lists and identifies:
(a) the name of each financial institution in which the Company or any
Company Subsidiary has borrowing or investment arrangements, deposit or
checking accounts or safe deposit boxes;
(b) the types of those arrangements and accounts, including, as
applicable, names in which accounts or boxes are held, the account or box
numbers and the name of each Person authorized to draw thereon or have
access thereto; and
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(c) the name of each Person holding a general or special power of
attorney from the Company or any Company Subsidiary and a description of
the terms of each such power.
Section 4.32. Relations With Governments, etc. Neither the Company nor
any Company Subsidiary has made, offered or agreed to offer anything of value to
any governmental official, political party or candidate for government office
which would cause the Company or any Company Subsidiary to be in violation of
the Foreign Corrupt Practices Act of 1977 or any domestic or foreign anti-
bribery or other Governmental Requirement to a similar effect.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORK AND NEWCO
Section 5.01. Organization; Power. WORK is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas, and
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its Organization State. Newco has been organized for the sole
purpose of participating in the Merger and has not, and will not, engage in any
activities other than those necessary to effectuate the Merger. Each of WORK
and Newco has all requisite corporate power and authority under the laws of its
Organization State and its Charter Documents to own or lease and to operate its
properties presently and following the Effective Time and to carry on its
business as now conducted and as proposed to be conducted following the
Effective Time. Neither WORK nor Newco has engaged in any operations since its
organization other than in connection with their formation and capitalization
and the transactions contemplated by this Agreement and the Other Agreements.
Section 5.02. Authorization; Enforceability; Absence of Conflicts;
Required Consents.
(a) The execution, delivery and performance by each of WORK and Newco
of this Agreement and each other Transaction Document to which it is or
will be a party, and the effectuation of the Merger and the other
transactions contemplated hereby and thereby, are within its corporate
power under its Charter Documents and the applicable Governmental
Requirements of its Organization State and have been duly authorized by all
proceedings, including actions permitted to be taken in lieu of
proceedings, required under its Charter Documents and the applicable
Governmental Requirements of its Organization State.
(b) This Agreement has been, and each of the other Transaction
Documents to which either of WORK or Newco is a party, when executed and
delivered to the other parties thereto (or, in the case of the Certificate
of Merger, the applicable Governmental Authorities), will have been, duly
executed and delivered by it and is, or when so executed and delivered will
be, its legal, valid and binding obligation, enforceable against it in
accordance with its terms, except as enforceability may be (i) limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
(ii) subject to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance in accordance with their
respective terms by each of WORK and Newco of the Transaction Documents to
which it is a party do not and will not (i) violate, breach or constitute a
default under (A) the Charter Documents of WORK or Newco, (B) any
Governmental Requirement applicable to WORK or Newco or (C) any Material
Agreement of WORK or Newco, (ii) result in the acceleration or mandatory
prepayment of any Indebtedness, or any Guaranty not constituting
Indebtedness, of WORK or Newco or afford any holder of any of that
Indebtedness, or any beneficiary of any of those Guaranties, the right to
require WORK or Newco to redeem, purchase or otherwise acquire, reacquire
or repay any of that Indebtedness, or to perform any of those
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Guaranties, (iii) cause or result in the imposition of, or afford any
Person the right to obtain, any Lien upon any property or assets of WORK or
Newco (or upon any revenues, income or profits of either WORK or Newco
therefrom) or (iv) result in the revocation, cancellation, suspension or
material modification, in any single case or in the aggregate, of any
Governmental Approval possessed by WORK or Newco at the date of this
Agreement and necessary for the ownership or lease and the operation of its
properties or the carrying on of its business as now conducted, including
any necessary Governmental Approval under each applicable Environmental
Law.
(d) Except for (i) the filing of the Certificate of Merger with the
applicable Governmental Authorities, (ii) filings of the Registration
Statement under the Securities Act and a registration statement on Form 8-A
with respect to the registration of the WORK Common Stock under the
Exchange Act and the SEC order declaring those registration statements
effective under the Securities Act and the Exchange Act, respectively, and
(iii) as may be required by the HSR Act or applicable state securities or
blue sky laws, no Governmental Approvals are required to be obtained, and
no reports or notices to or filings with any Governmental Authority are
required to be made, by WORK or Newco for the execution, delivery or
performance by WORK or Newco of the Transaction Documents to which it is a
party, the enforcement against WORK or Newco, as the case may be, of its
obligations thereunder or the effectuation of the Merger and the other
transactions contemplated thereby.
Section 5.03. Charter Documents. WORK has delivered to the Company true,
complete and correct copies of the Charter Documents of each of WORK and Newco.
No breach or violation of any Charter Document of either WORK or Newco has
occurred and is continuing.
Section 5.04. Capital Stock of WORK and Newco.
(a) Immediately prior to the Effective Time, (i) the authorized
Capital Stock of WORK will be comprised of (A) 100,000,000 shares of WORK
Common Stock and (B) 10,000,000 shares of WORK Preferred Stock, (ii) before
giving effect to the Merger and the merger transactions contemplated by the
Other Agreements, (A) the number of shares of WORK Common Stock then issued
and outstanding, will be as set forth in the Registration Statement when it
becomes effective under the Securities Act, (B) 1,000 shares of Series A
WORK Preferred Stock and 2,500 shares of Series B WORK Preferred Stock will
then be issued or outstanding but will be converted into shares of WORK
Common Stock on the IPO Closing Date, and (C) WORK will have authorized and
reserved for issuance, pursuant to Other Compensation Plans or the exercise
of Derivative Securities the number of shares of WORK Common Stock set
forth in the Registration Statement when it becomes effective under the
Securities Act.
(b) The authorized Capital Stock of Newco is comprised of 1,000 shares
of Newco Common Stock, all of which shares are issued, outstanding and
owned, of record and beneficially, by WORK. No Derivative Securities of
Newco are outstanding.
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(c) All shares of WORK Common Stock and Newco Common Stock outstanding
immediately prior to the Effective Time, and all shares of WORK Common
Stock to be issued pursuant to Section 2.04, when issued, will have been
duly authorized and validly issued in accordance with the TBCA and their
issuer's Charter Documents, and will be fully paid and nonassessable. None
of the shares of WORK Common Stock to be issued pursuant to Section 2.04
will, when issued, have been issued in breach or violation of (i) any
applicable statutory or contractual preemptive rights, or any other rights
of any kind (including any rights of first offer or refusal), of any Person
or (ii) the terms of any of its Derivative Securities then outstanding.
Section 5.05. Subsidiaries. Immediately prior to the IPO Closing Date,
(a) WORK will have no Subsidiaries other than Newco and each Entity defined as
"Newco" in each of the Other Agreements, (b) Newco will have no Subsidiaries,
and (c) neither WORK nor Newco will own, of record or beneficially, directly or
indirectly through any Person or otherwise (except pursuant hereto or to the
Other Agreements), any Capital Stock or Derivative Securities of any Entity not
described in this Section 5.05 as a Subsidiary of WORK (in the case of WORK) or
any Entity (in the case of Newco).
Section 5.06. Liabilities. Except as disclosed in the Private Placement
Memorandum, neither WORK nor Newco has any material liabilities of any kind
other than those incurred in connection with this Agreement and the Other
Agreements and the transactions contemplated hereby and thereby, including the
IPO.
Section 5.07. Compliance With Laws; No Litigation. Each of WORK and Newco
is in compliance with all Governmental Requirements applicable to it, and no
Litigation is pending or, to the knowledge of WORK, threatened to which WORK or
Newco is or may become a party which questions or involves the validity or
enforceability of any obligation of WORK or Newco under any Transaction
Document, or which seeks (or reasonably may be expected to seek) (a) to prevent
or delay consummation by WORK or Newco of the transactions contemplated by this
Agreement to be consummated by WORK or Newco, as the case may be, or (b) Damages
from WORK or Newco in connection with any such consummation.
Section 5.08. No Brokers. WORK has not, directly or indirectly, in
connection with this Agreement or the transactions contemplated hereby, employed
any broker, finder or agent, or agreed to pay or incurred any obligation to pay
any broker's or finder's fee, any sales commission or any similar form of
compensation.
Section 5.09. Private Placement Memorandum. At the date hereof, the
Private Placement Memorandum (other than the historical financial statements,
including the notes thereto, of the Founding Companies (including the Company)
and the historical information contained therein respecting the Company and the
Stockholders, to which this Section 5.09 does not apply) does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially misleading in
the light of the circumstances under which those statements are made.
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Section 5.10. Registration and Other Rights. Except as set forth in the
Registration Rights Agreement or otherwise described in the Private Placement
Memorandum or the Registration Statement, at the Effective Time WORK will have
no (a) commitment to any Person to cause securities of WORK to be registered
under the Securities Act or the securities laws of any state, (b) outstanding
Derivative Securities, or (c) outstanding agreements or commitments of any
character committing WORK to issue or acquire shares of its Capital Stock or
Derivative Securities.
Section 5.11. No Side Agreements. Neither WORK nor Newco has entered into
any agreement with any of the Founding Companies or any of the stockholders of
the Founding Companies other than the Other Agreements and the agreements
contemplated by each of the Other Agreements, including the employee and other
agreements referred to therein.
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ARTICLE VI
COVENANTS EXTENDING TO THE EFFECTIVE TIME
Section 6.01. Access and Cooperation; Due Diligence.
(a) From the date of this Agreement until the IPO Closing Date, the
Company, for the benefit of WORK and each Other Founding Company, will (i)
afford to the Representatives of WORK and each Other Founding Company
reasonable access to all the key employees, sites, properties, books and
records of each of the Company and the Company Subsidiaries, (ii) provide
WORK with such additional financial and operating data and other
information relating to the business and properties of each of the Company
and the Company Subsidiaries as WORK or any Other Founding Company may from
time to time reasonably request, and (iii) cooperate with WORK and each
Other Founding Company and their respective Representatives in the
preparation of any documents or other material which may be required in
connection with any Transaction Documents or any Other Transaction
Documents. Each Stockholder and the Company agree, for the benefit of WORK
and each Other Founding Company, that they will treat all Confidential
Information obtained by them in connection with the negotiation and
performance of this Agreement or the due diligence investigations conducted
with respect to each Other Founding Company as confidential in accordance
with the provisions of Section 11.01. In addition, WORK will cause each
Other Founding Company to enter into a provision identical to this Section
6.01(a) to require each Other Founding Company to keep confidential any
Confidential Information respecting any of the Company and the Company
Subsidiaries obtained by that Other Founding Company.
(b) Each of the Company and the Stockholders will use its best efforts
to secure, as soon as practicable after the execution of this Agreement,
all approvals or consents of third Persons as may be necessary to
consummate the transactions contemplated hereby.
(c) From the date hereof until the IPO Closing Date, WORK and Newco
will (i) afford to the Representatives of the Company and the Stockholders
access to all sites, properties, books and records of WORK and Newco, (ii)
provide the Company with such additional financial and operating data and
other information relating to the business and properties of WORK and Newco
as the Company or any Stockholder may from time to time reasonably request,
and (iii) cooperate with the Company and the Stockholders and their
respective Representatives in the preparation of any documents or other
material which may be required in connection with any Transaction
Documents.
(d) If this Agreement is terminated pursuant to Section 12.01, WORK
promptly will return, and will use reasonable commercial efforts to cause
all the Other Founding Companies to return, all written Confidential
Information of the Company it or they, as the case may be, then possess to
the Company.
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Section 6.02. Conduct of Business Pending Closing. From the date of this
Agreement until the Effective Time, the Company will, and will cause each
Company Subsidiary to, except as and only to the extent set forth in Schedule
6.02:
(a) carry on its businesses in substantially the same manner as it has
before, and not introduce any new method of management, operation or
accounting which is material to the Company;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear
and tear excepted;
(c) perform all its obligations under agreements relating to or
affecting its assets, properties and other rights;
(d) keep in full force and effect, without interruption, all its
present insurance policies or other comparable insurance coverage;
(e) use reasonable commercial efforts to (i) maintain and preserve its
business organization intact, (ii) retain its present employees, and (iii)
maintain its relationships with suppliers, subcontractors, customers and
others having business relations with it;
(f) comply with all applicable Governmental Requirements; and
(g) except as required or expressly permitted by this Agreement,
maintain the instruments and agreements governing its outstanding
Indebtedness and leases on their present terms and not enter into new or
amended Indebtedness or lease instruments or agreements involving amounts
over $5,000 in any case or $25,000 in the aggregate, without the prior
written consent of WORK (which consent will not be unreasonably withheld).
Section 6.03. Prohibited Activities. From the date of this Agreement
until the Effective Time, without the prior written consent of WORK or unless as
required or expressly permitted by this Agreement or as set forth on Schedule
6.03, the Company will not, and will not permit any Company Subsidiary to:
(a) make any change in its Charter Documents;
(b) issue any of its Capital Stock or issue or otherwise create any of
its Derivative Securities;
(c) make any Restricted Payment (other than as provided in Schedule
6.03);
(d) make any investments (other than Permitted Investments) in the
Capital Stock, Derivative Securities or Indebtedness of any Person;
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(e) enter into any contract or commitment (other than a Staffing
Contract) or incur or agree to incur any liability or make any capital
expenditures in a single transaction or a series of related transactions
involving an aggregate amount of more than $25,000 otherwise than in the
ordinary course of its business and consistent with its past practice;
(f) increase or commit or promise to increase the Cash Compensation
payable or to become payable to any officer, director, stockholder,
employee or agent, consultant or independent contractor of any of the
Company and the Company Subsidiaries or make any discretionary bonus or
management fee payment to any such Person, except bonuses or salary
increases to employees (other than the Stockholders or their Immediate
Family Members) at the times and in the amounts consistent with its past
practice;
(g) create or assume any Liens (other than Permitted Liens) upon any
of its assets or properties, whether now owned or hereafter acquired,
except for purchase money Liens incurred in connection with the acquisition
of equipment with an aggregate cost not in excess of $10,000 and necessary
or desirable for the conduct of the business of any of the Company and the
Company Subsidiaries;
(h) adopt, establish, amend or terminate any ERISA Employee Benefit
Plan, or any Other Compensation Plan or Employee Policies and Procedures,
or take any discretionary action, or omit to take any contractually
required action, if that action or omission could either (i) deplete the
assets of any ERISA Employee Benefit Plan or any Other Compensation Plan or
(ii) increase the liabilities or obligations under any such plan;
(i) sell, assign, lease or otherwise transfer or dispose of any of its
owned or leased Property, Plant or Equipment otherwise than in the ordinary
course of its business and consistent with its past practice;
(j) negotiate for the acquisition of any business or the start-up of
any new business;
(k) merge, consolidate or effect a share exchange with, or agree to
merge, consolidate or effect a share exchange with, any other Entity;
(1) waive any of its material rights or claims, provided that it may
negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice, but such adjustments
will not be deemed to be included in Section 4.17 of the Disclosure
Statement unless specifically listed in the Supplemental Information;
(m) commit a material breach of or amend materially or terminate any
Material Agreement of the Company or any of its Governmental Approvals; or
(n) enter into any other transaction (i) outside the ordinary course
of its business and consistent with its past practice or (ii) prohibited
hereby.
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Section 6.04. No Shop: Release of Directors.
(a) Each of the Company and the Stockholders agrees that, from the
date of this Agreement until the Effective Time, neither the Company nor
any Stockholder, nor any of their respective officers and directors shall,
and the Company and each Stockholder will direct and use their best efforts
to cause each of their respective Representatives not to, initiate, solicit
or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including any proposal or offer to
the Stockholders) with respect to a merger, acquisition, consolidation or
similar transaction involving, or any purchase of all or any significant
portion of the assets or any equity securities of, the Company (any such
proposal or offer being herein called an "Acquisition Proposal") or engage
in any activities, discussions or negotiations concerning, or provide any
Confidential Information respecting, the Company, any Other Founding
Company or WORK to, or have any discussions with, any Person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal. The Company and each Stockholder
will: (i) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons previously
conducted with respect to any of the foregoing, and each will take the
steps necessary to inform the Persons referred to in the first sentence of
this Section 6.04(a) of the obligations undertaken in this Section 6.04(a);
and (ii) notify WORK immediately if any such inquiries or proposals are
received by, any such information is requested from or any such discussions
or negotiations are sought to be initiated or continued with the Company or
any Stockholder.
(b) Each of the Company and the Stockholders hereby (i) waives every
right, if any, the Governmental Requirements of the Company's Organization
State afford the Company or Stockholders to require the Company's directors
(or their equivalents if the Company is not a corporation), in the exercise
of their fiduciary duties in their capacity as such, to engage in any of
the activities prohibited by this Section 6.04 and (ii) releases each such
person from any and all liability he might otherwise have to the Company or
any Stockholders but for this release.
Section 6.05. Notification of Certain Matters. The Stockholders and the
Company shall give prompt notice to WORK of (a) the existence or occurrence of
each condition or state of facts which becomes known to them and which will or
reasonably could be expected to cause any representation or warranty of the
Company or any Stockholder contained herein to be untrue or incorrect in any
material respect at or prior to the Closing or on the IPO Closing Date and (b)
any material failure of any Stockholder or the Company to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by that
Person hereunder. WORK shall give prompt notice to the Company of (a) the
existence or occurrence of each condition or state of facts which will or
reasonably could be expected to cause any representation or warranty of WORK or
Newco contained herein to be untrue or inaccurate at or prior to the Closing or
on the IPO Closing Date and (b) any material failure of WORK or Newco to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder. The delivery of any notice pursuant to this Section
6.05 shall not be deemed to (a) modify the representations or warranties herein
of the party delivering that notice, or any other party, which modification may
be made only
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pursuant to Section 6.06, (b) modify the conditions set forth in Article VII or
(c) limit or otherwise affect the remedies available hereunder to the party
receiving that notice.
Section 6.06. Supplemental Information. Each of the Company and the
Stockholders agrees that, with respect to its representations and warranties
contained in this Agreement, it will have the continuing obligation until the
Closing to provide WORK promptly with such additional supplemental Information
(collectively, the "Supplemental Information"), in the form of (a) amendments to
then existing Schedules or Sections of the Disclosure Statement or (b)
additional Schedules or Sections of the Disclosure Statement, as would be
necessary, in the light of the circumstances, conditions, events and states of
facts then known to the Company or any Stockholder, to make each of those
representations and warranties true and correct as of the Closing and on the IPO
Closing Date. For purposes only of determining whether the conditions to the
obligations of WORK and Newco which are specified in Sections 7.04(a)(i) and
7.04(b)(i) have been satisfied, and not for any purpose under Article IX, the
Schedules and the Disclosure Statement as of the Closing and on the IPO Closing
Date shall be deemed to be the Schedules and the Disclosure Statement as of the
date hereof as amended or supplemented by the Supplemental Information provided
to WORK prior to the Closing pursuant to this Section 6.06; provided, however,
that if the Supplemental Information so provided discloses the existence of
circumstances, conditions, events or states of facts which, in any combination
thereof, (a) have had a Material Adverse Effect on the Company which was not
reflected in the determination of the Merger Consideration or (b) in the
judgment of WORK (which shall be conclusive for purposes of this Section 6.06
and Article XII, but not for any purpose of Article IX), are having or will have
a Material Adverse Effect on the Company or the Surviving Corporation, as the
case may be, WORK will be entitled to terminate this Agreement pursuant to
Section 12.01(a)(iv) and to treat as WORK Indemnified Losses for all purposes of
Article IX (which treatment will not prejudice the right of any Stockholder
under Article IX to contest Damage Claims made by WORK in respect of those WORK
Indemnified Losses) all Damages to the Company or the Surviving Corporation
which are attributable to the circumstances, conditions, events and states of
facts first disclosed herein after the date hereof in the Supplemental
Information; and provided further, however, that if the circumstances,
conditions, events or states of facts disclosed in the Supplemental Information
and having or judged to have in the future such a Material Adverse Effect (A)
have not resulted from a breach by the Company or the Stockholders of any of
their covenants set forth in Article VI or elsewhere in this Agreement and (B)
do not indicate that any representation or warranty of the Stockholders and the
Company made in Articles III and IV shall have been untrue or inaccurate at the
date of this Agreement, then WORK shall only be entitled to terminate this
Agreement pursuant to Section 12.01(a)(iv), and shall not be entitled to treat
as WORK Indemnified Losses any such Damages to the Company or the Surviving
Corporation.
Section 6.07. Cooperation in Connection With the IPO. The Company and the
Stockholders will (a) provide WORK and the Underwriter with all the Information
concerning the Company or any of the Stockholders which is reasonably requested
by WORK or the Underwriter from time to time in connection with effecting the
IPO and (b) cooperate with WORK and the Underwriter and their respective
Representatives in the preparation and amendment of the Registration Statement
(including the Financial Statements) and in responding to the comments of the
SEC staff, if any, with respect thereto. WORK will provide to the Company and
the Stockholders copies of drafts of the Registration Statement prior to its
initial filing with the SEC. The Company and each
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Stockholder agree promptly to (a) advise WORK if, at any time during the period
in which a prospectus relating to the IPO is required to be delivered under the
Securities Act, any information contained in the then current Registration
Statement prospectus concerning the Company, any Company Subsidiary or the
Stockholders becomes incorrect or incomplete in any material respect and (b)
provide WORK with the information needed to correct or complete that
information. WORK will provide the Company with copies of the Registration
Statement, including all pre-effective amendments thereto, promptly after the
filing thereof with the SEC under the Securities Act.
Section 6.08. Additional Financial Statements. The Company will furnish
to WORK:
(a) as soon as available and in any event within 30 days after the end
of each of the Company's fiscal quarters which ends prior to the IPO
Pricing Date, an unaudited consolidated balance sheet of the Company and
the Company Subsidiaries as of the end of that fiscal quarter and the
related consolidated statements of income or operations, cash flows and
stockholders' or other owners' equity for that fiscal quarter and for the
period of the Company's fiscal year ended with that quarter, in each case
(i) setting forth in comparative form the figures for the corresponding
portion of the Company's previous fiscal year and (ii) prepared in
accordance with GAAP applied on basis consistent throughout the periods
indicated (excepting footnotes) and consistent with the basis on which the
Initial Financial Statements including the Current Balance Sheet were
prepared; and
(b) if requested by WORK in connection with any amendment of the
Registration Statement and promptly following any such request, such
summary consolidated operating or other financial information of the
Company and the Company Subsidiaries as of the end of either the first or
second fiscal month in any of the Company's fiscal quarters as WORK may
request.
Section 6.09. Termination of Plans. If requested by WORK, if permitted by
all applicable Governmental Requirements to do so, the Company will, or will
cause the applicable Company Subsidiary to, terminate each Plan identified in
Section 4.26(c) or (d) of the Disclosure Statement as a "Plan To Be Terminated"
at, or if agreed by the Company, prior to, the Effective Time.
Section 6.10. Disposition of Unwanted Assets. At or prior to the Closing,
the Company will make all arrangements and take all such actions as are
necessary and satisfactory to WORK to dispose, prior to the Effective Time, of
those assets of it or of one or more of the Company Subsidiaries which are
listed in, and which shall be disposed of as provided in, Schedule 6.10.
Section 6.11. HSR Act Matters. If WORK shall determine that filings under
the HSR Act are necessary or appropriate in connection with the effectuation of
the Merger or the consummation of the acquisitions contemplated by the Other
Agreements, and advises the Company in writing of that determination, the
Company promptly will compile and file under the HSR Act such information
respecting it as the HSR Act requires of an Entity to be acquired, and the
expiration or termination of the applicable waiting period and any extension
thereof under the HSR Act shall be
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deemed a condition precedent set forth in Section 7.02(b). Any filing fees
payable under the HSR Act shall be paid by WORK.
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ARTICLE VII
THE CLOSING AND CONDITIONS TO CLOSING AND CONSUMMATION
Section 7.02. Conditions to the Obligations of Each Party.
(a) The obligation of each Party to take the actions contemplated to
be taken by that Party at the Closing is subject to the satisfaction of
each of the following conditions on or before the date of the Closing:
(i) No Litigation. No Litigation shall be pending on the date of
the Closing to restrain, prohibit or otherwise interfere with, or to
obtain material damages or other relief from WORK or the Surviving
Corporation in connection with, the consummation of the Merger or the
IPO;
(ii) Governmental Approvals. All Governmental Approvals (other
than the acceptance for filing of the Certificate of Merger) required
to be obtained by any of the Company, WORK and Newco in connection
with the consummation of the Merger and the IPO shall have been
obtained; and
(iii) The Registration Statement. (A) The Registration
Statement, as amended to cover the offering, issuance and sale by WORK
of such number of shares of WORK Common Stock at the IPO Price (which
need not be set forth in the Registration Statement when it becomes
effective under the Securities Act) as shall yield aggregate cash
proceeds to WORK (net of the Underwriter's discount or commissions) in
at least the amount (the "Minimum Cash Amount") sufficient when added
to the funds, if any, available from other sources (the "Other
Financing Sources"), if any, and as set forth in the Registration
Statement when it becomes effective under the Securities Act to enable
WORK to pay or otherwise deliver on the IPO Closing Date (1) the total
cash portion of the Merger Consideration then to be delivered pursuant
to Section 2.04, (2) the total cash portion of the merger or other
acquisition consideration then to be delivered pursuant to the Other
Agreements as a result of the consummation of the mergers or other
acquisition transactions contemplated thereby, and (3) the total
amount of Indebtedness of the Founding Companies and WORK which the
Registration Statement discloses at the time it becomes effective
under the Securities Act will be repaid on the IPO Closing Date with
proceeds received by WORK from the IPO and the Other Financing
Sources, shall have been declared effective under the Securities Act
by the SEC; (B) no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC, and the SEC
shall not have initiated or threatened to initiate Litigation for that
purpose; (C) the Underwriter shall have agreed in writing (the
"Underwriting Agreement," which term includes the related pricing
agreement, if any) to purchase from WORK on a firm commitment basis
for resale to the public initially at the IPO Price, subject to the
conditions set forth in the Underwriting Agreement, such number of
shares of WORK Common Stock covered by the
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Registration Statement as, when multiplied by the price per share of
WORK Common Stock to be paid by the Underwriter to WORK pursuant to
the Underwriting Agreement, shall equal at least the Minimum Cash
Amount; and (D) neither the Registration Statement nor the Final
Prospectus shall contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements contained therein not materially misleading in the light of
the circumstances under which those statements are made.
(b) The obligation of each party hereto with respect to the actions to
be taken on the IPO Closing Date is subject to the satisfaction on that
date of each of the following conditions:
(i) No Litigation. No Litigation shall be pending on the IPO
Closing Date to restrain, prohibit or otherwise interfere with, or to
obtain material damages or other relief from WORK or the Surviving
Corporation in connection with, the consummation of the Merger or the
IPO;
(ii) Governmental Approvals. All Governmental Approvals required
to be obtained by the Company, WORK and Newco in connection with the
consummation of the Merger and the IPO shall have been obtained;
(iii) Receipt of Certain Certificates. Each party to the
Transferors' Agreement or his Representative shall have received the
certificates that such party is entitled to receive on the IPO Closing
Date pursuant to Section 3.5 of the Transferors' Agreement;
(iv) Registration Statement and Final Prospectus. Neither the
Registration Statement, in its form at the Effective Time, nor the
Final Prospectus shall contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements contained therein not materially misleading in the light of
the circumstances under which those statements are made; and
(vi) Closing of the IPO. (A) WORK shall have issued and sold
shares of WORK Common Stock to the Underwriter in accordance with the
Underwriting Agreement for initial resale at the IPO Price and
received payment therefor in an amount at least equal to the amount by
which (1) the Minimum Cash Amount exceeds (2) the aggregate amount of
funds actually received on the IPO Closing Date, if any, from any one
or more of the Other Financing Sources and (B) the IPO Price shall
have been at least $9.
Section 7.03. Conditions to the Obligations of the Company and the
Stockholders.
(a) The obligations of the Company and each Stockholder with respect
to actions to be taken by them at or before the Closing are subject to the
satisfaction, or the written waiver by the Company on behalf of itself and
each Stockholder pursuant to Section 11.05,
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on or before the date of the Closing of, in addition to the conditions
specified in Section 7.02 (a), all of the following conditions:
(i) Representations and Warranties. All of the representations
and warranties of WORK and Newco in Article V shall be true and correct in
all material respects as of the Closing as though made on that date;
(ii) Delivery of Documents. WORK shall have delivered to the
Company, with copies for each Stockholder:
(A) a WORK officer's certificate respecting the
representations and warranties of WORK and Newco in Article V and
compliance with the covenants of WORK and Newco in Article VI and in
the form thereof attached as an exhibit to the Closing Memorandum;
(B) corporate and tax opinions dated the IPO Closing Date
and addressed to the Company and the Stockholders from Counsel
for WORK and Newco substantially in the form thereof attached as
an exhibit to the Closing Memorandum, upon which the Underwriters
and their counsel will be authorized to rely;
(C) a certificate of the secretary or any assistant
secretary of WORK in the form thereof (without attachments
thereto) attached as an exhibit to the Closing Memorandum and
respecting, and to which there shall be attached, (1) the Charter
Documents of WORK and Newco (certified by the Secretary of State
of the State of Texas in the case of the certificates of
incorporation of WORK included therein); (2) the resolutions of
the boards of directors of WORK and Newco respecting the
Transaction Documents and the transactions contemplated thereby;
(3) a certificate respecting the incumbency and true signatures
of the WORK and Newco officers who execute the Transaction
Documents on behalf of WORK and Newco, respectively; (4) a
specimen certificate evidencing shares of WORK Common Stock; (5)
the prospectus included in the Registration Statement when it
became effective; and (6) a facsimile copy of the Underwriting
Agreement as executed and delivered by WORK and the Underwriter;
(D) the Registration Rights Agreement duly executed and
delivered by WORK; and
(E) a certificate, dated as of a Current Date, duly issued
by the Secretary of State of the State of Texas, showing WORK to
be in good standing and authorized to do business in that State.
(iii) Listing and Minimum Market Capitalization. Shares of the
WORK Common Stock shall have been admitted for listing on the New York Stock
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Exchange and the product obtained by multiplying the IPO Price times the
number of shares of the WORK Common Stock to be outstanding on the IPO
Closing Date, after consummation of the IPO and the issuance of the shares
of WORK Common Stock to be issued pursuant to this Agreement and the Other
Agreements equals at least $100 million;
(iv) Management Personnel. On the IPO Closing Date, Samuel Sacco
and B. Garfield French shall be the Chairman of the Board and the President
and Chief Executive Officer, respectively, of WORK.
(b) The obligations of the Company and each Stockholder with respect
to the actions to be taken by them on the IPO Closing Date are subject to
the satisfaction, or the written waiver by the Company on behalf of itself
and each Stockholder pursuant to Section 11.05, on or before the IPO
Closing Date, of, in addition to the conditions specified in Section
7.02(b), all of the following conditions:
(i) Representations and Warranties. All of the representations
and warranties of WORK and Newco in Article V shall be true and
correct in all material respects as of the IPO Closing Date as though
made on that date.
(ii) Continued Effectiveness. Each of the New Employment
Agreements and the Transferors' Agreement then shall be in full force
and effect.
Section 7.04. Conditions to the Obligations of WORK and Newco.
(a) The obligations of WORK and Newco with respect to actions to be
taken by them at or before the Closing are subject to the satisfaction, or
the written waiver by WORK and Newco pursuant to Section 11.05, on or
before the date of the Closing, of, in addition to the conditions specified
in Section 7.02 (a), all of the following conditions:
(i) Representations and Warranties. All the representations and
warranties of the Stockholders and the Company in Articles III and IV
shall be true and correct in all material respects as of the Closing
as though made at that time;
(ii) Delivery of Documents. The Stockholders and the Company
shall have delivered to WORK:
(A) a Company officer's certificate, signed by a Responsible
Officer, respecting the representations and warranties of the
Stockholders and the Company in Articles III and IV and
compliance with the covenants of the Stockholders and the Company
in Article VI and in the form thereof attached as an exhibit to
the Closing Memorandum;
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(B) opinions dated the IPO Closing Date and addressed to
WORK from Counsel for the Company and the Stockholders
substantially in the form thereof attached as exhibits to the
Closing Memorandum;
(C) a certificate of the secretary or any assistant
secretary of the Company in the form thereof (without attachments
thereto) attached as an exhibit to the Closing Memorandum and
respecting, and to which is attached, (1) the Charter Documents
of the Company; (2) the resolutions of the board of directors of
the Company respecting the Transaction Documents and the
transactions contemplated thereby; and (3) a certificate
respecting the incumbency and true signatures of the Responsible
Officers who execute the Transaction Documents on behalf of the
Company;
(D) from each Stockholder, a General Release duly executed
and delivered by that Stockholder;
(E) from each Stockholder, an executed Form W-9 or Form W-8,
as the case may be, and in the event any Stockholder is not a
U.S. citizen or resident for U.S. tax purposes, from the Company,
a properly executed statement in form and substance reasonably
acceptable to WORK for purposes of satisfying WORK's obligation
under Treasury regulations Section 1.1445-2(c)(3) promulgated
under the Code;
(F) a copy of the articles or certificate of incorporation
of the Company, as amended to the date of Closing, certified by
the appropriate Governmental Authorities in the Organization
State; and
(G) for each of the Company and the Company Subsidiaries, a
certificate, dated as of a Current Date, duly issued by the
appropriate Governmental Authorities in its Organization State
and, unless waived by WORK, in each other jurisdiction listed for
it in Section 4.02 of the Disclosure Statement, showing it to be
in good standing and authorized to do business in its
Organization State and those other jurisdictions and that all
state franchise and/or income tax returns and taxes due by it in
its Organization State and those other jurisdictions for all
periods prior to the Closing have been filed and paid.
(b) The obligations of WORK and Newco with respect to the actions to
be taken on the IPO Closing Date are subject to the satisfaction, or the
written waiver by WORK and Newco pursuant to Section 11.05, on or before
the IPO Closing Date, of, in addition to the conditions specified in
Section 7.02(b), all of the following conditions:
(i) Representations and Warranties. All of the representations
and warranties of the Stockholders and the Company in Articles III and
IV shall be true
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and correct in all material respects as of the IPO Closing Date as
though made on that date;
(ii) Continued Effectiveness. Each of the New Employment
Agreements and the Transferors' Agreement then shall be in full force
and effect.
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ARTICLE VIII
COVENANTS FOLLOWING THE EFFECTIVE TIME
Section 8.01. Disclosure. If, subsequent to the IPO Pricing Date and
prior to the 25th day after the date of the Final Prospectus, any Stockholder
becomes aware of any fact or circumstance which would change (or, if after the
Effective Time, would have changed) a representation or warranty of the Company
or any Stockholder in this Agreement or would affect any document delivered
pursuant hereto in any material respect that Stockholder will promptly give
notice of that fact or circumstance to WORK.
Section 8.02. Preparation and Filing of Tax Returns. Each party hereto
will, and will cause its 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 in conducting any audit or other
proceeding in respect of Taxes. This cooperation and information shall include
providing copies of all relevant portions of the relevant Returns, together with
such accompanying schedules and work papers, documents relating to rulings or
other determinations by Taxing Authorities and records concerning the ownership
and Tax bases of property as are relevant which a party possesses. Each party
will make its employees, if any, reasonably available on a mutually convenient
basis at its cost to provide an 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 attributable to the
preparation and filing of those Returns.
Section 8.03. Directors. WORK will cause such corporate proceedings as on
its part will be necessary to cause each of the persons, if any, who are named
in the Final Prospectus as persons who will become members of the board of
directors of WORK following the Effective Time to be appointed to the board when
the prospectus so provides.
Section 8.04. Removal of Guaranties. Within 120 days following the
Effective Time, WORK will cause the Stockholder Guaranties listed in Schedule
8.04 to be terminated. WORK hereby agrees to indemnify each Stockholder who is
a guarantor under any Stockholder Guaranty listed on Schedule 8.04 which is not
terminated on or before the IPO Closing Date against, and hold harmless each
such Stockholder from, any Damages incurred by such Stockholder as a result of
any default by the Company on or after the IPO Closing Date with respect to any
Indebtedness covered by such Stockholder Guaranty.
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ARTICLE IX
INDEMNIFICATION
Section 9.01. Survival of Representations and Warranties. All the
provisions of this Agreement will survive the Closing and the Effective Time
notwithstanding any investigation at any time made by or on behalf of any party
hereto or the provision of any Supplemental Information pursuant to Section
6.06, provided that the representations and warranties set forth in Articles IV,
V and VI and in any certificate delivered in connection herewith with respect to
any of those representations and warranties will terminate and expire two years
after the IPO Closing Date, except as follows: (a) the representations and
warranties of the Stockholders which relate expressly or by necessary
implication to Taxes or ERISA will survive until the expiration of the
applicable statutes of limitations (including all periods of extension and
tolling); and (b) the representations and warranties of WORK and the Company
will terminate and expire at the Effective Time. After a representation and
warranty has terminated and expired, no indemnification will or may be sought on
the basis of that representation and warranty by any Person who would have been
entitled pursuant to this Article IX to indemnification on the basis of that
representation and warranty prior to its termination and expiration, provided
that, in the case of each representation and warranty that will terminate and
expire as provided in this Section 9.01, no claim presented in writing for
indemnification pursuant to this Article IX on the basis of that representation
and warranty prior to its termination and expiration will be affected in any way
by the termination and expiration.
Section 9.02. Indemnification of WORK Indemnified Parties.
(a) Subject to the applicable provisions of Sections 9.01 and 9.06,
the Stockholders covenant and agree that they, jointly and severally, will
indemnify each WORK Indemnified Party against, and hold each WORK
Indemnified Party harmless from and in respect of, all Damages that arise
from, are based on or relate or otherwise are attributable to (i) any
breach of the representations and warranties of the Stockholders or the
Company set forth herein (other than in Article III) or in certificates
delivered in connection herewith (other than in respect of certificates
relating only to the representations and warranties in Article III), (ii)
any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (iii) any liability under
the Securities Act, the Exchange Act or other applicable Governmental
Requirement which arises out of or is based on (A) any untrue statement of
a material fact relating to the Company and the Company Subsidiaries, or
any of them, which is (1) provided to WORK or its counsel by the Company or
the Stockholders and (2) contained in any preliminary prospectus relating
to the IPO, the Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto, or (B) any
omission or alleged omission to state therein a material fact relating to
the Company and the Company Subsidiaries, or any of them, required to be
stated therein or necessary to make the statements therein not misleading,
and not provided to WORK or its counsel by the Company or the Stockholders
(each such Damage Claim and each Damage Claim described in Section 9.02(b)
being a "WORK Indemnified Loss").
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(b) Each Stockholder, severally and not jointly with any other Person,
covenants and agrees that he will indemnify each WORK Indemnified Party
against, and hold each WORK Indemnified Party harmless from and in respect
of, all Damage Claims that arise from, are based on or relate or otherwise
are attributable to (i) any breach of the representations and warranties of
that Stockholder solely as to that Stockholder set forth in Article III or
in certificates delivered by that Stockholder and relating to those
representations and warranties, (ii) any nonfulfillment of any several, and
not joint and several, agreement on the part of that Stockholder under this
Agreement or (iii) any liability under the Securities Act, the Exchange Act
or other applicable Governmental Requirement which arises out of or is
based on (A) any untrue statement or alleged untrue statement of a material
fact relating solely to that Stockholder which is (1) provided to WORK or
its counsel by that Stockholder and (2) contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or (B) any omission or alleged omission to state therein a
material fact relating solely to that Stockholder required to be stated
therein or necessary to make the statements therein not misleading, and not
provided to WORK or its counsel by that Stockholder.
(c) Notwithstanding anything to the contrary contained herein, the
amount of any Damages sustained by any Indemnified Party shall be
determined only after giving credit for the amount of the net monetary
benefit received by such Indemnified Party from any insurance carrier with
respect to any policy of insurance (not including any amounts the
Indemnified Party is required to pay with respect to deductibles or to
reimburse to such insurer), resulting from or attributable to, the event,
occurrence, state of facts, actions or other circumstance causing or giving
rise to such Damages.
Section 9.03. Indemnification of Stockholder Indemnified Parties. WORK
covenants and agrees that it will indemnify each Stockholder Indemnified Party
against, and hold each Stockholder Indemnified Party harmless from and in
respect of, all Damage Claims (that arise from, are based on or relate or
otherwise are attributable to (i) any breach by WORK or Newco of their
representations and warranties set forth herein or in their certificates
delivered to the Company or the Stockholders in connection herewith, (ii) any
nonfulfillment of any covenant or agreement on the part of WORK or Newco under
this Agreement (each such Damage Claim being a "Stockholder Indemnified Loss");
or (iii) any liability under the Securities Act, the Exchange Act or other
applicable Governmental Requirement which arises out of or is based on (A) any
untrue statement or alleged untrue statement of a material fact relating to
WORK, Newco or any of the Other Founding Companies contained in any preliminary
prospectus relating to the IPO, the Registration Statement or any prospectus
forming a part thereof, or any amendment thereof or supplement thereto, or (B)
any omission or alleged omission to state therein a material fact relating to
WORK, Newco or any of the Other Founding Companies, or any of them, required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances under which they were made.
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Section 9.04. Conditions of Indemnification.
(a) All claims for indemnification under this Agreement shall be
asserted and resolved as provided in this Section 9.04.
(b) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party
claim or claims asserted against the Indemnified Party ("Third Party
Claim") that could give rise to a right of indemnification under this
Agreement and (ii) transmit to the Indemnifying Party a written notice
("Claim Notice") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to the claim (if
any), an estimate of the amount of damages attributable to the Third Party
Claim to the extent feasible (which estimate shall not be conclusive of the
final amount of the claim) and the basis for the Indemnified Party's
request for indemnification under this Agreement. Except as set forth in
Section 9.01, the failure to promptly deliver a Claim Notice shall not
relieve the Indemnifying Party of its obligations to the Indemnified Party
with respect to the related Third Party Claim except to the extent that the
resulting delay is materially prejudicial to the defense of the claim.
Within 15 days after receipt of any Claim Notice (the "Election Period"),
the Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified
Party under this Article IX with respect to the Third Party Claim and (ii)
if the Indemnifying Party does not dispute its potential liability to the
Indemnified Party with respect to the Third Party Claim, whether the
Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against the Third Party
Claim.
(c) If the Indemnifying Party does not dispute its potential liability
to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of
the Third Party Claim, then the Indemnifying Party shall have the right to
defend, at its sole cost and expense, the Third Party Claim by all
appropriate proceedings, which proceedings shall be prosecuted diligently
by the Indemnifying Party to a final conclusion or settled at the
discretion of the Indemnifying Party in accordance with this Section
9.04(c) and the Indemnified Party will furnish the Indemnifying Party with
all information in its possession with respect to the Third Party Claim and
otherwise cooperate with the Indemnifying Party in the defense of the Third
Party Claim; provided, however, that the Indemnifying Party shall not enter
into any settlement with respect to any Third Party Claim that purports to
limit the activities of, or otherwise restrict in any way, any Indemnified
Party or any Affiliate of any Indemnified Party without the prior consent
of that Indemnified Party (which consent may be withheld in the sole
discretion of that Indemnified Party). The Indemnified Party is hereby
authorized, at the sole cost and expense of the Indemnifying Party if found
liable hereunder, to file, during the Election Period, any motion, answer
or other pleadings that the Indemnified Party shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party.
The Indemnified Party may participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section
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9.04(c) and will bear its own costs and expenses with respect to its
participation; provided, however, that if the named parties to any such
action (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party, and the Indemnified Party has been advised
in writing by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to the Indemnifying Party, then the Indemnified Party may employ separate
counsel at the expense of the Indemnifying Party, and, on its written
notification of that employment, the Indemnifying Party shall not have the
right to assume or continue the defense of the action on behalf of the
Indemnified Party.
(d) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this
Article IX, (B) elects not to defend the Indemnified Party pursuant to
Section 9.04(c) or (C) fails to notify the Indemnified Party that the
Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 9.04(c) or (ii) elects to defend the Indemnified Party pursuant to
Section 9.04(c) but fails diligently and promptly to prosecute or settle
the Third Party Claim, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder), the Third
Party Claim by all appropriate proceedings, which proceedings shall be
promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall have full control of
such defense and proceedings. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified Party
to the effect that the Indemnifying Party disputes its potential liability
to the Indemnified Party under this Article IX and if such dispute is
resolved in favor of the Indemnifying Party, the Indemnifying Party shall
not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 9.04 or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable and appropriate costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
9.04(d), and the Indemnifying Party shall bear its own costs and expenses
with respect to such participation.
(e) If any Indemnified Party should have a claim against any
Indemnifying Party hereunder that does not involve a Third Party Claim, the
Indemnified Party shall transmit to the Indemnifying Party a written notice
(the "Indemnity Notice") describing in reasonable detail the nature of the
claim, an estimate of the amount of Damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final
amount of the claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not
notify the Indemnified Party within 15 days from its receipt of the
Indemnity Notice that the Indemnifying Party disputes the claim, the claim
specified by the Indemnified Party in the Indemnity Notice shall be deemed
a liability of the Indemnifying Party hereunder. If the Indemnifying
Party has timely disputed the claim, as provided above, the dispute shall
be resolved by proceedings in an appropriate court of competent
jurisdiction if the parties do not reach a settlement of such dispute
within 30 days after notice of the dispute is given.
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(f) Payments of all amounts owing by an Indemnifying Party pursuant to
this Article IX relating to a Third Party Claim shall be made within 30
days after the latest of (i) the settlement of that Third Party Claim, (ii)
the expiration of the period for appeal of a final adjudication of that
Third Party Claim or (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement. Payments of all amounts owing by an
Indemnifying Party pursuant to Section 9.04(e) shall be made within 30 days
after the later of (i) the expiration of the 30-day Indemnity Notice period
or (ii) the expiration of the period for appeal of a final adjudication of
the Indemnifying Party's liability to the Indemnified Party under this
Agreement.
Section 9.05. Remedies Exclusive. Except as otherwise expressly provided
in this Agreement, the remedies provided in this Article IX are the exclusive
remedies available to one party against the other, either at law or in equity,
in respect of any matter indemnified against in this Article IX.
Section 9.06. Limitations on Indemnification.
(a) Notwithstanding the provisions of Section 9.02(a), neither the
Company nor any of the Stockholders shall be required to indemnify or hold
harmless any of the WORK Indemnified Parties on account of any WORK
Indemnified Loss under Section 9.02(a) unless the liability of the Company
and the Stockholders in respect of that WORK Indemnified Loss, when
aggregated with the liability of the Company and the Stockholders in
respect of all WORK Indemnified Losses under Section 9.02 (a), exceeds, and
only to the extent the aggregate amount of all those WORK Indemnified
Losses does exceed, the Threshold Amount. In no event shall (i) the
aggregate joint and several liability of the Company and the Stockholders
under this Agreement, including Section 9.02(a), exceed the Ceiling Amount
or (ii) the aggregate liability of each Stockholder under this Agreement,
including Sections 9.02(a) and 9.02(b), exceed that Stockholder's Pro Rata
Share of the Ceiling Amount.
(b) Notwithstanding the provisions of Section 9.03, WORK shall not be
required to indemnify or hold harmless any of the Stockholder Indemnified
Parties on account of any Stockholder Indemnified Loss unless the liability
of WORK in respect of that Stockholder Indemnified Loss, when aggregated
with the liability of WORK in respect of all Stockholder Indemnified
Losses, exceeds, and only to the extent the aggregate amount of all those
Stockholder Indemnified Losses does exceed, the Threshold Amount. In no
event shall WORK be liable under this Agreement, including Section 9.03,
for any amount in excess of the Ceiling Amount.
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EXHIBIT 2.23
EXHIBIT 1.02-B
GENERAL RELEASE
THIS GENERAL RELEASE (this "Release") is made as of ________________,
1998, by the undersigned in connection with the closing of the transactions
contemplated by the Agreement and Plan of Reorganization dated as of July 10,
1998 (the "Reorganization Agreement"), among Work International Corporation, a
Texas corporation ("WORK"), [Newco] Acquisition, Inc., a ___________
corporation and a wholly owned subsidiary of WORK, [Name of Founding
Company] , a _________ corporation (the "Company"), and the other Persons
listed on the signature page thereof (each of those Persons individually, a
"Stockholder"). Words and terms and not otherwise defined in this Release shall
have the meaning set forth in the Reorganization Agreement or the Uniform
Provisions incorporated therein.
PRELIMINARY STATEMENT
The undersigned is a Stockholder and will receive Merger Consideration
as a result of the Merger. The undersigned understands and acknowledges it is a
condition to the performance by WORK and Newco of their respective obligations
under the Reorganization Agreement, and thus is a condition to the consummation
of the Merger, that the undersigned execute and deliver this Release at or
before the Closing, as contemplated by the Reorganization Agreement.
RELEASE
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration the receipt and sufficiency of which hereby are
acknowledged, and intending to be legally bound hereby, the undersigned hereby
covenants and undertakes as follows for the benefit of all past, present and
future WORK Indemnified Parties, including, after the Effective Time, the
Company and all Company Subsidiaries, if any, and their respective
Representatives (collectively, the "Released Parties"):
1. Release. The undersigned, on behalf of the undersigned and each
of the undersigned's Related Parties, hereby unconditionally and irrevocably
releases and forever discharges, to the fullest extent permitted by applicable
law, the Released Parties from any and all debt, liabilities, obligations,
contracts, agreements, understandings, claims, demands, actions or causes of
action, suits, judgments or controversies of any kind whatsoever (collectively,
"Claims") against the Company and the Company Subsidiaries, if any, or any of
them, that arises out of or is based on any act or failure to act (including any
act or failure to act that constitutes ordinary or gross negligence or reckless
or willful, or wanton misconduct), misrepresentation, omission, transaction,
fact, event or other matter occurring prior to the IPO Closing Date (whether
based on any Governmental Requirement or right of action, at law or in equity or
otherwise, foreseen or unforseen, matured or unmatured, known or unknown,
accrued or not accrued) (collectively, "Pre-IPO Closing Matters"), including
without limitation: (a) claims by the undersigned with respect to repayment of
loans or indebtedness; (b) any rights, titles and interests in, to or under any
agreements, arrangements
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or understandings to which the undersigned is a party; and (c) claims by the
undersigned with respect to dividends, violation of preemptive rights, or
payment of salaries or other compensation or in any way arising out of or in
connection with the undersigned's employment with the Company or any Company
Subsidiary, the cessation of that employment, the undersigned's status as an
officer, director or stockholder of the Company or otherwise (but excluding any
and all claims in respect of (i) accrued and unpaid amounts owing to the
undersigned pursuant to each Employment Agreement disclosed in Section 4.26(b)
of the Disclosure Statement delivered to WORK by the Stockholders under the
Reorganization Agreement, (ii) accrued and unpaid Cash Compensation owing to the
undersigned at the rates or in the amounts, as the case may be, set forth in the
list described in Section 4.26(a) of the Disclosure Statement, (iii) benefits
accrued under each Company or Other Compensation Plan or Employee Benefit Plan
the existence of which has been disclosed in Section 4.26(c) or (d) of the
Disclosure Statement, (iv) amounts or other obligations owed to the undersigned,
directly or indirectly, pursuant to each Related Party Agreement, if any, which
is disclosed in Schedule 4.11 of the Disclosure Statement as an agreement to be
continued past the date of the Closing and to which the undersigned, directly or
indirectly, is a party, (v) any right of reimbursement of the undersigned with
respect to amounts the undersigned was obligated to pay to discharge obligations
of the Company pursuant to Guaranties of the undersigned which are identified on
Schedule 8.04 to the Reorganization Agreement, (vi) any indemnification rights
that the undersigned may have as an officer or director of the Company under
statutes empowering corporations in the Company's state of incorporation to
indemnify their officers and directors, or under the Company's bylaws or any
written indemnification agreement between the undersigned and the Company
implementing such statutory indemnification rights, but only with respect to
third-party claims or proceedings that relate to actions taken by the
undersigned as an officer or director of the Company prior to the IPO Closing
Date hereof and that are disclosed to WORK in the Disclosure Statement or, if
asserted or brought for the first time after the IPO Closing Date, would not
constitute a breach of the representations or warranties of the Company or its
stockholders under the Reorganization Agreement and (vii) if the Company uses
the cash method of accounting for tax purposes and the Reorganization Agreement
authorizes the distribution by the Company of cash basis accounts and notes
receivable to the undersigned, any obligation of the Company set forth in the
Reorganization Agreement to pay over the proceeds thereof to the undersigned as
therein set forth). The undersigned further agrees not to file or bring any
Litigation before any Governmental Authority on the basis of or respecting any
Claim concerning any Pre-IPO Closing Matter against any Released Party.
Notwithstanding anything to the contrary contained in this Release, this Release
shall not affect the rights of the undersigned under the Reorganization
Agreement or any other Transaction Document.
2. Competency. The undersigned (a) acknowledges that the undersigned
fully comprehends and understands all the terms of this Release and their legal
effects and (b) expressly represents and warrants that (i) the undersigned is
competent to execute this Release knowingly and voluntarily and without reliance
on any statement or representation of any Released Party (or a Representative
thereof) and (ii) he or she had the opportunity to consult with an attorney of
the undersigned's choice regarding this Release.
3. Parties in Interest. This Release is for the benefit of the
Released Parties and shall be binding on the undersigned and the undersigned's
legal representatives and Related Persons.
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4. Governing Law. THIS RELEASE AND THE RIGHTS AND OBLIGATIONS OF THE
UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING CONFLICT OF
LAWS) OF THE STATE OF ____________.
5. Amendment. This Release may not be clarified, modified, changed
or amended except in writing and signed by the undersigned (or the undersigned's
duly authorized representatives), the Company and WORK.
6. Severability. If any provision of this Release is held to be
illegal, invalid or unenforceable under present or future laws, that provision
shall be severable and this Release shall be construed and enforced as if that
illegal, invalid or unenforceable provision never comprised a part hereof, and
the remaining provisions hereof shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision, and there
shall be added automatically as part of this Release a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
IN WITNESS WHEREOF, the undersigned has executed this Release as of
the date first written above.
STOCKHOLDERS:
-----------------------------------------
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EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WORK INTERNATIONAL CORPORATION
ARTICLE ONE
Work International Corporation (the "Corporation"), pursuant to the
provisions of Article 4.07 of the Texas Business Corporation Act (the "TBCA"),
hereby adopts these Amended and Restated Articles of Incorporation which
accurately copy the articles of incorporation and all amendments thereto that
are in effect to date and as further amended by such Amended and Restated
Articles of Incorporation as hereinafter set forth and which contain no other
changes in any provision thereof:
ARTICLE TWO
The articles of incorporation of the Corporation are amended by the Amended
and Restated Articles of Incorporation as follows:
Article I is amended and restated in its entirety as follows:
"ARTICLE I
NAME
The name of the corporation is WORK International Corporation (the
"Corporation")."
The first paragraph of Article IV is amended (i) to increase the aggregate
number of authorized shares to 55,000,000 from 25,000,000, and (ii) to increase
the authorized shares of common stock, par value $.001 ("Common Stock"), to
50,000,000 from 20,000,000. Article IV is further amended by adding a new
second paragraph providing for a split of the presently outstanding 2,975,000
shares of Common Stock into 1,491,085 shares of Common Stock by splitting each
outstanding share of Common Stock into 0.50120488 of a share of Common Stock
(the "Reverse Split"). So amended, the first two paragraphs of Article IV are
restated in their entirety as follows:
"The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting
of: (i) 50,000,000 shares of common stock, par value $.001 per share
(the "Common Stock"), and (ii) 5,000,000 shares of preferred stock, par
value $.001 per share
<PAGE>
(the "Preferred Stock"). Shares of any class of capital
stock of the Corporation may be issued for such consideration and for such
corporate purposes as the Board of Directors of the Corporation (the "Board
of Directors") may from time to time determine. Each share of Common Stock
shall be entitled to one vote. The Board of Directors has designated two
series of the Corporation's Preferred Stock. The Statement of Designation,
Preferences, Rights and Limitations of the Series A Preferred Stock is
attached hereto as Exhibit A and is incorporated herein by reference. The
Statement of Designation, Preferences, Rights and Limitations of the Series
B Preferred Stock is attached hereto as Exhibit B and is incorporated
herein by reference.
Each of the shares of the Common Stock outstanding at the date and
time these Amended and Restated Articles of Incorporation are filed shall
be split into 0.50120488 of a share of the Common Stock (the "Reverse
Split") without any further action by the shareholders or Board of
Directors of the Corporation. No fractional shares shall be issued, and
the number of shares to be issued to each stockholder shall be rounded up
or down to the nearest whole number. Pursuant to the terms of the
Statement of Designation, Preferences, Rights and Limitations of the Series
A Preferred Stock, as a result of the Reverse Split, the Conversion Factor
for the Series A Preferred Stock will be 4.98798. Pursuant to the terms of
the Statement of Designation, Preferences, Rights and Limitations of the
Series B Preferred Stock, as a result of the Reverse Split, the Conversion
Factor for the Series B Preferred Stock will be 7.980768."
Paragraph A of Article X is amended to delay dividing the board of
directors into three classes until the Corporation has a class or series of
capital stock registered under the Securities Exchange Act of 1934 and to change
the year-end dates preceding the annual meetings marking the expiration of the
terms of directors first elected to Class I, Class II, and Class III to 1998,
1999, and 2000 respectively. So amended, paragraph A of Article X is restated
in its entirety as follows:
"A. NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of directors
which shall constitute the whole Board of Directors shall be fixed from
time to time by a majority of the directors then in office; provided,
however, that from and after the first date as of which the Corporation has
a class or series of capital stock registered under the Exchange Act, the
number of directors which shall constitute the whole Board of Directors
shall be not less than three and the Board of Directors shall be divided
into three classes: Class I, Class II and Class III. Each director shall
serve for a term ending on the third annual meeting following the annual
meeting at which such director was elected; provided, however, that the
directors first elected to Class I shall serve for a term expiring
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at the annual meeting next following the end of the calendar year 1998, the
directors first elected to Class II shall serve for a term expiring at the
annual meeting next following the end of the calendar year 1999, and the
directors first elected to Class III shall serve for a term expiring at the
annual meeting next following the end of the calendar year 2000. Each
director shall hold office until the annual meeting at which such
director's term expires and, the foregoing notwithstanding, shall serve
until his successor shall have been duly elected and qualified or until his
earlier death, resignation or removal. Election of directors need not be by
written ballot unless the Bylaws of the Corporation shall so provide."
ARTICLE THREE
The Reverse Split will reduce the stated capital of the Corporation by
$1,483.91 to a total of $1,494.59.
ARTICLE FOUR
The amendment made by these Amended and Restated Articles of Incorporation
was effected in conformity with the provisions of the TBCA and such amendment
(the "Amendment") made by these Amended and Restated Articles of Incorporation
was duly adopted by the unanimous written consent of the shareholders of the
Corporation entitled to vote thereon, in accordance with Article 9.10 of the
TBCA, as of the 10th day of July 1998.
ARTICLE FIVE
The number of shares of the Corporation outstanding at the time of such
adoption was 2,975,000 shares of Common Stock, 1,000 shares of Series A
Preferred Stock and 2,500 shares of Series B Preferred Stock; the number of
shares entitled to vote thereon was 2,975,000 shares of Common Stock. In
accordance with Article 9.10 of the TBCA, the holders of all shares of Common
Stock gave their written consent in favor of the Amendment.
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<PAGE>
ARTICLE SIX
The articles of incorporation and all amendments and supplements thereto
are hereby superseded by the Amended and Restated Articles of Incorporation
attached hereto as Exhibit I which accurately copy the entire text thereof as
amended as above set forth.
Dated: July 10, 1998 Work International Corporation
/s/ B. Garfield French
-------------------------------------
B. Garfield French
President and Chief Executive Officer
4
<PAGE>
EXHIBIT I
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WORK INTERNATIONAL CORPORATION
ARTICLE I
NAME
The name of the corporation is WORK International Corporation (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Texas is c/o C T
Corporation System, 811 Dallas Avenue, Houston, Texas 77002. The name of its
registered agent at such address is C T Corporation System.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the TBCA.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 55,000,000 shares, consisting of:
(i) 50,000,000 shares of common stock, par value $.001 per share (the "Common
Stock"), and (ii) 5,000,000 shares of preferred stock, par value $.001 per share
(the "Preferred Stock"). Shares of any class of capital stock of the
Corporation may be issued for such consideration and for such corporate purposes
as the Board of Directors of the Corporation (the "Board of Directors") may from
time to time determine. Each share of Common Stock shall be entitled to one
vote. The Board of Directors has designated two series of the Corporation's
Preferred Stock. The Statement of Designation, Preferences, Rights and
Limitations of the Series A Preferred Stock is attached hereto as Exhibit A and
is incorporated herein by reference. The Statement of Designation, Preferences,
Rights and Limitations of the Series B Preferred Stock is attached hereto as
Exhibit B and is incorporated herein by reference.
Each of the shares of the Common Stock outstanding at the date and time
these Amended and Restated Articles of Incorporation are filed shall be split
into 0.50120488 of a share of the Common Stock (the "Reverse Split") without any
further action by the shareholders or Board of Directors of the Corporation. No
fractional shares shall be issued, and the number of shares to be issued to each
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stockholder shall be rounded up or down to the nearest whole number. Pursuant
to the terms of the Statement of Designation, Preferences, Rights and
Limitations of the Series A Preferred Stock, as a result of the Reverse Split,
the Conversion Factor for the Series A Preferred Stock will be 4.98798. Pursuant
to the terms of the Statement of Designation, Preferences, Rights and
Limitations of the Series B Preferred Stock, as a result of the Reverse Split,
the Conversion Factor for the Series B Preferred Stock will be 7.980768.
A. PREFERRED STOCK. The Preferred Stock may be divided into and issued
from time to time in one or more series as may be fixed and determined by the
Board of Directors. The relative rights and preferences of the Preferred Stock
of each series shall be such as shall be stated in any resolution or resolutions
adopted by the Board of Directors setting forth the designation of the series
and fixing and determining the relative rights and preferences thereof (a
"Directors' Resolution"). The Board of Directors is hereby authorized to fix and
determine the powers, designations, preferences, and relative, participating,
optional or other rights, including, without limitation, voting powers, full or
limited, preferential rights to receive dividends or assets upon liquidation,
rights of conversion or exchange into Common Stock, Preferred Stock of any
series or other securities, any right of the Corporation to exchange or convert
shares into Common Stock, Preferred Stock of any series or other securities, or
redemption provision or sinking fund provisions, as between series and as
between the Preferred Stock or any series thereof and the Common Stock, and the
qualifications, limitations or restrictions thereof, if any, all as shall be
stated in a Directors' Resolution, and the shares of Preferred Stock or any
series thereof may have full or limited voting powers, or be without voting
powers, all as shall be stated in a Directors' Resolution. Except where
otherwise set forth in the Directors' Resolution providing for the issuance of
any series of Preferred Stock, the number of shares comprising such series may
be increased or decreased (but not below the number of shares then outstanding)
from time to time by like action of the Board of Directors. The shares of
Preferred Stock of any one series shall be identical with the other shares in
the same series in all respects except as to the dates from and after which
dividends thereon shall cumulate, if cumulative.
B. REACQUIRED SHARES OF PREFERRED STOCK. Shares of any series of any
Preferred Stock that have been redeemed (whether through the operation of a
sinking fund or otherwise), purchased by the Corporation, or which, if
convertible or exchangeable, have been converted into, or exchanged for, shares
of stock of any other class or classes or any evidences of indebtedness shall
have the status of authorized and unissued shares of Preferred Stock and may be
reissued as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock or as part
of any other series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the Directors' Resolution providing for
the issuance of any series of Preferred Stock and to any filing required by law.
C. INCREASE IN AUTHORIZED PREFERRED STOCK. The number of authorized
shares of Preferred Stock may be increased or decreased by the affirmative vote
of the holders of a majority of the stock of the Corporation entitled to vote
without the separate vote of holders of Preferred Stock as a class.
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ARTICLE V
EXISTENCE
The existence of the Corporation is to be perpetual.
ARTICLE VI
NO PREEMPTIVE RIGHTS
No stockholder shall be entitled, as a matter of right, to subscribe for or
acquire additional, unissued or treasury shares of any class of capital stock of
the Corporation whether now or hereafter authorized, or any bonds, debentures or
other securities convertible into, or carrying a right to subscribe to or
acquire such shares, but any shares or other securities convertible into, or
carrying a right to subscribe to or acquire such shares may be issued or
disposed of by the Board of Directors to such persons and on such terms as in
its discretion it shall deem advisable.
ARTICLE VII
NO CUMULATIVE VOTING
At each election of directors, every stockholder entitled to vote at such
election shall have the right to vote in person or by proxy the number of shares
owned by him for as many persons as there are directors to be elected and for
whose election he has a right to vote. No stockholder shall have the right to
cumulate his votes in any election of directors.
ARTICLE VIII
NO STOCKHOLDER ACTION WITHOUT A MEETING
Except as otherwise required by law, special meetings of the stockholders
of the Corporation may be called only by the Chairman of the Board, the Chief
Executive Officer, the President, the Board of Directors by the written order of
a majority of the entire Board of Directors, by such other persons as may be set
forth in the Bylaws of the Corporation (the "Bylaws"), or by the holders of at
least fifty percent of all of the shares entitled to vote at the proposed
special meeting; provided, however that from and after the first date as of
which the Corporation has a class or series of capital stock registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), any action
required or permitted to be taken by the stockholders of the Corporation must be
effected at an annual or special meeting of stockholders of the Corporation and
may not be effected by any consent in writing by such stockholders, and a
special meeting of stockholders of the Corporation may be called only by the
Chairman of the Board, the Chief Executive Officer, the President or the Board
of Directors by the written order of a majority of the entire Board of
Directors, and not by the stockholders except as otherwise provided by law or
the Bylaws.
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ARTICLE IX
VOTE REQUIRED
Except as otherwise required by law, any corporate action that requires
the approval of the stockholders of the Corporation, including, but not limited
to, amendment of these Articles of Incorporation or any merger, reorganization,
dissolution or liquidation of the Corporation, shall be approved by the
affirmative vote of a majority of the shares entitled to vote thereon.
ARTICLE X
BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors. In addition to the authority and
powers conferred upon the Board of Directors by the TBCA or by the other
provisions of these Articles of Incorporation, the Board of Directors is hereby
authorized and empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject to the provisions
of the TBCA, these Articles of Incorporation and the Bylaws of the Corporation
(the "Bylaws"); provided, however, that no Bylaws hereafter adopted by the
stockholders of the Corporation, or any amendments thereto, shall invalidate any
prior act of the Board of Directors that would have been valid if such Bylaws or
amendment had not been adopted.
1. NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of directors
which shall constitute the whole Board of Directors shall be fixed from time to
time by a majority of the directors then in office; provided, however, that from
and after the first date as of which the Corporation has a class or series of
capital stock registered under the Exchange Act, the number of directors which
shall constitute the whole Board of Directors shall be not less than three and
the Board of Directors shall be divided into three classes: Class I, Class II
and Class III. Each director shall serve for a term ending on the third annual
meeting following the annual meeting at which such director was elected;
provided, however, that the directors first elected to Class I shall serve for a
term expiring at the annual meeting next following the end of the calendar year
1998, the directors first elected to Class II shall serve for a term expiring at
the annual meeting next following the end of the calendar year 1999, and the
directors first elected to Class III shall serve for a term expiring at the
annual meeting next following the end of the calendar year 2000. Each director
shall hold office until the annual meeting at which such director's term expires
and, the foregoing notwithstanding, shall serve until his successor shall have
been duly elected and qualified or until his earlier death, resignation or
removal. Election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide
2. SUCCEEDING DIRECTORS. At such annual election, the directors chosen
to succeed those whose terms then expire shall be of the same class as the
directors they succeed, unless, by reason of any intervening changes in the
authorized number of directors, the Board of Directors shall have designated one
or more directorships whose terms then expires as directorships of another class
in order to more nearly achieve equality of number of directors among the
classes. In the event of any changes in the authorized number of directors,
each director then continuing to serve shall
<PAGE>
nevertheless continue as a director of the class of which he is a member until
the expiration of his current term, or his prior death, resignation or removal.
The Board of Directors shall specify the class to which a newly created
directorship shall be allocated.
3. REMOVAL OF DIRECTORS. No director of the Corporation shall be removed
from office as a director by vote or other action of the stockholders or
otherwise except for cause, and then only by the affirmative vote of the holders
of at least a majority of the voting power of all outstanding shares of capital
stock of the Corporation generally entitled to vote in the election of
directors, voting together as a single class. Except as may otherwise be
provided by law, cause of removal of a director shall be deemed to exist only
if: (i) the director whose removal is proposed has been convicted, or where a
director is granted immunity to testify where another has been convicted, of a
felony by a court of competent jurisdiction and such conviction is no longer
subject to direct appeal; (ii) such director has been found by the affirmative
vote of a majority of the entire Board of Directors at any regular or special
meeting of the Board of Directors called for that purpose or by a court of
competent jurisdiction to have been grossly negligent or guilty of misconduct in
the performance of his duties to the Corporation in a matter of substantial
importance to the Corporation; or (iii) such director has been adjudicated by a
court of competent jurisdiction to be mentally incompetent, which mental
incompetency directly affects his ability as a director of the Corporation.
4. VACANCIES. Newly created directorships resulting from any increase in
the number of directors and any vacancies on the Board of Directors resulting
from death, resignation, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until his earlier death, resignation or removal.
No decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
ARTICLE XI
INDEMNIFICATION
A. MANDATORY INDEMNIFICATION. Each person who at any time is or was a
director or officer of the Corporation, and is threatened to be or is made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise, whether the basis of
a Proceeding is an alleged action in such person's official capacity or in
another capacity while holding such office, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the TBCA, or any
other applicable law as may from time to time be in effect (but, in the case of
any such amendment or enactment, only to the extent that such amendment or law
permits the Corporation to provide broader indemnification rights than such law
prior to such amendment or enactment
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permitted the Corporation to provide), against all expense, liability and loss
(including, without limitation, court costs and attorneys' fees, judgments,
fines, excise taxes or penalties, and amounts paid or to be paid in settlement)
actually and reasonably incurred or suffered by such person in connection with a
Proceeding, and such indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation or a director, officer,
partner, venturer, proprietor, member, employee, trustee, agent or similar
functionary of another domestic or foreign corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other for-profit
or non-profit enterprise, and shall inure to the benefit of such person's heirs,
executors and administrators. The Corporation's obligations under this Section A
include, but are not limited to, the convening of any meeting, and the
consideration of any matter thereby, required by statute in order to determine
the eligibility of any person for indemnification.
B. PREPAYMENT OF EXPENSES. Expenses incurred by a director or officer of
the Corporation in defending a Proceeding shall be paid by the Corporation in
advance of the final disposition of such Proceeding to the fullest extent
permitted by, and only in compliance with, the TBCA or any other applicable laws
as may from time to time be in effect, including, without limitation, any
provision of the TBCA which requires, as a condition precedent to such expense
advancement, the delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under Section A of this Article X or otherwise. Repayments of all
amounts so advanced shall be upon such terms and conditions, if any, as the
Corporation's Board of Directors deems appropriate.
C. VESTING. The Corporation's obligation to indemnify and to prepay
expenses under Sections A and B of this Article X shall arise, and all rights
granted to the Corporation's directors and officers hereunder shall vest, at the
time of the occurrence of the transaction or event to which a Proceeding
relates, or at the time that the action or conduct to which such Proceeding
relates was first taken or engaged in (or omitted to be taken or engaged in),
regardless of when such Proceeding is first threatened, commenced or completed.
Notwithstanding any other provision of these Articles of Incorporation or the
Bylaws, no action taken by the Corporation, either by amendment of these
Articles of Incorporation or the Bylaws or otherwise, shall diminish or
adversely affect any rights to indemnification or prepayment of expenses granted
under Sections A and B of this Article X which shall have become vested as
aforesaid prior to the date that such amendment or other corporate action is
effective or taken, whichever is later.
D. ENFORCEMENT. If a claim under Section A or Section B or both Sections
A and B of this Article X is not paid in full by the Corporation within thirty
(30) days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit in a court of competent
jurisdiction against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall also be entitled to
be paid the expense of prosecuting such claim. It shall be a defense to any
such suit (other than a suit brought to enforce a claim for expenses incurred in
defending any Proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the TBCA or other applicable law to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall
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be on the Corporation. The failure of the Corporation (including its Board of
Directors, independent legal counsel, or stockholders) to have made a
determination prior to the commencement of such suit as to whether
indemnification is proper in the circumstances based upon the applicable
standard of conduct set forth in the TBCA or other applicable law shall neither
be a defense to the action nor create a presumption that the claimant has not
met the applicable standard of conduct. The termination of any Proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal Proceeding, had reasonable cause to believe that his conduct was
unlawful.
E. NONEXCLUSIVE. The indemnification provided by this Article X shall
not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any statute, bylaw, other provisions of
these Articles of Incorporation, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
F. PERMISSIVE INDEMNIFICATION. The rights to indemnification and
prepayment of expenses which are conferred to the Corporation's directors and
officers by Sections A and B of this Article X may be conferred upon any
employee or agent of the Corporation if, and to the extent, authorized by the
Board of Directors.
G. INSURANCE. The Corporation shall have power to purchase and maintain
insurance, at its expense, on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, partner, venturer,
proprietor, member, employee, trustee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or non-profit
enterprise against any expense, liability or loss asserted against such person
and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
provisions of this Article X, the Bylaws, the TBCA or other applicable law.
H. IMPLEMENTING ARRANGEMENTS. Without limiting the power of the
Corporation to procure or maintain insurance or other arrangement on behalf of
any of the persons as described in Section G of this Article X, the Corporation
may, for the benefit of persons eligible for indemnification by the Corporation,
(i) create a trust fund, (ii) establish any form of self-insurance, (iii) secure
its indemnity obligation by grant of a security interest or other lien on the
assets of the Corporation, or (iv) establish a letter of credit, guaranty or
surety arrangement.
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ARTICLE XII
LIMITED DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this Article XI shall not eliminate or limit
the liability of a director: (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) an act or omission for which the liability of a director is expressly
provided for by an applicable statute, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the Texas Miscellaneous Corporation Laws Act or any other applicable law
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the such laws, as so amended. No amendment to or repeal of this Article XI will
apply to, or have any effect on, the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of the
director occurring prior to such amendment or repeal.
ARTICLE XII
BYLAWS
Except as otherwise required by law, the Board of Directors is expressly
and exclusively authorized to adopt, amend or repeal the Bylaws, or adopt new
Bylaws, without any action on the part of the stockholders, and the stockholders
of the Corporation may not adopt, amend or repeal the Bylaws, or adopt new
Bylaws.
ARTICLE XIV
INITIAL CONSIDERATION FOR ISSUANCE OF SHARES
The Corporation shall not commence business until it has received for the
issuance of its shares consideration of at least $1,000, consisting of money,
labor done or property actually received.
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ARTICLE XV
CURRENT BOARD OF DIRECTORS
The names and mailing addresses of the current members of the Board of
Directors are:
B. Garfield French
700 Louisiana, Suite 3900
Houston, Texas 77002
Samuel R. Sacco
700 Louisiana, Suite 3900
Houston, Texas 77002
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EXHIBIT A
STATEMENT OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE
SERIES A PREFERRED STOCK
OF
WORK INTERNATIONAL CORPORATION
Pursuant to Section 2.13 of the Texas Business Corporation Act (the
"TBCA"), Work International Corporation, a corporation organized and existing
under the TBCA (the "Corporation"), does hereby certify:
That, pursuant to authority conferred upon the Board of Directors of the
Corporation by its Articles of Incorporation, and pursuant to the provisions of
the TBCA, such Board of Directors by unanimous written consent dated October 6,
1997, duly adopted a resolution providing for the issuance of a series of One
Thousand (1,000) shares of the Corporation's Preferred Stock, $.001 par value
per share, to be designated "Series A Preferred Stock," and fixing the voting
powers, preferences and relative, participating, optional or other rights, and
the qualifications, limitations or restrictions thereof, which resolution is as
follows:
RESOLVED, that pursuant to the authority expressly granted and vested in
the Board of Directors of the Corporation in accordance with the provisions of
its Articles of Incorporation, there shall be established and authorized for
issuance a series of the Corporation's Preferred Stock, $.001 par value per
share, designated "Series A Preferred Stock" (herein referred to as "Series A
Preferred Stock"), consisting of One Thousand (1,000) shares, each of the par
value of $.001 per share, and having the voting powers, preferences and
relative, participating, optional and other rights, and the qualifications,
limitations or restrictions set forth below:
1. Voting Rights.
(a) The Corporation shall not, without the consent of the holders of
at least a majority of the shares of the outstanding Series A Preferred Stock,
adopt any amendment to this Statement which would alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely, provided that no such consent shall be required with respect to
(i) any amendment to this Statement that increases or decreases the number of
shares of Series A Preferred Stock which the Corporation is authorized to issue
(provided that no such amendment shall reduce the number of authorized shares to
below the number of shares then outstanding), or (ii) the establishment or
issuance of any other series of Preferred Stock or any other class of stock of
the Corporation that has any powers, preferences or rights that are different
from, greater than, superior to or in preference of the Series A Preferred
Stock.
(b) Except as provided in paragraph (a) above or otherwise required by
law, the holders of Series A Preferred Stock shall have no right or power to
vote on the election of directors or on any other question or in any proceedings
involving the Corporation.
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2. Liquidation.
(a) Preference. Subject to the rights of the holders of any other
class or series of capital stock of the Corporation ranking senior to or on a
parity with the Series A Preferred Stock with respect to liquidation, in the
event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, the holders of record of the
issued and outstanding shares of Series A Preferred Stock shall be entitled to
receive, out of the assets of the Corporation legally available for distribution
to the holders of shares of Series A Preferred Stock, prior and in preference to
any distribution of any of the assets of the Corporation to the holders of
common stock, par value $.001 per share (the "Common Stock"), of the Corporation
and any other class or series of capital stock of the Corporation ranking junior
to the Series A Preferred Stock with respect to liquidation, an amount in cash
per share equal to $1,000. If, upon such liquidation, dissolution or winding up
of the affairs of the Corporation, the assets of the Corporation distributable
among the holders of Series A Preferred Stock and any class or series of capital
stock of the Corporation ranking on a parity therewith in respect thereto shall
be insufficient to permit the payment in full to all such holders of shares of
the preferential amounts payable to them, then the entire assets of the
Corporation available for distribution to such holders of shares shall be
distributed ratably among such holders in proportion to the respective amounts
that would be payable per share if such assets were sufficient to permit payment
in full. After payment of the full amount to which they are entitled upon
liquidation pursuant to this Section 2(a), the holders of shares of Series A
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation or other entity nor a sale, transfer,
lease or exchange of all or part of the Corporation's assets will be considered
a liquidation, dissolution or winding up of the affairs of the Corporation for
purposes of this Section 2(a).
(b) Adjustments. The liquidation preference provided for herein with
respect to the Series A Preferred Stock shall be equitably adjusted to reflect
any stock dividend, stock distribution, stock split or reverse stock split,
combination of shares, subdivision of shares or reclassification of shares with
respect to the Series A Preferred Stock.
3. Conversion Rights. The Series A Preferred Stock shall be convertible
as follows:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this Section, the holder of any shares of Series A Preferred Stock
shall have the right at such holder's option, without the payment of any
additional consideration therefor, to convert any shares of Series A Preferred
Stock into fully paid and nonassessable shares of Common Stock at the Conversion
Ratio (as defined herein) in effect on any Conversion Date (as defined herein)
upon the terms hereinafter set forth.
(b) Conversion Ratio. Each share of Series A Preferred Stock shall be
convertible pursuant to this Section into a number of shares of Common Stock
determined by dividing: (x) 1,000 by (y) the Conversion Factor in effect on any
Conversion Date (the "Conversion Ratio"). For the purposes of this Section 3,
the term "Conversion Factor" initially shall mean 2.5.
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(c) Mechanics of Conversion. The holder of any shares of Series A
Preferred Stock may exercise the conversion right specified in Section 3(a) by
surrendering to the Corporation or any transfer agent of the Corporation the
certificate or certificates for the shares to be converted, accompanied by
written notice specifying the number of shares to be converted. Conversion
shall be deemed to have been effected on the date when delivery of notice of an
election to convert and of certificates for shares being converted is made, and
such date is referred to herein as the "Conversion Date." Subject to the
provisions of Section 3(f)(iv), as promptly as practicable thereafter the
Corporation shall issue and deliver, or caused to be issued and delivered, to
the holder a certificate or certificates for the number of full shares of Common
Stock to which such holder is entitled and a check or cash with respect to any
fractional interest in a share of Common Stock as provided in Section 3(e).
Subject to the provisions of Section 3(f)(iv), the person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a holder of record of such Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series A Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver, or caused to be issued and
delivered, to the holder of the certificate so surrendered for conversion, at
the expense of the Corporation, a new certificate covering the number of shares
of Series A Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(d) Mandatory Conversion. Immediately upon the closing of any initial
public offering of the Common Stock, each share of Series A Preferred Stock then
outstanding shall be automatically converted, without any action on the part of
the holder thereof, into such shares of Common Stock as such share of Series A
Preferred Stock would be convertible into if converted at the option of the
holder pursuant to Section 3(a). Following such mandatory conversion, holders
of shares of Series A Preferred Stock shall only be entitled to the rights of
holders of Common Stock and the Corporation.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series A Preferred Stock. If more
than one share of Series A Preferred Stock is surrendered for conversion at any
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of Series A
Preferred Stock, the Corporation shall pay out of funds legally available
therefor a cash adjustment in respect of such fractional interest, rounded to
the nearest one hundredth (1/100th) of a share, in an amount equal to that
fractional interest of the then fair value, rounded to the nearest cent ($.01),
of one share of Common Stock, as determined in good faith by the Board of
Directors of the Corporation, irrespective of any accounting treatment, which
determination shall be final and binding; provided, however, if the Common Stock
is then traded or quoted on a national exchange or a nationally recognized
quotation system, the fair market value shall be the closing price of a share of
Common Stock on such exchange or quotation system as of the Conversion Date.
(f) Conversion Factor Adjustments. The Conversion Factor shall be
subject to adjustment from time to time as follows:
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(i) Issuance of Preferred Stock. If the Corporation shall issue
any shares of a class of Preferred Stock that is convertible into Common
Stock at a conversion ratio more favorable to the holder of such Preferred
Stock than the Conversion Ratio currently in effect for the Series A
Preferred Stock (the "Other Preferred Stock"), then the Conversion Factor
shall be adjusted so as to make the Conversion Ratio for the Series A
Preferred Stock equal to the conversion ratio of such Other Preferred
Stock.
(ii) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (x) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (y)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or (z) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Factor in effect at the time of the record
date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted to that
number determined by multiplying the Conversion Factor in effect by a
fraction (x) the numerator of which shall be the total number of issued and
outstanding shares of Common Stock immediately prior to such dividend,
distribution, subdivision, combination or reclassification and (y) the
denominator of which shall be the total number of issued and outstanding
shares of Common Stock immediately after such dividend, distribution,
subdivision, combination or reclassification. Successive adjustments in
the Conversion Factor shall be made whenever any event specified above
shall occur.
(iii) Rounding of Calculations: Minimum Adjustment. All
calculations under this Section 3(f) shall be made to the nearest cent
($.01) or to the nearest one hundredth (1/100th) of a share, as the case
may be. Notwithstanding any provision of this Section 3 to the contrary,
no adjustment in the Conversion Factor shall be made if the amount of such
adjustment would be less than 1% of the then current Conversion Factor
until the end of one year after such adjustment otherwise would have been
required; but any such amount shall be carried forward and an adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate 1% of the then current
Conversion Factor or more, provided that if the events giving rise to such
adjustments occur within three months of each other, then such adjustments
shall be calculated as if the events giving rise to them had occurred
simultaneously on the date of the first such event.
(iv) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 3(f)
provide that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of
such event (x) issuing to the holder of any share of Series A Preferred
Stock converted after such record date and before the occurrence of such
event, the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the
shares of Common Stock issuable upon such conversion before giving effect
to such adjustment and (y) paying to such holder any amount of cash in lieu
of a fractional share of Common Stock pursuant to Section 3(e); provided
that the Corporation upon request shall deliver to such holder a due bill
or
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other appropriate instrument evidencing such holder's right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(g) Statement Regarding Adjustments. Whenever the Conversion Factor
shall be adjusted as provided in Section 3(f), the Corporation shall forthwith
file, at the office of any transfer agent for the Series A Preferred Stock and
at the principal office of the Corporation, a statement showing in detail the
method of calculation of such adjustment, the facts requiring such adjustment
and the Conversion Factor that shall be in effect after such adjustment, and the
Corporation shall, upon the request of any holder of Series A Preferred Stock,
cause a copy of such statement to be sent by mail, first class postage prepaid
to such holder at his address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's president or chief financial
officer. Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
Section 3(h).
(h) Notice to Holders. In the event the Corporation shall propose to
take any action of the type described in Section 3(f)(ii) or 3(i), the
Corporation shall give notice to each holder of shares of Series A Preferred
Stock in the manner set forth in Section 3(g), which notice shall specify the
record date, if any, with respect to any such action and the approximate date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Conversion Factor and the number, kind or class of shares or other
securities or property which shall be deliverable upon conversion of shares of
Series A Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 10 calendar days
prior to the date so fixed, and in the case of all other action, such notice
shall be given at least 15 calendar days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any such action.
(i) Mergers, etc. In the event the Corporation shall be a party to
any transaction (including, without limitation, a merger, consolidation, sale,
lease or transfer of all or substantially all of its assets, reclassification of
the Common Stock or reorganization of the Corporation) as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series A Preferred Stock shall thereafter be convertible into the kind
and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such transaction by a holder of that
number of shares of Common Stock, or fraction thereof, into which one share of
Series A Preferred Stock was convertible immediately prior to such transaction.
(j) Treasury Stock. For the purposes of this Section 3, the sale or
other disposition of any shares of Common Stock theretofore held in the
Corporation's treasury shall be deemed to be an issuance thereof.
(k) Costs. The Corporation shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock upon conversion of any shares of Series A Preferred Stock;
provided that the Corporation shall not be required to pay any taxes which may
be payable in respect of any transfer involved in the issuance
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or delivery of any certificate for such shares in the name other than that of
the holder of the shares of Series A Preferred Stock in respect of which such
shares are being issued.
4. Reacquired Shares. Any shares of Series A Preferred Stock converted
or otherwise acquired by the Corporation in any manner whatsoever shall not be
reissued as part of such series and shall be retired promptly after the
acquisition thereof. All such shares shall upon their retirement become
authorized but unissued shares of Preferred Stock.
5. Dividends.
(a) Generally. Subject to the rights of the holders of any class or
series of capital stock of the Corporation ranking senior to or on a parity with
the Series A Preferred Stock with respect to dividends, the holders of the
Series A Preferred Stock shall be entitled to receive, if, as and when declared
by the Board of Directors out of any assets of the Corporation legally available
therefor, such dividends as may be declared from time to time by the Board of
Directors in respect of the Series A Preferred Stock.
(b) Allocation of Dividends. Dividends payable on the Series A
Preferred Stock, if paid, or if declared and set apart for payment, must be paid
or declared and set apart for payment on all outstanding shares of Series A
Preferred Stock contemporaneously. If dividends payable on the Series A
Preferred Stock and any other class or series of capital stock of the
Corporation ranking on a parity therewith in respect thereto are declared and
paid in an amount less than all accumulated and current dividends on all such
shares, the total amount declared and paid shall be allocated among all of such
shares so that the per share dividend to be declared and paid on each share is
the same percentage of the sum of the accumulated dividends for each such share.
(c) Dividend Payment Preference. The Series A Preferred Stock shall
have preference over the Common Stock as to payment of dividends. The
Corporation shall not declare or pay any distributions to the holders of the
Common Stock or any other class or series of capital stock ranking junior to the
Series A Preferred Stock in respect of the payment of dividends at any time
during which dividends declared or payable on outstanding Series A Preferred
Stock have not been paid in full. In this Section 5(c), "distribution" means
the transfer of cash or property without consideration, whether by way of
dividend or otherwise (except a dividend solely in shares of Common Stock), or
the purchase or redemption by the Corporation of shares of Common Stock or any
other shares of capital stock of the Corporation ranking junior to the Series A
Preferred Stock in respect of payment of dividends for cash or property, but
does not include the repurchase by the Corporation of shares from an officer,
director, employee or consultant of the Corporation.
6. Redemption.
(a) Optional Redemption. The shares of Series A Preferred Stock shall
be redeemable, in whole or in part, at the option of the Corporation at any
time, and from time to time, after October 1, 2000, at the redemption price of
$1,000 per share.
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(b) Mechanics of Redemption. Except as otherwise required by law,
notice of any redemption pursuant to this Section 6 must be delivered in writing
to the holder of Series A Preferred Stock whose shares are selected for
redemption not less than 30 days prior to the redemption date. Such notice
shall state: (i) the redemption date; (ii) the number of shares of Series A
Preferred Stock to be redeemed; (iii) the redemption price; and (iv) the method
by which certificates for such shares are to be surrendered for redemption.
Upon surrender of the certificate for any shares called for redemption and not
previously converted (properly endorsed or signed for transfer), such shares
shall be redeemed by the Corporation at the date of redemption. From and after
the date of redemption, unless the Corporation shall default in providing for
the payment of the applicable redemption price, shares of Series A Preferred
Stock will no longer be deemed to be outstanding and all rights in respect of
such shares of the Corporation will cease, except the right to receive the
redemption price.
7. Exclusion of Other Rights. Unless otherwise required by law, the
shares of Series A Preferred Stock shall not have any voting powers, preferences
or relative, participating, optional or other special rights other than those
specifically set forth herein.
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EXHIBIT B
STATEMENT OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE
SERIES B PREFERRED STOCK
OF
WORK INTERNATIONAL CORPORATION
Pursuant to Section 2.13 of the Texas Business Corporation Act (the
"TBCA"), Work International Corporation, a corporation organized and existing
under the TBCA (the "Corporation"), does hereby certify:
That, pursuant to authority conferred upon the Board of Directors of the
Corporation by its Articles of Incorporation, and pursuant to the provisions of
the TBCA, such Board of Directors by unanimous written consent dated March 4,
1998, duly adopted a resolution providing for the issuance of a series of Three
Thousand (3,000) shares of the Corporation's Preferred Stock, $.001 par value
per share, to be designated "Series B Preferred Stock," and fixing the voting
powers, preferences and relative, participating, optional or other rights, and
the qualifications, limitations or restrictions thereof, which resolution is as
follows:
RESOLVED, that pursuant to the authority expressly granted and vested in
the Board of Directors of the Corporation in accordance with the provisions of
its Articles of Incorporation, there shall be established and authorized for
issuance a series of the Corporation's Preferred Stock, $.001 par value per
share, designated "Series B Preferred Stock" (herein referred to as "Series B
Preferred Stock"), consisting of Three Thousand (3,000) shares, each of the par
value of $.001 per share, and having the voting powers, preferences and
relative, participating, optional and other rights, and the qualifications,
limitations or restrictions set forth below:
1. Voting Rights.
(a) The Corporation shall not, without the consent of the holders of
at least a majority of the shares of the outstanding Series B Preferred Stock,
adopt any amendment to this Statement which would alter or change the powers,
preferences or special rights of the Series B Preferred Stock so as to affect
them adversely, provided that no such consent shall be required with respect to
(i) any amendment to this Statement that increases or decreases the number of
shares of Series B Preferred Stock which the Corporation is authorized to issue
(provided that no such amendment shall reduce the number of authorized shares to
below the number of shares then outstanding), or (ii) the establishment or
issuance of any other series of Preferred Stock or any other class of stock of
the Corporation that has any powers, preferences or rights that are different
from, greater than, superior to or in preference of the Series B Preferred
Stock.
(b) Except as provided in paragraph (a) above or otherwise required by
law, the holders of Series B Preferred Stock shall have no right or power to
vote on the election of directors or on any other question or in any proceedings
involving the Corporation.
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2. Liquidation.
(a) Preference. Subject to the rights of the holders of any other
class or series of capital stock of the Corporation ranking senior to or on a
parity with the Series B Preferred Stock with respect to liquidation, in the
event of any liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, the holders of record of the
issued and outstanding shares of Series B Preferred Stock shall be entitled to
receive, out of the assets of the Corporation legally available for distribution
to the holders of shares of Series B Preferred Stock, prior and in preference to
any distribution of any of the assets of the Corporation to the holders of
common stock, par value $.001 per share (the "Common Stock"), of the Corporation
and any other class or series of capital stock of the Corporation ranking junior
to the Series B Preferred Stock with respect to liquidation, an amount in cash
per share equal to $1,000. If, upon such liquidation, dissolution or winding up
of the affairs of the Corporation, the assets of the Corporation distributable
among the holders of Series B Preferred Stock and any class or series of capital
stock of the Corporation ranking on a parity therewith in respect thereto shall
be insufficient to permit the payment in full to all such holders of shares of
the preferential amounts payable to them, then the entire assets of the
Corporation available for distribution to such holders of shares shall be
distributed ratably among such holders in proportion to the respective amounts
that would be payable per share if such assets were sufficient to permit payment
in full. After payment of the full amount to which they are entitled upon
liquidation pursuant to this Section 2(a), the holders of shares of Series B
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation or other entity nor a sale, transfer,
lease or exchange of all or part of the Corporation's assets will be considered
a liquidation, dissolution or winding up of the affairs of the Corporation for
purposes of this Section 2(a).
(b) Adjustments. The liquidation preference provided for herein with
respect to the Series B Preferred Stock shall be equitably adjusted to reflect
any stock dividend, stock distribution, stock split or reverse stock split,
combination of shares, subdivision of shares or reclassification of shares with
respect to the Series B Preferred Stock.
3. Conversion Rights. The Series B Preferred Stock shall be convertible
as follows:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this Section, the holder of any shares of Series B Preferred Stock
shall have the right at such holder's option, without the payment of any
additional consideration therefor, to convert any shares of Series B Preferred
Stock into fully paid and nonassessable shares of Common Stock at the Conversion
Ratio (as defined herein) in effect on any Conversion Date (as defined herein)
upon the terms hereinafter set forth.
(b) Conversion Ratio. Each share of Series B Preferred Stock shall be
convertible pursuant to this Section into a number of shares of Common Stock
determined by dividing: (x) 1,000 by (y) the Conversion Factor in effect on any
Conversion Date (the "Conversion Ratio"). For the purposes of this Section 3,
the term "Conversion Factor" initially shall mean 4.0.
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(c) Mechanics of Conversion. The holder of any shares of Series B
Preferred Stock may exercise the conversion right specified in Section 3(a) by
surrendering to the Corporation or any transfer agent of the Corporation the
certificate or certificates for the shares to be converted, accompanied by
written notice specifying the number of shares to be converted. Conversion
shall be deemed to have been effected on the date when delivery of notice of an
election to convert and of certificates for shares being converted is made, and
such date is referred to herein as the "Conversion Date." Subject to the
provisions of Section 3(f)(iv), as promptly as practicable thereafter the
Corporation shall issue and deliver, or caused to be issued and delivered, to
the holder a certificate or certificates for the number of full shares of Common
Stock to which such holder is entitled and a check or cash with respect to any
fractional interest in a share of Common Stock as provided in Section 3(e).
Subject to the provisions of Section 3(f)(iv), the person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a holder of record of such Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the number of shares covered by a
certificate representing shares of Series B Preferred Stock surrendered for
conversion, the Corporation shall issue and deliver, or caused to be issued and
delivered, to the holder of the certificate so surrendered for conversion, at
the expense of the Corporation, a new certificate covering the number of shares
of Series B Preferred Stock representing the unconverted portion of the
certificate so surrendered.
(d) Mandatory Conversion. Immediately upon the closing of any initial
public offering of the Common Stock, each share of Series B Preferred Stock then
outstanding shall be automatically converted, without any action on the part of
the holder thereof, into such shares of Common Stock as such share of Series B
Preferred Stock would be convertible into if converted at the option of the
holder pursuant to Section 3(a). Following such mandatory conversion, holders
of shares of Series B Preferred Stock shall only be entitled to the rights of
holders of Common Stock and the Corporation.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series B Preferred Stock. If more
than one share of Series B Preferred Stock is surrendered for conversion at any
one time by the same holder, the number of full shares of Common Stock issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares so surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of Series B
Preferred Stock, the Corporation shall pay out of funds legally available
therefor a cash adjustment in respect of such fractional interest, rounded to
the nearest one hundredth (1/100th) of a share, in an amount equal to that
fractional interest of the then fair value, rounded to the nearest cent ($.01),
of one share of Common Stock, as determined in good faith by the Board of
Directors of the Corporation, irrespective of any accounting treatment, which
determination shall be final and binding; provided, however, if the Common Stock
is then traded or quoted on a national exchange or a nationally recognized
quotation system, the fair market value shall be the closing price of a share of
Common Stock on such exchange or quotation system as of the Conversion Date.
(f) Conversion Factor Adjustments. The Conversion Factor shall be
subject to adjustment from time to time as follows:
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(i) Issuance of Preferred Stock. If the Corporation shall issue
any shares of a class of Preferred Stock that is convertible into Common
Stock at a conversion ratio more favorable to the holder of such Preferred
Stock than the Conversion Ratio currently in effect for the Series B
Preferred Stock (the "Other Preferred Stock"), then the Conversion Factor
shall be adjusted so as to make the Conversion Ratio for the Series B
Preferred Stock equal to the conversion ratio of such Other Preferred
Stock.
(ii) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (x) declare a dividend or make a
distribution on its Common Stock in shares of its Common Stock, (y)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares of Common Stock or (z) combine or reclassify the
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, the Conversion Factor in effect at the time of the record
date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted to that
number determined by multiplying the Conversion Factor in effect by a
fraction (x) the numerator of which shall be the total number of issued and
outstanding shares of Common Stock immediately prior to such dividend,
distribution, subdivision, combination or reclassification and (y) the
denominator of which shall be the total number of issued and outstanding
shares of Common Stock immediately after such dividend, distribution,
subdivision, combination or reclassification. Successive adjustments in
the Conversion Factor shall be made whenever any event specified above
shall occur.
(iii) Rounding of Calculations: Minimum Adjustment. All
calculations under this Section 3(f) shall be made to the nearest cent
($.01) or to the nearest one hundredth (1/100th) of a share, as the case
may be. Notwithstanding any provision of this Section 3 to the contrary,
no adjustment in the Conversion Factor shall be made if the amount of such
adjustment would be less than 1% of the then current Conversion Factor
until the end of one year after such adjustment otherwise would have been
required; but any such amount shall be carried forward and an adjustment
with respect thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount and any other amount
or amounts so carried forward, shall aggregate 1% of the then current
Conversion Factor or more, provided that if the events giving rise to such
adjustments occur within three months of each other, then such adjustments
shall be calculated as if the events giving rise to them had occurred
simultaneously on the date of the first such event.
(iv) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this Section 3(f)
provide that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of
such event (x) issuing to the holder of any share of Series B Preferred
Stock converted after such record date and before the occurrence of such
event, the additional shares of Common Stock issuable upon such conversion
by reason of the adjustment required by such event over and above the
shares of Common Stock issuable upon such conversion before giving effect
to such adjustment and (y) paying to such holder any amount of cash in lieu
of a fractional share of Common Stock pursuant to Section 3(e); provided
that the Corporation upon request shall deliver to such holder a due
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bill or other appropriate instrument evidencing such holder's right to
receive such additional shares, and such cash, upon the occurrence of the
event requiring such adjustment.
(g) Statement Regarding Adjustments. Whenever the Conversion Factor
shall be adjusted as provided in Section 3(f), the Corporation shall forthwith
file, at the office of any transfer agent for the Series B Preferred Stock and
at the principal office of the Corporation, a statement showing in detail the
method of calculation of such adjustment, the facts requiring such adjustment
and the Conversion Factor that shall be in effect after such adjustment, and the
Corporation shall, upon the request of any holder of Series B Preferred Stock,
cause a copy of such statement to be sent by mail, first class postage prepaid
to such holder at his address appearing on the Corporation's records. Each such
statement shall be signed by the Corporation's president or chief financial
officer. Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
Section 3(h).
(h) Notice to Holders. In the event the Corporation shall propose to
take any action of the type described in Section 3(f)(ii) or 3(i), the
Corporation shall give notice to each holder of shares of Series B Preferred
Stock in the manner set forth in Section 3(g), which notice shall specify the
record date, if any, with respect to any such action and the approximate date on
which such action is to take place. Such notice shall also set forth such facts
with respect thereto as shall be reasonably necessary to indicate the effect of
such action (to the extent such effect may be known at the date of such notice)
on the Conversion Factor and the number, kind or class of shares or other
securities or property which shall be deliverable upon conversion of shares of
Series B Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 10 calendar days
prior to the date so fixed, and in the case of all other action, such notice
shall be given at least 15 calendar days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not affect
the legality or validity of any such action.
(i) Mergers, etc. In the event the Corporation shall be a party to
any transaction (including, without limitation, a merger, consolidation, sale,
lease or transfer of all or substantially all of its assets, reclassification of
the Common Stock or reorganization of the Corporation) as a result of which
shares of Common Stock shall be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series B Preferred Stock shall thereafter be convertible into the kind
and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such transaction by a holder of that
number of shares of Common Stock, or fraction thereof, into which one share of
Series B Preferred Stock was convertible immediately prior to such transaction.
(j) Treasury Stock. For the purposes of this Section 3, the sale or
other disposition of any shares of Common Stock theretofore held in the
Corporation's treasury shall be deemed to be an issuance thereof.
(k) Costs. The Corporation shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock upon conversion of any shares of Series B Preferred Stock;
provided that the Corporation shall not be required to pay any taxes which may
be payable in respect of any transfer involved in the issuance
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or delivery of any certificate for such shares in the name other than that of
the holder of the shares of Series B Preferred Stock in respect of which such
shares are being issued.
4. Reacquired Shares. Any shares of Series B Preferred Stock converted
or otherwise acquired by the Corporation in any manner whatsoever shall not be
reissued as part of such series and shall be retired promptly after the
acquisition thereof. All such shares shall upon their retirement become
authorized but unissued shares of Preferred Stock.
5. Dividends.
(a) Generally. Subject to the rights of the holders of any class or
series of capital stock of the Corporation ranking senior to or on a parity with
the Series B Preferred Stock with respect to dividends, the holders of the
Series B Preferred Stock shall be entitled to receive, if, as and when declared
by the Board of Directors out of any assets of the Corporation legally available
therefor, such dividends as may be declared from time to time by the Board of
Directors in respect of the Series B Preferred Stock.
(b) Allocation of Dividends. Dividends payable on the Series B
Preferred Stock, if paid, or if declared and set apart for payment, must be paid
or declared and set apart for payment on all outstanding shares of Series B
Preferred Stock contemporaneously. If dividends payable on the Series B
Preferred Stock and any other class or series of capital stock of the
Corporation ranking on a parity therewith in respect thereto are declared and
paid in an amount less than all accumulated and current dividends on all such
shares, the total amount declared and paid shall be allocated among all of such
shares so that the per share dividend to be declared and paid on each share is
the same percentage of the sum of the accumulated dividends for each such share.
(c) Dividend Payment Preference. The Series B Preferred Stock shall
have preference over the Common Stock as to payment of dividends. The
Corporation shall not declare or pay any distributions to the holders of the
Common Stock or any other class or series of capital stock ranking junior to the
Series B Preferred Stock in respect of the payment of dividends at any time
during which dividends declared or payable on outstanding Series B Preferred
Stock have not been paid in full. In this Section 5(c), "distribution" means
the transfer of cash or property without consideration, whether by way of
dividend or otherwise (except a dividend solely in shares of Common Stock), or
the purchase or redemption by the Corporation of shares of Common Stock or any
other shares of capital stock of the Corporation ranking junior to the Series B
Preferred Stock in respect of payment of dividends for cash or property, but
does not include the repurchase by the Corporation of shares from an officer,
director, employee or consultant of the Corporation.
6. Redemption.
(a) Optional Redemption. The shares of Series B Preferred Stock shall
be redeemable, in whole or in part, at the option of the Corporation at any
time, and from time to time, after March 1, 2001, at the redemption price of
$1,000 per share.
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(b) Mechanics of Redemption. Except as otherwise required by law,
notice of any redemption pursuant to this Section 6 must be delivered in writing
to the holder of Series B Preferred Stock whose shares are selected for
redemption not less than 30 days prior to the redemption date. Such notice
shall state: (i) the redemption date; (ii) the number of shares of Series B
Preferred Stock to be redeemed; (iii) the redemption price; and (iv) the method
by which certificates for such shares are to be surrendered for redemption.
Upon surrender of the certificate for any shares called for redemption and not
previously converted (properly endorsed or signed for transfer), such shares
shall be redeemed by the Corporation at the date of redemption. From and after
the date of redemption, unless the Corporation shall default in providing for
the payment of the applicable redemption price, shares of Series B Preferred
Stock will no longer be deemed to be outstanding and all rights in respect of
such shares of the Corporation will cease, except the right to receive the
redemption price.
7. Exclusion of Other Rights. Unless otherwise required by law, the
shares of Series B Preferred Stock shall not have any voting powers, preferences
or relative, participating, optional or other special rights other than those
specifically set forth herein.
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EXHIBIT 3.2
BYLAWS
OF
WORK INTERNATIONAL CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of Work International
Corporation (the "Corporation") will be in Houston, Texas. The Board of
Directors of the Corporation (the "Board of Directors") may elect to relocate
the principal office of the Corporation from time to time as it shall deem
necessary and proper.
Section 2. Other Offices. The Corporation may also have offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders will be
held at the principal office of the Corporation, or at such other place as may
be determined by the Board of Directors and stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. An annual meeting of Stockholders shall be
held for the election of directors at such date, time and place as may be
designated by resolution of the Board of Directors from time to time; provided
that each successive annual meeting shall be held on a date within 13 months
after the date of the preceding annual meeting. Only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting or at the direction of the Board of
Directors, or (c) otherwise properly brought before the meeting by a stockholder
of the Corporation. For business to be properly brought before an annual meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation, no less than 60 days nor more than 180 days prior to
the anniversary date of the immediately preceding annual meeting; provided,
however, that in the event that the date of the annual meeting is changed by
more than 30 days from such anniversary date, notice by the stockholder to be
timely must be received not later than the close of business on the tenth day
following the earlier of the date on which a written statement setting forth the
date of such meeting was mailed to stockholders or the date on which it is first
disclosed to the public. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to
<PAGE>
bring before the annual meeting: (a) a brief description of the business desired
to be brought before the annual meeting, (b) the name and address, as they
appear on the Corporation's books, of the stockholder proposing such proposal,
(c) the class and number of shares of the Corporation that are beneficially
owned by the stockholder, and (d) any material interest of the stockholder in
such business. In addition, if the stockholder's ownership of shares of the
Corporation, as set forth in the notice, is solely beneficial, documentary
evidence of such ownership must accompany the notice. Notwithstanding anything
else in these Bylaws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 2. The presiding officer of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that any business that was not
properly brought before the meeting is out of order and shall not be transacted
at the meeting.
Section 3. Notice of Annual Meeting. Written or printed notice of the
annual meeting, stating the place, day and hour thereof, will be served upon or
mailed to each stockholder entitled to vote thereat at such address as appears
on the books of the Corporation, not less than ten days nor more than sixty days
before the date of the meeting.
Section 4. Special Meeting. Except as otherwise required by law or the
Articles of Incorporation, special meetings of the stockholders of the
Corporation may be called only by the Chairman of the Board of Directors (the
"Chairman of the Board"), the Chief Executive Officer, the President, the Board
of Directors by the written order of a majority of the entire Board of
Directors, or upon the written request of stockholders owning not less than
fifty percent of the shares of capital stock of the Corporation issued,
outstanding and entitled to vote at such meeting delivered to the President or
Secretary that states the purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special meeting
of stockholders, stating the place, day and hour and purpose or purposes
thereof, will be served upon or mailed to each stockholder entitled to vote
thereat at such address as appears on the books of the Corporation, not less
than ten days nor more than sixty days before the date of the meeting.
Section 6. Business at Special Meeting. Business transacted at all special
meetings will be confined to the purpose or purposes stated in the notice.
Section 7. Stockholder List. At least ten days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, will be prepared by the
Secretary. Such list, for a period of ten days prior to such meeting, will be
kept on file at the registered office of the Corporation and will be subject to
inspection by any stockholder at any time during usual business hours. Such list
will also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole time of
the meeting.
Section 8. Quorum. The holders of at least one-half of the shares of
capital stock issued and outstanding and entitled to vote thereat, represented
in person or by proxy, will constitute a
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quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by law, the Articles of Incorporation or these
Bylaws. If, however, such quorum is not present or represented at any meeting
of the stockholders, the stockholders entitled to vote thereat, represented in
person or by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At any such adjourned meeting at which a quorum is
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 9. Voting. Unless otherwise provided by law, the Articles of
Incorporation or these Bylaws, each stockholder will have one vote for each
share of stock having voting power, registered in his name on the books of the
Corporation. When a quorum is present at any meeting, the vote of the holders of
a majority of the shares having voting power represented in person or by proxy
and voted for or against or expressly abstained on any question will decide such
question brought before such meeting, unless the question is one upon which, by
express provision of law, the Articles of Incorporation or these Bylaws, a
different vote is required, in which case such express provision will govern and
control the decision of such question. In the case of a matter submitted for a
vote of the stockholders as to which a stockholder approval requirement is
applicable under the stockholder approval policy of any stock exchange or
quotation system on which the capital stock of the Corporation is traded or
quoted, the requirements under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any provisions of the Internal Revenue Code, in each
case for which no higher voting requirement is specified by the Texas Business
Corporation Act (the "TBCA"), the Articles of Incorporation or these Bylaws, the
vote required for approval shall be the requisite vote specified in such
stockholder approval policy, the Exchange Act or Internal Revenue Code
provision, as the case may be (or the highest such requirement if more than one
is applicable). Unless otherwise provided in the Articles of Incorporation or
these Bylaws in accordance with the TBCA, directors shall be elected by a
plurality of the votes cast by the holders of outstanding shares of capital
stock of the Corporation entitled to vote in the election of directors at a
meeting of stockholders at which a quorum is present.
Section 10. Proxies. At any meeting of the stockholders every stockholder
having the right to vote will be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder or his duly
authorized attorney in fact and bearing a date not more than eleven months prior
to said meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation will be
managed by a Board of Directors. The Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law, by the Articles of Incorporation or these Bylaws directed or required to be
exercised or done by the stockholders.
Section 2. Number of Directors. The number of directors which constitute
the whole Board of Directors will be no more than twelve, as such number shall
be determined by resolution
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of the Board of Directors from time to time; provided, however, that no decrease
in the number of directors shall have the effect of shortening the term of any
incumbent director; provided further, however, that from and after the first
date as of which the Corporation has a class or series of capital stock
registered under the Exchange Act, the number of directors which shall
constitute the whole Board of Directors shall be not less than three.
Section 3. Nomination. Only persons who are nominated in accordance with
the procedures set forth in these Bylaws shall be eligible to serve as
directors. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders (a) by or at the direction
of the Board of Directors or (b) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
Section 3, who shall be entitled to vote for the election of directors at the
meeting and who complies with the notice procedures set forth in this Section 3.
Nominations by stockholders shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation (a) in the case of an annual meeting, not less than
60 days nor more than 180 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is changed by more than 30 days from such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the earlier of the date on which a
written statement setting forth the date of such meeting was mailed to
stockholders or the date on which it is first disclosed to the public, and (b)
in the case of a special meeting at which directors are to be elected, not later
than the close of business on the tenth day following the earlier of the date on
which a written statement setting forth the date of such meeting was mailed to
stockholders or the date on which it is first disclosed to the public. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to the stockholder giving the notice
(i) the name and address, as they appear on the Corporation's books, of such
stockholder and (ii) the class and number of shares of the Corporation which are
beneficially owned by such stockholder and which are owned of record by such
stockholder; and (c) as to the beneficial owner, if any, on whose behalf the
nomination is made, (i) the name and address of such person and (ii) the class
and number of shares of the Corporation which are beneficially owned by such
person. At the request of the Board of Directors, any person nominated by the
Board of Directors for election as a director shall furnish to the Secretary of
the Corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.
The presiding officer of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this Section 3 and he shall so declare to the meeting,
and the defective nomination shall be disregarded.
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Section 4. Election and Term. Subject to the requirements of the Articles
of Incorporation, the directors of each class shall be elected at the annual
meeting of stockholders, except as provided in Section 5, and each director
elected shall hold office until the expiration of his term and until his
successor shall be elected and shall qualify. Directors need not be residents of
Texas or stockholders of the Corporation.
Section 5. Vacancies. If any vacancy occurs in the Board of Directors
caused by death, resignation, retirement, disqualification, or removal from
office of any director, or otherwise, or if any new directorship is created by
an increase in the authorized number of directors, a majority of the directors
then in office, though less than a quorum, or a sole remaining director, may
choose a successor or fill the newly created directorship; and a director so
chosen shall hold office until his term expires and until his successor shall be
duly elected and shall qualify, unless sooner displaced.
Section 6. Resignation; Removal. Any director may resign at any time.
Unless otherwise prescribed by law or the Articles of Incorporation, a director
may be removed from office only for cause and then only by the affirmative vote
of the holders of at least a majority of the voting power of all outstanding
shares of capital stock of the Corporation generally entitled to vote in the
election of directors, voting together as a single class. Except as may
otherwise be provided by law, cause of removal of a director shall be deemed to
exist only if: (i) the director whose removal is proposed has been convicted, or
where a director is granted immunity to testify where another has been
convicted, of a felony by a court of competent jurisdiction and such conviction
is no longer subject to direct appeal; (ii) such director has been found by the
affirmative vote of a majority of the entire Board of Directors at any regular
or special meeting of the Board of Directors called for that purpose or by a
court of competent jurisdiction to have been grossly negligent or guilty of
misconduct in the performance of his duties to the Corporation in a matter of
substantial importance to the Corporation; or (iii) such director has been
adjudicated by a court of competent jurisdiction to be mentally incompetent,
which mental incompetency directly affects his ability as a director of the
Corporation.
Section 7. Compensation. Directors, as such, shall receive such
compensation for their services and such reimbursement of expenses as shall be
determined by the Board of Directors.
ARTICLE IV
MEETINGS OF THE BOARD
Section 1. First Meeting. The Board of Directors may hold its first
meeting for the purpose of organization and the transaction of business, if a
quorum is present, immediately after and at the same place as the annual meeting
of the stockholders, and no notice of such meeting shall be necessary; or the
Board of Directors may meet at such place and time as is fixed by the consent in
writing of all the directors.
Section 2. Regular Meetings. Regular meetings of the Board of Directors
may be held at such time and place either within or without the State of Texas
and with such notice or without notice as is determined from time to time by the
Board of Directors.
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Section 3. Special Meetings. Special meetings of the Board of Directors
may be called by the President or the Chairman of the Board on one days notice
to each director, either personally or by mail or telegram. Special meetings
will be called by the President or the Chairman of the Board in like manner and
on like notice upon the written request of a majority of the Board of Directors.
Section 4. Quorum and Voting. At all meetings of the Board of Directors, a
majority of the directors will be necessary and sufficient to constitute a
quorum for the transaction of business; and the act of a majority of the
directors present at any meeting at which there is a quorum will be the act of
the Board of Directors, except as may be otherwise specifically provided by law,
the Articles of Incorporation or these Bylaws. If a quorum is not present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present.
Section 5. Telephone Meetings. The Board of Directors may hold meetings in
any manner permitted by law. Without limitation, at any meeting of the Board of
Directors, a director may attend by telephone, radio, television, interactive
media or similar means of communication by means of which all participants can
hear each other which permits him to participate in the meeting, and a director
so attending will be deemed present at the meeting for all purposes including
the determination of whether a quorum is present.
Section 6. Action by Written Consent. Any action required or permitted to
be taken by the Board of Directors or any committee of the Board of Directors
under applicable statutory provisions, the Articles of Incorporation, or these
Bylaws, may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by all the members of the Board of Directors or
such committee, as the case may be, and filed with the minutes of the meetings
of the Board of Directors or such committee, as the case may be.
ARTICLE V
COMMITTEES
Section 1. Committees of Directors. The Board of Directors may establish
an Audit Committee and a Compensation Committee, and may establish an Executive
Committee and such other committees as may be established by resolution of a
majority of the whole Board of Directors. Each of such committees shall consist
of one or more members of the Board of Directors and shall have a chairman that
is selected by the Board of Directors. Members of committees of the Board of
Directors shall be elected annually by vote of a majority of the Board of
Directors. The Chief Executive Officer shall be an ex-officio nonvoting member
of each committee (except the Audit and Compensation Committees) of which he is
not an official voting member. With respect to any committee (including the
Audit and Compensation Committees) of which the Chief Executive Officer is not
an official voting member, the Chief Executive Officer shall be given notice of
all committee meetings at the same time notice is given to committee members,
and the Chief Executive Officer shall be afforded the opportunity to speak at
the committee meeting. Presence of a majority of the committee members (not
counting any ex-officio nonvoting members) shall constitute a quorum. Committees
may act by majority vote of the voting members present at a meeting. Each of
such
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committees shall have and may exercise such of the powers of the Board of
Directors in the management of the business and affairs of the Corporation as
may be provided in these Bylaws or by resolution of the Board of Directors. Each
of such committees may authorize the seal of the Corporation to be affixed to
any document or instrument. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
or disqualified member at any meeting of such committee. Meetings of committees
may be called by the chairman of the committee by written, telegraphic or
telephonic notice to all members of the committee and the Chief Executive
Officer and shall be at such time and place as shall be stated in the notice of
such meeting. Any member of a committee may participate in any meeting by means
of conference telephone or similar communications equipment. In the absence or
disqualification of a member of any committee the chairman of such committee
may, if deemed advisable, appoint another member of the Board of Directors to
act at the meeting in the place of the disqualified or absent member. The
chairman of the committee may fix such other rules and procedures governing
conduct of meetings as he shall deem appropriate.
Section 2. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate two or more
directors to constitute an Executive Committee, which committee, to the extent
provided in such resolution, will have and may exercise all of the authority of
the Board of Directors in the business and affairs of the Corporation, and may
have power to authorize the seal of the Corporation to be affixed to all papers
which may require it, except where action by the Board of Directors is specified
by law. The Executive Committee will keep regular minutes of its proceedings and
report the same to the Board of Directors when required.
Section 3. Audit Committee. The Audit Committee shall consist of not less
than two members of the Board of Directors. The Audit Committee shall be
responsible for recommending to the entire Board of Directors engagement and
discharge of independent auditors of the financial statements of the
Corporation, shall review the professional service provided by the independent
auditors, shall review the independence of independent auditors, shall review
with the auditors the plan and results of the auditing engagement, shall
consider the range of audit and non-audit fees, shall review the adequacy of the
Corporation's system of internal audit controls, shall review the results of
procedures for internal auditing and shall consult with the internal auditor of
the Corporation with respect to all aspects of the Corporation's internal
auditing program. In addition, the Audit Committee shall direct and supervise
special investigations as deemed necessary by the Audit Committee.
Section 4. Compensation Committee. The Compensation Committee shall
consist of not less than two members of the Board of Directors. The Compensation
Committee shall recommend to the Board of Directors the compensation to be paid
to officers and key employees of the Corporation and the compensation of the
Board of Directors. Except as otherwise provided in any specific plan adopted by
the Board of Directors, the Compensation Committee shall be responsible for
administration of executive compensation plans, stock option plans and other
forms of direct or indirect compensation of officers and key employees, and each
member of the Compensation Committee shall have the power and authority to
execute and bind the Corporation to such
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documents, agreements and instruments related to such plans and compensation as
are approved by the Compensation Committee. In the alternative, the
Compensation Committee may authorize any officer of the Corporation to execute
such documents, agreements and instruments on behalf of the Corporation. In
addition, the Compensation Committee shall review levels of pension benefits and
insurance programs for officers and key employees.
Section 5. Other Committees. The Board of Directors may similarly create
other committees for such terms and with such powers and duties as the Board of
Directors deems appropriate except as provided to the contrary by law, the
Articles of Incorporation, or these Bylaws.
Section 6. Advisory Directors. The Board of Directors may, by majority
vote, appoint one or more advisory directors. Advisory directors shall serve at
the Board of Directors' convenience solely to advise the Board of Directors, and
shall have no formal responsibilities. No advisory director shall be entitled to
vote at meetings of the Board of Directors, nor shall any advisory director be
counted when determining whether there is a quorum at meetings of the Board of
Directors. Advisory directors shall not be, by virtue of their position as
advisory directors, agents of the Corporation, and they shall not have the power
to bind the Corporation.
ARTICLE VI
NOTICES
Section 1. Methods of Notice. Whenever any notice is required to be given
to any stockholder or director under the provisions of any law, the Articles of
Incorporation or these Bylaws, it will not be construed to require personal
notice, but such notice may be given in writing by mail addressed to such
stockholder or director at such address as appears on the books of the
Corporation, and such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail with postage thereon prepaid.
Notice to directors may also be given by telegram, by facsimile, by telephone or
in person, and notice given by such means shall be deemed given at the time it
is delivered.
Section 2. Waiver of Notice. Whenever any notice is required to be given
to any stockholder or director under the provisions of any law, the Articles of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, will be deemed equivalent to the giving of such notice. Attendance at
any meeting will constitute a waiver of notice thereof except as otherwise
provided by law.
ARTICLE VII
OFFICERS
Section 1. Executive Officers. The officers of the Corporation will
consist of President, Vice President, Treasurer, and Secretary, each of whom
shall be elected by the Board of Directors. The Board of Directors may also
elect a Chairman of the Board, a Chief Executive Officer, additional
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vice presidents, and one or more assistant secretaries and assistant treasurers.
Any two or more offices may be held by the same person.
Section 2. Election and Qualification. The Board of Directors at its first
meeting after each annual meeting of stockholders will elect the President, one
or more Vice Presidents, a Secretary and a Treasurer, none of whom need be a
member of the Board of Directors.
Section 3. Other Officers and Agents. The Board of Directors may elect or
appoint such other officers, assistant officers and agents as it deems
necessary, who will hold their offices for such terms and shall exercise such
powers and perform such duties as determined from time to time by the Board of
Directors.
Section 4. Salaries. The salaries of all officers of the Corporation will
be fixed by the Board of Directors except as otherwise directed by the Board of
Directors.
Section 5. Term, Removal and Vacancies. The officers of the Corporation
will hold office until their resignation or their successors are chosen and
qualify. Any officer, agent or member of the Executive Committee elected or
appointed by the Board of Directors may be removed at any time by the Board of
Directors; provided, however, that such removal shall be without prejudice to
the contract rights, if any, of such removed party. If any such office becomes
vacant for any reason, the vacancy will be filled by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board, if one is
elected, shall preside at meetings of the Board of Directors and stockholders
and shall have such other powers and duties as may from time to time be
prescribed by duly adopted resolutions of the Board of Directors.
Section 7. Chief Executive Officer. The Chief Executive Officer, if one is
elected, shall preside at meetings of the Board of Directors and stockholders if
there is no Chairman of the Board, and shall supervise and have overall
responsibility for the business, administration and operations of the
Corporation. In general, he shall perform all duties as from time to time may be
assigned to him by the Board of Directors. He shall from time to time make such
reports of the affairs of the Corporation as the Board of Directors may require.
Section 8. President. The President shall, subject to the Board of
Directors, have general executive charge, management and control of the
properties and operations of the Corporation in the ordinary course of its
business with all such powers with respect to such responsibilities including
the powers of general manager; and the president shall see that all orders and
resolutions of the Board of Directors are carried into effect. The president
shall have such other powers and duties as may from time to time be prescribed
by duly adopted resolution of the Board of Directors.
Section 9. Vice President. The Vice Presidents in the order determined by
the Board of Directors will, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and will perform
such other duties as the Board of Directors and President may prescribe.
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Section 10. Secretary. The Secretary will attend all meetings of the Board
of Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and will
perform like duties for the standing committees when required. He will give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and will perform such other duties as may be
prescribed by the Board of Directors and President. He will keep in safe custody
the seal of the Corporation and, when authorized by the Board of Directors,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an assistant secretary.
Section 11. Assistant Secretaries. The assistant secretaries in the order
determined by the Board of Directors will perform, in the absence or disability
of the Secretary, the duties and exercise the powers of the Secretary and will
perform such other duties as the Board of Directors and President may prescribe.
Section 12. Treasurer. The Treasurer will have the custody of the corporate
funds and securities and will keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and will deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. He will
disburse the funds of the Corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and will render to the
Board of Directors and President, whenever they may require it, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation.
Section 13. Assistant Treasurers. The Assistant Treasurers in the order
determined by the Board of Directors, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and will
perform such other duties as the Board of Directors and President may prescribe.
Section 14. Officer's Bond. If required by the Board of Directors, any
officer will give the Corporation a bond (to be renewed as the Board of
Directors may require) in such sum and with such surety or sureties as is
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
ARTICLE VIII
SHARES AND STOCKHOLDERS
Section 1. Certificates Representing Shares. The certificates representing
shares of capital stock of the Corporation will be numbered and entered in the
books of the Corporation as they are issued. They will exhibit the holder's name
and number of shares and will be signed by the Chief Executive Officer,
President or Vice-President and the Secretary or an Assistant Secretary. The
signature of any such officer may be facsimile if the certificate is
countersigned by a transfer agent or registered by a registrar, other than the
Corporation itself or an employee of the Corporation. In
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case any officer who has signed or whose facsimile signature has been placed
upon such certificate has ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issuance.
Section 2. Transfer of Shares. Upon surrender to the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it will be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books. Notwithstanding
the foregoing, no transfer will be recognized by the Corporation if such
transfer would violate federal or state securities laws, the Articles of
Incorporation, or any stockholders' agreements which may be in effect at the
time of the purported transfer. The Corporation may, prior to any such transfer,
require an opinion of counsel to the effect that any such transfer does not
violate applicable securities laws requiring registration or an exemption from
registration prior to any such transfer.
Section 3. Fixing Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of stockholders for any other proper purpose, the Board
of Directors may provide that the stock transfer books be closed for a stated
period but not to exceed, in any case, sixty days. If the stock transfer books
are closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books must be closed for at least ten
days immediately preceding such meeting. In lieu of closing the stock transfer
books, the Board of Directors may fix in advance a date as the record date for
any such determination of stockholders, such date, in any case, to be not more
than sixty days and, in case of a meeting of stockholders, not less than ten
days prior to the date on which the particular action requiring such
determination of stockholders is to be taken. If the stock transfer books are
not closed and no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or stockholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, will be the record date
for such determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as herein
provided, such determination will apply to any adjournment thereof except where
the determination has been made through the closing of stock transfer books and
the stated period of closing has expired.
Section 4. Registered Stockholders. The Corporation is entitled to
recognize the exclusive right of a person registered on its books as the owner
of the share to receive dividends, and to vote as such owner, and for all other
purposes as such owner; and the Corporation is not bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has express or other notice thereof, except
as otherwise provided by the laws of Texas.
Section 5. Lost Certificate. The Board of Directors may direct a new
certificate or certificate to be issued in place of any certificate or
certificate theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person
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claiming the certificate to be lost or destroyed. When authorizing such issue
of a new certificate or certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost or destroyed certificate or certificate, or his legal
representatives, to advertise the same in such manner as it shall require and/or
give the Corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost or destroyed.
ARTICLE IX
GENERAL
Section 1. Dividends. The Board of Directors may from time to time
declare, and the Corporation pay, dividends on its outstanding shares of capital
stock in cash, in property, or in its own shares, except when the declaration or
payment thereof would be contrary to law, the Articles of Incorporation or these
Bylaws. Such dividends may be declared at any regular or special meeting of the
Board of Directors, and the declaration and payment will be subject to all
applicable provisions of law, the Articles of Incorporation and these Bylaws.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors from time to time, in its absolute discretion,
deems proper as a reserve fund to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors may determine to be in the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section 3. Directors' Annual Statement. The Board of Directors will
present at each annual meeting and when called for by vote of the stockholders
at any special meeting of the stockholders, a full and clear statement of the
business and condition of the Corporation.
Section 4. Checks. All checks or demands for money and notes of the
Corporation will be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 5. Corporate Records. The Corporation will keep at its registered
office or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders giving the names and addresses of all
stockholders and the number and class of shares held by each. All other books
and records of the Corporation may be kept at such place or places within or
without the State of Texas as the Board of Directors may from time to time
determine.
Section 6. Seal. The corporate seal will have inscribed thereon the name
of the Corporation. The seal may be used by causing it or a facsimile thereof to
be impressed, affixed or reproduced.
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Section 7. Amendment. The Board of Directors shall have the exclusive
power to make, alter, amend and repeal the Bylaws. Any Bylaws made by the Board
of Directors under the powers conferred hereby may not be altered, amended or
repealed by the stockholders.
Section 8. Indemnification. Each director, officer and former director or
officer of the Corporation, and any person who may have served or who may
hereafter serve at the request of the Corporation as a director or officer of
another corporation in which it owns shares of capital stock or of which it is a
creditor, is hereby indemnified by the Corporation against expenses actually and
necessarily incurred by him in connection with the defense of any action, suit
or proceeding in which he is made a party by reason of being or having been such
director or officer, except in relation to matters as to which he shall be
adjudged in such action, suit or proceeding to be liable for negligence or
misconduct in the performance of duty. Such indemnification will not be deemed
exclusive of any other rights to which such director, officer or other person
may be entitled under any agreement, vote of stockholders, or otherwise. Without
limitation, nothing in this section shall limit any indemnification provisions
in the Articles of Incorporation.
Section 9. Election Not to be Governed by Part Thirteen of the TBCA. The
Corporation expressly elects not to be governed by the provisions of Part
Thirteen of the TBCA.
I, the undersigned Secretary of Work International Corporation, hereby
certify that the foregoing is a true and correct copy of the Bylaws of said
Corporation, adopted by the written consent of the Board of Directors of the
Corporation on the 4th day of September, 1997.
/s/ Richard K. Reiling
---------------------------
Richard K. Reiling,
Secretary
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EXHIBIT 4.2
EXHIBIT 1.02-A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of __________________, 1998, among Work International
Corporation, a Texas corporation ("WORK"), and each person listed on the
signature pages of this Agreement under the caption "Stockholders" (each a
"Stockholder" and, collectively, the "Stockholders").
WHEREAS, pursuant to various acquisition agreements entered into with
WORK (collectively, the "Acquisition Agreements"), each of the Stockholders has
received on the date hereof shares of common stock, par value $.001 per share,
of WORK ("Common Stock"); and
WHEREAS, in order to induce the Stockholders to enter into their
respective Acquisition Agreements, WORK has agreed to provide registration
rights on the terms set forth in this Agreement for the benefit of the
Stockholders;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. The following capitalized terms shall have the
meanings assigned to them in this Section 1 or in the parts of this Agreement
referred to below:
Code: the Internal Revenue Code of 1986, as amended, and any successor
thereto.
Commission: the Securities and Exchange Commission, and any successor
thereto.
Demand Registration: as defined in Section 3.
Effective Time: as defined in Section 3.
Exchange Act: the Securities Exchange Act of 1934, as amended, and any
successor thereto, and the rules and regulations thereunder.
Exempt Offering: as defined in Section 2.
Registrable Common: shares of Common Stock that were issued to the
Stockholders pursuant to the Acquisition Agreements, and any additional shares
of Common Stock issued or distributed in respect of any other shares of
Registrable Common by way of a stock dividend or distribution or stock split or
in connection with a combination of shares, recapitalization, reorganization,
merger, consolidation or otherwise. For purposes of this Agreement, shares of
Registrable Common will cease to be Registrable Common when and to the extent
that (i) a registration statement covering such shares has been declared
effective under the Securities Act and such shares have been disposed of
pursuant to such effective registration statement, (ii) such shares
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are sold pursuant to Rule 144 or become saleable under Rule 144(k), or (iii)
such shares have been otherwise transferred to a person or entity that is not a
Stockholder, other than pursuant to Section 11.
Registration Notice: as defined in Section 2.
Requesting Holders: as defined in Section 3.
Restricted Period: as defined in Section 3.
Rule 144: Securities Act Rule 144 (or any similar or successor
provision under the Securities Act).
Securities Act: the Securities Act of 1933, as amended, and any
successor thereto, and the rules and regulations thereunder.
Selling Stockholder: as defined in Section 12.
2. Piggyback Registration Rights. At any time after the first
anniversary of the date of this Agreement and before the third anniversary of
the date of this Agreement, whenever WORK proposes to register any Common Stock
for its own account under the Securities Act for a public offering for cash,
other than a registration relating to the offering or issuance of shares in
connection with (i) employee compensation or benefit plans or (ii) one or more
acquisition transactions under a Registration Statement on Form S-4 or Form S-1
under the Securities Act (or a successor to Form S-4 or Form S-1) (any such
offering or issuance being an "Exempt Offering"), WORK will give each
Stockholder written notice of its intent to do so (a "Registration Notice") at
least 20 days prior to the filing of the related registration statement with the
Commission. Such notice shall specify the approximate date on which WORK
proposes to file such registration statement and shall contain a statement that
the Stockholders are entitled to participate in such offering and shall set
forth the number of shares of Registrable Common that represents the best
estimate of the lead managing underwriter (or if not known or applicable, WORK)
that will be available for sale by the holders of Registrable Common in the
proposed offering. If WORK shall have delivered a Registration Notice, each
Stockholder shall be entitled to participate on the same terms and conditions as
WORK in the public offering to which the Registration Notice relates and to
offer and sell shares of Registrable Common therein only to the extent provided
in this Section 2. Each Stockholder desiring to participate in such offering
shall notify WORK no later than ten days following receipt of the Registration
Notice of the aggregate number of shares of Registrable Common that such
Stockholder then desires to sell in the offering. Each Stockholder desiring to
participate in such public offering may include shares of Registrable Common in
the registration statement relating to the offering, to the extent that the
inclusion of such shares shall not reduce the number of shares of Common Stock
to be offered and sold by WORK to be included therein. If the lead managing
underwriter selected by WORK for a public offering (or, if the offering is not
underwritten, a financial advisor to WORK) reasonably determines that marketing
factors require a limitation on the number of shares of Registrable Common to be
offered and sold in such offering, there shall be included in the offering only
that number of shares of Registrable Common, if any, requested to be included in
the offering
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that such lead managing underwriter or financial advisor, as the case may be,
reasonably and in good faith believes will not jeopardize the success of the
offering, provided, however, that if the lead managing underwriter or financial
advisor, as the case may be, determines that marketing factors require a
limitation on the number of shares of Registrable Common to be offered and sold
as aforesaid and so notifies WORK in writing, the number of shares of
Registrable Common to be offered and sold by holders desiring to participate in
the offering, shall be allocated among such holders on a pro rata basis based on
their holdings of Registrable Common. WORK shall have the right at any time to
reduce the number of shares requested by any Stockholder to be included in such
registration to the extent that WORK reasonably concludes that inclusion of such
shares is likely to jeopardize the non-recognition status under the Code of any
acquisition transaction consummated pursuant to any of the Acquisition
Agreements; provided, however, that any determination to exclude shares from any
such registration pursuant to this provision shall be based on advice of tax
counsel to WORK or its independent accountants.
3. Demand Registration Rights. At any time after the period ending
on the first anniversary of the date of this Agreement (the "Restricted Period")
and before the third anniversary of the date of this Agreement, the holders of
at least 51% of the shares of Registrable Common then outstanding may request
(the Stockholders making such request are herein referred to as the "Requesting
Holders") in writing that WORK file a registration statement under the
Securities Act covering the registration of all or, if less than all, at least
one million, of the shares of Registrable Common then held by such Stockholders
(a "Demand Registration"). Within ten days of the receipt of such request, WORK
shall give written notice of such request to all other Stockholders and shall
use its best efforts to effect as soon as practicable the registration under the
Securities Act in accordance with Section 4 hereof (including without
limitation, the execution of an undertaking to file post-effective amendments)
of all shares of Registrable Common which the Stockholders request be registered
within 30 days after the mailing of such notice, provided, however, that WORK
shall be obligated to effect only one Demand Registration pursuant to this
Section 3. In connection with a Demand Registration, the holders of a majority
of shares of Registrable Common included in such Demand Registration, in their
sole discretion, shall determine whether (a) to proceed with, withdraw from or
terminate such offering, (b) to select, subject to the approval of WORK (which
approval shall not be unreasonably withheld), a managing underwriter or
underwriters to administer such offering, (c) to enter into an underwriting
agreement for such offering, and (d) to take such actions as may be necessary to
close the sale of Registrable Common contemplated by such offering, including
waiving any conditions to closing such sale that may not have been fulfilled.
If such holders exercise their discretion under this paragraph to terminate a
proposed Demand Registration, the terminated Demand Registration shall not
constitute the Demand Registration under this Section 3, if the determination to
terminate such Demand Registration (i) follows the exercise by WORK of any of
its rights provided by the last two paragraphs of this Section 3 or (ii) results
from a material adverse change in the condition (financial or other), results of
operations, prospects or properties of the Company. Notwithstanding the
foregoing, a registration will not count as the Demand Registration under this
Section 3 until such registration has become effective and unless either (i) the
Requesting Holders are able to register and sell all of the shares of
Registrable Common requested by them to be included in such registration or (ii)
such registration statement has remained effective for at least 120 days.
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Notwithstanding the preceding paragraph, if WORK shall furnish to the
Requesting Holders a certificate signed by the President of WORK stating that,
in the good faith judgment of the Board of Directors of WORK, it would be
detrimental to WORK and its stockholders if such registration statement were to
be filed and it is therefore beneficial to defer the filing of such registration
statement, WORK shall have the right to defer such filing for a period of not
more than 90 days after receipt of the request of the Requesting Holders. WORK
shall promptly give notice to the holders of Registrable Common at the end of
any delay period under this paragraph.
Notwithstanding the preceding two paragraphs, if at the time of any
request by the Requesting Holders for a Demand Registration, WORK has fixed
plans to file within 90 days after such request for the sale of any of its
securities in a public offering under the Securities Act (other than an Exempt
Offering), no Demand Registration shall be initiated under this Section 3 until
90 days after the effective date of such registration unless WORK is no longer
proceeding diligently to effect such registration; provided that WORK shall
provide the holders of Registrable Common the right to participate in such
public offering pursuant and subject to Section 2.
4. Registration Procedures. In connection with registrations under
Sections 2 and 3, and subject to the terms and conditions contained therein,
WORK shall (a) use its best efforts to prepare and file with the Commission as
soon as reasonably practicable, a registration statement with respect to the
Registrable Common and use its best efforts to cause such registration to
promptly become and remain effective for a period of at least 180 days (or such
shorter period during which holders shall have sold all Registrable Common which
they requested to be registered); provided, however, that such 180-day period
shall be extended for a period equal to the period that a Stockholder agrees to
refrain from selling any securities included in such registration in accordance
with Section 8, during which the Stockholders may not make sales under such
registration statement (b) prepare and file with the Commission such amendments
(including post-effective amendments) to such registration statement and
supplements to the related prospectus to reflect appropriately the plan of
distribution of the securities registered thereunder until the completion of the
distribution contemplated by such registration statement or for so long
thereafter as a dealer is required by law to deliver a prospectus in connection
with the offer and sale of the shares of Registrable Common covered by such
registration statement and/or as shall be necessary so that neither such
registration statement nor the related prospectus shall 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 therein not misleading and so
that such registration statement and the related prospectus will otherwise
comply with applicable legal requirements; (c) provide to any Stockholder
requesting to include shares of Registrable Common in such registration
statement and a single counsel for all holders of Registrable Common requesting
to include shares of Registrable Common in such registration statement, which
counsel shall be selected by the holders of a majority of shares of Registrable
Common requested to be included in such registration statement and shall be
reasonably satisfactory to WORK, an opportunity to review and provide comments
with respect to such registration statement (and any post-effective amendment
thereto) prior to such registration statement (or post-effective amendment)
becoming effective; (d) use its best efforts to register and qualify the
Registrable Common covered by such registration statement under applicable
securities or "Blue Sky" laws of such jurisdictions as the holders shall
reasonably request for the distribution of the Registrable Common; (e) take such
other actions as are reasonable and necessary to comply with the
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requirements of the Securities Act; (f) furnish such number of prospectuses
(including preliminary prospectuses) and documents incident thereto as a
Stockholder from time to time may reasonably request; (g) provide to any
Stockholder requesting to include Registrable Common in such registration
statement and any managing underwriter participating in any distribution
thereof, and to any attorney, accountant or other agent retained by such
Stockholder or managing underwriter, reasonable access to appropriate officers
and directors of WORK to ask questions and to obtain information reasonably
requested by any such Stockholder, managing underwriter, attorney, accountant or
other agent in connection with such registration statement or any amendment
thereto; provided, however, that (i) in connection with any such access or
request, any such requesting persons shall cooperate to the extent reasonably
practicable to minimize any disruption to the operation by WORK of its business
and (ii) any records, information or documents shall be kept confidential by
such requesting persons, unless (A) such records, information or documents are
in the public domain or otherwise publicly available or (B) disclosure of such
records, information or documents is required by court or administrative order
or by applicable law (including, without limitation, the Securities Act); (h)
notify each Stockholder and the managing underwriters participating in the
distribution pursuant to such registration statement promptly (i) when WORK is
informed that such registration statement or any post-effective amendment to
such registration statement becomes effective, (ii) of any request by the
Commission for an amendment or any supplement to such registration statement or
any related prospectus, (iii) of the issuance by the Commission of any stop
order suspending the effectiveness of such registration statement or of any
order preventing or suspending the use of any related prospectus or the
initiation or threat of any proceeding for that purpose, (iv) of the suspension
of the qualification of any shares of Registrable Common included in such
registration statement for sale in any jurisdiction or the initiation or threat
of a proceeding for that purpose, (v) of any determination by WORK that any
event has occurred which makes untrue any statement of a material fact made in
such registration statement or any related prospectus or which requires the
making of a change in such registration statement or any, related prospectus in
order that the same will not 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 therein not misleading, and (vi) of the completion of the
distribution contemplated by such registration statement if it relates to an
offering by WORK; (i) in the event of the issuance of any stop order suspending
the effectiveness of such registration statement or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any shares of Registrable Common included in such registration statement for
sale in any jurisdiction, use reasonable efforts to obtain its withdrawal; (j)
otherwise use reasonable efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, but not later than fifteen months after the
effective date of such registration statement, an earnings statement covering
the period of at least twelve months beginning with the first full fiscal
quarter after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11 (a) of the Securities Act;
(k) use reasonable diligence to cause all shares of Registrable Common included
in such registration statement to be listed on any securities exchange
(including, for this purpose, the Nasdaq National Market) on which the Common
Stock is then listed at the initiation of WORK; (l) use reasonable diligence to
obtain an opinion from legal counsel (which may include the General Counsel of
WORK) in customary form and covering such matters of the type customarily
covered by opinions as the underwriters, if any, may reasonably request; (m)
provide a transfer agent and registrar for all such Registrable Common not later
than
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the effective date of such registration statement; (n) enter into such customary
agreements (including an underwriting agreement in customary form) as the
underwriters, if any, may reasonably request in order to expedite or facilitate
the disposition of such shares of Registrable Common; and (o) use reasonable
diligence to obtain a "comfort letter" from WORK's independent public
accountants in customary form and covering such matters of the type customarily
covered by comfort letters as the underwriters, if any, may reasonably request.
As used in this Section 4 and elsewhere herein, the term "underwriters" does not
include any Stockholder.
5. Underwriting Agreement. In connection with each registration
pursuant to Section 2 or 3 covering an underwritten registered public offering,
WORK and each participating Stockholder agree to enter into a written agreement
with the managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of WORK's size and investment stature, including
provisions for indemnification by WORK and each Selling Stockholder as more
fully described in Section 12.
6. Availability of Rule 144. Notwithstanding anything contained
herein to the contrary, (including Sections 2 and 3), WORK shall not be
obligated to register shares of Registrable Common held by any Stockholder when
the resale provisions of Rule 144(k) are available to such Stockholder or such
Stockholder is otherwise entitled to sell the shares of Registrable Common held
by him or her in a brokerage transaction without registration under the
Securities Act and without limitation as to volume or manner of sale or both.
7. Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may permit the sale of
the shares of Registrable Common held by the Stockholders to the public without
registration, WORK agrees to:
(a) make and keep public information available (as those terms are
understood and defined in Rule 144) at all times from and after 90 days
following the effective date of the registration statement;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of WORK under the
Securities Act and the Exchange Act at any time that it is subject to such
reporting requirements;
(c) so long as a Stockholder owns any shares of Registrable Common,
furnish to the Stockholder forthwith upon request a written statement by
WORK as to its compliance with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act (at any time that it is subject to such
reporting requirements), a copy of the most recent annual or quarterly
report of WORK, and such other reports and documents filed in accordance
with such reporting requirements as a Stockholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a
Stockholder to sell any such securities without registration; and
(d) if required by the transfer agent and registrar for the Common
Stock, use reasonable diligence to obtain an opinion from legal counsel
(which may include the General
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Counsel of WORK) addressed to such transfer agent and registrar, with
respect to any sale of shares of Registerable Common pursuant to Rule 144
(or, at the option of WORK, pay the reasonable fees and expenses of legal
counsel retained by a Stockholder to provide such an opinion).
8. Market Standoff.
(a) In consideration of the granting to Stockholders of the
registration rights pursuant to this Agreement, each Stockholder agrees
that, for so long as such Stockholder holds shares of Registrable Common,
except as permitted by Sections 2 and 3, such Stockholder will not sell,
transfer or otherwise dispose of, including without limitation through put
or short sale arrangements, shares of Common Stock in the ten days prior to
the effectiveness of any registration (other than relating to an Exempt
Offering) of Common Stock for sale to the public and for up to 90 days
following the effectiveness of such registration.
(b) Except for Exempt Offerings or in connection with the acquisition
by WORK of another company or business, WORK shall not offer to sell or
sell any shares of capital stock of WORK during the 90-day period
immediately following the commencement of an underwritten public offering
of shares of Registrable Common pursuant to a Demand Registration.
9. Registration Expenses. All expenses incurred in connection with any
registration, qualification and compliance under this Agreement (including,
without limitation, all registration, filing, qualification, legal, printing and
accounting fees, and including all reasonable fees of one counsel acting on
behalf of all holders of the securities being registered in such registration)
shall be borne by WORK. All underwriting commissions and discounts applicable
to shares of Registrable Common included in the registrations under this
Agreement shall be borne by the holders of the securities so registered pro rata
on the basis of the number of shares so registered. Subject to the foregoing,
all expenses incident to WORK's performance of or compliance with this
Agreement, including, without limitation, all filing fees, fees and expenses of
compliance with securities or Blue Sky laws (including, without limitation, fees
and disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Common), printing expenses, messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
WORK's officers and employees performing legal or accounting duties), the fees
and expenses applicable to shares of Registrable Common included in connection
with the listing of the securities to be registered on each securities exchange
(including, for this purpose, the Nasdaq National Market) on which similar
securities issued by WORK are then listed at the initiation of WORK, registrar
and transfer agents' fees and fees and disbursements of counsel for WORK and its
independent certified public accountants, securities act liability insurance of
WORK and its officers and directors (if WORK elects to obtain such insurance),
the fees and expenses of any special experts retained by WORK in connection with
such registration and fees and expenses of other persons retained by WORK and
incurred in connection with each registration hereunder (but not including,
without limitation, any underwriting fees, discounts or commissions attributable
to the sale of Registrable Common, and transfer taxes, if any), will be borne by
WORK.
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10. Participation in Underwritten Registrations. No holder of
Registrable Common may participate in any underwritten registration hereunder
unless such holder (a) agrees to sell such holder's securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
11. Transfer of Registration Rights; Additional Grants of Registration
Rights. The registration rights provided to the holders of Registrable Common
under Sections 2 and 3 hereof may not be transferred to any other person or
entity, except to another Stockholder or pursuant to the laws of descent and
distribution; provided, however, that such transferees are bound by and subject
to the terms and conditions contained herein. The Company may, without the
prior consent of the Stockholders, extend the registration rights provided for
in this Agreement to additional persons or entities who become holders of Common
Stock subsequent to the date of this Agreement by entering into one or more
addenda to this Agreement with any such stockholders, and, upon execution of any
such addenda, any stockholder that is a party thereto shall thereafter be a
"Stockholder" for purposes of this Agreement and any shares of Common Stock
referred to therein as such shall be shares of "Registrable Common" for purposes
of this Agreement. Nothing herein shall limit the ability of WORK to grant to
any person or entity any registration or similar rights in the future with
respect to Common Stock or other securities of WORK (whether pursuant to the
foregoing provision or otherwise).
12. Indemnification and Contribution.
(a) Indemnification by the Company. To the extent permitted by law,
WORK agrees to indemnify and hold harmless each Stockholder who sells
shares of Registrable Common in a registered offering pursuant to either
Section 2 or Section 3 (a "Selling Stockholder"), from and against any and
all losses, claims, damages, liabilities and expenses (including reasonable
legal expenses) arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Common or in any
amendment or supplement thereto or in any related preliminary prospectus,
or arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or expenses arise out of, or are based upon,
any such untrue statement or omission or allegation thereof based upon
information furnished in writing to WORK by such Selling Stockholder or on
such Selling Stockholder's behalf expressly for use therein. In connection
with an underwritten offering of shares of Registrable Common, WORK will
indemnify any underwriters of the Registrable Common, their partners,
officers and directors and each person who controls such underwriters
(within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act) on substantially the same basis as that of the
indemnification of the Selling Stockholders provided in this Section 12(a).
Notwithstanding the foregoing, WORK's indemnification obligations with
respect to any preliminary prospectus shall not inure to the benefit of any
Selling Stockholder or underwriter with respect to any loss, claim, damage,
liability (or actions in respect thereof)
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or expense arising out of or based on any untrue statement or alleged
untrue statement or omission or alleged omission to state a material fact
in such preliminary prospectus, in any case where (i) a copy of the
prospectus used to confirm sales of shares of Registrable Common was not
sent or given to the person asserting such loss, claim, damage or liability
at or prior to the written confirmation of the sale to such person and (ii)
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected in such prospectus.
(b) Conduct of Indemnification Proceedings. Promptly after receipt by
a Selling Stockholder of notice of any claim or the commencement of any
action or proceeding brought or asserted against such Selling Stockholder
in respect of which indemnity may be sought from WORK, such Selling
Stockholder shall notify WORK in writing of the claim or the commencement
of that action or proceeding; provided, however, that the failure to so
notify WORK shall not relieve WORK from any liability that it may have to
the Selling Stockholder otherwise than pursuant to the indemnification
provisions of this Agreement. If any such claim or action or proceeding
shall be brought against a Selling Stockholder and such Selling Stockholder
shall have duly notified WORK thereof, WORK shall have the right to assume
the defense thereof, including the employment of counsel. Such Selling
Stockholder shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Selling Stockholder unless
(i) WORK has agreed to pay such fees and expenses or (ii) the named parties
to any such action or proceeding include both such Selling Stockholder and
WORK, and such Selling Stockholder shall have been advised by counsel that
there may be one or more legal defenses available to such Selling
Stockholder which are different from or additional to those available to
WORK, in which case, if such Selling Stockholder notifies WORK in writing
that it elects to employ separate counsel at the expense of WORK, WORK
shall not have the right to assume the defense of such action or proceeding
on behalf of such Selling Stockholder; it being understood, however, that
WORK shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any
time for all Selling Stockholders. WORK shall not be liable for any
settlement of any such action or proceeding effected without WORK's written
consent.
(c) Indemnification by Holders of Registrable Common. In connection
with any registration in which a Selling Stockholder is participating, such
Selling Stockholder will furnish to WORK in writing such information and
affidavits as WORK reasonably requests for use in connection with any
related registration statement or prospectus. To the extent permitted by
law, each Selling Stockholder severally agrees to indemnify and hold
harmless WORK, its directors and officers who sign the registration
statement relating to shares of Registrable Common offered by such Selling
Stockholder and each person, if any, who controls WORK within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from WORK to such Selling
Stockholder, but only with respect to information concerning such Selling
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Stockholder furnished in writing by such Selling Stockholder or on such
Selling Stockholder's behalf expressly for use in any registration
statement or prospectus relating to shares of Registrable Common offered by
such Selling Stockholder, or any amendment or supplement thereto, or any
related preliminary prospectus. In case any action or proceeding shall be
brought against WORK or its directors or officers, or any such controlling
person, in respect of which indemnity may be sought against such Selling
Stockholder, such Selling Stockholder shall have the rights and duties
given to WORK, and WORK or its directors or officers or such controlling
persons shall have the rights and duties given to such Selling Stockholder,
by the preceding paragraph. Each Selling Stockholder also agrees to
indemnify and hold harmless any underwriters of the Registrable Common,
their partners, officers and directors and each person who controls such
underwriters (within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act) on substantially the same basis as that
of the indemnification of WORK provided in this Section 12(c).
Notwithstanding anything to the contrary herein, in no event shall the
amount paid or payable by any Selling Stockholder under this Section 12(c)
exceed the amount of net proceeds received by such Selling Stockholder from
the offering of the Registrable Common.
(d) Contribution. If the indemnification provided for in this Section
12 is unavailable to any indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and expenses in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified parties in connection with the
actions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by such indemnified party or indemnified parties and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. WORK and the Selling
Stockholders agree that it would not be just and equitable if contribution
pursuant to this Section 12(d) were determined by pro rata allocation or by
any other method of allocation that does not take account of the equitable
considerations referred to in this Section 12(d). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. If indemnification is
available under this Section 12, the indemnifying parties shall indemnify
each indemnified party to the full extent provided in Sections 12(a) and
(c) without regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration provided for in this
Section 12(d).
13. Miscellaneous
(a) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented,
and waivers
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or consents to departures from the provisions hereof may not be given,
unless WORK has obtained the written consent of holders of at least 51% of
the shares of Registrable Common then outstanding.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or sent by telex or telecopy, or
registered or certified mail (return receipt requested), postage prepaid,
or courier to the parties at the following addresses (or at such other
address for any party as shall be specified by like notice), provided that
notices of a change of address shall be effective only upon receipt
thereof. Notices sent by mail shall be effective when answered back,
notices sent by telecopier shall be effective when receipt is acknowledged,
and notices sent by courier guaranteeing next day delivery shall be
effective on the next business day after timely delivery by the courier.
Notices shall be sent to the following addresses:
(i) if to a Stockholder, at the most current address given by
such Stockholder to WORK in a writing making specific reference to
this Agreement;
(ii) if to WORK, at the following address:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
with copies to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: William W. Wiggins, Jr.
Telecopy: (713) 228-4935
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the heirs, executors, administrators, successors and
assigns of each of the parties.
(d) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
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(e) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise effect the meaning hereof.
(f) Section References. Unless the context requires otherwise,
references in this Agreement to "Sections" are to Sections of this
Agreement.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN THAT STATE.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all the rights and privileges of
the Stockholders shall be enforceable to the fullest extent permitted by
law.
(i) Entire Agreement; Termination. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter. This Agreement, except the
provisions of Section 12 (which shall survive until the expiration of the
applicable statutes of limitations) and this Section 13, shall terminate
and be of no further force or effect on the third anniversary of the date
of this Agreement; provided, however, that no such termination shall affect
a registration pursuant to Section 2 or Section 3 of this Agreement which
is pending on the third anniversary of the date of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WORK:
WORK INTERNATIONAL CORPORATION
By:
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Monte R. Stephens, Vice President and Chief
Acquisitions Officer
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STOCKHOLDERS:
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective as
of September 30, 1997, between Work International Corporation, a Texas
corporation (the "Company"), and Samuel R. Sacco, an individual residing in
Burke, Virginia (the "Executive").
RECITALS
WHEREAS, the Company has been formed to acquire companies engaged in the
business of temporary help staffing and outsourcing services, human resource
management and technology project management; and
WHEREAS, the Company wishes to employ the Executive, and the Executive is
willing to accept employment, on the terms and conditions of this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the Company employing the Executive and
the mutual promises and covenants set forth herein, and for other good and
valuable consideration, the receipt, adequacy and legal sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the
Executive as a full-time executive employee of the Company in the position of
Chairman of the Board for the Employment Term (as hereinafter defined) to render
such services and to perform such duties as are customarily attendant to such
position as well as such other duties, which are not inconsistent with the
Executive's status as an executive employee of the Company, as shall from time
to time reasonably be requested by the Board of Directors of the Company (the
"Board of Directors") or the officers of the Company senior to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such employment and shall render the services required of him under
Section 1.1. The Executive shall devote his full business time, attention and
energy to the business of the Company and the performance of his duties under
this Agreement. The foregoing shall not, however, prohibit the Executive from
making and managing personal investments, or from engaging in civic or
charitable activities, that do not materially impair the performance of his
duties under this Agreement. If appointed or elected, as applicable, the
Executive also shall serve during all or any part of the Employment Term as any
other officer and/or as a director of the Company or any of its subsidiaries or
affiliates, without any additional compensation other than that specified in
this Agreement.
<PAGE>
1.3 Place of Performance. The Executive shall be based in the
Alexandria, Virginia area, and nothing in this Agreement shall require the
Executive to relocate his base of employment or principal place of residence
from this area.
1.4 Termination of Existing Contracts. The Executive agrees that all
agreements and contracts, whether written or oral, relating to the employment of
the Executive by any other entity or person, are terminated as of the
commencement of the Employment Term.
2. Term of Employment. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date this Agreement (the
"Commencement Date") and shall continue (unless earlier terminated as herein
provided) through and expire on the first anniversary of the Commencement Date;
provided, that upon completion of the Company's initial public offering ("IPO")
during the Employment Term, this Agreement shall continue thereafter and expire
on the third anniversary of the IPO (the "Expiration Date").
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $150,000 per annum; provided, that the payment
of the Annual Salary will not commence until October 3, 1997. The Executive
shall also be eligible, during the Employment Term, to receive such other
compensation, whether in the form of cash bonuses, incentive compensation, stock
options, stock appreciation rights, restricted stock awards or otherwise
(collectively, the "Additional Compensation"), as the Board of Directors (or any
committee of the Board) may, in its discretion, approve. The Annual Salary and
the Additional Compensation shall be payable in accordance with the applicable
payroll and/or other compensation policies and plans of the Company as in effect
from time to time, less such deductions as shall be required to be withheld by
applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent eligible, to
participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, similar benefit plan or other "fringe benefits" of
the Company, which may be available to all other senior executives of the
Company generally on the same terms as such other executives.
3.3 Executive Support. The Company shall provide to the Executive
office facilities, furniture, fixtures and equipment, secretarial and support
personnel and other executive support services as the Executive shall reasonably
require in connection with his performance of his obligations under this
Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his obligations under this Agreement, including expenses for
travel, food and entertainment. The Company shall reimburse the Executive for
all such business expenses if (i) such expenses are incurred by the
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Executive in accordance with the Company's business expense reimbursement
policy, if any, as may be established and modified by the Company from time to
time, and (ii) the Executive provides to the Company a record of (A) the amount
of the expense, (B) the date, place and nature of the expense, (C) the business
reason for the expense and (D) the names, occupations and other data concerning
individuals entertained sufficient to establish their business relationship to
the Company. The Company shall have no obligation to reimburse the Executive
for expenses that are not incurred and substantiated as required by this Section
3.4.
3.5 Stock Options. At such time as the Company issues its initial
shares of common stock to the founders (the "Effective Date"), the Company will
(i) grant the Executive non-qualified stock options (the "Options") to purchase
150,000 shares of the common stock of the Company as presently constituted, at
the price per share at which shares of Common Stock are sold in the IPO pursuant
to an option agreement to be entered into (the "Option Agreement"), and (ii)
sell to the Executive 175,000 shares of common stock at the same purchase price
paid by the other founders of the Company ("Founders' Shares"). The Founders'
Shares will be subject to a restriction such that the Executive will vest as to
one-third of such shares on the completion of the IPO, and as to one-third of
such shares on each of the first and second anniversaries of the IPO. The
Options will vest as to one-third of such shares on the completion of the
Company's initial public offering ("IPO"), and as to one-third of such shares on
each of the first and second anniversaries of the IPO. The Options shall have a
term of ten (10) years from the date of grant, and may be exercised in whole or
in part, from time to time, at any time after vesting by the payment of cash or
the tender of shares of the Company's common stock having a value equal to the
exercise price of the Options being exercised, all as set forth in the Option
Agreement. Upon the issuance of shares of Common Stock in connection with the
exercise of the Options and as a condition precedent to receiving certificates
representing such Common Stock, and upon the issuance of the Founders' Shares,
Executive shall become a party to any Shareholders Agreement entered into by the
founding shareholders of the Company (the "Shareholders' Agreement"), by
executing and delivering (and by causing his spouse to execute and deliver) a
counterpart of the Shareholders Agreement provided same is then in effect.
Commencing with the IPO and for each partial or full calendar year thereafter
during the term hereof, provided Executive is then serving as an employee of the
Company, the Company shall grant to Employee options to purchase such number of
additional shares as the Board of Directors of the Company may determine, on
such terms and conditions as shall be established at such time.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that
(i) the Company, which for purposes of this Section 4 includes all of its
present and future subsidiaries and affiliates, including such subsidiaries and
affiliates as may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business described in the Recitals
set forth on the first page of this Agreement (the "Business"); (ii) the
Executive is one of a limited number of persons who will perform a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States; (iv) his work for the Company will give him, trade secrets of,
and confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the
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Business and the goodwill of the Company; (vi) he has means to support himself
and his dependents other than by engaging in the Business in violation of the
Restrictive Covenants and the Restrictive Covenants will not impair such
ability. Accordingly, the Executive agrees as follows:
4.1.1 Non-Compete. For a period commencing on the Commencement
Date and ending (i) if this Agreement is terminated pursuant to its Section
5.3, on the date which is one year from the effective date of the
Executive's termination or (ii) otherwise, on the third anniversary of the
date this Agreement is otherwise terminated (the "Restricted Period"), the
Executive shall not (A) engage, as an officer, director or in any other
managerial capacity or as an owner, co-owner or other investor of or in,
whether as an employee, independent contractor, consultant or advisor, or
as a sales or manufacturer's representative or distributor of any kind, in
any business selling any products or providing any services which are sold
or offered by the Company, or any of its then current vendors or suppliers,
on the date the Executive's employment is terminated, within any territory
surrounding any sales office or regional center (each a "facility") in
which the Company was engaged in business immediately prior to the date of
the Executive's termination of employment (for purposes of this Section
4.1, the territory surrounding a facility shall be: (A) the city, town or
village in which the facility is located, (B) the county or parish in which
the facility is located, (C) the counties or parishes contiguous to the
county or parish in which the facility is located, (D) the area located
within 100 miles of the facility and (E) the area in which the facility
regularly makes sales or provides services, all of such locations being
herein collectively called the "Territory"), or (B) call on any person or
entity that at the time is, or at any time within one year prior to the
date of termination of the Executive's employment was, a customer of the
Company within the Territory, for the purpose of soliciting or selling any
product or service which is then sold or offered within the Territory by
the Company or any of its then current vendors or suppliers, if the
Executive has knowledge of that customer relationship; provided, however,
that nothing in this Section 4.1.1 shall prohibit the Executive from
owning, directly or indirectly, solely as an investment, securities of any
entity traded on any national securities exchange or over-the-counter
market if the Executive is not a controlling person of, or a member of a
group which controls, such entity and does not, directly or indirectly, own
five percent or more of any class of securities of such entity.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and thereafter, the Executive shall keep secret and
retain in strict confidence, and shall not use for the benefit of himself
or others, all confidential matters of the Company, including, without
limitation, "know-how," trade secrets, customer lists, details of client or
consultant contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of production
and distribution, technical processes, designs and design projects,
inventions and research projects of the Company learned by the Executive
heretofore or during the Restricted Period; nor shall the Executive exploit
for his own benefit, or the benefit of others, personal relationships with
customers, suppliers or agents of the Company in connection with or
adversely affecting the Business formed previously or during the Restricted
Period.
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4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or independent sales agent of the Company away
from the Company or encourage any such employee or agent to leave such
employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in the Business and (i) which
was called on by the Company, in connection with the possible acquisition
by the Company of that person or entity, or (ii) with respect to which the
Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
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4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Blue-Pencilling. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause (as hereinafter defined). If
such right is exercised, the Company's obligation to the Executive shall be
limited to the payment of any unpaid Annual Salary, Additional Compensation and
other benefits,
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if any, accrued up to the effective date (which shall not be retroactive)
specified in the Company's notice of termination. As used in this Section 5.2
and in Section 5.3 below, the term "Cause" shall mean that the Board of
Directors shall have determined that (i) there has been a material breach by the
Executive of the terms of this Agreement, (ii) the Executive has willfully and
persistently failed or refused to follow the reasonable policies and directives
established by the Board of Directors or executive officers of the Company
senior to the Executive, (iii) the Executive has wrongfully misappropriated
money or other assets or properties of the Company or any subsidiary or
affiliate of the Company, (iv) the Executive has been convicted of any felony or
other serious crime, (v) the Executive's chronic absenteeism, neglect of duties,
alcoholism or drug addiction, or (vi) the Executive has exhibited gross moral
turpitude relevant to his office or employment with the Company or any
subsidiary or affiliate of the Company.
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation to
the Executive shall be limited to the payment of any unpaid Annual Salary,
Additional Compensation and other benefits, if any, accrued up to the effective
date (which shall not be retroactive) specified in the Company's notice of
termination, plus payment of any Annual Salary which otherwise would be payable
to the Executive until the date which is one year from the effective date of the
Executive's termination.
5.4 Termination upon Disability or by Executive. If during the
Employment Term the Executive becomes physically or mentally disabled, whether
totally or partially, as evidenced by the written statement of a competent
physician licensed to practice medicine in the United States, so that the
Executive is unable to substantially perform his services hereunder for (i) a
period of six consecutive months, or (ii) for shorter periods aggregating six
months during any twelve-month period, the Company may at any time after the
last day of the six consecutive months of disability or the day on which the
shorter periods of disability equal an aggregate of six months, by written
notice to the Executive, terminate the Executive's employment hereunder. If such
right is exercised, the Company's obligation to the Executive shall be limited
to the payment of any unpaid Annual Salary, Additional Compensation and other
benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination, plus payment of
any Annual Salary which otherwise would be payable to the Executive during the
six-month period following such effective date. If Executive terminates his
employment hereunder for any reason, the Company's obligation to the Executive
shall be limited to the payment of any unpaid Annual Salary, Additional
Compensation and other benefits, if any, accrued up to the effective date of
such termination.
6. Insurance. The Company may, from time to time, apply for and take out,
in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and
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other instruments in writing as may reasonably be required by an insurance
company or companies to which any application or applications for insurance may
be made by or for the Company.
7. Indemnification. The Executive shall be entitled to the benefit of the
indemnification obligations of the Company set forth in the Company's Articles
of Incorporation, as amended through the date of this Agreement and the
Company's bylaws as in effect at the date of this Agreement.
8. Other Provisions.
8.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
2777 Allen Parkway
Suite 800
Houston, Texas 77019
Telecopy No.:_________________
(ii) if to the Executive, to:
5606 DeSoto Street
Burke, Virginia 22015
Telephone No: (703) 425-5317
Telecopy No.:_________________
Either party may change its address for notice hereunder by notice to the
other party.
8.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
8.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder
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preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
8.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Texas, without reference to principles governing choice or
conflicts of law.
8.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits, rights or
obligations hereunder.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Richard K. Reiling
-----------------------------
Richard K. Reiling
EXECUTIVE:
/s/ Samuel R. Sacco
--------------------------------
Samuel R. Sacco
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into on November 1,
1997, between Work International Corporation, a Texas corporation (the
"Company"), and Bruce Garfield French, an individual residing in Toronto, Canada
(the "Executive").
RECITALS
WHEREAS, the Company has been formed to acquire companies engaged in the
business of temporary help staffing and outsourcing services, human resource
management and technology project management; and
WHEREAS, the Company wishes to employ the Executive, and the Executive is
willing to accept employment, on the terms and conditions of this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the Company employing the Executive and
the mutual promises and covenants set forth herein, and for other good and
valuable consideration, the receipt, adequacy and legal sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the
Executive as a full-time executive employee of the Company in the position of
President and Chief Executive Officer for the Employment Term (as hereinafter
defined) to render such services and to perform such duties as are customarily
attendant to such position as well as such other duties, which are not
inconsistent with the Executive's status as an executive employee and founder of
the Company, as shall from time to time reasonably be requested by the Board of
Directors of the Company (the "Board of Directors") of which the Executive shall
be a member.
1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such employment and shall render the services required of him under
Section 1.1. The Executive shall devote his full business time, attention and
energy to the business of the Company and the performance of his duties under
this Agreement. The foregoing shall not, however, prohibit the Executive from
making and managing personal investments, or from engaging in civic or
charitable activities, that do not materially impair the performance of his
duties under this Agreement. If appointed or elected, as applicable, the
Executive also shall serve during all or any part of the Employment Term as any
other officer and/or as a director of the Company or any of its subsidiaries or
affiliates, without any additional compensation other than that specified in
this Agreement.
<PAGE>
1.3 Place of Performance. Prior to the completion of the Company's
IPO (as defined in Section 3.5 below), the Executive agrees to perform his
service under this Agreement primarily at the Company's office in Houston,
Texas, with all reasonable expenses incurred in connection with his travel from
his personal residence in Toronto, Canada to Houston, Texas to be reimbursed by
the Company upon compliance with Section 3.4 hereof. Subsequent to the IPO, the
Company intends to establish an office in Toronto, Canada from which the
Executive will perform his services under this Agreement. Nothing in this
Agreement will require the Executive to relocate his place of residence from
Toronto, Canada.
1.4 Termination of Existing Contracts. The Executive agrees, and
represents and warrants, that all agreements and contracts, whether written or
oral, relating to the employment of the Executive by any other entity or person
("Third Party Agreements"), are terminated as of the commencement of the
Employment Term. The Executive further agrees, and represents and warrants,
that the execution of this Agreement and the performance of his duties hereunder
will not breach or be a violation of any Third Party Agreement.
2. Term of Employment. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on ______________________ (the
"Commencement Date") and shall continue (unless earlier terminated as herein
provided) through and expire on the third anniversary of the Commencement Date;
provided, that upon completion of the Company's initial public offering ("IPO")
during the Employment Term, this Agreement shall continue thereafter and expire
on the third anniversary of the IPO (the "Expiration Date") and (unless
previously terminated in accordence with this Agreement) shall, upon the
Expiration Date or the last day of any automatically renewed term, be
automatically renewed for successive three-year terms.
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $200,000 USD per annum; provided, that the
payment of the Annual Salary will not commence until ________________________.
The Executive shall also be eligible, during the Employment Term, to receive
such other compensation, whether in the form of cash bonuses, incentive
compensation, stock options, stock appreciation rights, restricted stock awards
or otherwise (collectively, the "Additional Compensation"), as the Board of
Directors (or any committee of the Board) may, in its discretion, approve. The
Annual Salary and the Additional Compensation shall be payable in accordance
with the applicable payroll and/or other compensation policies and plans of the
Company as in effect from time to time, less such deductions as shall be
required to be withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent eligible, to
participate in any group life, hospitalization or disability insurance plan,
health program, pension plan, similar benefit plan or other "fringe benefits" of
the Company, which may be available to all other senior executives of the
Company generally on the same terms as such other executives.
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3.3 Executive Support. Subject to Section 1.3 above, the Company
shall provide to the Executive office facilities, furniture, fixtures and
equipment, secretarial and support personnel and other executive support
services as the Executive shall reasonably require in connection with his
performance of his obligations under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his obligations under this Agreement, including expenses for
travel, food and entertainment and expenses incurred pursuant to Section 1.3
above. The Company shall reimburse the Executive for all such business expenses
if (i) such expenses are incurred by the Executive in accordance with the
Company's business expense reimbursement policy, if any, as may be established
and modified by the Company from time to time, and (ii) the Executive provides
to the Company a record of (A) the amount of the expense, (B) the date, place
and nature of the expense, (C) the business reason for the expense and (D) the
names, occupations and other data concerning individuals entertained sufficient
to establish their business relationship to the Company. The Company shall have
no obligation to reimburse the Executive for expenses that are not incurred and
substantiated as required by this Section 3.4.
3.5 Stock Options. At such time as the Company issues its initial
shares of common stock to the founders (the "Effective Date"),which shares shall
be issued contemporaneously with the execution of this Agreement, the Company
will (i) grant the Executive non-qualified stock options (the "Options") to
purchase 200,000 shares of the common stock of the Company as presently
constituted, at the price per share at which shares of Common Stock are sold in
the IPO pursuant to an option agreement to be entered into (the "Option
Agreement"), and (ii) sell to the Executive 450,000 shares of common stock at
the same purchase price paid ($.001 per share) by the other founders of the
Company ("Founders' Shares"). The Founders' Shares will be fully vested on
issuance. The Options will vest as to one-third of such shares on the completion
of the Company's initial public offering ("IPO"), and as to one-third of such
shares on each of the first and second anniversaries of the IPO. The Options
shall have a term of ten (10) years from the date of grant, and may be exercised
in whole or in part, from time to time, at any time after vesting by the payment
of cash or the tender of shares of the Company's common stock having a value
equal to the exercise price of the Options being exercised, all as set forth in
the Option Agreement. Upon the issuance of shares of Common Stock in connection
with the exercise of the Options and as a condition precedent to receiving
certificates representing such Common Stock, and upon the issuance of the
Founders' Shares, Executive shall become a party to any Shareholders Agreement
entered into by the founding shareholders of the Company (the "Shareholders'
Agreement"), by executing and delivering (and by causing his spouse to execute
and deliver) a counterpart of the Shareholders Agreement provided same is then
in effect. Commencing with the IPO and for each partial or full calendar year
thereafter during the term hereof, provided Executive is then serving as an
employee of the Company, the Company shall grant to Employee options to purchase
such number of additional shares as the Board of Directors of the Company may
determine, on such terms and conditions as shall be established at such time.
3.6 Car Allowance. The Company agrees to provide a car allowance to
the Executive of $1250.00 per month, which allowence will be guaranteed in any
event through July 1999. Insurance and normal operating expenses for one
automobile will be reimbursed by the Company.
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4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that
(i) the Company, which for purposes of this Section 4 includes all of its
present and future subsidiaries and affiliates, including such subsidiaries and
affiliates as may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business described in the Recitals
set forth on the first page of this Agreement (the "Business"); (ii) the
Executive is one of a limited number of persons who will perform a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States; (iv) his work for the Company will give him, trade secrets of,
and confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants and the
Restrictive Covenants will not impair such ability. Accordingly, the Executive
agrees as follows:
4.1.1 Non-Compete. For a period commencing on the Commencement
Date and ending (i) if this Agreement is terminated pursuant to its Section
5.3, on the date which is one year from the effective date of the
Executive's termination or (ii) otherwise, on the third anniversary of the
date this Agreement is otherwise terminated (the "Restricted Period"), the
Executive shall not (A) engage, as an officer, director or in any other
managerial capacity or as an owner, co-owner or other investor of or in,
whether as an employee, independent contractor, consultant or advisor, or
as a sales or manufacturer's representative or distributor of any kind, in
any business selling any products or providing any services which are sold
or offered by the Company, or any of its then current vendors or suppliers,
on the date the Executive's employment is terminated, within any territory
surrounding any sales office or regional center (each a "facility") in
which the Company was engaged in business immediately prior to the date of
the Executive's termination of employment (for purposes of this Section
4.1, the territory surrounding a facility shall be: (A) the city, town or
village in which the facility is located, (B) the county or parish in which
the facility is located, (C) the counties or parishes contiguous to the
county or parish in which the facility is located, (D) the area located
within 100 miles of the facility and (E) the area in which the facility
regularly makes sales or provides services, all of such locations being
herein collectively called the "Territory"), or (B) call on any person or
entity that at the time is, or at any time within one year prior to the
date of termination of the Executive's employment was, a customer of the
Company within the Territory, for the purpose of soliciting or selling any
product or service which is then sold or offered within the Territory by
the Company or any of its then current vendors or suppliers, if the
Executive has knowledge of that customer relationship; provided, however,
that nothing in this Section 4.1.1 shall prohibit the Executive from
owning, directly or indirectly, solely as an investment, securities of any
entity traded on any national securities exchange or over-the-counter
market if the Executive is not a controlling person of, or a member of a
group which controls, such entity and does not, directly or indirectly, own
five percent or more of any class of securities of such entity.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and thereafter, the Executive shall keep secret and
retain in strict confidence, and shall not use for the benefit of himself
or others, all confidential matters of
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the Company, including, without limitation, "know-how," trade secrets,
customer lists, details of client or consultant contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, business acquisition plans, new personnel
acquisition plans, methods of production and distribution, technical
processes, designs and design projects, inventions and research projects of
the Company learned by the Executive heretofore or during the Restricted
Period; nor shall the Executive exploit for his own benefit, or the benefit
of others, personal relationships with customers, suppliers or agents of
the Company in connection with or adversely affecting the Business formed
previously or during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or independent sales agent of the Company away
from the Company or encourage any such employee or agent to leave such
employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in the Business and (i) which
was called on by the Company, in connection with the possible acquisition
by the Company of that person or entity, or (ii) with respect to which the
Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
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4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Blue-Pencilling. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation
orother benefit upon the death, termination or disability of the Executive.
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5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause (as hereinafter defined). If
such right is exercised, the Company's obligation to the Executive shall be
limited to the payment of any unpaid Annual Salary, Additional Compensation and
other benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination. As used in this
Section 5.2 and in Section 5.3 below, the term "Cause" shall mean that the Board
of Directors shall have determined that (i) there has been a material breach by
the Executive of the terms of this Agreement, (ii) the Executive has willfully
and persistently failed or refused to follow the reasonable policies and
directives established by the Board of Directors or executive officers of the
Company senior to the Executive, (iii) the Executive has wrongfully
misappropriated money or other assets or properties of the Company or any
subsidiary or affiliate of the Company, (iv) the Executive has been convicted of
any felony or other serious crime, (v) the Executive's chronic absenteeism,
neglect of duties, alcoholism or drug addiction, or (vi) the Executive has
exhibited gross moral turpitude relevant to his office or employment with the
Company or any subsidiary or affiliate of the Company.
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date, but in no event
prior to the IPO, and continuing through the end of the Employment Term, the
Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive without Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date (which shall not be retroactive) specified in
the Company's notice of termination, plus payment of any Annual Salary which
otherwise would be payable to the Executive until the date which is one year
from the effective date of the Executive's termination.
5.4 Termination upon Disability or by Executive. If during the
Employment Term the Executive becomes physically or mentally disabled, whether
totally or partially, as evidenced by the written statement of a competent
physician licensed to practice medicine in the United States, so that the
Executive is unable to substantially perform his services hereunder for (i) a
period of six consecutive months, or (ii) for shorter periods aggregating six
months during any twelve-month period, the Company may at any time after the
last day of the six consecutive months of disability or the day on which the
shorter periods of disability equal an aggregate of six months, by written
notice to the Executive, terminate the Executive's employment hereunder. If such
right is exercised, the Company's obligation to the Executive shall be limited
to the payment of any unpaid Annual Salary, Additional Compensation and other
benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination, plus payment of
any Annual Salary which otherwise would be payable to the Executive during the
six-month period following such effective date. If Executive terminates his
employment hereunder for any reason, the Company's obligation to the Executive
shall be limited to the payment of any unpaid Annual Salary, Additional
Compensation and other benefits, if any, accrued up to the effective date of
such termination.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may
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change from time to time), policies for health, accident, disability or other
insurance upon the Executive or his life, in any amount or amounts that it may
deem necessary or appropriate to protect its interest. The Executive agrees to
aid the Company in procuring such insurance by submitting to reasonable medical
examinations and by filling out, executing and delivering such applications and
other instruments in writing as may reasonably be required by an insurance
company or companies to which any application or applications for insurance may
be made by or for the Company.
7. Indemnification. The Executive shall be entitled to the benefit of
the indemnification obligations of the Company set forth in the Company's
Articles of Incorporation, as amended through the date of this Agreement and the
Company's bylaws as in effect at the date of this Agreement.
8. Other Provisions.
8.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, ten days after the date of deposit in the United States mail or
Canada Post, as follows:
(i) if to the Company, to:
2777 Allen Parkway
Suite 800
Houston, Texas 77019
U.S.A.
Telecopy No.: (281) 698-2585
(ii) if to the Executive, to:
195 Hudson Drive
Toronto, Ontario M4T 2K7
Canada
Telephone No: 416-486-5544
Telecopy No.: 416-481-7113
Either party may change its address for notice hereunder by notice to the
other party.
8.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
8.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving
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compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
8.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Texas, without reference to principles governing choice or
conflicts of law.
8.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits, rights or
obligations hereunder.
8.6 Execution and Counterparts. This Agreement may be executed, by
facsimile or other evidence of manual execution, in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Richard K. Reiling
--------------------------------
Richard K. Reiling
EXECUTIVE:
/s/ Bruce Garfield
-----------------------------------
Bruce Garfield French
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective as
of December 6, 1997, between Work International Corporation, a Texas
corporation (the "Company"), and Mark Walz, an individual residing in Houston,
Texas (the "Executive").
RECITALS
WHEREAS, the Company has been formed to acquire companies engaged in the
business of temporary staffing and outsourcing services, human resource
management and technology project management; and
WHEREAS, the Company wishes to employ the Executive, and the Executive is
willing to accept employment, on the terms and conditions of this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the Company employing the Executive and
the mutual promises and covenants set forth herein, and for other good and
valuable consideration, the receipt, adequacy and legal sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the
Executive as a full-time executive employee of the Company in the position of
Vice President and Chief Financial Officer for the Employment Term (as
hereinafter defined) to render such services and to perform such duties as are
customarily attendant to such position as well as such other duties, which are
not inconsistent with the Executive's status as an executive employee of the
Company, as shall from time to time reasonably be requested by the Board of
Directors of the Company (the "Board of Directors") or the officers of the
Company senior to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such employment and shall render the services required of him under
Section 1.1. The Executive shall devote the substantial majority of his
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
<PAGE>
1.3 Place of Performance. The Executive shall be based in the
Houston, Texas area, and nothing in this Agreement shall require the Executive
to relocate his base of employment or principal place of residence from this
area.
1.4 Termination of Existing Contracts. The Executive agrees that all
agreements and contracts, whether written or oral, relating to the employment of
the Executive by any other entity or person, are terminated as of the
commencement of the Employment Term.
2. Term of Employment. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date this Agreement (the
"Commencement Date") and shall continue (unless earlier terminated as herein
provided) through and expire on the first anniversary of the Commencement Date;
provided, that upon completion of the Company's initial public offering ("IPO")
during the Employment Term, this Agreement shall continue thereafter and expire
on the third anniversary of the IPO (the "Expiration Date").
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $120,000 per annum; provided, that until the
completion of the IPO, the executive shall receive such compensation as shall be
allocated to him by the Board of Directors from funds available to compensate
executive officers of the Company. The Executive shall also be eligible, during
the Employment Term, to receive such other compensation, whether in the form of
cash bonuses, incentive compensation, stock options, stock appreciation rights,
restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time,
less such deductions as shall be required to be withheld by applicable law and
regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, to choose, on a quarterly basis, either:
(i) if and to the extent eligible, to participate in any group life,
hospitalization or disability insurance plan, health program, pension plan,
similar benefit plan or other "fringe benefits" of the Company, which may be
available to all other senior executives of the Company generally on the same
terms as such other executives; or (ii) to receive the sum of $500.00 per month
for reimbursement of expenses that would generally be covered by such benefit
plans.
3.3 Executive Support. The Company shall provide to the Executive
office facilities, furniture, fixtures and equipment, secretarial and support
personnel and other executive support services as the Executive shall reasonably
require in connection with his performance of his obligations under this
Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his obligations under
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this Agreement, including expenses for travel, food and entertainment. The
Company shall reimburse the Executive for all such business expenses if (i) such
expenses are incurred by the Executive in accordance with the Company's business
expense reimbursement policy, if any, as may be established and modified by the
Company from time to time, and (ii) the Executive provides to the Company a
record of (A) the amount of the expense, (B) the date, place and nature of the
expense, (C) the business reason for the expense and (D) the names, occupations
and other data concerning individuals entertained sufficient to establish their
business relationship to the Company. The Company shall have no obligation to
reimburse the Executive for expenses that are not incurred and substantiated as
required by this Section 3.4.
3.5 Stock Options. At such time as the Company issues its initial
shares of common stock to the founders (the "Effective Date"), the Company will
(i) grant the Executive non-qualified stock options (the "Options") to purchase
100,000 shares of the common stock of the Company as presently constituted, at
the price per share at which shares of Common Stock are sold in the IPO pursuant
to an option agreement to be entered into (the "Option Agreement"), and (ii)
sell to the Executive 160,000 shares of common stock at the same purchase price
paid by the other founders of the Company ("Founders' Shares"). The Founders'
Shares will be subject to a restriction such that the Executive will vest as to
all of such shares on the completion of the IPO. The Options will vest as to 33%
of such shares upon the completion of the IPO and as to the remaining 67% of
such shares upon the first anniversary of the completion of the IPO. The Options
shall have a term of ten (10) years from the date of grant, and may be exercised
in whole or in part, from time to time, at any time after vesting by the payment
of cash or the tender of shares of the Company's common stock having a value
equal to the exercise price of the Options being exercised, all as set forth in
the Option Agreement. Upon the issuance of shares of Common Stock in connection
with the exercise of the Options and as a condition precedent to receiving
certificates representing such Common Stock, and upon the issuance of the
Founders' Shares, Executive shall become a party to any Shareholders Agreement
entered into by the founding shareholders of the Company (the "Shareholders'
Agreement"), by executing and delivering (and by causing his spouse to execute
and deliver) a counterpart of the Shareholders Agreement provided same is then
in effect. Commencing with the IPO and for each partial or full calendar year
thereafter during the term hereof, provided Executive is then serving as an
employee of the Company, the Company shall grant to Employee options to purchase
such number of additional shares as the Board of Directors of the Company may
determine, on such terms and conditions as shall be established at such time.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that
(i) the Company, which for purposes of this Section 4 includes all of its
present and future subsidiaries and affiliates, including such subsidiaries and
affiliates as may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business described in the Recitals
set forth on the first page of this Agreement (the "Business"); (ii) the
Executive is one of a limited number of persons who will perform a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States; (iv) his work for the Company will give him, trade secrets of,
and confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents
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other than by engaging in the Business in violation of the Restrictive Covenants
and the Restrictive Covenants will not impair such ability. Accordingly, the
Executive agrees as follows:
4.1.1 Non-Compete. For a period commencing on the Commencement
Date and ending (i) if this Agreement is terminated pursuant to its Section
5.3, on the effective date of the Executive's termination or (ii)
otherwise, on the third anniversary of the date this Agreement is otherwise
terminated (the "Restricted Period"), the Executive shall not (A) engage,
as an officer, director or in any other managerial capacity or as an owner,
co-owner or other investor of or in, whether as an employee, independent
contractor, consultant or advisor, or as a sales or manufacturer's
representative or distributor of any kind, in any business selling any
products or providing any services which are sold or offered by the
Company, or any of its then current vendors or suppliers, on the date the
Executive's employment is terminated, within any territory surrounding any
sales office or regional center (each a "facility") in which the Company
was engaged in business immediately prior to the date of the Executive's
termination of employment (for purposes of this Section 4.1, the territory
surrounding a facility shall be: (1) the city, town or village in which the
facility is located, (2) the county or parish in which the facility is
located, (3) the counties or parishes contiguous to the county or parish in
which the facility is located, (4) the area located within 100 miles of the
facility and (5) the area in which the facility regularly makes sales or
provides services, all of such locations being herein collectively called
the "Territory"), or (B) call on any person or entity that at the time is,
or at any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company within the Territory,
for the purpose of soliciting or selling any product or service which is
then sold or offered within the Territory by the Company or any of its then
current vendors or suppliers, if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own five percent or more of any class
of securities of such entity.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and thereafter, the Executive shall keep secret and
retain in strict confidence, and shall not use for the benefit of himself
or others, all confidential matters of the Company, including, without
limitation, "know-how," trade secrets, customer lists, details of client or
consultant contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of production
and distribution, technical processes, designs and design projects,
inventions and research projects of the Company learned by the Executive
during the Restricted Period, but excluding any information learned by the
Executive prior to the Restricted Period or any information which is or
becomes available publicly except through the Executive or any person who
is prohibited from making such disclosure; nor shall the Executive exploit
for his own benefit, or the benefit of others, personal relationships with
customers, suppliers or agents of the Company in connection with or
adversely affecting the Business formed previously or during the Restricted
Period.
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4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or independent sales agent of the Company away
from the Company or encourage any such employee or agent to leave such
employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in the Business and (i) which
was called on by the Company, in connection with the possible acquisition
by the Company of that person or entity, or (ii) with respect to which the
Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or
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<PAGE>
other benefits derived or received by the Executive as the result of any
transaction constituting a breach of the Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Blue-Pencilling. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation, and Founders Shares and Options,
which shall vest according to the schedule set forth herein, and other accrued
benefits, if any, earned up to the date of the Executive's death; provided,
however, if any Additional Compensation or other benefits are governed by the
provisions of any written employee benefit plan or policy of the Company, any
written agreement contemplated thereunder or any other separate written
agreement entered into between the Executive and the Company, the terms and
conditions of such plan, policy or agreement shall control in the event of any
discrepancy or conflict with the provisions of this Agreement regarding such
Additional Compensation or other benefit upon the death, termination or
disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause (as hereinafter defined). If
such right is exercised, the Company's obligation to the Executive shall be
limited to the payment of any unpaid Annual Salary, Additional Compensation and
other benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination. The Founders
Shares and the Options shall continue to vest and become exercisable in
accordance with the schedule set forth herein. As used in this Section 5.2 and
in
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Section 5.3 below, the term "Cause" shall mean that the Board of Directors shall
have determined that (i) there has been a material breach by the Executive of
the terms of this Agreement, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive, (iii) the Executive has wrongfully misappropriated money or other
assets or properties of the Company or any subsidiary or affiliate of the
Company, (iv) the Executive has been convicted of any felony or other serious
crime, (v) the Executive's chronic absenteeism, neglect of duties, alcoholism or
drug addiction, or (vi) the Executive has exhibited gross moral turpitude
relevant to his office or employment with the Company or any subsidiary or
affiliate of the Company.
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation to
the Executive shall be limited to the payment of any unpaid Annual Salary,
Additional Compensation and other benefits, if any, accrued up to the effective
date (which shall not be retroactive) specified in the Company's notice of
termination, plus payment of any Annual Salary which otherwise would be payable
to the Executive until the date which is three months from the effective date of
the Executive's termination. The Founders Shares and the Options shall continue
to vest and become exercisable in accordance with the schedule set forth herein.
5.4 Termination upon Disability or by Executive. If during the
Employment Term the Executive becomes physically or mentally disabled, whether
totally or partially, as evidenced by the written statement of a competent
physician licensed to practice medicine in the United States, so that the
Executive is unable to substantially perform his services hereunder for (i) a
period of six consecutive months, or (ii) for shorter periods aggregating six
months during any twelve-month period, the Company may at any time after the
last day of the six consecutive months of disability or the day on which the
shorter periods of disability equal an aggregate of six months, by written
notice to the Executive, terminate the Executive's employment hereunder. If such
right is exercised, the Company's obligation to the Executive shall be limited
to the payment of any unpaid Annual Salary, Additional Compensation and other
benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination, plus payment of
any Annual Salary which otherwise would be payable to the Executive during the
six-month period following such effective date. The Founders Shares and the
Options shall continue to vest and become exercisable in accordance with the
schedule set forth herein. If Executive terminates his employment hereunder for
any reason, the Company's obligation to the Executive shall be limited to the
payment of any unpaid Annual Salary, Additional Compensation and other benefits,
if any, accrued up to the effective date of such termination.
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6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
7. Indemnification. The Executive shall be entitled to the benefit of
the indemnification obligations of the Company set forth in the Company's
Articles of Incorporation, as amended through the date of this Agreement and the
Company's bylaws as in effect at the date of this Agreement.
8. Other Provisions.
8.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
2777 Allen Parkway
Suite 800
Houston, Texas 77019
Telecopier No.: 713/852-2585
(ii) if to the Executive, to:
__________________________________
__________________________________
__________________________________
Telecopier No.:___________________
Either party may change its address for notice hereunder by notice to the
other party.
8.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
8.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving
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compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder, nor any single
or partial exercise of any right, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
8.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Texas, without reference to principles governing choice or
conflicts of law.
8.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits, rights or
obligations hereunder.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Gary French
-------------------------------
Gary French, President
and Chief Executive Officer
EXECUTIVE:
/s/ Mark Walz
--------------------------------
Mark Walz
9
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into effective as
of November 15, 1997, between Work International Corporation, a Texas
corporation (the "Company"), and Monte R. Stephens, an individual residing in
Houston, Texas (the "Executive").
RECITALS
WHEREAS, the Company has been formed to acquire companies engaged in the
business of temporary staffing and outsourcing services, human resource
management and technology project management; and
WHEREAS, the Company wishes to employ the Executive, and the Executive is
willing to accept employment, on the terms and conditions of this Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the Company employing the Executive and
the mutual promises and covenants set forth herein, and for other good and
valuable consideration, the receipt, adequacy and legal sufficiency of which are
hereby acknowledged, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the
Executive as a full-time executive employee of the Company in the position of
Chief Acquisitions Officer for the Employment Term (as hereinafter defined) to
render such services and to perform such duties as are customarily attendant to
such position as well as such other duties, which are not inconsistent with the
Executive's status as an executive employee of the Company, as shall from time
to time reasonably be requested by the Board of Directors of the Company (the
"Board of Directors") or the officers of the Company senior to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such employment and shall render the services required of him under
Section 1.1. The Executive shall devote the substantial majority of his
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement; provided, that Employee shall be
allowed to complete the termination of his accounting practice. The foregoing
shall not, however, prohibit the Executive from making and managing personal
investments, or from engaging in civic or charitable activities, that do not
materially impair the performance of his duties under this Agreement. If
appointed or elected, as applicable, the Executive also shall serve during all
or any part of the Employment Term as any other officer and/or as a director of
the Company or any of its subsidiaries or affiliates, without any additional
compensation other than that specified in this Agreement.
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1.3 Place of Performance. The Executive shall be based in the
Houston, Texas area, and nothing in this Agreement shall require the Executive
to relocate his base of employment or principal place of residence from this
area.
1.4 Termination of Existing Contracts. The Executive agrees that all
agreements and contracts, whether written or oral, relating to the employment of
the Executive by any other entity or person, are terminated as of the
commencement of the Employment Term.
2. Term of Employment. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date this Agreement (the
"Commencement Date") and shall continue (unless earlier terminated as herein
provided) through and expire on the first anniversary of the Commencement Date;
provided, that upon completion of the Company's initial public offering ("IPO")
during the Employment Term, this Agreement shall continue thereafter and expire
on the third anniversary of the IPO (the "Expiration Date").
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under
this Agreement, the Company shall pay the Executive a salary (the "Annual
Salary"), subject to such increases as the Board of Directors may, in its
discretion, approve, at a rate of $120,000 per annum. The Executive shall also
be eligible, during the Employment Term, to receive such other compensation,
whether in the form of cash bonuses, incentive compensation, stock options,
stock appreciation rights, restricted stock awards or otherwise (collectively,
the "Additional Compensation"), as the Board of Directors (or any committee of
the Board) may, in its discretion, approve. The Annual Salary and the Additional
Compensation shall be payable in accordance with the applicable payroll and/or
other compensation policies and plans of the Company as in effect from time to
time, less such deductions as shall be required to be withheld by applicable law
and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, to choose, on a quarterly basis, either:
(i) if and to the extent eligible, to participate in any group life,
hospitalization or disability insurance plan, health program, pension plan,
similar benefit plan or other "fringe benefits" of the Company, which may be
available to all other senior executives of the Company generally on the same
terms as such other executives; or (ii) to receive the sum of $500.00 per month
for reimbursement of expenses that would generally be covered by such benefit
plans.
3.3 Executive Support. The Company shall provide to the Executive
office facilities, furniture, fixtures and equipment, secretarial and support
personnel and other executive support services as the Executive shall reasonably
require in connection with his performance of his obligations under this
Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his obligations under this Agreement, including expenses for
travel, food and entertainment. The Company shall reimburse the Executive for
all such business expenses if (i) such expenses are incurred by the Executive in
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accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of (A) the amount of the expense, (B)
the date, place and nature of the expense, (C) the business reason for the
expense and (D) the names, occupations and other data concerning individuals
entertained sufficient to establish their business relationship to the Company.
The Company shall have no obligation to reimburse the Executive for expenses
that are not incurred and substantiated as required by this Section 3.4.
3.5 Stock Options. At such time as the Company issues its initial
shares of common stock to the founders (the "Effective Date"), the Company will
(i) grant the Executive non-qualified stock options (the "Options") to purchase
100,000 shares of the common stock of the Company as presently constituted, at
the price per share at which shares of Common Stock are sold in the IPO pursuant
to an option agreement to be entered into (the "Option Agreement"), and (ii)
sell to the Executive 160,000 shares of common stock at the same purchase price
paid by the other founders of the Company ("Founders' Shares"). The Founders'
Shares will be subject to a restriction such that the Executive will vest as to
all of such shares on the completion of the IPO. The Options will vest as to 33%
of such shares upon the completion of the IPO and as to the remaining 67% of
such shares upon the first anniversary of the completion of the IPO. The Options
shall have a term of ten (10) years from the date of grant, and may be exercised
in whole or in part, from time to time, at any time after vesting by the payment
of cash or the tender of shares of the Company's common stock having a value
equal to the exercise price of the Options being exercised, all as set forth in
the Option Agreement. Upon the issuance of shares of Common Stock in connection
with the exercise of the Options and as a condition precedent to receiving
certificates representing such Common Stock, and upon the issuance of the
Founders' Shares, Executive shall become a party to any Shareholders Agreement
entered into by the founding shareholders of the Company (the "Shareholders'
Agreement"), by executing and delivering (and by causing his spouse to execute
and deliver) a counterpart of the Shareholders Agreement provided same is then
in effect. Commencing with the IPO and for each partial or full calendar year
thereafter during the term hereof, provided Executive is then serving as an
employee of the Company, the Company shall grant to Employee options to purchase
such number of additional shares as the Board of Directors of the Company may
determine, on such terms and conditions as shall be established at such time.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that
(i) the Company, which for purposes of this Section 4 includes all of its
present and future subsidiaries and affiliates, including such subsidiaries and
affiliates as may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business described in the Recitals
set forth on the first page of this Agreement (the "Business"); (ii) the
Executive is one of a limited number of persons who will perform a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States; (iv) his work for the Company will give him, trade secrets of,
and confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants and the
Restrictive Covenants will not impair such ability. Accordingly, the Executive
agrees as follows:
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4.1.1 Non-Compete. For a period commencing on the Commencement
Date and ending (i) if this Agreement is terminated pursuant to its Section
5.3, on the effective date of the Executive's termination or (ii)
otherwise, on the third anniversary of the date this Agreement is otherwise
terminated (the "Restricted Period"), the Executive shall not (A) engage,
as an officer, director or in any other managerial capacity or as an owner,
co-owner or other investor of or in, whether as an employee, independent
contractor, consultant or advisor, or as a sales or manufacturer's
representative or distributor of any kind, in any business selling any
products or providing any services which are sold or offered by the
Company, or any of its then current vendors or suppliers, on the date the
Executive's employment is terminated, within any territory surrounding any
sales office or regional center (each a "facility") in which the Company
was engaged in business immediately prior to the date of the Executive's
termination of employment (for purposes of this Section 4.1, the territory
surrounding a facility shall be: (1) the city, town or village in which the
facility is located, (2) the county or parish in which the facility is
located, (3) the counties or parishes contiguous to the county or parish in
which the facility is located, (4) the area located within 100 miles of the
facility and (5) the area in which the facility regularly makes sales or
provides services, all of such locations being herein collectively called
the "Territory"), or (B) call on any person or entity that at the time is,
or at any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company within the Territory,
for the purpose of soliciting or selling any product or service which is
then sold or offered within the Territory by the Company or any of its then
current vendors or suppliers, if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own five percent or more of any class
of securities of such entity.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and thereafter, the Executive shall keep secret and
retain in strict confidence, and shall not use for the benefit of himself
or others, all confidential matters of the Company, including, without
limitation, "know-how," trade secrets, customer lists, details of client or
consultant contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans, business
acquisition plans, new personnel acquisition plans, methods of production
and distribution, technical processes, designs and design projects,
inventions and research projects of the Company learned by the Executive
heretofore or during the Restricted Period; nor shall the Executive exploit
for his own benefit, or the benefit of others, personal relationships with
customers, suppliers or agents of the Company in connection with or
adversely affecting the Business formed previously or during the Restricted
Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the
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Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or independent sales agent of the Company away
from the Company or encourage any such employee or agent to leave such
employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in the Business and (i) which
was called on by the Company, in connection with the possible acquisition
by the Company of that person or entity, or (ii) with respect to which the
Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid
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or unenforceable, the remainder of the Restrictive Covenants shall not thereby
be affected and shall be given full effect, without regard to the invalid
portions.
4.4 Blue-Pencilling. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation, and Founders Shares and Options,
which shall vest according to the schedule set forth herein, and other accrued
benefits, if any, earned up to the date of the Executive's death; provided,
however, if any Additional Compensation or other benefits are governed by the
provisions of any written employee benefit plan or policy of the Company, any
written agreement contemplated thereunder or any other separate written
agreement entered into between the Executive and the Company, the terms and
conditions of such plan, policy or agreement shall control in the event of any
discrepancy or conflict with the provisions of this Agreement regarding such
Additional Compensation or other benefit upon the death, termination or
disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause (as hereinafter defined). If
such right is exercised, the Company's obligation to the Executive shall be
limited to the payment of any unpaid Annual Salary, Additional Compensation and
other benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination. The Founders
Shares and the Options shall continue to vest and become exercisable in
accordance with the schedule set forth herein. As used in this Section 5.2 and
in Section 5.3 below, the term "Cause" shall mean that the Board of Directors
shall have determined that (i) there has been a material breach by the Executive
of the terms of this Agreement, (ii) the Executive has willfully and
persistently failed or refused to follow the reasonable policies and directives
established by the Board of Directors or executive officers of the Company
senior to the Executive, (iii) the Executive has wrongfully misappropriated
money or other assets or properties of the Company or any subsidiary or
affiliate of the Company, (iv) the Executive has been convicted of
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any felony or other serious crime, (v) the Executive's chronic absenteeism,
neglect of duties, alcoholism or drug addiction, or (vi) the Executive has
exhibited gross moral turpitude relevant to his office or employment with the
Company or any subsidiary or affiliate of the Company.
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation to
the Executive shall be limited to the payment of any unpaid Annual Salary,
Additional Compensation and other benefits, if any, accrued up to the effective
date (which shall not be retroactive) specified in the Company's notice of
termination, plus payment of any Annual Salary which otherwise would be payable
to the Executive until the date which is six months from the effective date of
the Executive's termination. The Founders Shares and the Options shall continue
to vest and become exercisable in accordance with the schedule set forth herein.
5.4 Termination upon Disability or by Executive. If during the
Employment Term the Executive becomes physically or mentally disabled, whether
totally or partially, as evidenced by the written statement of a competent
physician licensed to practice medicine in the United States, so that the
Executive is unable to substantially perform his services hereunder for (i) a
period of six consecutive months, or (ii) for shorter periods aggregating six
months during any twelve-month period, the Company may at any time after the
last day of the six consecutive months of disability or the day on which the
shorter periods of disability equal an aggregate of six months, by written
notice to the Executive, terminate the Executive's employment hereunder. If such
right is exercised, the Company's obligation to the Executive shall be limited
to the payment of any unpaid Annual Salary, Additional Compensation and other
benefits, if any, accrued up to the effective date (which shall not be
retroactive) specified in the Company's notice of termination, plus payment of
any Annual Salary which otherwise would be payable to the Executive during the
six-month period following such effective date. The Founders Shares and the
Options shall continue to vest and become exercisable in accordance with the
schedule set forth herein. If Executive terminates his employment hereunder for
any reason, the Company's obligation to the Executive shall be limited to the
payment of any unpaid Annual Salary, Additional Compensation and other benefits,
if any, accrued up to the effective date of such termination.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
7. Indemnification. The Executive shall be entitled to the benefit of
the indemnification obligations of the Company set forth in the Company's
Articles of Incorporation, as amended through the date of this Agreement and the
Company's bylaws as in effect at the date of this Agreement.
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8. Other Provisions.
8.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
(i) if to the Company, to:
2777 Allen Parkway
Suite 800
Houston, Texas 77019
Telecopier No.: 713/852-2585
(ii) if to the Executive, to:
______________________________
______________________________
______________________________
Telecopier No.:_______________
Either party may change its address for notice hereunder by notice to the
other party.
8.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
8.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
8.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Texas, without reference to principles governing choice or
conflicts of law.
8.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's
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consent provided such assignment does not diminish any of the Executive's
benefits, rights or obligations hereunder.
8.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
WORK INTERNATIONAL CORPORATION
By: /s/ Gary French
--------------------------------
Gary French, President
and Chief Executive Officer
EXECUTIVE:
/s/ Monte R. Stephens
-----------------------------------
Monte R. Stephens
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EXHIBIT 10.8
EXECUTION COPY
Employment Agreement
Between
The Burnett Companies Consolidated, Inc.
and
Susan Burnett
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EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between The Burnett Companies
Consolidated, Inc., a Texas corporation (the "Company"), and Susan Burnett, a
resident of Houston, Texas (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), BCC Acquisition, Inc., a Texas
corporation and a wholly owned subsidiary of WORK (the "Merger Subsidiary"), and
the stockholders of the Company, including the Executive, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Company will merge with the Merger Subsidiary in a merger (the "Merger") of
which the Company will be the surviving corporation and as a result of which the
Company will become a wholly owned subsidiary of WORK; and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as President of the Company for the duration of the Employment Term (as defined
in Section 2 below), to render such services and to perform such duties as are
normally associated with and inherent in the executive capacity in which the
Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to her by the Board of Directors
of the Company (the "Board of Directors") or the officers of the Company senior
to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
her under
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Section 1.1. During the Employment Term, the Executive shall devote her full
business time, attention and energy to the business of the Company and the
performance of her duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of her duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater
Houston Metropolitan Area, and nothing in this Agreement shall require the
Executive to relocate her base of employment or principal place of residence
from the Greater Houston Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement or in Exhibit
"A," hereto), (ii) require the Company to cease to make available to the
Executive, and, subject to her meeting all applicable eligibility requirements,
the Executive shall be entitled to continue to be covered under, all group
health, medical and dental insurance policies, plans and programs maintained by
the Company for its employees generally, in each case until replacement coverage
is provided by the Company, or (iii) impair or adversely affect any
indemnification rights that Executive may have under statutes empowering
corporations in the Company's state of incorporation to indemnify their officers
and directors, or under the Company's bylaws or any written indemnification
agreement between the Executive and the Company implementing such statutory
indemnification rights, but only with respect to third-party claims or
proceedings that relate to actions taken by the Executive as an officer or
director of the Company prior to the date hereof and that are disclosed to WORK
in the Disclosure Statement delivered to WORK pursuant to the Acquisition
Agreement or, if asserted or brought for the first time after the date hereof,
would not constitute a breach of the representations or warranties of the
Company or its stockholders under the Acquisition Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
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3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $150,000 per annum. After the first anniversary of the Commencement
Date, the Annual Salary will be subject to such increases as the Board of
Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent she is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with her performance of her duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of her
performance of her duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
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3.5 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of her duties to the Company to the
fullest extent permitted under Texas law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) her work for the Company has given her,
and will continue to give her, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) she has means to support herself and her dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair her ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity. As used in this Section 4, the term
"Restricted Period" means the period beginning on the Commencement Date and
ending on the date which is the later of two years after the Commencement
Date or one year after the Executive's employment with the Company
terminates for any reason.
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4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of herself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for her own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of her association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by
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WORK, the Company or any subsidiary of WORK or the Company in connection
with the possible acquisition by WORK, the Company or any such subsidiary
of that person or entity, or (ii) with respect to which WORK, the Company
or any subsidiary of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
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4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected her duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has wrongfully misappropriated money or other
assets or properties of the Company or any subsidiary or affiliate of the
Company, (iv) the Executive has been convicted of any felony or other serious
crime, (v) the Executive's employment performance has been substantially
impaired by chronic absenteeism, alcoholism or drug addiction, or (vi) the
Executive has exhibited gross moral turpitude relevant to her office or
employment with the Company or any subsidiary or affiliate of the Company.
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5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform her services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) her voluntary
resignation, or (iii) her death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of her employment and (b) at
the Company's expense, continue to include the Executive and her eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or her life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
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7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
The Burnett Companies Consolidated, Inc.
9800 Richmond Avenue, Suite 800
Houston, Texas 77042
Telecopy: (713) 268-6032
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
if to the Executive, to:
Susan Burnett
201 Vanderpool #34
Houston, Texas 77024
Telecopy: [None]
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder
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shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Texas without reference to principles governing choice or
conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
THE BURNETT COMPANIES CONSOLIDATED, INC.
By: ______________________________
Rusty Burnett
Vice President
______________________________
SUSAN BURNETT
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EXHIBIT A
---------
Paid vacation per annum: 4 weeks
Paid personal days per annum: 7 work days
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EXHIBIT 10.9
EXECUTION COPY
Employment Agreement
Between
Sparks Personnel Services, Inc.
and
Stephen M. Sparks
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between Sparks Personnel
Services, Inc., a Maryland corporation (the "Company"), and Stephen M. Sparks, a
resident of Potomac, Maryland (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), SPS Acquisition, Inc., a Maryland
corporation and a wholly owned subsidiary of WORK (the "Merger Subsidiary"), and
the stockholders of the Company, including the Executive, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Company will merge with the Merger Subsidiary in a merger (the "Merger") of
which the Company will be the surviving corporation and as a result of which the
Company will become a wholly owned subsidiary of WORK; and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as President of the Company for the duration of the Employment Term (as defined
in Section 2 below), to render such services and to perform such duties as are
normally associated with and inherent in the executive capacity in which the
Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to him by the Board of Directors
of the Company (the "Board of Directors") or the officers of the Company senior
to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater
Washington/Baltimore Metropolitan Area, and nothing in this Agreement shall
require the Executive to relocate his base of employment or principal place of
residence from the Greater Washington/Baltimore Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
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3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $150,000 per annum. After the first anniversary of the Commencement
Date, the Annual Salary will be subject to such increases as the Board of
Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
3.5 Automobile. The Company shall provide the Executive with the use of
a Company-owned or leased automobile for use by the Executive in connection with
the performance of his duties under this Agreement, and shall pay the reasonable
costs of insuring, operating and maintaining the automobile, or, in lieu thereof
the Company, at is option, may pay to the Executive an automobile allowance to
help defray the Executive's cost of owning and operating a personal
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automobile for such purpose. Such Company furnished automobile or such
allowance shall be comparable to the automobile or allowance that was taken into
account in determining the merger consideration that is to be paid by the
Company to the Company's stockholders pursuant to the Acquisition Agreement.
3.6 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under Maryland law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity.
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As used in this Section 4, the term "Restricted Period" means the period
beginning on the Commencement Date and ending on the date which is the
later of two years after the Commencement Date or one year after the
Executive's employment with the Company terminates for any reason.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
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4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by WORK, the Company or
any subsidiary of WORK or the Company in connection with the possible
acquisition by WORK, the Company or any such subsidiary of that person or
entity, or (ii) with respect to which WORK, the Company or any subsidiary
of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
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4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected his duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has
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wrongfully misappropriated money or other assets or properties of the Company or
any subsidiary or affiliate of the Company, (iv) the Executive has been
convicted of any felony or other serious crime, (v) the Executive's employment
performance has been substantially impaired by chronic absenteeism, alcoholism
or drug addiction, or (vi) the Executive has exhibited gross moral turpitude
relevant to his office or employment with the Company or any subsidiary or
affiliate of the Company.
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to
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reasonable medical examinations and by filling out, executing and delivering
such applications and other instruments in writing as may reasonably be required
by an insurance company or companies to which any application or applications
for insurance may be made by or for the Company.
7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
Sparks Personnel Services, Inc.
15825 Shady Grove Road, Suite 150
Rockville, Maryland 20850
Telecopy: (301) 948-5890
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
if to the Executive, to:
Stephen M. Sparks
12021 Wetherfield Lane
Potomac, Maryland 20854
Telecopy: [None]
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
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7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Maryland without reference to principles governing choice
or conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
SPARKS PERSONNEL SERVICES, INC.
By: ______________________________
Scott Newlin
Chief Operating Officer
______________________________
STEPHEN M. SPARKS
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EXHIBIT 10.10
EXECUTION COPY
Employment Agreement
Between
TOSI Placement Services, Inc.
and
Gilbert Rosen
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between TOSI Placement Services,
Inc., a Ontario corporation (the "Company"), and Gilbert Rosen, a resident of
Toronto, Ontario, Canada (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), 1296209 Ontario, Inc. Acquisition,
Inc., a Ontario corporation and a wholly owned subsidiary of WORK (the "Merger
Subsidiary"), and the stockholders of the Company, including the Executive, are
entering into an Agreement and Plan of Reorganization (the "Acquisition
Agreement"), under which the Company will merge with the Merger Subsidiary in a
merger (the "Merger") of which the Company will be the surviving corporation and
as a result of which the Company will become a wholly owned subsidiary of WORK;
and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as President and Secretary of the Company for the duration of the Employment
Term (as defined in Section 2 below), to render such services and to perform
such duties as are normally associated with and inherent in the executive
capacity in which the Executive will be serving, as well as such other duties,
which are not inconsistent with the Executive's position as an executive of the
Company, as shall from time to time reasonably be assigned to him by the Board
of Directors of the Company (the "Board of Directors") or the officers of the
Company senior to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater
Toronto Metropolitan Area, and nothing in this Agreement shall require the
Executive to relocate his base of employment or principal place of residence
from the Greater Toronto Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
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<PAGE>
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of CDN$60,000 (Canadian) per annum. After the first anniversary of the
Commencement Date, the Annual Salary will be subject to such increases as the
Board of Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
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3.5 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under Ontario law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity. As used in this Section 4, the term
"Restricted Period" means the period beginning on the Commencement Date and
ending on the date which is the later of two years after the Commencement
Date or one year after the Executive's employment with the Company
terminates for any reason.
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<PAGE>
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by
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<PAGE>
WORK, the Company or any subsidiary of WORK or the Company in connection
with the possible acquisition by WORK, the Company or any such subsidiary
of that person or entity, or (ii) with respect to which WORK, the Company
or any subsidiary of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
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<PAGE>
4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected his duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has wrongfully misappropriated money or other
assets or properties of the Company or any subsidiary or affiliate of the
Company, (iv) the Executive has been convicted of any felony or other serious
crime, (v) the Executive's employment performance has been substantially
impaired by chronic absenteeism, alcoholism or drug addiction, or (vi) the
Executive has exhibited gross moral turpitude relevant to his office or
employment with the Company or any subsidiary or affiliate of the Company.
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5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in Canada, so that the Executive is unable to substantially
perform his services hereunder for (i) a period of six consecutive months, or
(ii) for shorter periods aggregating six months during any period of twelve
consecutive months, the Company may at any time after the last day of the six
consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
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7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
TOSI Placement Services, Inc.
10 King Street East
Suite 1500
Toronto, Ontario
M5C 1C3
Telecopy: (416) 482-4976
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
if to the Executive, to:
Gilbert Rosen
34 Montclair Avenue
Toronto, Ontario, Canada M4V 1W1
Telecopy: (416) 482-4976
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
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7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Ontario, Canada without reference to principles governing
choice or conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
TOSI PLACEMENT SERVICES, INC.
By:
-----------------------------------------
Harriet Rosen
Vice President
-----------------------------------------
GILBERT ROSEN
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EXHIBIT 10.11
EXECUTION COPY
Employment Agreement
Between
Contract Health Professionals, Inc.
and
Morton Fishman
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between Contract Health
Professionals, Inc., a Florida corporation (the "Company"), and Morton Fishman,
a resident of Palm Beach Gardens, Florida (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), CHPI Acquisition, Inc., a Florida
corporation and a wholly owned subsidiary of WORK (the "Merger Subsidiary"), and
the stockholders of the Company, including the Executive, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Company will merge with the Merger Subsidiary in a merger (the "Merger") of
which the Company will be the surviving corporation and as a result of which the
Company will become a wholly owned subsidiary of WORK; and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as President of the Company for the duration of the Employment Term (as defined
in Section 2 below), to render such services and to perform such duties as are
normally associated with and inherent in the executive capacity in which the
Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to him by the Board of Directors
of the Company (the "Board of Directors") or the officers of the Company senior
to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater
Dade, Broward and Palm Beach Counties Metropolitan Area, and nothing in this
Agreement shall require the Executive to relocate his base of employment or
principal place of residence from the Greater Dade, Broward and Palm Beach
Counties Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
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<PAGE>
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $100,000 per annum. After the first anniversary of the Commencement
Date, the Annual Salary will be subject to such increases as the Board of
Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
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<PAGE>
3.5 Automobile. The Company shall provide the Executive with an
automobile allowance of $400 per month to help defray the Executive's cost of
owning and operating a personal automobile for business purposes.
3.6 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under Florida law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity.
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<PAGE>
As used in this Section 4, the term "Restricted Period" means the period
beginning on the Commencement Date and ending on the date which is the
later of two years after the Commencement Date or one year after the
Executive's employment with the Company terminates for any reason.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
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<PAGE>
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by WORK, the Company or
any subsidiary of WORK or the Company in connection with the possible
acquisition by WORK, the Company or any such subsidiary of that person or
entity, or (ii) with respect to which WORK, the Company or any subsidiary
of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
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<PAGE>
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected his duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has
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<PAGE>
wrongfully misappropriated money or other assets or properties of the Company or
any subsidiary or affiliate of the Company, (iv) the Executive has been
convicted of any felony or other serious crime, (v) the Executive's employment
performance has been substantially impaired by chronic absenteeism, alcoholism
or drug addiction, or (vi) the Executive has exhibited gross moral turpitude
relevant to his office or employment with the Company or any subsidiary or
affiliate of the Company.
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to
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<PAGE>
reasonable medical examinations and by filling out, executing and delivering
such applications and other instruments in writing as may reasonably be required
by an insurance company or companies to which any application or applications
for insurance may be made by or for the Company.
7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
Contract Health Professionals, Inc.
7108 Fairway Drive
Palm Beach Gardens, Florida 33418
Telecopy: (561) 624-4324
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
if to the Executive, to:
Morton Fishman
11 St. James Drive
Palm Beach Gardens, Florida 33418
Telecopy: (561) 625-1421
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
9
<PAGE>
7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Florida without reference to principles governing choice or
conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
CONTRACT HEALTH PROFESSIONALS, INC.
By:
----------------------------------------
Melanie Fishman
Vice President
----------------------------------------
MORTON FISHMAN
10
<PAGE>
EXHIBIT 10.12
EXECUTION COPY
Employment Agreement
Between
CoreLink Staffing Services, Inc.
and
John Haesler
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between CoreLink Staffing
Services, Inc., a California corporation (the "Company"), and John Haesler, a
resident of Irvine, California (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), CSSI Acquisition, Inc., a California
corporation and a wholly owned subsidiary of WORK (the "Merger Subsidiary"), and
the stockholders of the Company, including the Executive, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Company will merge with the Merger Subsidiary in a merger (the "Merger") of
which the Company will be the surviving corporation and as a result of which the
Company will become a wholly owned subsidiary of WORK; and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as Vice President of the Company for the duration of the Employment Term (as
defined in Section 2 below), to render such services and to perform such duties
as are normally associated with and inherent in the executive capacity in which
the Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to him by the Board of Directors
of the Company (the "Board of Directors") or the officers of the Company senior
to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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<PAGE>
Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater
Irvine, California Metropolitan Area, and nothing in this Agreement shall
require the Executive to relocate his base of employment or principal place of
residence from the Greater Irvine, California Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
2
<PAGE>
3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $80,000 per annum. After the first anniversary of the Commencement
Date, the Annual Salary will be subject to such increases as the Board of
Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
3
<PAGE>
3.5 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under California law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity. As used in this Section 4, the term
"Restricted Period" means the period beginning on the Commencement Date and
ending on the date which is the later of two years after the Commencement
Date or one year after the Executive's employment with the Company
terminates for any reason.
4
<PAGE>
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by
5
<PAGE>
WORK, the Company or any subsidiary of WORK or the Company in connection
with the possible acquisition by WORK, the Company or any such subsidiary
of that person or entity, or (ii) with respect to which WORK, the Company
or any subsidiary of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
6
<PAGE>
4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected his duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has wrongfully misappropriated money or other
assets or properties of the Company or any subsidiary or affiliate of the
Company, (iv) the Executive has been convicted of any felony or other serious
crime, (v) the Executive's employment performance has been substantially
impaired by chronic absenteeism, alcoholism or drug addiction, or (vi) the
Executive has exhibited gross moral turpitude relevant to his office or
employment with the Company or any subsidiary or affiliate of the Company.
7
<PAGE>
5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
8
<PAGE>
7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
CoreLink Staffing Services, Inc.
18301 Von Karmann Avenue, Suite 120
Irvine, California 92612
Telecopy: (714) 883-0163
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
if to the Executive, to:
John Haesler
24 San Ramon
Irvine, California 92612
Telecopy: [None]
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder
9
<PAGE>
shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of California without reference to principles governing choice
or conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
CORELINK STAFFING SERVICES, INC.
By: ______________________________
Linda Haesler
President
______________________________
JOHN HAESLER
10
<PAGE>
EXHIBIT 10.13
EXECUTION COPY
Employment Agreement
Between
Professional Consulting Network, Inc.
and
James Schneider
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between Professional Consulting
Network, Inc., a California corporation (the "Company"), and James Schneider, a
resident of Mill Valley, California (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), PCN Acquisition, Inc., a California
corporation and a wholly owned subsidiary of WORK (the "Merger Subsidiary"), and
the stockholders of the Company, including the Executive, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Company will merge with the Merger Subsidiary in a merger (the "Merger") of
which the Company will be the surviving corporation and as a result of which the
Company will become a wholly owned subsidiary of WORK; and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as President of the Company for the duration of the Employment Term (as defined
in Section 2 below), to render such services and to perform such duties as are
normally associated with and inherent in the executive capacity in which the
Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to him by the Board of Directors
of the Company (the "Board of Directors").
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, or from engaging in
activities as a member of the Executive Board of the National Association of
Computer Consultant Businesses, that do not materially impair the performance of
his duties under this Agreement. If appointed or elected, as applicable, the
Executive also shall serve during all or any part of the Employment Term as any
other officer and/or as a director of the Company or any of its subsidiaries or
affiliates, without any additional compensation other than that specified in
this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater San
Francisco Metropolitan Area, and nothing in this Agreement shall require the
Executive to relocate his base of employment or principal place of residence
from the Greater San Francisco Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
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3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $120,000 per annum. After the first anniversary of the Commencement
Date, the Annual Salary will be subject to such increases as the Board of
Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
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3.5 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under California law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity. As used in this Section 4, the term
"Restricted Period" means the period beginning on the Commencement Date and
ending on the date which is the later of two years after the Commencement
Date or one year after the Executive's employment with the Company
terminates for any reason.
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4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by
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WORK, the Company or any subsidiary of WORK or the Company in connection
with the possible acquisition by WORK, the Company or any such subsidiary
of that person or entity, or (ii) with respect to which WORK, the Company
or any subsidiary of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
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4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean:
5.2.1 Earn Out Period. During the Earn Out Period (as defined
in Section 5.3), that a majority of the Board of Directors shall have
determined, and a majority of the Board of Directors of WORK shall have
concurred, that (i) the Executive has grossly neglected his duties, and
such gross neglect of duty continues for ten days after notice from the
Company, (ii) the Executive has willfully and persistently failed or
refused to follow the reasonable policies and directives established by the
Board of Directors and such failure or refusal continues for ten days after
notice from the Company, without good reason or objection by the Executive
(iii) the Executive has embezzled money or other assets or properties of
the Company or any subsidiary or affiliate of the Company, (iv) the
Executive's employment performance has been substantially impaired by
chronic absenteeism, alcoholism or drug addiction, or (v) the Executive has
exhibited gross moral turpitude relevant to his office or employment with
the Company or any subsidiary or affiliate of the Company.
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5.2.2 After the Earn Out Period. After the Earn Out Period,
that a majority of the Board of Directors shall have determined, and a
majority of the Board of Directors of WORK shall have concurred, that (i)
there has been a material breach by the Executive of the terms of this
Agreement or the Executive has neglected his duties, and such breach or
neglect of duty continues for ten days after notice from the Company, (ii)
the Executive has willfully and persistently failed or refused to follow
the reasonable policies and directives established by the Board of
Directors and such failure or refusal continues for ten days after notice
from the Company, (iii) the Executive has wrongfully misappropriated money
or other assets or properties of the Company or any subsidiary or affiliate
of the Company, (iv) the Executive has been convicted of any felony or
other serious crime, (v) the Executive's employment performance has been
substantially impaired by chronic absenteeism, alcoholism or drug
addiction, or (vi) the Executive has exhibited gross moral turpitude
relevant to his office or employment with the Company or any subsidiary or
affiliate of the Company.
5.3 Termination Without Cause. During the period beginning on the
Commencement Date and ending on December 31, 1999 (the "Earn-Out Period"), the
Company shall have no right to terminate Employee without cause. After the Earn-
Out Period, the Company shall have the right, exercisable by serving notice
effective in accordance with its terms, to terminate the Executive's employment
under this Agreement and discharge the Executive without Cause. If such right
is exercised, the Company's obligation to the Executive shall be as set forth in
Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
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Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
Professional Consulting Network, Inc.
595 Market Street, Suite 1400
San Francisco, California 94105-2821
Telecopy: (415) 777-8632
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
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if to the Executive, to:
James Schneider
8 Deer Hill
Mill Valley, California 94941
Telecopy: [None]
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of California without reference to principles governing choice
or conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
PROFESSIONAL CONSULTING NETWORK, INC.
By: ______________________________
Peter Jozwik
Vice President
______________________________
JAMES SCHNEIDER
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EXHIBIT 10.14
EXECUTION COPY
Employment Agreement
Between
Smith Hanley Associates, Inc.
and
Thomas A. Hanley
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July 10, 1998, between Smith Hanley Associates,
Inc., a New York corporation (the "Company"), and Thomas A. Hanley, a resident
of New Canaan, Connecticut (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), SHA Acquisition, Inc., a New York
corporation and a wholly owned subsidiary of WORK (the "Merger Subsidiary"), and
the stockholders of the Company, including the Executive, are entering into an
Agreement and Plan of Reorganization (the "Acquisition Agreement"), under which
the Company will merge with the Merger Subsidiary in a merger (the "Merger") of
which the Company will be the surviving corporation and as a result of which the
Company will become a wholly owned subsidiary of WORK; and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as President of the Company for the duration of the Employment Term (as defined
in Section 2 below), to render such services and to perform such duties as are
normally associated with and inherent in the executive capacity in which the
Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to him by the Board of Directors
of the Company (the "Board of Directors") or the officers of the Company senior
to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater New
York, New York Metropolitan Area, and nothing in this Agreement shall require
the Executive to relocate his base of employment or principal place of residence
from the Greater New York, New York Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the second anniversary of the Commencement
Date (the "Expiration Date"), unless earlier terminated as herein provided.
However, if the Acquisition Agreement is terminated under the terms of its
Article XII, then this Agreement shall also terminate, automatically and without
the requirement of any action on the part of either of its parties.
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3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $120,000 per annum. After the first anniversary of the Commencement
Date, the Annual Salary will be subject to such increases as the Board of
Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
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3.5 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under New York law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one year prior to the date of termination of the
Executive's employment was, a customer of the Company, for the purpose of
soliciting or selling any product or service which is then sold or offered
within the Territory by the Company if the Executive has knowledge of that
customer relationship; provided, however, that nothing in this Section
4.1.1 shall prohibit the Executive from owning, directly or indirectly,
solely as an investment, securities of any entity traded on any national
securities exchange or over-the-counter market if the Executive is not a
controlling person of, or a member of a group which controls, such entity
and does not, directly or indirectly, own one percent or more of any class
of securities of such entity. As used in this Section 4, the term
"Restricted Period" means the period beginning on the Commencement Date and
ending on the date which is the later of two years after the Commencement
Date or one year after the Executive's employment with the Company
terminates for any reason.
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4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by
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WORK, the Company or any subsidiary of WORK or the Company in connection
with the possible acquisition by WORK, the Company or any such subsidiary
of that person or entity, or (ii) with respect to which WORK, the Company
or any subsidiary of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
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4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
5.2 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised,
the Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected his duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has wrongfully misappropriated money or other
assets or properties of the Company or any subsidiary or affiliate of the
Company, (iv) the Executive has been convicted of any felony or other serious
crime, (v) the Executive's employment performance has been substantially
impaired by chronic absenteeism, alcoholism or drug addiction, or (vi) the
Executive has exhibited gross moral turpitude relevant to his office or
employment with the Company or any subsidiary or affiliate of the Company.
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5.3 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.
5.4 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.5 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and dental insurance
policies, plans and programs maintained by the Company during Severance Benefit
Period for the Company's employees, or management employees, generally. The
Company's obligation to perform the obligations listed in subsections (a) and
(b) of this Section will not be reduced by the Executive's employment by another
employer during the Severance Benefit Period, and the Executive shall have no
obligation to mitigate damages by seeking such employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
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7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
Smith Hanley Associates, Inc.
99 Park Avenue
New York, New York 10016
Telecopy: (212) 818-9067
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
if to the Executive, to:
Thomas A. Hanley
235 Canoe Hill Road
New Canaan, Connecticut 06840
Telecopy: [None]
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder
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shall operate as a waiver thereof, nor shall any waiver on the part of any party
of any right, power or privilege hereunder, nor any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of Connecticut without reference to principles governing
choice or conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
SMITH HANLEY ASSOCIATES, INC.
By: ______________________________
Thomas A. Hanley
President
______________________________
THOMAS A. HANLEY
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EXHIBIT 10.15
EXECUTION COPY
Employment Agreement
Between
------------------------
and
------------------------
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of July ____, 1998, between _________________, a
_________________ corporation (the "Company"), and ____________________, a
resident of _________________, _________________ (the "Executive"),
W I T N E S S E T H:
WHEREAS, on the date of this Agreement, the Company, Work International
Corporation, a Texas corporation ("WORK"), Acquisition, Inc., a
_________________ corporation and a wholly owned subsidiary of WORK (the "Merger
Subsidiary"), and the stockholders of the Company, including the Executive, are
entering into an Agreement and Plan of Reorganization (the "Acquisition
Agreement"), under which the Company will merge with the Merger Subsidiary in a
merger (the "Merger") of which the Company will be the surviving corporation and
as a result of which the Company will become a wholly owned subsidiary of WORK;
and
WHEREAS, the Executive has served as an officer and director of the
Company, and has contributed substantially to the Company's growth and success;
and
WHEREAS, WORK wishes to insure that the Company will have the continued
benefit of the Executive's knowledge and experience concerning the affairs of
the Company and the staffing industry generally, and to keep them from being
availed of by third parties, and has therefore required as a condition to its
execution of the Acquisition Agreement that the Executive enter into this
Agreement to become effective upon consummation of the Merger; and
WHEREAS, the Executive is willing to accept employment by the Company on
the terms and conditions of this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the Executive
as _________________ of the Company for the duration of the Employment Term (as
defined in Section 2 below), to render such services and to perform such duties
as are normally associated with and inherent in the executive capacity in which
the Executive will be serving, as well as such other duties, which are not
inconsistent with the Executive's position as an executive of the Company, as
shall from time to time reasonably be assigned to him by the Board of Directors
of the Company (the "Board of Directors")
1.2 Acceptance of Employment by the Executive. The Executive accepts such
employment for the Employment Term and agrees to render the services required of
him under
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Section 1.1. During the Employment Term, the Executive shall devote his full
business time, attention and energy to the business of the Company and the
performance of his duties under this Agreement. The foregoing shall not,
however, prohibit the Executive from making and managing personal investments,
or from engaging in civic or charitable activities, that do not materially
impair the performance of his duties under this Agreement. If appointed or
elected, as applicable, the Executive also shall serve during all or any part of
the Employment Term as any other officer and/or as a director of the Company or
any of its subsidiaries or affiliates, without any additional compensation other
than that specified in this Agreement.
1.3 Place of Performance. The Executive shall be based in the Greater
_________________ Metropolitan Area, and nothing in this Agreement shall require
the Executive to relocate his base of employment or principal place of residence
from the Greater _________________ Metropolitan Area.
1.4 Termination of Existing Contracts. The Executive agrees that all
other agreements and contracts, whether written or oral, relating to the
employment of the Executive by the Company shall be terminated effective as of
the commencement of the Employment Term. However, nothing in this Section 1.4
shall (i) affect accrued vacation, holiday or sick pay accruals (but only to
the extent such accruals were reflected in the Company's financial statements
delivered to WORK pursuant to the Acquisition Agreement or in the Disclosure
Statement delivered to WORK pursuant to the Acquisition Agreement), (ii) require
the Company to cease to make available to the Executive, and, subject to his
meeting all applicable eligibility requirements, the Executive shall be entitled
to continue to be covered under, all group health, medical and dental insurance
policies, plans and programs maintained by the Company for its employees
generally, in each case until replacement coverage is provided by the Company,
or (iii) impair or adversely affect any indemnification rights that Executive
may have under statutes empowering corporations in the Company's state of
incorporation to indemnify their officers and directors, or under the Company's
bylaws or any written indemnification agreement between the Executive and the
Company implementing such statutory indemnification rights, but only with
respect to third-party claims or proceedings that relate to actions taken by the
Executive as an officer or director of the Company prior to the date hereof and
that are disclosed to WORK in the Disclosure Statement delivered to WORK
pursuant to the Acquisition Agreement or, if asserted or brought for the first
time after the date hereof, would not constitute a breach of the representations
or warranties of the Company or its stockholders under the Acquisition
Agreement.
2. Employment Term. The term of the Executive's employment under this
Agreement (the "Employment Term") shall commence on the date of consummation of
the Merger pursuant to the Acquisition Agreement (the "Commencement Date"), and
shall continue through and expire on the _________________ [INSERT "second" or
"third"] anniversary of the Commencement Date (the "Expiration Date"), unless
earlier terminated as herein provided. However, if the Acquisition Agreement is
terminated under the terms of its Article XII, then this Agreement shall also
terminate, automatically and without the requirement of any action on the part
of either of its parties.
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3. Compensation and Other Benefits.
3.1 Annual Salary. As compensation for services to be rendered under this
Agreement, the Company shall pay the Executive a salary (the "Annual Salary") at
a rate of $_________________ per annum . After the first anniversary of the
Commencement Date, the Annual Salary will be subject to such increases as the
Board of Directors may, in its discretion, approve. The Executive shall also be
eligible, during the balance of the Employment Term after the first anniversary
of the Commencement Date, to receive such other compensation, whether in the
form of cash bonuses, incentive compensation, stock options, stock appreciation
rights, restricted stock awards or otherwise (collectively, the "Additional
Compensation"), as the Board of Directors (or any committee of the Board) may,
in its discretion, approve. The Annual Salary and the Additional Compensation
shall be payable in accordance with the applicable payroll and/or other
compensation policies and plans of the Company as in effect from time to time
during the Employment Term, less such deductions as shall be required to be
withheld by applicable law and regulations.
3.2 Participation in Employee Benefit Plans. The Executive shall be
permitted, during the Employment Term, if and to the extent he is and continues
to meet all applicable eligibility requirements, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit plan or other "fringe benefits" of the Company, which may
be available to all other members of the Company's management on generally the
same terms.
3.3 Executive Support. The Company shall provide to the Executive office
facilities, furniture, and equipment, secretarial and support personnel and
other management level support services as the Executive shall reasonably
require in connection with his performance of his duties under this Agreement.
3.4 Reimbursement of Business Expenses. The Executive may incur
reasonable, ordinary and necessary business expenses in the course of his
performance of his duties under this Agreement, including expenses for travel,
food and entertainment. The Company shall reimburse the Executive for all such
business expenses if (i) the expenses are incurred by the Executive in
accordance with the Company's business expense reimbursement policy, if any, as
may be established and modified by the Company from time to time, and (ii) the
Executive provides to the Company a record of and appropriate receipts for (A)
the amount of the expense, (B) the date, place and nature of the expense, (C)
the business reason for the expense and (D) the names, occupations and other
data concerning individuals entertained sufficient to establish their business
relationship to the Company. The Company shall have no obligation to reimburse
the Executive for expenses that are not incurred and substantiated as required
by this Section 3.4.
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INSERT FOR EXECUTIVES WHO WILL RECEIVE AUTO OR AUTO ALLOWANCE
[ 3.5 Automobile. The Company shall provide the Executive with the use of
a Company-owned or leased automobile for use by the Executive in connection with
the performance of his duties under this Agreement, and shall pay the reasonable
costs of insuring, operating and maintaining the automobile, or, in lieu thereof
the Company, at is option, may pay to the Executive an automobile allowance to
help defray the Executive's cost of owning and operating a personal automobile
for such purpose.] INSERT FOR THOSE COMPANIES THAT DID NOT BACK OUT THE COST OF
AN AUTO IN EBIT [Such Company furnished automobile or such allowance shall be
comparable to the automobile or allowance that was taken into account in
determining the merger consideration that is to be paid by the Company to the
Company's stockholders pursuant to the Acquisition Agreement. ]
3.6 Indemnification. The Company shall indemnify the Executive for
actions taken in the course and scope of his duties to the Company to the
fullest extent permitted under _________________ law.
4. Non-Competition.
4.1 Covenants Against Competition. The Executive acknowledges that (i)
the Company, which for purposes of this Section 4 includes WORK and all of its
present and future subsidiaries and affiliates, including subsidiaries and
affiliates that may be formed or incorporated during the Restricted Period (as
defined in Section 4.1.1), is engaged in the business of providing temporary
personnel staffing, personnel placement, staff leasing, professional employer
organization and training or business solutions (the "Business"); (ii) the
Executive is one of a limited number of persons who has performed a significant
role in developing the Business; (iii) the Business is conducted throughout the
United States and internationally; (iv) his work for the Company has given him,
and will continue to give him, possession of and access to trade secrets of, and
confidential information concerning, the Company; (v) the agreements and
covenants contained in this Section 4 (collectively, the "Restrictive
Covenants") are essential to protect the Business and the goodwill of the
Company; (vi) he has means to support himself and his dependents other than by
engaging in the Business in violation of the Restrictive Covenants, and (vii)
the Restrictive Covenants will not impair his ability to do so. Accordingly,
the Executive agrees as follows:
4.1.1 Non-Compete. During the Restricted Period, the Executive
shall not (A) engage, anywhere within the Territory (as hereinafter
defined), as an officer, director or in any other managerial capacity or as
an owner, co-owner or other investor or creditor in or of, whether as an
employee, independent contractor, consultant or advisor, in any business
selling or providing any services which are sold or offered by the Company,
within a 50-mile radius surrounding each office (each a "facility" and the
area within a 50-mile radius of each such facility, the "Territory") at
which the Executive was employed by the Company within the three-year
period immediately preceding the date of the Executive's termination of
employment, or (B) call on any person or entity that at the time is, or at
any time within one
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year prior to the date of termination of the Executive's employment was, a
customer of the Company, for the purpose of soliciting or selling any
product or service which is then sold or offered within the Territory by
the Company if the Executive has knowledge of that customer relationship;
provided, however, that nothing in this Section 4.1.1 shall prohibit the
Executive from owning, directly or indirectly, solely as an investment,
securities of any entity traded on any national securities exchange or
over-the-counter market if the Executive is not a controlling person of, or
a member of a group which controls, such entity and does not, directly or
indirectly, own one percent or more of any class of securities of such
entity. As used in this Section 4, the term "Restricted Period" means the
period beginning on the Commencement Date and ending on the date which is
the later of two years after the Commencement Date or one year after the
Executive's employment with the Company terminates for any reason.
4.1.2 Confidential Information; Personal Relationships. During
the Restricted Period and two years thereafter, the Executive shall keep
secret and retain in strict confidence, and shall not use for the benefit
of himself or others, all confidential matters of the Company, including,
without limitation, "know-how," trade secrets, customer lists, details of
client or consultant contracts, pricing policies, bidding practices and
procedures, operational methods, marketing plans or strategies, project
development techniques or plans, business acquisition plans, new personnel
acquisition plans, inventions and research projects of the Company learned
by the Executive heretofore or during the Restricted Period; nor shall the
Executive, during the Restricted Period, exploit for his own benefit, or
the benefit of others, personal relationships with customers, suppliers or
agents of the Company in connection with or adversely affecting the
Business formed previously during the course of his association with the
Company or formed during the Restricted Period.
4.1.3 Property of the Company. All memoranda, notes, lists,
records and other documents or papers (and all copies thereof), including
such items stored in computer memories, on microfiche or by any other
means, made or compiled by or on behalf of the Executive, or made available
to the Executive relating to the Company, other than purely personal
matters, are and shall be the Company's property and shall be delivered to
the Company promptly upon the termination of the Executive's employment
(whether such termination is for Cause, as hereinafter defined, or
otherwise) or at any other time on request of the Company.
4.1.4 Employees of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any employee or agent of the Company away from the Company
or encourage any such employee or agent to leave such employment.
5
<PAGE>
4.1.5 Consultants of the Company. During the Restricted Period
and thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not, directly or indirectly,
hire or solicit any consultant then under contract with the Company or
encourage any such consultant to terminate such relationship.
4.1.6 Acquisition Candidates. During the Restricted Period and
thereafter for as long as the Executive shall remain an employee of or
consultant to the Company, the Executive shall not call on any Acquisition
Candidate (as defined below in this Section 4.1.6), with the knowledge of
such Acquisition Candidate's status as such, for the purpose of acquiring,
or arranging the acquisition of, that Acquisition Candidate by any person
or entity other than the Company. In this Section 4.1.6 "Acquisition
Candidate" means any person or entity engaged in any of the businesses of
providing temporary personnel staffing, personnel placement, staff leasing,
professional employer organization, training or business solutions or other
consulting services, and (i) which was called on by WORK, the Company or
any subsidiary of WORK or the Company in connection with the possible
acquisition by WORK, the Company or any such subsidiary of that person or
entity, or (ii) with respect to which WORK, the Company or any subsidiary
of WORK or the Company has made an acquisition analysis.
4.2 Rights and Remedies upon Breach. If the Executive breaches or
threatens to commit a breach of the Restrictive Covenants, the Company shall
have the following rights and remedies, each of which shall be independent of
the others and severally enforceable, and each of which is in addition to, and
not in lieu of, any other rights and remedies available to the Company under law
or in equity:
4.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach or threatened breach of the
Restrictive Covenants would cause irreparable injury to the Company and
that money damages would not provide an adequate remedy to the Company.
4.2.2 Accounting. The right and remedy to require the Executive
to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transaction constituting a breach of the
Restrictive Covenants.
4.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions.
6
<PAGE>
4.4 Reformation. If any court determines that any Restrictive
Covenant, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, such court shall have the power to reduce
the duration or scope of such provision, as the case may be, and, in its reduced
form, such provision shall then be enforceable.
4.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of the
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company's right to the
relief provided above in the courts of any other jurisdiction within the
geographical scope of the Restrictive Covenants, as to breaches of such
covenants in such other respective jurisdictions, such covenants as they relate
to each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
4.6 Enforceability of Covenants Under Acquisition Agreement.
Notwithstanding anything to the contrary set forth in this Agreement, nothing
herein shall limit or impair in any way the separate and independent
enforceability of the non-competition covenants set forth in Article X of the
Acquisition Agreement, which covenants shall be and remain separate and
independent covenants enforceable in accordance with their term.
5. Termination.
5.1 Termination upon Death. If the Executive dies during the
Employment Term, this Agreement shall terminate, except that the Executive's
legal representatives, successors, heirs or assigns shall be entitled to receive
the Annual Salary, the Additional Compensation and other accrued benefits, if
any, earned up to the date of the Executive's death; provided, however, if any
Additional Compensation or other benefits are governed by the provisions of any
written employee benefit plan or policy of the Company, any written agreement
contemplated thereunder or any other separate written agreement entered into
between the Executive and the Company, the terms and conditions of such plan,
policy or agreement shall control in the event of any discrepancy or conflict
with the provisions of this Agreement regarding such Additional Compensation or
other benefit upon the death, termination or disability of the Executive.
INSERT FOR PROFESSIONAL CONSULTING
[ 5.2 Termination for Cause. At any time during the Employment
Term, the Company shall have the right, exercisable by serving notice effective
in accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised, the
Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean:
7
<PAGE>
5.2.1 Earn Out Period. During the Earn Out Period (as defined
in Section 5.3), that a majority of the Board of Directors shall have
determined, and a majority of the Board of Directors of WORK shall have
concurred, that (i) the Executive has grossly neglected his duties, and
such gross neglect of duty continues for ten days after notice from the
Company, (ii) the Executive has willfully and persistently failed or
refused to follow the reasonable policies and directives established by the
Board of Directors and such failure or refusal continues for ten days after
notice from the Company, without good reason or objection by the Executive
(iii) the Executive has embezzled money or other assets or properties of
the Company or any subsidiary or affiliate of the Company, (iv) the
Executive's employment performance has been substantially impaired by
chronic absenteeism, alcoholism or drug addiction, or (v) the Executive has
exhibited gross moral turpitude relevant to his office or employment with
the Company or any subsidiary or affiliate of the Company.
5.2.2 After the Earn Out Period. After the Earn Out Period,
that a majority of the Board of Directors shall have determined, and a
majority of the Board of Directors of WORK shall have concurred, that (i)
there has been a material breach by the Executive of the terms of this
Agreement or the Executive has neglected his duties, and such breach or
neglect of duty continues for ten days after notice from the Company, (ii)
the Executive has willfully and persistently failed or refused to follow
the reasonable policies and directives established by the Board of
Directors and such failure or refusal continues for ten days after notice
from the Company, (iii) the Executive has wrongfully misappropriated money
or other assets or properties of the Company or any subsidiary or affiliate
of the Company, (iv) the Executive has been convicted of any felony or
other serious crime, (v) the Executive's employment performance has been
substantially impaired by chronic absenteeism, alcoholism or drug
addiction, or (vi) the Executive has exhibited gross moral turpitude
relevant to his office or employment with the Company or any subsidiary or
affiliate of the Company.]
INSERT FOR ALL OTHER COMPANIES
[ 5.3 Termination for Cause. At any time during the Employment Term,
the Company shall have the right, exercisable by serving notice effective in
accordance with its terms, to terminate the Executive's employment under this
Agreement and discharge the Executive for Cause. If such right is exercised, the
Company's obligation to the Executive shall be limited to the payment of any
unpaid Annual Salary, Additional Compensation and other benefits, if any,
accrued up to the effective date specified in the Company's notice of
termination (which date shall not be retroactive). As used in this Section 5.2
and elsewhere in this Agreement, the term "Cause" shall mean that a majority of
the Board of Directors shall have determined, and a majority of the Board of
Directors of WORK shall have concurred, that (i) there has been a material
breach by the Executive of the terms of this Agreement or the Executive has
neglected his duties, and such breach or neglect of duty continues for ten days
after notice from the Company, (ii) the Executive has willfully and persistently
failed or refused to follow the reasonable policies and directives established
by the Board of Directors or executive officers of the Company senior to the
Executive and such failure or refusal continues for ten days after notice from
the Company, (iii) the Executive has wrongfully misappropriated money
8
<PAGE>
or other assets or properties of the Company or any subsidiary or affiliate of
the Company, (iv) the Executive has been convicted of any felony or other
serious crime, (v) the Executive's employment performance has been substantially
impaired by chronic absenteeism, alcoholism or drug addiction, or (vi) the
Executive has exhibited gross moral turpitude relevant to his office or
employment with the Company or any subsidiary or affiliate of the Company.]
INSERT FOR COMPANIES WITH EARN-OUT AGREEMENTS
[ 5.4 Termination Without Cause. During the period beginning on the
Commencement Date and ending on ____________ (the "Earn-Out Period"), the
Company shall have no right to terminate Employee without cause. After the Earn-
Out Period, the Company shall have the right, exercisable by serving notice
effective in accordance with its terms, to terminate the Executive's employment
under this Agreement and discharge the Executive without Cause. If such right
is exercised, the Company's obligation to the Executive shall be as set forth in
Section 5.5 below.]
INSERT FOR ALL OTHER COMPANIES
[ 5.5 Termination Without Cause. At any time during the period
beginning on the first anniversary of the Commencement Date and continuing
through the end of the Employment Term, the Company shall have the right,
exercisable by serving notice effective in accordance with its terms, to
terminate the Executive's employment under this Agreement and discharge the
Executive without Cause. If such right is exercised, the Company's obligation
to the Executive shall be as set forth in Section 5.5 below.]
5.6 Termination upon Disability. If during the Employment Term the
Executive becomes physically or mentally disabled, whether totally or partially,
as evidenced by the written statement of a competent physician licensed to
practice medicine in the United States, so that the Executive is unable to
substantially perform his services hereunder for (i) a period of six consecutive
months, or (ii) for shorter periods aggregating six months during any period of
twelve consecutive months, the Company may at any time after the last day of the
six consecutive months of disability or the day on which the shorter periods of
disability equal an aggregate of six months within a period of twelve
consecutive months, by written notice to the Executive, terminate the
Executive's employment hereunder. If such right is exercised, the Company's
obligation to the Executive shall be as set forth in Section 5.5 below.
5.7 Severance Benefit. If at any time during or after the Employment
Term, the Executive's employment by the Company is terminated for any reason
other than (i) a termination for Cause under Section 5.2, (ii) his voluntary
resignation, or (iii) his death, then for a period of twelve months following
the date of termination of the Executive's employment (the "Severance Benefit
Period"), the Company shall continue to (a) pay to the Executive the amount of
Annual Salary in effect at the date of termination of his employment and (b) at
the Company's expense, continue to include the Executive and his eligible
dependents under the coverage of all group health, medical and
9
<PAGE>
dental insurance policies, plans and programs maintained by the Company during
Severance Benefit Period for the Company's employees, or management employees,
generally. The Company's obligation to perform the obligations listed in
subsections (a) and (b) of this Section will not be reduced by the Executive's
employment by another employer during the Severance Benefit Period, and the
Executive shall have no obligation to mitigate damages by seeking such
employment.
6. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or others as the
designated beneficiary (which it may change from time to time), policies for
health, accident, disability or other insurance upon the Executive or his life,
in any amount or amounts that it may deem necessary or appropriate to protect
its interest. The Executive agrees to aid the Company in procuring such
insurance by submitting to reasonable medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
7. Other Provisions.
7.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, five days after the date of deposit in the United States mail, as
follows:
if to the Company, to:
------------------------
------------------------
------------------------,
Telecopy:
----------------
with a copy to:
Work International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attn.: Monte R. Stephens
Vice President and Chief Acquisitions Officer
Telecopy No.: (713) 225-6104
10
<PAGE>
if to the Executive, to:
------------------------
------------------------
------------------------,
Telecopy:
----------------
Either party may change its address for notice hereunder by notice to the
other party.
7.2 Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to its subject matter and
supersedes all prior agreements, written or oral, with respect thereto;
provided, however, that nothing herein shall in any way limit the obligation,
rights or liabilities of the parties under any written stock option agreement
separately entered into by the parties.
7.3 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.4 Governing Law; Venue. This Agreement, except as set forth in
Section 4.5 hereof, shall be governed by, and construed in accordance with, the
laws of the State of _________________ without reference to principles governing
choice or conflicts of law.
7.5 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party, except that the Company may assign this Agreement to
any of its subsidiaries or affiliates without the Executive's consent provided
such assignment does not diminish any of the Executive's benefits or rights, or
increase in any material respect any of the Executive's obligations, hereunder.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
---------------------------------
By:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
12
<PAGE>
Exhibit 10.16
July 2, 1998
WORK International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
Attention: Samuel R. Sacco
Gentlemen:
The purpose of this letter is to confirm the engagement of Bollard Group,
L.L.C. ("Bollard") to act as financial advisor to WORK International Corporation
(together with its affiliates and subsidiaries, the "Company") in connection
with potential Transactions involving the Company. For purposes hereof, a
"Transaction" shall mean, whether in one or a series of transactions, the
purchase or other acquisition, directly or indirectly, of all or a significant
portion of the assets or securities of companies or businesses in the staffing
or information technology industries (collectively, "Businesses") or any other
extraordinary corporate transaction involving a Business, whether by way of a
merger or consolidation, reorganization, recapitalization or restructuring,
tender or exchange offer, negotiated purchase, leveraged buyout, minority
investment or partnership, collaborative venture or otherwise.
1. In connection with its engagement hereunder, Bollard shall:
a. identify potential parties to a Transaction and, only if requested or
approved in advance by the Company, contact such parties and/or their
representatives and assist the Company in negotiations relating to a
Transaction;
b. evaluate and recommend financial and strategic alternatives with
respect to a Transaction;
c. advise the Company as to the timing, structure and pricing of a
Transaction;
<PAGE>
WORK International Corporation
July 2, 1998
Page 2
d. assist the Company in the preparation of confidential materials
describing the Company and its operations and in the preparation and
negotiation of (and, if requested, execute on behalf of the Company)
any confidentiality and acquisition agreement to be entered into with
a Business in connection with a Transaction; and
e. provide such other financial advisory and investment banking services
as are customary for similar transactions and as may be mutually
agreed upon by the Company and Bollard.
In connection with the services contemplated by clause (e) above, the
Company hereby authorizes the negotiation and execution by Bollard on
behalf of the Company of confidentiality agreements to be entered into by
third parties in connection with a Transaction and the use of the
confidential memorandum or other data furnished to Bollard by the Company
for distribution to potential parties to a Transaction. Bollard further
agrees that it will not contact any potential parties to enter into a
Transaction without the request by or prior approval of the Company.
2. As compensation for Bollard's services hereunder, the Company hereby agrees
to pay Bollard a transaction fee to be determined in accordance with
Schedule A hereto, payable in cash promptly upon consummation of a
Transaction if, during the term of this agreement or within 12 months
thereafter, a Transaction is consummated or a definitive agreement is
entered into with one or more parties identified to the Company by Bollard
that subsequently results in a Transaction. Bollard agrees that no such
fee will be paid to Bollard under this agreement regarding a Transaction
completed by the Company with any of the parties set forth on Schedule B
hereto. Bollard and the Company further agree that Bollard has been
requested to provide services under this agreement with respect to
potential Transactions with the companies listed on Schedule C. In
addition, if the Company consummates any Transaction pursuant to which the
Company owes a fee to Bollard under this Section 2, Bollard agrees that the
Company will not be responsible for any fees or commissions payable to
other brokers or agents arising out of such a Transaction, it being
expressly understood that any such fees or commissions will be paid by the
owners of the entity being sold to the Company or by Bollard.
3. Regardless of whether a Transaction occurs, the Company hereby agrees to
(i) pay Bollard a fee of $10,000 per month during the term hereof, which
will be paid on the first day of the month, and (ii) reimburse Bollard
promptly for its travel and other reasonable out-of-pocket expenses
incurred by Bollard in performing its services hereunder; provided, that
such
<PAGE>
WORK International
July 2, 1998
Page 3
expenses will not exceed $10,000 per month without the prior approval of
the Company. This monthly fee and all expenses paid by the Company pursuant
to this Section 3 will be considered as a credit against any fee payable to
Bollard under Section 2 above.
4. The term of Bollard's engagement as financial advisor to the Company shall
commence on the date of the completion of the Company's initial public
offering and continue until 24 months after the date thereof, unless
extended by mutual written consent.
5. The Company agrees to indemnify Bollard and related persons in accordance
with the indemnification letter attached hereto as Schedule D, the
provisions of which are incorporated herein in their entirety.
6. The Company recognizes and confirms that Bollard in acting pursuant to this
engagement will be using information in reports and other information
provided by others, including, without limitation, information provided by
or on behalf of the Company, and that Bollard does not assume
responsibility for and may rely, without independent verification, on the
accuracy and completeness of any such reports and information. The Company
hereby warrants that any information relating to the Company that is
furnished to Bollard by or on behalf of the Company will be fair, accurate
and complete and will not contain any material omissions or misstatements
of fact. The Company agrees that any information or advice rendered by
Bollard or its representatives in connection with this engagement is for
the confidential use of the Company's Board of Directors only in its
evaluation of a Transaction and, except as otherwise required by law, the
Company will not and will not permit any third party to disclose or
otherwise refer to such advice or information in any manner without prior
written consent.
7. Bollard may, at its own expense, place announcements or advertisements in
financial newspapers and journals describing its services hereunder.
8. This Agreement is conditional upon, and shall be effective only upon the
completion of, an underwritten initial public offering of the Company's
Common Stock.
9. This agreement (a) shall be governed by and construed in accordance with
the laws of the State of Texas, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof, (b)
incorporates the entire understanding of the parties with respect to the
subject matter hereof and supersedes all previous agreements should they
exist with respect thereto, (c) may not be amended or modified except in a
writing executed
<PAGE>
WORK International
July 2, 1998
Page 4
by the Company and Bollard, and (d) shall be binding upon and inure to the
benefit of the Company, Bollard, the other Indemnified Parties specified in
Schedule D hereto and their respective successors and assigns. The Company
and Bollard agree to waive trial by jury in any action, proceeding or
counterclaim brought by or on behalf of either party with respect to any
matter whatsoever relating to or arising out of any actual or proposed
Transaction or the engagement of or performance by Bollard hereunder. The
Company acknowledges that Bollard in connection with its engagement
hereunder is acting as an independent contractor with duties owing solely
to the Company and that nothing in this agreement is intended to confer
upon any other person any rights or remedies hereunder or by reason hereof.
This agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement. Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to us a copy of this
letter.
Very truly yours,
BOLLARD GROUP, L.L.C.
By:
-------------------------------
Gary D. Schwing, Manager
Accepted and agreed to as of the
date set forth above:
WORK INTERNATIONAL CORPORATION
By:
------------------------------
Samuel R. Sacco,
Chairman of the Board
<PAGE>
SCHEDULE A
TRANSACTION FEE SCHEDULE
The Transaction Fee shall be calculated as follows:
<TABLE>
<CAPTION>
TRANSACTION VALUE FEE
<S> <C>
Up to $1.0 million $50,000$
Over $1.0 million and up to $2.0 million $50,000 plus 4% of amount over $1.0 million
Over $2.0 million and up to $3.0 million $90,000 plus 3% of amount over $2.0 million
Over $3.0 million and up to $50.0 million $120,000 plus 2% of amount over $3.0 million
Over $50 million $1,060,000 plus 1.5% of amount over $50.0 million
</TABLE>
"Transaction Value" shall mean the total proceeds and other consideration paid
or received or to be paid or received in connection with a Transaction (which
consideration shall be deemed to include amounts in escrow), including, without
limitation: (i) cash; (ii) notes, securities and other property; (iii)
liabilities, including all debt, pension liabilities and guarantees, assumed;
(iv) payments made in installments; (v) amounts payable under consulting
agreements, agreements not to compete or similar arrangements (including such
payments to management); (vi) contingent payments (whether or not related to
future earnings or operations); and (vii) if the Transaction involves the
disposition of assets, the net value of current assets not sold. For purposes
of computing any fees payable to Bollard hereunder, non-cash consideration shall
be valued as follows: (x) publicly traded securities shall be valued at the
average of their closing prices (as reported in The Wall Street Journal) for the
five trading days prior to the closing of the Transaction and (y) any other non-
cash consideration shall be valued at the fair market value thereof as
determined in good faith by the Company and Bollard.
A-1
<PAGE>
SCHEDULE B
Parian
DCI
Select
Keybase
Pyramid
Myta
RSI
Whitaker
Peak
Gary Nelson
Sharp
Abigail Abbott
JFC
The Reserves Network
<PAGE>
SCHEDULE C
U.S. Legal Services
Solution Technologies
Eliasson
JBS
TRS
<PAGE>
SCHEDULE D
INDEMNIFICATION
Recognizing that transactions of the type contemplated in this engagement
sometimes result in litigation and that Bollard's role is advisory, the Company
agrees to indemnify and hold harmless Bollard, its affiliates and their
respective officers, directors, employees, agents and controlling persons
(collectively, the "Indemnified Parties"), from and against any losses, claims,
damages and liabilities, joint or several, related to or arising in any manner
out of any transaction, proposal or any other matter (collectively, the
"Matters") contemplated by the engagement of Bollard hereunder, and will
promptly reimburse the Indemnified Parties for all reasonable expenses
(including fees and expenses of legal counsel) as incurred in connection with
the investigation of, preparation for or defense of any pending or threatened
claim related to or arising in any manner out of any Matter contemplated by the
engagement of Bollard hereunder, or any action or proceeding arising therefrom
(collectively, "Proceedings"), whether or not such Indemnified Party is a formal
party to any such Proceeding. Notwithstanding the foregoing, the Company shall
not be liable in respect of any losses, claims, damages, liabilities or expenses
that a court of competent jurisdiction shall have determined by final judgment
resulted solely from the gross negligence or willful misconduct of an
Indemnified Party. The Company further agrees that it will not, without the
prior written consent of Bollard, settle, compromise or consent to the entry of
any judgment in any pending or threatened Proceeding in respect of which
indemnification may be sought hereunder (whether or not Bollard or any
Indemnified Party is an actual or potential party to such Proceeding), unless
such settlement, compromise or consent includes an unconditional release of
Bollard and each other Indemnified Party hereunder from all liability arising
out of such Proceeding.
The Company agrees that if any indemnification or reimbursement sought pursuant
to this letter were for any reason not to be available to any Indemnified Party
or insufficient to hold it harmless as and to the extent contemplated by this
letter, then the Company shall contribute to the amount paid or payable by such
Indemnified Party in respect of losses, claims, damages and liabilities in such
proportion as is appropriate to reflect the relative benefits to the Company and
its stockholders on the one hand and Bollard on the other, in connection with
the Matters to which such indemnification or reimbursement relates or , if such
allocation is not permitted by applicable law, not only such relative benefits
but also the relative faults of such parties as well as any other equitable
considerations. It is hereby agreed that the relative benefits to the Company
and/or its stockholders and to Bollard with respect to Bollard's engagement
shall be deemed to be in the same proportion as (i) the total value paid or
received or to be paid or received by the Company and/or it stockholders
pursuant to the Matters (whether or not consummated) for which Bollard is
engaged to render financial advisory services bears to (ii) the fees paid to
Bollard in connection with such engagement. In no event shall the Indemnified
Parties contribute or otherwise be liable for an amount in excess of the
aggregate amount of fees actually received by Bollard pursuant to such
engagement (excluding amounts received by Bollard as reimbursement of expenses).
D-1
<PAGE>
The Company further agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to the Company
for or in connection with Bollard's engagement hereunder except for losses,
claims, damages, liabilities or expenses that a court of competent jurisdiction
shall have determined by final judgment resulted solely from the gross
negligence or willful misconduct of such Indemnified Party. The indemnity,
reimbursement and contribution obligations of the Company shall be in addition
to any liability which the Company may otherwise have and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company or an Indemnified Party.
The indemnity, reimbursement and contribution provisions set forth herein shall
remain operative and in full force and effect regardless of (i) any withdrawal,
termination or consummation of or failure to initiate or consummate any Matter
referred to herein, (ii) any investigation made by or on behalf of any party
hereto or any person controlling (within the meaning of Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act
of 1934, as amended) any party hereto, (iii) any termination or the completion
or expiration of this letter or Bollard's engagement and (iv) whether or not
Bollard shall, or shall not be called upon to, render any formal or informal
advice in the course of such engagement.
D-2
<PAGE>
EXHIBIT 10.17
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into
effective as of the 1st day of April, 1998 between WORK International
Corporation, a Texas corporation (the "Company"), and the Bollard Group, LLC
(the "Consultant").
W I T N E S S E T H:
WHEREAS, the Company desires to engage the Consultant and the Consultant
desires to perform consulting services for the Company.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Consultant hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms have
the meanings prescribed below:
AFFILIATE when used to indicate a relationship with any person, means: (i)
any corporation or organization of which such person is an officer, director or
partner or is directly or indirectly the beneficial owner of at least 10% of the
outstanding shares of any class of equity securities or financial interest
therein; (ii) any trust or other estate in which such person has a beneficial
interest or as to which such person serves as trustee or in any similar
fiduciary capacity; or (iii) any person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, or is acting as agent on behalf of, or as an officer or director
of, such person. As used in the definition of Affiliate, the term "control"
(including the terms "controlling," "controlled by" or "under common control
with") means the possession, direct or indirect, of the power to direct, cause
the direction of or influence the management and policies of a person, whether
through the ownership of voting securities, by contract, through the holding of
a position as a director or officer of such person, or otherwise.
COMPANY means WORK International Corporation, a Texas corporation, the
principal executive office of which is located at 700 Louisiana, Suite 3900,
Houston, Texas 77002, or any Affiliate thereof.
CONFIDENTIAL INFORMATION means information which is delivered to, comes
into the possession of, or which the Consultant was given access to by the
Company and is used in the business of the Company or its Affiliates and (i) is
proprietary to, about or created by the Company or its Affiliates, (ii) gives
the Company or its Affiliates some competitive business advantage, (iii) the
opportunity of obtaining such advantage or the disclosure of which could be
detrimental to the interests of the Company or its Affiliates, (iv) is
designated as Confidential Information by the Company or its Affiliates, is
known by the Consultant to be considered confidential by the Company or its
Affiliates, or from all the relevant circumstances should reasonably be assumed
by the Consultant to be confidential and proprietary to the Company or its
Affiliates, or (v) is not generally known by non-Company personnel. Any such
information that becomes publicly known through no act or fault of the
Consultant shall cease to be Confidential Information for purposes of this
<PAGE>
Agreement. Such Confidential Information includes, without limitation, the
following types of information and other information of a similar nature
(whether or not reduced to writing or designated as confidential):
(a) Internal personnel and financial information of the Company or its
Affiliates, vendor information (including vendor characteristics, services,
prices, lists and agreements), purchasing and internal cost information,
internal service and operational manuals, and the manner and methods of
conducting the business of the Company or its Affiliates;
(b) Marketing and development plans, price and cost data, price and
fee amounts, pricing and billing policies, quoting procedures, marketing
techniques, forecasts and forecast assumptions and volumes, and future
plans and potential strategies (including, without limitation, all
information relating to any acquisition prospect and the identity of any
key contact within the organization of any acquisition prospect) of the
Company or its Affiliates which have been or are being discussed;
(c) Names of customers and their representatives, contracts (including
their contents and parties), customer services, and the type, quantity,
specifications and content of products and services purchased, leased,
licensed or received by customers of the Company or its Affiliates; and
(d) Confidential and proprietary information provided to the Company
or its Affiliates by any actual or potential customer, government agency or
other third party (including businesses, consultants and other entities and
individuals).
CONSULTANT means Bollard Group, LLC, a Texas limited liability corporation,
the principal executive office of which is located at 700 Louisiana, Suite 3900,
Houston, Texas 77002, and any personnel or Affiliates thereof.
CONSULTING FEE shall have the meaning assigned thereto in Section 41
hereof.
CONSULTING PERIOD shall have the meaning assigned thereto in Section 3
hereof.
DATE OF TERMINATION shall have the meaning assigned thereto in Section 5
hereof.
EFFECTIVE DATE means April 1, 1998.
IPO shall mean the Company's initial public offering.
NOTICE OF TERMINATION means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Consultant's consulting under the provision so indicated, and
(iii) specifies the termination date, if such date is other than the date of
receipt of such notice.
2
<PAGE>
2. GENERAL DUTIES OF THE COMPANY AND THE CONSULTANT. The Company hereby
engages the Consultant, and the Consultant agrees to provide management and
investment banking advice and assistance in order to help the Company prepare
for the IPO, which services shall include those services described on Exhibit A
hereto. While acting in this capacity, the Consultant shall devote time and
effort to the tasks assigned to the Consultant by the Company and shall perform
those tasks in a timely and professional manner. Consultant agrees that such
services will require that it be involved in and be available to provide
services on a regular basis. The Consultant's services hereunder shall be
performed at such locations as the parties hereto may mutually agree upon from
time to time.
3. TERM. Unless sooner terminated pursuant to other provisions hereof, the
Consultant's period of engagement under this Agreement shall commence on the
Effective Date and terminate on December 31, 1998 (the "Consulting Period").
4. COMPENSATION AND BENEFITS.
4.1 CONSULTING FEE. As compensation for services to the Company, the
Company shall pay the Consultant, beginning on the Effective Date and continuing
up to and including the Date of Termination, $30,000 per month (the "Consulting
Fee"), payable on the first day of each month beginning on April 1, 1998 and
continuing through the Consulting Period until the Date of Termination.
4.2 REIMBURSEMENT OF EXPENSES. The Consultant may from time to time until
the Date of Termination incur various business expenses customarily incurred by
such consultants, including, without limitation, travel, entertainment and
similar expenses incurred for the benefit of the Company. The Company shall
reimburse the Consultant for all such reasonable out-of-pocket expenses from
time to time, at the Consultant's request, upon submission of an appropriate
expense report by such persons with supporting information regarding such
expenses.
5. TERMINATION. This Agreement will terminate automatically upon the earliest
to occur of (the "Date of Termination"): (i) the termination of this Agreement
by the Company or the Consultant on 30 days' written notice to the other party;
(ii) the successful completion of the IPO; (iii) the liquidation or dissolution
of the Company or the Consultant; (iv) the entry by a court of a decree or order
of relief against, or the commencement by, the Company or the Consultant, of a
case or proceeding (whether voluntary or involuntary) under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law; or
(v) the expiration of the Consulting Period. Any termination of this Agreement
by the Company or by the Consultant shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 71 of
this Agreement.
6. CONSULTANT'S CONFIDENTIALITY OBLIGATION.
6.1 The Consultant hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 6. The Consultant
acknowledges that all such Confidential Information is in the nature of a trade
secret.
3
<PAGE>
6.2 As a consequence of the Consultant's acquisition or anticipated
acquisition of Confidential Information, the Consultant shall occupy a position
of trust and confidence with respect to the affairs and business of the Company
and its Affiliates. In view of the foregoing and of the consideration to be
provided to the Consultant, the Consultant agrees that it is reasonable and
necessary that the Consultant make each of the following covenants:
(a) Until the Date of Termination and for all times thereafter, the
Consultant shall not disclose Confidential Information to any person or
entity, either inside or outside of the Company, other than as necessary in
carrying out its duties and responsibilities as set forth in Section 2
hereof, without first obtaining the Company's prior written consent (unless
such disclosure is compelled pursuant to court orders or subpoena, and at
which time the Consultant shall give notice of such proceedings to the
Company);
(b) Until the Date of Termination and for all times thereafter, the
Consultant shall not use, copy or transfer Confidential Information other
than as necessary in carrying out its duties and responsibilities as set
forth in Section 2 hereof, without first obtaining the Company's prior
written consent; and
(c) On the Date of Termination, the Consultant shall promptly deliver
to the Company (or its designee) all written materials, records and
documents made by the Consultant or which came into its possession during
the Consulting Period concerning the business or affairs of the Company or
its Affiliates, including, without limitation, all materials containing
Confidential Information.
7. MISCELLANEOUS.
7.1 NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that notice of change of address shall be deemed given only when received):
If to the Company to:
President
WORK International Corporation
700 Louisiana, Suite 3900
Houston, Texas 77002
If to the Consultant to:
Richard K. Reiling
Bollard Group
700 Louisiana, Suite 3900
Houston, Texas 77002
or to such other names or addresses as the Company or the Consultant, as the
case may be, shall designate by notice to the other party hereto in the manner
specified in this Section 71.
4
<PAGE>
7.2 INDEPENDENT CONTRACTOR STATUS. The relationship between the
Company and the Consultant is that of an independent contractor.
7.3 WAIVER OF BREACH. The waiver by any party hereto of a breach of
any provision of this Agreement shall neither operate nor be construed as a
waiver of any subsequent breach by any party.
7.4 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the Company, its successors, legal representatives and assigns,
and upon the Consultant, its successors, legal representatives and assigns;
provided, however, the Consultant agrees that its rights and obligations
hereunder are personal to it and may not be assigned without the express written
consent of the Company.
7.5 ENTIRE AGREEMENT; NO ORAL AMENDMENTS. This Agreement, together
with any exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or similar subject matter between the Consultant and the
Company and constitutes the entire agreement between the Consultant and the
Company with respect to the subject matter of this Agreement. This Agreement
may not be modified in any respect by any verbal statement, representation or
agreement made by any Consultant, officer, or representative of the Company or
by any written agreement unless signed by an officer of the Company who is
expressly authorized by the Company to execute such document.
7.6 SEVERABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
7.7 JURISDICTION; ARBITRATION. The laws of the State of Texas shall
govern the interpretation, validity and effect of this Agreement without regard
to the place of execution or the place for performance thereof. Any controversy
or claim arising out of or relating to this Agreement, or the breach thereof,
shall be settled by arbitration located in Houston, Texas, administered by the
American Arbitration Association in accordance with its applicable arbitration
rules, and the judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof, which judgment shall be
binding upon the parties hereto.
7.8 INJUNCTIVE RELIEF. The Company and the Consultant agree that a
breach of any term of this Agreement by the Consultant would cause irreparable
damage to the Company and that, in the event of such breach, the Company shall
have, in addition to any and all remedies of law, the right to any injunction,
specific performance and other equitable relief to prevent or to redress the
violation of the Consultant's duties or responsibilities hereunder.
7.9 COUNTERPARTS. This Agreement may be executed by facsimile
signature and in any number of counterparts, each of which will be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one instrument.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement on this _____ day of May, 1998, to be effective as of
the Effective Date.
COMPANY:
WORK INTERNATIONAL CORPORATION
-------------------------------------
B. Garfield French,
President and Chief Executive Officer
CONSULTANT:
BOLLARD GROUP, LLC
-------------------------------------
Richard K. Reiling,
Manager
6
<PAGE>
EXHIBIT A
1. FINANCING. The Consultant will assist the Company in determining its
long and short-term capital requirements, in determining the best method of
fulfilling the Company's capital requirements, in locating sources of equity as
well as long and short-term debt financing, in preparing formal presentations
to potential investors and lenders, in negotiating the terms and conditions of
such financing and in consummating such financing and equity funding.
2. FINANCIAL CONTROLS AND SYSTEMS. The Consultant will assist the
Company in determining the need for and in devising and installing financial,
accounting and other office and business systems and controls.
3. MANAGEMENT PERSONNEL. The Consultant will assist the Company in the
conduct of management interviews and reviews to determine appropriate managerial
candidates and the efficiency of the current managerial organization of the
Company, the level of performance of the Company's executives and managers, and
the need to eliminate or add additional executive or managerial positions. The
Consultant will assist the Company in locating and hiring personnel to fill any
vacancy which may exist from time to time in executive or managerial positions
within the Company.
4. PROMOTION OF BUSINESS ASSOCIATIONS. The Consultant, through travel,
entertainment and otherwise, will assist the Company in developing and
maintaining business associations and relations with persons, companies or
institutions (such as existing and potential lenders, investors, customers and
suppliers) who are in a position to further the interests of the Company.
5. ACQUISITIONS. The Consultant will assist the Company in locating
possible acquisition candidates, in investigating and evaluating the condition,
financial and otherwise, of potential acquisition candidates, in structuring or
determining the format of acquisition transactions, in negotiating the terms and
conditions of acquisitions, in obtaining any financing which may be required in
connection with an acquisition and in carrying out and effecting the actual
acquisition.
6. GENERAL. The Consultant will generally assist the Company in
developing business investment and management plans and programs, in formulating
polices and objectives, and in carrying out such plans, programs and policies.
7
<PAGE>
EXHIBIT 10.18
AGREEMENT
This Agreement dated July 2, 1998, but effective as of November 1, 1997, is
between Work International Corporation, a Texas corporation (the "Company"), and
Bollard Group, l.l.c., a Texas limited liability company ("Bollard").
WITNESSETH:
Whereas, the Company proposes to acquire a number of personnel companies
(the "Founding Companies") simultaneously with, and conditioned upon, the
successful completion of an initial underwritten public offering of the
Company's common stock (the "IPO");
Whereas, the Company desires to obtain the assistance of Bollard to provide
certain acquisition services needed by the Company to complete the IPO.
Now, Therefore, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledge, the parties hereto agree as follows:
1. Acquisition Services. Bollard agrees to provide to the Company its
services relating to facilitating and completing the IPO.
2. Compensation. In consideration of the services to be provided by
Bollard pursuant to Section 1 of this Agreement, the Company agrees to pay to
Bollard, at the closing of the IPO, a fee of $775,000.
3. Miscellaneous. This Agreement shall be binding upon the Company and
Bollard and their respective successors and assigns and may not be amended
without the written consent of both the Company and Bollard. This Agreement
shall be construed and enforced in accordance with the laws of the State of
Texas. The Company and Bollard hereby further agree that any other Agreement
executed by them regarding the services to be provided by Bollard to the
Company, other than a Consulting Agreement dated as of April 1, 1998, a funding
agreement dated July 2, 1998 and an engagement letter dated July 2, 1998, is
hereby terminated and is of no further force and effect.
<PAGE>
In witness whereof, the parties have duly executed this Agreement as of the
date first written above.
WORK INTERNATIONAL CORPORATION
By:
-----------------------------
Samuel R. Sacco
Chairman of the Board
BOLLARD GROUP, L.L.C.
By:
-----------------------------
Gary D. Schwing, Manager
2
<PAGE>
EXHIBIT 21.1
The following is a list of subsidiaries as of the closing of the Offering
and the Acquisitions of WORK International Corporation:
Subsidiary State of Organization
- ---------- ---------------------
Absolutely Professional Staffing, Inc. New York
AIM Staffing, Inc. California
Access Staffing, Inc. California
Benetemps, Inc. New Hampshire
Botal Associates, Inc. New York
The Burnett Companies Consolidated, Inc. Texas
Contract Health Professionals Inc. Florida
Core Personnel, Inc. Virginia
Core Personnel of Arlington, Inc. Virginia
CoreLink Staffing Services, Inc. California
Customer Care Solutions, LLC Maryland
Law Pros Legal Placement Services, Inc. New Jersey
Law Resources, Inc. District of Columbia
Professional Consulting Network, Inc. California
Smith Hanley Associates, Inc. New York
Smith Hanley Consulting Group, Inc. Connecticut
Sparks Personnel Services, Inc. Maryland
Sparks Associates, Inc. Maryland
Task Management, Inc. Connecticut
TOSI Placement Services Inc. Ontario, Canada
WSI Personnel Services, Inc. Colorado
_____________________
(1) List of subsidiaries as of the closing of the Offering and the Pending
Acquisitions.
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
Work International Corporation:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Houston, Texas
July 10, 1998
<PAGE>
EXHIBIT 23.3
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 25, 1998
/s/ Roger A. Ramsey
-----------------------
ROGER A. RAMSEY
<PAGE>
EXHIBIT 23.4
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 25, 1998
/s/ John M. Sullivan
------------------------
JOHN M. SULLIVAN
<PAGE>
EXHIBIT 23.5
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 25, 1998
/s/ J. Patrick Millinor, Jr.
----------------------------
J. PATRICK MILLINOR, JR.
<PAGE>
EXHIBIT 23.6
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 25, 1998
/s/ Susan W. Burnett
------------------------
SUSAN W. BURNETT
<PAGE>
EXHIBIT 23.7
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 26, 1998
/s/ Stephen M. Sparks
-------------------------
STEPHEN M. SPARKS
<PAGE>
EXHIBIT 23.8
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 25, 1998
/s/ Gilbert Rosen
---------------------
GILBERT ROSEN
<PAGE>
EXHIBIT 23.9
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 26, 1998
/s/ Morton Fishman
----------------------
MORTON FISHMAN
<PAGE>
EXHIBIT 23.10
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 26, 1998
/s/ John R. Haesler
-----------------------
JOHN R. HAESLER
<PAGE>
EXHIBIT 23.11
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 26, 1998
/s/ James Schneider
-----------------------
JAMES SCHNEIDER
<PAGE>
EXHIBIT 23.12
CONSENT
In accordance with Rule 438 under the Securities Act of 1933, as amended,
the undersigned consents to being named in this Registration Statement on Form
S-1 as a person who is about to become a director of Work International
Corporation.
June 26, 1998
/s/ Thomas A. Hanley, Jr.
-----------------------------
THOMAS A. HANLEY, JR.
