UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DECEMBER 19, 1997
Date of Report (Date of earliest event reported)
COMPUTER HORIZONS CORP.
(exact name of registrant as specified in its charter)
NEW YORK 0-7282 13-2638902
(State or other Commission File (I.R.S. Employer
jurisdiction of Number Identification Number)
incorporation or
organization)
49 OLD BLOOMFIELD AVENUE, MOUNTAIN LAKES, NEW JERSEY 07046-1495
(Address of Principal Executive Offices) (Zip Code)
(973) 299-4000
Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report.)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to the Agreement and Plan of Merger, dated as
of December 2, 1997, among Computer Horizons Corp., a New York
corporation ("Computer Horizons"), CG Computer Services
Corporation, a California corporation ("CG"), CHC Acquisition
Corp., a California corporation and wholly-owned subsidiary of
Computer Horizons ("Sub"), Alan R. Grushcow and Sabina Ephraim
(the "Merger Agreement"), the merger of Sub with and into CG (the
"Merger") was consummated on December 19, 1997. Pursuant to the
Merger, CG became a wholly-owned subsidiary of Computer Horizons
and each of the shares of common stock, no par value, of CG that
were outstanding immediately prior to the consummation of the
Merger were converted into the right to receive .79033 shares of
common stock, par value $.l0, of Computer Horizons ("Computer
Horizons Common Stock"). As a result of the Merger, Alan R.
Grushcow and Sabina Ephraim, the sole stockholders of CG (the
"Stockholders"), shall receive a total of 566,666 shares of
Computer Horizons Common Stock for all of the outstanding shares
of CG. Approximately 56,666 shares of such shares of Computer
Horizons Common Stock shall be held in escrow in the event
Computer Horizons shall be entitled to indemnification for
certain breaches by the Stockholders of representations,
warranties or obligations made by them in the Merger Agreement.
Subject to any claims for indemnification, one-half of such
escrowed shares (or if such shares have been liquidated, the cash
value thereof) shall be delivered to the Stockholders upon the
issuance of an audit report with respect to the consolidated
financial statements of Computer Horizons for the fiscal year
ending December 31, 1997 and the balance of such escrowed shares
shall be delivered to the Stockholders upon the first anniversary
of consummation of the Merger.
CG provides information technology staffing,
provisioning and support primarily on the west coast of the
United States through its San Francisco and Los Angeles,
California locations. CG has moved into other markets by
expanding in Chicago, Illinois and Parsippany, New Jersey.
Through its staff of consultants, CG provides a wide range of
information technology support and staffing to Fortune 500
companies.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) and (b) The financial statements of the businesses
acquired and pro forma financial information
required by paragraphs (a) and (b), respectively,
of Item 7 of Form 8-K are not included in this
initial Current Report on Form 8-K but shall be
filed by amendment not later than sixty (60) days
after the date that this initial Current Report on
Form 8-K must be filed.
(b) The following document is furnished as an Exhibit to
this Current Report on Form 8-K pursuant to Item 601 of
Regulation S-K:
2. Agreement and Plan of Merger, dated December 2,
1997, among Computer Horizons Corp., CG Computer
Services Corporation, CHC Acquisition Corp., Alan
R. Grushcow and Sabina Ephraim.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
COMPUTER HORIZONS CORP.
Date: December 29, 1997
By: /s/ William J. Murphy
Name: William J. Murphy
Title: Chief Financial
Officer
EXHIBIT INDEX
DOC. NO. DOCUMENT DESCRIPTION
2. Agreement and Plan of Merger, dated as of December 2,
1997, among Computer Horizons Corp., CG Computer
Services Corporation, CHC Acquisition Corp., Alan R.
Grushcow and Sabina Ephraim.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
Computer Horizons Corp., CG Computer Services Corporation, Alan
R. Grushcow, Sabina Ephraim
and
CHC Acquisition Corp.
Dated as of December 2, 1997
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of December 2, 1997,
among Computer Horizons Corp., a New York corporation ("Parent"), CHC
Acquisition Corp, a California corporation and wholly-owned subsidiary
of Parent ("Sub"), CG Computer Services Corporation, a California
corporation ("CG"), and Alan R. Grushcow and Sabina Ephraim
(collectively "Stockholder"), the sole stockholders of CG.
The Parent, the Sub, CG and the Stockholder desire that Parent
acquire CG pursuant to the merger of Sub with and into CG in
accordance with the terms of this Agreement and the California
Corporations Code.
For federal income tax purposes, it is intended that the Merger,
as defined herein, shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
For accounting purposes, it is intended as a condition of
closing that the Merger shall be accounted for as a pooling of
interests.
The parties hereto agree as follows:
ARTICLE I
THE MERGER; THE SURVIVING CORPORATION
Section 1.1 The Merger. In accordance with the provisions of
this Agreement and the California Corporations Code at the Effective
Time, as defined in Section 1.2 hereof, Sub shall be merged with and
into CG (the "Merger"), the separate existence of Sub shall thereupon
cease, and CG shall be the surviving corporation in the Merger (the
"Surviving Corporation") and shall continue its corporate existence
under the California Corporations Code. The Merger shall have the
effects set forth in Section 1107 of the California Corporations Code.
Section 1.2 Effective Time of the Merger. The Merger shall
become effective at the time of filing of or at such later time
specified in, a properly executed Agreement of Merger, in the form
required by and executed in accordance with the California
Corporations Code, filed with the Secretary of State of the State of
California, in accordance with the provisions of Section 1103 of the
California Corporations Code. Such filing shall be made as soon as
practicable after the Closing (as defined in Section 1.3). When used
in this Agreement, the term "Effective Time" shall mean the date and
time at which the Merger shall become effective.
Section 1.3 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Proskauer Rose LLP, 1585 Broadway, New York, New York, at
10:00 a.m., local time, on the fifth business day after the day on
which all of the conditions set forth in Article VII are satisfied or
waived or on such other date and at such other time and place as
Parent and CG shall agree (the "Closing Date").
Section 1.4 Certificate of Incorporation. The Articles of
Incorporation of Sub in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended
in accordance with applicable law, except that the name of the
Surviving Corporation shall be "CG Computer Services Corporation."
Section 1.5 By-Laws. The By-Laws of Sub as in effect at the
Effective Time shall be the By-Laws of the Surviving Corporation until
amended in accordance with applicable law.
Section 1.6 Directors and Officers of Surviving Corporation.
(a) The directors of Sub at the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the
Articles of Incorporation or By-Laws of the Surviving Corporation or
as otherwise provided by law.
(b) The officers of Sub at the Effective Time shall be the
initial officers of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the
Articles of Incorporation or By-Laws of the Surviving Corporation or
as otherwise provided by law.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Exchange Ratio. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder
thereof:
(a) Each share of common stock, no par value, of CG (the
"CG Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with
Section 2.1(b) hereof) shall be converted into (the "Conversion
Ratio") the right to receive such number of shares of the Common
Stock, par value $.10 per share, of Parent (the "Parent Common
Stock"), as is determined by dividing (i) the quotient resulting from
dividing (A) $18,500,000 by (B) the Closing Value, as defined in
Section 2.3, by (ii) the total number of shares of CG Common Stock
outstanding as of the Effective Time; provided, however,
(x) if the Closing Value is less than $33.00, the Conversion
Ratio shall be fixed at the quotient resulting from
dividing 566,666 by the total number of shares of CG
Common Stock outstanding as of the Effective Time; and
(y) if the Closing Value is above $40.00, the Conversion
Ratio shall be fixed at the quotient resulting from
dividing 462,500 by the total number of shares of CG
Common Stock outstanding as of the Effective Time
(b) All shares of CG Common Stock that are held by CG as
treasury shares shall be canceled and retired and cease to exist, and
no securities of Parent or other consideration shall be delivered in
exchange therefor.
(c) Each share of Common Stock, par value $.01 per share,
of Sub ("Sub Common Stock"), issued and outstanding immediately prior
to the Effective Time shall be converted into and become one fully
paid and nonassessable share of Common Stock, no par value, of the
Surviving Corporation.
Section 2.2 Exchange of CG Stock. Immediately after the
Effective Time at the Closing, the holders of CG Common Stock shall
present to the Parent for cancellation a certificate or certificates
which immediately prior to the Effective Time represented outstanding
shares of CG Common Stock (the "Certificates") that were converted
pursuant to Section 2.1 into the right to receive shares of Parent
Common Stock prior to the Closing Date, and the Parent shall thereupon
deliver to such holder in exchange therefor (x) a certificate
representing that number of whole shares of Parent Common Stock which
such holder has the right to receive pursuant to the provisions of
this Article II and (y) cash in lieu of any fractional shares of
Parent Common Stock to which such Stockholder is entitled pursuant to
Section 2.3, after giving effect to any required tax withholdings on
such cash payment for fractional shares. The shares of Parent Common
Stock shall be deemed to have been issued at the Effective Time.
Section 2.3 No Fractional Securities. No certificates or
scrip representing fractional shares of Parent Common Stock shall be
issued upon the surrender for exchange of Certificates, and such
fractional interests shall not entitle the holder thereof to vote or
to any rights of a security holder. In lieu of any such fractional
securities, each holder of CG Common Stock who would otherwise have
been entitled to a fraction of a share of Parent Common Stock upon
surrender of such holder's Certificates will be entitled to receive,
and Parent will timely make a cash payment (without interest)
determined by multiplying (i) the fractional interest to which such
holder would otherwise be entitled (after taking into account all
shares of CG Common Stock then held of record by such holder) and (ii)
the average of the per share closing prices for Parent Common Stock on
NASDAQ for the thirty consecutive trading days ending three trading
days preceding the Closing (the "Closing Value").
Section 2.4 Options. (a) Prior to the Effective Time, CG
shall, effective as of the Effective Time, cause the unexercised
portion of each outstanding stock option to purchase shares of CG
Common Stock (the "Options") that is then outstanding to be cancelled.
The holders of Options shall have the right to submit contingent (i.e.
subject to consummation of the Merger) exercises of the vested portion
of any Option and participate in the Merger by submitting to CG a duly
executed written notice of exercise and full payment of the exercise
price on or before the Closing Date. All holders properly exercising
their Options shall be entitled to receive such number of the shares
of Parent Common Stock distributed to Stockholder under Section 2.2 as
the exercised options specify.
(b) Except as may be otherwise agreed to by the Parent
or Sub and CG, as of the Effective Time the provisions of any plan,
program or arrangement providing for the issuance or grant of any
interest in respect of the capital stock of CG or any of its
subsidiaries shall be deleted as of the Effective Time and no holder
of options or any participant in any option plans or any other plans,
programs or arrangements shall have any right thereunder to acquire
any equity securities of CG, the Surviving Corporation or any
subsidiary thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder, jointly and severally, represent and
warrant to Parent and Sub as follows:
Section 3.1 Organization. CG is a corporation duly
organized, validly existing and in good standing under the laws of the
State of California and has the corporate power to carry on its
business as it is now being conducted or presently proposed to be
conducted. CG is duly qualified as a foreign corporation to do
business and is in good standing in the jurisdictions listed on
Schedule 3.1 hereto and is not required to be so qualified and in good
standing in any other jurisdiction where the character of its
properties owned or held under lease or the nature of its activities
would make such qualification necessary.
Section 3.2 Capitalization.
(a) The authorized capital stock of CG consists of
10,000,000 shares of CG Common Stock and 5,000,000 shares of Preferred
Stock. As of the date hereof, there are 717,000 shares of CG Common
Stock and no shares of Preferred Stock issued and outstanding, and the
Stockholder is the sole record and beneficial holder of such shares.
Such shares are owned by the Stockholder free and clear of any and all
liens, claims or encumbrances of any nature whatsoever (whether
absolute, accrued, contingent or otherwise) ("Liens"). All of the
issued and outstanding shares of CG Common Stock are validly issued,
fully paid and nonassessable. Schedule 3.2(a) hereto lists the
individuals and entities, other than the Stockholder, who were at any
time holders of record or beneficially of (i) securities issued by CG
or (ii) Rights, as hereinafter defined.
(b) Except as set forth on Schedule 3.2(b), (i) there
is no outstanding right, subscription, warrant, call, option or other
agreement or arrangement of any kind (collectively, "Rights") to
purchase or otherwise to receive from CG any of the outstanding
authorized but unissued or treasury shares of the capital stock or any
other security of CG, (ii) there is no outstanding security of any
kind convertible into or exchangeable for such capital stock and (iii)
there is no voting trust or other agreement or understanding to which
CG is a party or is bound with respect to the voting of the capital
stock of CG. Schedule 3.2 (b) sets forth the vested portion of each
outstanding option.
Section 3.3 No Subsidiaries; Affiliates. CG has no
Subsidiaries, as hereinafter defined, and has conducted its business
solely through CG at all times. All assets, properties and rights
relating to CG's business are held by, and all agreements, obligations
and transactions relating to CG's business have been entered into,
incurred and conducted by, CG rather than any of its Affiliates or any
of the Stockholder's Affiliates. As used in this Agreement, (i) the
term "Subsidiary" means, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which
(x) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have a
majority of the voting interest in such partnership) or (y) at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation
or other organization is directly or indirectly owned or controlled by
such party and/or one or more of its Subsidiaries. There are no
Affiliates, as hereinafter defined, of CG, other than the Stockholder.
For purposes of this Agreement, the term "Affiliate" means, with
respect to any party, an individual or entity controlled by, in
control of, or under common control with, such party.
Section 3.4 Authority Relative to this Agreement. CG has the
requisite corporate power and authority, and the Stockholder has the
capacity, to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by CG and the consummation by CG of the transactions
contemplated on its part hereby have been duly authorized by CG's
Board of Directors and the Stockholder, and no other corporate
proceedings on the part of CG are necessary to authorize this
Agreement or for CG to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by CG and the Stockholder and constitutes the valid and
binding agreement of CG and the Stockholder, enforceable against each
of them in accordance with its terms, except as such enforceability
may be subject to the laws of general application relating to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to creditors generally and rules of law
governing specific performance, injunctive relief or other equitable
remedies.
Section 3.5 Certificate of Incorporation and By-laws. CG has
heretofore furnished to Parent a complete and correct copy of the
articles of incorporation and by-laws, as amended to date of June 23,
1983. Such articles of incorporation and by-laws are in full force and
effect. CG is not in violation of any of the provisions of its
articles of incorporation or by-laws.
Section 3.6 Consents and Approvals; No Violations. Neither
the execution, delivery and performance of this Agreement by CG, nor
the consummation by CG of the transactions contemplated hereby, will
(i) conflict with or result in any breach of any provisions of the
articles of incorporation or by-laws of CG, (ii) require a filing
with, or a permit, authorization, consent or approval of, any federal,
state, local or foreign court, arbitration tribunal, administrative
agency or commission or other governmental or other regulatory
authority or administrative agency or commission (a "Governmental
Entity"), except for the filing and recordation of an Agreement of
Merger as required by the California Corporations Code, (iii), except
as set forth on Schedule 3.6, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of a Lien on any
property or asset of CG pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
agreement or other instrument or obligation (each, a "Contract") to
which CG is a party or by which CG or any of its properties or assets
may be bound which violations, breaches, defaults, rights of
termination, cancellation or acceleration or creations of liens,
individually or in the aggregate, would have a CG Material Adverse
Effect (as defined in Section 3.8) or (iv) violate any law, order,
writ, injunction, decree, statute, rule or regulation of any
Governmental Entity applicable to CG, or any of its properties or
assets.
Section 3.7 Financial Statements. CG has delivered to the
Parent (a) the financial statements of CG as of December 31, 1994,
1995 and 1996, and for each of the fiscal years then ended, in each
case, accompanied by the audit opinion of Deloitte & Touche LLP, CG's
independent auditors, and (b) the unaudited interim financial
statements of CG as of September 30, 1997 and for the five months then
ended (collectively, the "Financial Statements"). Except as indicated
on the interim Financial Statements and for the absence of footnotes
thereto, the Financial Statements of CG have been prepared in
accordance with generally accepted accounting principles ("GAAP"),
consistently applied throughout the periods indicated. The Financial
Statements are set forth on Schedule 3.7 hereto, are true and correct,
and fairly present the consolidated financial position of CG as at the
dates thereof and the results of operations and cash flows of CG for
the periods then ended. Since December 31, 1996, there has been no
change in any of the significant accounting (including tax accounting)
policies, practices or procedures of CG. With respect to each of the
audited Financial Statements, there were no audit adjustments proposed
by Deloitte & Touche LLP which were not accepted by CG and
appropriately reflected thereon.
Section 3.8 Absence of Certain Changes or Events; Contracts.
Except as set forth on Schedule 3.8, since December 31, 1996, (i) CG
has not conducted its business and operations other than in the
ordinary course of business and consistent with past practices, or
taken any actions of a type prohibited by the provisions of Section
5.1 hereof, and (ii) there has not been any fact, event, circumstance
or change affecting or relating to CG which has had or is reasonably
likely to have, individually or in the aggregate, a material adverse
effect on the financial condition, results of operations, business,
assets, liabilities, prospects or properties of CG, or the ability of
CG to consummate the Merger and the other transactions contemplated by
this Agreement (a "CG Material Adverse Effect"); provided, however,
that a CG Material Adverse Effect shall not include any adverse effect
following the date of this Agreement to the extent solely attributable
to (i) the announcement or pendency of the transactions contemplated
by this Agreement or (ii) changes in national economic conditions or
industry conditions generally. Except as set forth on Schedule 3.6
(Consents and Approvals), the transactions contemplated by this
Agreement will not constitute a change of control under or require the
consent from or the giving of notice to any party pursuant to the
terms, conditions or provisions of any Contract to which CG is a
party., which change of control or failure to obtain consent or give
notice would have a CG Material Effect.
Section 3.9 Litigation. Except as set forth on Schedule 3.9,
there is no suit, action, proceeding or investigation pending or
threatened in writing against or affecting CG, any of its Affiliates
or the Stockholder. There is no judgment, decree, injunction, ruling
or order of any Governmental Entity outstanding against CG, any of its
Affiliates or the Stockholder.
Section 3.10 Absence of Undisclosed Liabilities. Except for
liabilities or obligations which (i) are disclosed, accrued or
reserved against on CG's Financial Statements (including the financial
statement notes thereto), (ii) are disclosed on Schedule 3.9
(Litigation) or (iii) were incurred after September 30, 1997 in the
ordinary course of business and consistent with past practice, CG has
no liabilities or obligations (whether absolute, accrued, contingent
or otherwise and of any kind, regardless of any assessment as to the
potential of same).
Section 3.11 No Default. CG is not in default or violation
(and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition
or provision of (i) its charter or by-laws, or (ii) any order, writ,
injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to CG.
Section 3.12 Taxes.
(a) CG has heretofore delivered or hereafter will make
available to Parent upon request true, correct and complete copies of
the federal, state, local and foreign income, franchise, sales and
other Tax Returns, as hereinafter defined, filed by CG for each of
CG's fiscal years ended December 31, 1994, 1995 and 1996. CG has duly
filed all federal, state, local and foreign income, franchise, sales
and other Tax Returns required to be filed by it. All such Tax Returns
are true, correct and complete, and CG has duly paid all Taxes, as
hereinafter defined, shown on such Tax Returns and has paid or made
adequate provision for payment of all accrued but unpaid Taxes
anticipated in respect of all periods since the periods covered by
such Tax Returns. All deficiencies assessed as a result of any
examination of Tax Returns of CG by federal, state, local or foreign
tax authorities have been paid or reserved on the financial statements
of CG in accordance with GAAP consistently applied. CG is not, and has
never been, a party to any written tax-sharing agreements. No issue
has been raised during the past five years by any federal, state,
local or foreign taxing authority which, if raised with regard to any
other period not so examined, could reasonably be expected to result
in a proposed deficiency for any other period not so examined. CG has
not granted any extension or waiver of the statutory period of
limitations applicable to any claim for any Taxes. (i) CG is not a
party to any agreement, contract or arrangement that would result,
separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 28OG of the Code;
(ii) no consent has been filed under Section 341(f) of the Code with
respect to CG; (iii) CG has not participated in, or cooperated with,
an international boycott within the meaning of Section 999 of the
Code; and (iv) CG has not issued or assumed any corporate acquisition
indebtedness, as defined in Section 279(b) of the Code. CG has
complied with all applicable laws, rules and regulations relating to
the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or
similar provisions under any foreign laws) and has, within the time
and in the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts required
to be so withheld and paid over under all applicable laws.
(b) For purposes of this Agreement, the term "Taxes" shall mean
all taxes, charges, fees, levies, duties, imposts or other
assessments, including, without limitation, income, gross receipts,
excise, property, sales, use, transfer, gains, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United
States, or any state, local or foreign government or subdivision or
agency thereof, including any interest, penalties or additions
thereto. For purposes of this Agreement, the term "Tax Return" shall
mean any report, return or other information or document required to
be supplied to a taxing authority in connection with Taxes.
Section 3.13 Title to Properties; Encumbrances. CG has good
and valid title to, or a valid leasehold interest in, all of its
properties and assets (real, personal and mixed, tangible and
intangible), including, without limitation, all the properties and
assets reflected in the balance sheet of CG as of September 30, 1997
(except for properties and assets disposed of in the ordinary course
of business and consistent with past practices since September 30,
1997). Except for the lien (the "Bank Lien") held by Union Bank of
California to secure CG's line of credit (under which there were no
amounts outstanding on September 30, 1997), none of such properties or
assets are subject to any Liens.
Section 3.14 Intellectual Property. (a) CG is the sole and
exclusive owner of all patents, patent applications, patent rights,
trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, trade secrets, registrations for and
applications for registration of trademarks, service marks and
copyrights, technology and know-how, rights in computer software and
other proprietary rights and information and all technical and user
manuals and documentation made or used in connection with any of the
foregoing, used or held for use in connection with the businesses of
CG as currently conducted (collectively, the "Intellectual Property"),
free and clear of all Liens except the Bank Lien; provided, however,
that the term "Intellectual Property" does not include (i) software or
documentation created in the course of performing services for clients
(the rights to which generally become the property of the client) or
(ii) "off the shelf" software purchased or licensed by CG from third
parties for accounting, employee training and other internal
administrative functions.
(b) All registrations and applications for the
Intellectual Property that are used in the conduct of CG's business
(i) are valid, subsisting, in proper form and enforceable, and have
been duly maintained, including the submission of all necessary
filings and fees in accordance with the legal and administrative
requirements of the appropriate jurisdictions and (ii) have not
lapsed, expired or been abandoned, and no application or registration
therefor is the subject of any legal or governmental proceeding before
any registration authority in any jurisdiction.
(c) CG owns or has the right to use all of the
Intellectual Property used by it or held for use by it in connection
with its business. To the knowledge of the Stockholder, there are no
conflicts with or infringements of any Intellectual Property by any
third party. The conduct of the businesses of CG as currently
conducted does not, conflict with or infringe in any way any
proprietary right of any third party, and there is no claim and the
Stockholder knows of no fact that could reasonably be expected to
support any suit, action or proceeding pending or threatened in
writing against CG (i) alleging any such conflict or infringement with
any third party's proprietary rights, or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual
Property.
Section 3.15 Compliance with Applicable Law. (i) CG holds,
and is in compliance with the terms of, all permits, licenses,
exemptions, orders and approvals of all Governmental Entities
necessary for the conduct of its business ("CG Permits"), (ii) no fact
exists or event has occurred, and no action or proceeding is pending
or threatened in writing that has a reasonable possibility of
resulting in a revocation, non-renewal, termination, suspension or
other impairment of any CG Permits, (iii) the business of CG is being
conducted in compliance in all material respects with all applicable
laws, ordinances, regulations, judgments, decrees or orders of any
Governmental Entity ("Applicable Law") and (iv) (a) no investigation
or review by any Governmental Entity with respect to CG is pending or
threatened in writing and (b) no Governmental Entity has, indicated to
CG in writing an intention to conduct the same.
Section 3.16 Employee Benefit Plans; ERISA. (a) Schedule
3.16 contains a list of all "employee benefit plans," within the
meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe
benefit, insurance, welfare, post-retirement, health, life, stock
option, stock purchase, restricted stock, tuition refund, service
award, company car, scholarship, relocation, disability, accident,
sick, vacation, holiday, termination, unemployment, individual
employment, consulting, executive compensation, incentive, commission,
payroll practices, retention, change in control, noncompetition, or
other plan, agreement, policy, trust fund, or arrangement (whether
written or unwritten, insured or self-insured) (i) established,
maintained, sponsored, or contributed to (or with respect to which any
obligation to contribute has been undertaken) within the last six
years by CG or any entity that would be deemed a "single employer"
with CG under Section 414(b), (c), (m) or (o) of the Code or Section
4001 of ERISA (an "ERISA Affiliate") on behalf of any employee,
director, shareholder, or beneficiary of CG (whether current, former,
or retired) or their beneficiaries or (ii) with respect to which CG or
any ERISA Affiliate has or has had any obligation on behalf of any
such employee, director, shareholder, or beneficiary (each a "Plan"
and, collectively, the "Plans"). With respect to each ERISA Plan, true
and complete copies, if applicable, of the documents embodying or
relating to the ERISA Plan, including, without limitation, each
significant written communication received by or furnished to CG or
any ERISA Affiliate from the Internal Revenue Service ("IRS"), the
Pension Benefit Guaranty Corporation ("PBGC"), U.S. Department of
Labor ("DOL"), or any other governmental authority including, without
limitation, the most recent application for determination letter
submitted to the IRS and the most recent determination letter received
from the IRS, have been delivered to Buyer or hereafter will be made
available to Parent upon request.
(b) Neither CG, any ERISA Affiliate, nor any of their
respective predecessors has ever contributed to, contributes to, has
ever been required to contribute to, or otherwise participated in or
participates in or in any way, directly or indirectly, has any
liability with respect to any plan subject to Section 412 of the Code,
Section 302 of ERISA or Title IV of ERISA, including, without
limitation any, "multiemployer plan" (within the meaning of Sections
(3)(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code), or any
single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA).
(c) CG, each ERISA Affiliate, each Plan, and each "plan
sponsor" (within the meaning of Section 3(16) of ERISA) of each
"welfare benefit plan" (within the meaning of Section 3(1) of ERISA)
has complied in all respects with the requirements of Section 4980B of
the Code and Title I, Subtitle B, Part 6 of ERISA.
(d) With respect to each of the Plans on Schedule 3.16;
(i) each Plan intended to qualify under Section 401(a)
of the Code has been qualified since its inception and has received a
determination letter under Revenue Procedure 93-39 from the IRS to the
effect that the Plan is qualified under Section 401 of the Code and
any trust maintained pursuant thereto is exempt from federal income
taxation under Section 501 of the Code and nothing has occurred or is
expected to occur through the date of the Closing that caused or could
cause the loss of such qualification or exemption or the imposition of
any penalty or tax liability;
(ii) all payments required by any Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums, or intercompany
charges) with respect to all periods through the date of the Closing
shall have been made prior to the Closing (on a pro rata basis where
such payments are otherwise discretionary at year end) or provided for
by CG as applicable, by full accruals as if all targets required by
such Plan had been or will be met at maximum levels) on its financial
statements;
(iii) no claim, lawsuit, arbitration or other action
has been asserted, instituted or threatened in writing against the
Plans (other than non-material routine claims for benefits, and
appeals of such claims), any trustee or fiduciaries thereof, CG, any
ERISA Affiliate, any director, officer, or employee thereof, or any of
the assets of any trust of the Plans;
(iv) the Plan complies and has been maintained and
operated in all material respects in accordance with its terms and
applicable law, including, without limitation, ERISA and the Code;
(v) no "prohibited transaction," within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred or is
expected to occur with respect to the Plan (and the consummation of
the transactions contemplated by this Agreement will not constitute or
directly or indirectly result in such a "prohibited transaction");
(vi) no Plan is or expected to be under audit or
investigation by the IRS, DOL, or any other governmental authority and
no such completed audit, if any, has resulted in the imposition of any
tax or penalty;
(vii) each Plan intended to meet requirements for
tax-favored treatment under any provision of the Code, including,
without limitation, Sections 79, 105, 106, 117, 120, 125, 127, 129,
132, 162(m), 404, 404A, 419, 419A, or 501(c)(9) of the Code satisfies
the applicable requirements under the Code; and
(viii) with respect to each Plan that is funded mostly
or partially through an insurance policy, neither CG nor any ERISA
Affiliate has any liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent
liability.
(e) The consummation of the transactions contemplated by
this Agreement will not give rise to any liability for severance pay,
termination pay or withdrawal liability, or accelerate the time of
payment or vesting or increase the amount of compensation or benefits
due to any employee, director, shareholder or beneficiary of CG
(whether current, former, or retired) or their beneficiaries solely by
reason of such transactions. No amounts payable under any Plan will
fail to be deductible for federal income tax purposes by virtue of
Sections 280G or 162(m) of the Code.
(f) Neither CG nor any ERISA Affiliate maintains,
contributes to, or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal
Social Security Act, or a plan qualified under Section 401(a) of the
Code) to any current or future retiree.
(g) Except as set forth on Schedule 3.16, neither CG,
any ERISA Affiliate, nor any officer or employee thereof, has made any
promises or commitments, whether legally binding or not, to create any
additional plan, agreement, or arrangement, or to modify or change any
existing Plan.
(h) Except as set forth on Schedule 3.16, no event,
condition, or circumstance exists that could result in an increase of
the benefits provided under any Plan or the expense of maintaining any
Plan from the level of benefits or expense incurred for the most
recent fiscal year ended.
(i) Neither CG nor any ERISA Affiliate has any unfunded
liabilities pursuant to any Plan that is not intended to be qualified
under Section 401(a) of the Code.
Section 3.17 Labor Matters; Employment Matters (i) There are
no lawsuits pending or threatened in writing between CG and any of its
employees; (ii) CG is not a party to, or bound by, any collective
bargaining agreement, contract or other understanding with a labor
union or labor organization and to the knowledge of the Stockholder
there is no activity involving any employees of CG seeking to certify
a collective bargaining unit or engaging in any other organizational
activity; and (iii) there are no strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any group of CG
employees. Each area manager, technical director and salesperson
employed by CG is listed on Schedule 3.17A hereto, and, except as
noted thereon, each employee listed on Schedule 3.17A has executed and
delivered to CG an agreement regarding post-termination activities in
substantially the form set forth on Schedule 3.17A hereto. Schedule
3.17B contains a list of the names, office locations, compensation and
years of credited service for severance, vacation and pension plan
purposes of all full- and part-time employees of the Company as at
December 31, 1996. To the knowledge of the Stockholder, as of the date
hereof, no area manager, technical director or salesperson (each, a
"key employee") listed on Schedule 3.17 has indicated that he/she is
considering terminating or plans to terminate his or her employment.
CG has complied in all material respects with applicable wage and
hour, equal employment, safety and other legal requirements relating
to its employees.
Section 3.18 Environmental Laws and Regulations.
[INTENTIONALLY OMITTED]
Section 3.19 Restrictions on Business Activities. Except
for this Agreement, there is no agreement, judgment, injunction, order
or decree binding upon CG or the Stockholder which has or could
reasonably be expected to have (after giving effect to the
consummation of the Merger) the effect of prohibiting or impairing the
business practices of CG, the acquisition of property by CG or the
conduct of business by CG.
Section 3.20 Accounting Matters. To the knowledge of the
Stockholder, based solely on consultation with CG's independent
auditors, neither CG, any of its directors or officers nor the
Stockholder, has taken any action which would prevent accounting for
the Merger as a pooling of interests in accordance with Accounting
Principles Board Opinion No. 16, the interpretive releases pursuant
thereto and the pronouncements of the SEC.
Section 3.21 Affiliate Transactions. Except as set forth in
Schedule 3.21, there are no Contracts or other transactions between
CG, on the one hand, and any (i) officer or director of CG or the
Stockholder of CG or (ii) affiliate (as such term is defined in
Regulation 12b-2 promulgated under the Exchange Act) of any such
officer, director or stockholder, on the other hand.
Section 3.22 Brokers. [INTENTIONALLY OMITTED]
Section 3.23 Certain Tax Matters. [INTENTIONALLY OMITTED]
Section 3.24 Accounts Receivable. Schedule 3.24 hereto is a
complete and accurate aging of all of the accounts receivable of CG on
a line item basis set forth on the books and records of CG as of
September 30, 1997. All such accounts receivable of CG: (i) represent
sales actually made in the ordinary course of business for goods or
services delivered or rendered to unaffiliated customers in bona fide
arm's length transactions, (ii) constitute valid claims, and (iii) are
good and collectible in full, in each case at the aggregate recorded
amounts thereof (but net of a reserve of $ 40,000 which is not
reflected on the interim Financial Statements) without right of
recourse, defense, deduction, return of goods, counterclaim, or
offset, and (iv) have not been extended or rolled over in order to
make them current.
Section 3.25 Inventory. [INTENTIONALLY OMITTED]
Section 3.26 Real and Personal Property. CG does not own any
real property. Schedule 3.26A contains a complete and correct list of
all real property leased by CG and the name of the landlord for each
such property. Schedule 3.26B contains a complete and correct list
and brief description of all equipment, machinery, computers,
furniture, leasehold improvements, vehicles and other personal
property owned or leased by CG. CG's equipment (whether leased or
owned) is in good operating condition and repair, subject to ordinary
wear and tear.
Section 3.27 Insurance. Schedule 3.27 contains a complete
and correct list of all policies of insurance of any kind or nature
covering CG, including, without limitation, policies of life, fire,
theft, casualty, product liability, workmen's compensation, business
interruption, employee fidelity and other casualty and liability
insurance, indicating the type of coverage, name of insured, the
insurer, the premium, the expiration date of each policy and the
amount of coverage. All such policies (i) are with insurance companies
financially sound and reputable and are in full force and effect; (ii)
are sufficient for compliance with all requirements of law and of all
applicable agreements; (iii) are valid, outstanding and enforceable
policies; and (iv) provide insurance coverage for the assets and
operations of CG in amounts customary for persons carrying on the same
business as CG. Complete and correct copies of such policies will be
made available upon request. Since January 1, 1995, CG has not been
denied any insurance coverage which it has requested or made any
material reduction in the scope or change in the nature of its
insurance coverage. The products liability and personal injury
insurance maintained by CG has been on an "occurrence" basis since at
least January 1, 1992.
Section 3.28 Books and Records. The books and records of CG
are complete and correct in all material respects and have been
maintained in accordance with good business practices and GAAP. The
minute books of CG, as previously made available to Parent, are
complete and accurate records in all material respects of all meetings
of the shareholders and board of directors of CG.
Section 3.29 Improper Payments. CG and its officers and
agents have not made any illegal or improper payments to, or provided
any illegal or improper benefit or inducement for, any governmental
official, supplier, customer or other person, in an attempt to
influence any such person to take or to refrain from taking any action
relating to CG.
Section 3.30 Officers and Directors; Bank Accounts, etc.
Schedule 3.30 lists: (i) all officers and directors of CG; (ii) all
bank accounts and safe deposit boxes maintained by CG and all
authorized signatories therefor; and (iii) all credit cards under
which employees of CG may incur liability, and the persons holding
such cards. Except for Ceridian (CG's payroll service) which holds a
special power of attorney to make payroll tax filings on CG's behalf,
no person or entity holds any general or special power of attorney
from CG.
Section 3.31 Customers and Suppliers. (a) Schedule 3.31
hereto sets forth a list of CG's 10 largest customers (including the
addresses, phone numbers and names of contact persons at such
customers) in order of aggregate dollar volume of sales during its
last two fiscal years, showing the approximate total sales in dollars
and product description of sales by CG to each such customer during
each such period.
(b) Except as set forth on Schedule 3.31(b), there has not
been any material adverse change, and there are no facts known to the
Stockholder which are reasonably likely to cause a material adverse
change, in the business relationship of CG with any customer named on
Schedule 3.31(a). To the knowledge of Stockholder, no customer is
considering termination, non-renewal or any adverse modification of
its arrangements with CG except (i) as set forth on Schedule 3.31(b)
or (ii) for such terminations, non-renewals or adverse modifications
which are not, individually or in the aggregate, reasonably likely to
have a CG Material Adverse Effect.
(c) Schedule 3.31(c) hereto sets forth a complete and
accurate summary aging of all accounts payable of CG.
Section 3.32 Contracts and Commitments. (a) The contracts
listed on Schedule 3.32 hereto are all of the Contracts, written or
oral and whether legally binding or otherwise, to which CG is a party
or as to which it or its properties may be bound or which otherwise
relate to the business conducted by CG (excluding contracts with any
customer which has not been an active customer during calendar year
1997 and any Contract that involves a commitment by CG of less than
$25,000 over the next 12 months).
(b) CG is not in breach or default, nor, to the
knowledge of the Stockholder, is there any basis for any valid claim
of breach or default by CG, under any Contract in any material
respect. Except as set forth on Schedule 3.6 (Consents and Approvals),
the Contracts listed on Schedule 3.32 are valid and in full force and
effect, and consummation of the transactions contemplated by this
Agreement will not cause any such Contract to cease to be valid and in
full force and effect. Accurate and complete copies of all Contracts
set forth on Schedule 3.32, including all amendments thereto, have
been heretofore delivered to Parent or will be made available upon
request.
Section 3.33 Disclosure. No representation, warranty or
other statement by CG and the Stockholder herein or in any document
delivered pursuant hereto contains or will contain an untrue statement
of a material fact, or omits to state a material fact necessary to
make the statements contained herein or therein not misleading;
provided, however, that neither this nor any other representation in
this Agreement shall constitute a representation or warranty by CG or
the Stockholder with respect to any projections, forecasts or other
forward-looking financial information heretofore delivered or made
available to Parent. Except as set forth in the Schedules hereto, the
Stockholder does not have knowledge of any fact (excluding general
economic or industry conditions) that could reasonably be expected to
have a CG Material Adverse Effect.
Section 3.34 Stockholder's Investment Intent. (a) The
Stockholder is acquiring shares of Parent Common Stock pursuant hereto
for the Stockholder's own account for investment and not with a view
to the resale or distribution or public offering thereof in violation
of the Securities Act of 1933, as amended (the "Act");
(b) The Stockholder understands that the shares of
Parent Common Stock to be received by him hereunder have not been
registered under the Act;
(c) The Stockholder has such knowledge and experience in
financial and business matters that he is capable of evaluating the
merits and risks of an investment in the shares.
(d) Parent has made available to the Stockholder at a
reasonable time prior to the execution of this Agreement the
opportunity to ask questions and receive answers concerning the terms
and conditions of this Agreement and to obtain any additional
information concerning Parent which Parent possesses or can acquire
without unreasonable effort or expense.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to CG as follows:
Section 4.1 Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York and has the corporate power to carry on its business
as it is now being conducted or presently proposed to be conducted.
Parent and its subsidiaries are duly qualified as foreign corporations
to do business and are in good standing in each jurisdiction where the
character of their properties owned or held under lease or the nature
of their activities would make such qualification necessary, except
where the failure to be so qualified or in good standing would not
have a CHC Material Adverse Effect (as defined in Section 4.6). Sub is
a corporation duly organized, validly existing and in good standing
under the laws of the State of California. Sub has not engaged in any
business (other than in connection with this Agreement and the
transactions contemplated hereby) since the date of its incorporation.
Section 4.2 Capitalization. The authorized capital stock of
Parent consists of 60,000,000 shares of Parent Common Stock and
200,000 shares of Preferred Stock. As of the date hereof, (i)
24,549,874 shares of Parent Common Stock and no shares of Preferred
Stock were issued and outstanding and (ii) options and warrants to
acquire 2,161,125 shares of Parent Common Stock (the "Parent Stock
Options") are outstanding. The shares of Parent Common Stock issuable
in exchange for shares of CG Common Stock at the Effective Time in
accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable. The
authorized capital stock of Sub consists of 2,000 shares of Sub Common
Stock, of which 100 shares, as of the date hereof, were issued and
outstanding. All of such outstanding shares are owned by Parent, and
are validly issued, fully paid and nonassessable.
Section 4.3 Authority Relative to this Agreement. Each of
Parent and Sub has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
each of Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated on its part hereby have been duly authorized
by their respective Boards of Directors, and no other corporate
proceedings on the part of Parent or Sub are necessary to authorize
this Agreement or for Parent and Sub to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed
and delivered by each of Parent and Sub and constitutes a valid and
binding agreement of each of Parent and Sub, enforceable against
Parent and Sub in accordance with its terms, except as such
enforceability may be subject to the laws of general application
relating to bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to creditors generally and
rules of law governing specific performance, injunctive relief or
other equitable remedies.
Section 4.4 Consents and Approvals No Violations. Neither
the execution, delivery and performance of this Agreement by Parent or
Sub, nor the consummation by Parent or Sub of the transactions
contemplated hereby will (i) conflict with or result in any breach of
any provisions of the Certificate of Incorporation or By-Laws of
Parent or of Sub, (ii) require a filing with, or a permit,
authorization, consent or approval of, any Governmental Entity (except
pursuant to the Registration Rights Agreement), other than the filing
and recordation of a Certificate of Merger as required by the
California Corporations Code, (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or
both) a default or give rise to any right of termination, cancellation
or acceleration under, or result in the creation of a Lien on any
property or asset of Parent or its subsidiaries pursuant to, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by
which any of their properties or assets may be bound which would have
a CHC Material Adverse Effect or (iv) violate any law, order, writ,
injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to Parent, Sub or any of their properties or assets.
Section 4.5 Reports and Financial Statements. Parent has
timely filed all reports required to be filed with the SEC pursuant to
the Exchange Act or the Securities Act (collectively, the "Parent SEC
Reports"), and has previously made available to CG true and complete
copies of all such Parent SEC Reports. Such Parent SEC Reports, as of
their respective dates, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and none of such SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Parent, including
the notes thereto, included in the Parent SEC Reports (the "Parent
Financial Statements") have been prepared in accordance with GAAP
consistently applied and fairly present the consolidated financial
condition of Parent as at the dates thereof and consolidated results
of operations and cash flows for the periods then ended.
Section 4.6 Absence of Certain Changes or Events. Since
March 31, 1997, there has not been any fact, event, circumstance or
change affecting or relating to Parent and its subsidiaries which has
had or is reasonably likely to have, individually or in the aggregate,
a material adverse effect on (A) the financial condition, results of
operations, business, assets, liabilities, prospects or properties of
Parent and its subsidiaries, taken as a whole, or (B) the likelihood
of Parent to consummate the Merger and the other transactions
contemplated by this Agreement or a "CHC Material Adverse Effect");
provided, however, that a CHC Material Adverse Effect shall not
include any adverse effect following the date of this Agreement which
is solely attributable to (i) the announcement or pendency of the
transactions contemplated by this Agreement or (ii) changes in
national economic conditions or industry conditions generally.
Section 4.7 Disclosure. No representation, warranty or other
statement by Parent herein contains an untrue statement of a material
fact, or omits to state a material fact necessary to make the
statements contained herein not misleading. Except as set forth in the
Parent's Registration Statement on Form S-2 filed June 6, 1995 (File
No. 03359103), Parent's Form 10K for the year ended December 31, 1995
and the SEC reports filed between January 1, 1997 and the date hereof.
Parent does not have knowledge of any fact (excluding general economic
or industry conditions) that could reasonably be expected to have a
CHC Material Adverse Effect.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 Conduct of Business by CG Pending the Merger.
Prior to the Effective Time, unless Parent shall otherwise agree in
writing, or as otherwise expressly contemplated by this Agreement:
(a) CG shall conduct its business only in the ordinary
and usual course consistent with past practice, and CG shall use its
reasonable efforts to preserve intact the present business
organization, keep available the services of its present officers and
key employees, and preserve the goodwill of those having business
relationships with it;
(b) CG shall not (i) amend its charter or bylaws, (ii)
split, combine or reclassify any shares of its outstanding capital
stock, (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or (iv) directly or
indirectly redeem or otherwise acquire any shares of its capital
stock;
(c) CG shall not (i) authorize for issuance, issue or
sell or agree to issue or sell any shares of, or Rights to acquire or
convertible into any shares of, its capital stock (whether through the
issuance, granting, or acceleration of vesting with regard to options,
warrants, commitments, subscriptions, rights to purchase or otherwise)
except upon the exercise of outstanding employee stock options, to the
extent vested pursuant to the original terms of such options as are
set forth on Schedule 3.2(b) hereto; (ii) merge or consolidate with
another entity; (iii) acquire or purchase an equity interest in or a
substantial portion of the assets of another corporation, partnership
or other business organization or otherwise acquire any assets outside
the ordinary and usual course of business and consistent with past
practice which has heretofore been specified to Parent in writing or
otherwise enter into any contract, commitment or transaction outside
the ordinary and usual course of business consistent with past
practice; (iv) sell, lease, license, waive, release, transfer,
encumber or otherwise dispose of any of its assets outside the
ordinary and usual course of business and consistent with past
practice; (v) incur, assume or prepay any indebtedness or any other
liabilities other than in the ordinary course of business and
consistent with past practice; (vi) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person; (vii) make any
loans, advances or capital contributions to, or investments in, any
other person (except for payroll advances and other advances to
employees for approved expenses consistent with past practice); (viii)
authorize or make capital expenditures in excess of the amounts
currently budgeted therefor; (ix) permit any insurance policy naming
CG as a beneficiary or a loss payee to be canceled or terminated other
than in the ordinary course of business; or (x) enter into any
contract, agreement, commitment or arrangement with respect to any of
the foregoing;
(d) CG shall not (i) adopt, enter into, terminate or
amend (except as may be required by Applicable Law) any Plan or other
arrangement for the current or future benefit or welfare of any
director, officer or current or former employee, (ii) increase in any
manner the compensation or fringe benefits of, or pay any bonus to,
any director, officer or employee (except for normal increases in
salaried compensation in the ordinary course of business consistent
with past practice, or (iii) take any action to fund or in any other
way secure, or to accelerate or otherwise remove restrictions with
respect to, the payment of compensation or benefits under any employee
plan, agreement, contract, arrangement or other Plan;
(e) CG shall not take any action with respect to, or
make any change in, its accounting or tax policies or procedures,
except as required by law or to comply with GAAP; and
(f) CG shall not knowingly take or allow to be taken any
action which would reasonably be expected to jeopardize the treatment
of Parent's acquisition of CG as a pooling of interests for accounting
purposes.
(g) CG shall be entitled to repay in full to the
Stockholder all principal and accrued interest on the two $51,000
(original principal amount) outstanding Stockholder loans, and CG
shall also be entitled to terminate its line of credit with Union Bank
of California, including the securing of a written release of the
Stockholder, his family and his trusts from their guarantee of CG's
line of credit, without violating the prohibitions of this Section
5.1.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Access and Information. Each of CG and Parent
shall (and shall cause its officers, directors, employees, auditors
and agents to) afford to the other and to the other's officers,
employees, financial advisors, legal counsel, accountants, consultants
and other representatives reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its
books and records (other than privileged documents) and its
properties, plants and personnel and, during such period, each shall
furnish promptly to the other a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of
federal securities laws, provided that no investigation pursuant to
this Section 6.1 shall affect any representations or warranties made
herein or the conditions to the obligations of the respective parties
to consummate the Merger. Unless otherwise required by law, each party
agrees that it (and its representatives) shall hold in confidence all
non-public information so acquired.
Section 6.2 No Solicitation. Prior to the Effective Time,
CG agrees that neither it, any of its Affiliates, nor any of the
respective directors, officers, employees, agents or representatives
of the foregoing will, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or disclosing
non-public information) any inquiries or the making of any proposal
with respect to any merger, consolidation or other business
combination involving CG or the acquisition of all or any significant
assets or capital stock of CG taken as a whole (an "Acquisition
Transaction") or negotiate, explore or otherwise engage in discussions
with any person (other than Parent and its representatives) with
respect to any Acquisition Transaction or enter into any agreement,
arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this
Agreement. CG agrees that as of the date hereof, it, its Affiliates,
and the respective directors, officers, employees, agents and
representatives of the foregoing, shall immediately cease and cause to
be terminated any existing activities, discussions or negotiations
with any person (other than Parent and its representatives) conducted
heretofore with respect to any Acquisition Transaction. CG agrees to
immediately advise Parent in writing of any inquiries or proposals (or
desire to make a proposal) received by (or indicated to), any such
information requested from, or any such negotiations or discussions
sought to be initiated or continued with, any of its Affiliates, or
any of the respective directors, officers, employees, agents or
representatives of the foregoing, in each case from a person (other
than Parent and its representatives) with respect to an Acquisition
Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon Parent's
request, the status thereof, as well as any actions taken or other
developments pursuant to this Section 6.2.
Section 6.3 Reasonable Best Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including,
without limitation, the obtaining of all necessary waivers, consents
and approvals and the effecting of all necessary registrations and
filings. Parent also agrees (i) to use its reasonable best efforts to
prepare and file as soon as practicable after the Effective Time, but
in no event later than January 15, 1998, the registration statement
contemplated by the Registration Rights Agreement referred to in
Section 7.3(e), which Registration Statement shall also include the
shares of Parent Common Stock issuable to John Stypulkoski pursuant to
Section 2.4 of this Agreement and (ii) as soon as practicable after
the Effective Time, but in no event later than February 24, 1998, to
publicly report financial results covering the first 30 days of
combined operations of CG and Parent after the Merger in accordance
with the requirements for ending the restricting on resales of stock
acquired in the Merger imposed by the rules for pooling of interests
accounting.
Section 6.4 Expenses. If the Merger is consummated, the
success fee and expenses payable to Broadview Associates LLC under
that certain Letter Agreement dated November 26, 1996 between CG and
Broadview Associates LLC shall be paid by Parent, and all other costs
and expenses incurred by Parent or Stockholder in connection with this
Agreement (including the Exhibits hereto) and the transactions
contemplated hereby (and thereby) shall be paid by Parent, provided,
however, that with respect to costs and expenses incurred by the
Stockholder, Parent shall pay such costs and expenses only up to a
maximum of $100,000. If this Agreement is terminated and the Merger is
not consummated, all costs and expenses incurred in connection with
this Agreement (including the Exhibits hereto) and the transactions
contemplated hereby (and thereby) shall be paid by the party incurring
such expenses.
Section 6.5 Public Announcements. Each party agrees that it
will not issue any press release or otherwise make any public
statement with respect to this Agreement (including the Exhibits
hereto) or the transactions contemplated hereby (or thereby) without
the prior consent of the other parties, which consent shall not be
unreasonably withheld, delayed or conditioned; provided, however, that
such disclosure can be made without obtaining such prior consent if
(i) the disclosure is required by law and (ii) the party making such
disclosure has first used its reasonable best efforts to consult with
(but not obtain the consent of) the other parties about the form and
substance of such disclosure. Notwithstanding the foregoing, neither
party shall issue any press release or otherwise make any public
statement (not including an SEC filing) with respect to this Agreement
or the transactions contemplated hereby unless and until Parent shall
have satisfactorily completed the additional due diligence
contemplated by Section 8.1 (e).
Section 6.6 Supplemental Disclosure. CG shall give prompt
notice to Parent, and Parent shall give prompt notice to CG, of (i)
the occurrence, or non-occurrence, of any event of which they gain
knowledge, the occurrence, or non-occurrence, of which would be likely
to cause (x) any representation or warranty contained in this
Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or
satisfied and (ii) any failure of CG or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that
the delivery of any notice pursuant to this Section 6.6 shall not have
any effect for the purpose of determining the satisfaction of the
conditions set forth in Article VII of this Agreement or otherwise
limit or affect the remedies available hereunder to any party.
Section 6.7 Tax-Free Reorganization. Unless CG shall
otherwise first agree in writing, or as otherwise contemplated by this
Agreement, neither Parent nor Sub shall knowingly take any action or
fail to take any action that would jeopardize qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the
Code.
Section 6.8 Year 2000 Methodology. Parent agrees that, from
and after the Effective Time, it will not use or employ in the conduct
of its business the Year 2000 methodology developed by CG (the "2000
Methodology"), which methodology is contained in a written report
delivered to Parent prior to Closing, provided, however, if, at any
time following the Effective Time Parent shall use or employ the 2000
Methodology in the conduct of its business, the Stockholder shall
thereafter be released from its obligation to indemnify Parent or any
other Parent Claimant (as such term is defined in Section 9.2 hereof)
for any Losses (as such term is defined in Section 9.2 hereof)
suffered by Parent or such other Parent Claimant as a direct result of
such use of the 2000 Methodology. Notwithstanding the foregoing, the
Stockholder shall not be released from its obligation to indemnify
Parent and each Parent Claimant for Losses sustained as a result of
Parent's possession, ownership or control of the 2000 Methodology.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) No Order. No Governmental Entity (including a
federal or state court) of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the
Merger or any transaction contemplated by this Agreement; provided,
however, that the parties shall use their reasonable best efforts to
cause any such decree, judgment, injunction or other order to be
vacated or lifted.
Section 7.2 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of the following additional conditions, unless waived
in writing by Parent:
(a) Representations and Warranties. The representations
and warranties of the Stockholder set forth in this Agreement shall be
true and correct in all material respects, as of the date hereof, and,
except to the extent such representations and warranties speak as of a
specific date, as of the Effective Time as though made at and as of
the Effective Time. Parent shall have received a certificate signed by
the Stockholder to such effect.
(b) Performance of Obligations of CG and the
Stockholder. Each of CG and the Stockholder shall have performed all
obligations required to be performed by it under this Agreement at or
prior to the Effective Time in all material respects, and Parent shall
have received a certificate signed on behalf of CG by the chief
executive officer of CG to such effect.
(c) Letters of Resignation. Parent and Sub shall have
received letters of resignation addressed to CG from the members of
CG's board of directors, which resignations shall be effective as of
the Effective Time.
(d) Pooling Letter. Parent shall have received from
Grant Thornton, LLP a letter, dated the Closing Date and addressed to
Parent, to the effect that, subject to customary qualifications, the
Merger qualifies for pooling of interests treatment for financial
reporting purposes in accordance with GAAP.
(e) Counsel Opinion. Parent shall have received from
CG's counsel, Guth Rothman & Christopher LLP an opinion in form and
substance satisfactory to Parent.
(f) Escrow Agreement. The Stockholder shall have entered
into an escrow agreement in substantially the form annexed hereto as
Exhibit A and, pursuant thereto, shall have delivered to the Escrow
Agent thereunder, the shares of Parent Common Stock referred to
therein.
Section 7.3 Conditions to Obligation of CG and Stockholder
to Effect the Merger. The obligations of CG and the Stockholder to
effect the Merger shall be subject to the satisfaction at or prior to
the Effective Time of the following additional conditions:
(a) Representations and Warranties. The representations
and warranties of Parent set forth in this Agreement shall be true and
correct as of the date hereof, and, except to the extent such
representations and warranties speak as of a specific date, as of the
Effective Time as though made on and as of the Effective Time. CG
shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to
such effect.
(b) Performance of Obligations of Parent and Sub. Each
of Parent and Sub shall have performed all obligations required to be
performed by it under this Agreement at or prior to the Effective Time
in all material respects, and CG shall have received a certificate
signed on behalf of Parent by the chief executive officer or the chief
financial officer of Parent to such effect.
(c) Counsel Opinion. CG and the Stockholder shall have
received from Parent's counsel, Proskauer Rose LLP, an opinion in form
and substance satisfactory to CG and the Stockholder.
(d) Escrow Agreement. Parent and a mutually acceptable
escrow agent shall have entered into an escrow agreement in
substantially the form annexed hereto as Exhibit A.
(e) Registration Rights Agreement; NASD Notification.
Parent shall have entered into a registration rights agreement in
substantially the form annexed hereto as Exhibit B, and filed with the
NASD a notification form for the additional listing of the shares of
Parent Common Stock to be issued hereunder.
ARTICLE VIII
TERMINATION
Section 8.1 Termination . This Agreement may be terminated
at any time prior to the Effective Time, whether before or after
approval by the stockholders of Parent or CG:
(a) by mutual consent of Parent and CG;
(b) by either Parent or CG, if (i) the Merger shall not
have been consummated before December 22, 1997 (unless, in the case of
any such termination pursuant to this Section 8.1(b), the failure to
so consummate the Merger by such date shall have been caused by the
action or failure to act of the party seeking to terminate this
Agreement, which action or failure to act constitutes a breach of this
Agreement); or (ii) the average of the per share closing prices for
Parent Common Stock on NASDAQ for ten consecutive trading days prior
to the Effective Time shall be more than $46.00 or less than $27.00.
(c) by Parent, if (i) there has been a breach of any
representations or warranties of CG or (ii) there has been a breach of
any of the covenants or agreements set forth in this Agreement on the
part of CG, which breach is not curable or, if curable, is not cured
within 30 days after written notice of such breach is given by Parent
to CG;
(d) by CG, if (i) there has been a breach of any
representations or warranties of Parent or (ii) there has been a
breach of any of the covenants or agreements set forth in this
Agreement on the part of Parent, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such
breach is given by CG to Parent; (e) by Parent
at any time prior to December 15,1997 if, in Parent's reasonable
judgement and sole and exclusive discretion, based on the results of
its due diligence interviews of CG's customers and key employees, the
Merger is not in accord with Parent's best interests by virtue of the
discovery of such facts concerning CG's relationships with its
customers and key employees; and
(f) by Parent at any time prior to December 19, 1997, if
Parent shall not have secured Employment Agreements in the form
attached as Exhibit C hereto, executed by those key employees of CG
listed on Schedule 3.17 that Parent, in its sole discretion, deems
necessary.
Section 8.2 Effect of Termination. In the event of
termination of this Agreement pursuant to this Article VIII, the
Merger shall be deemed abandoned and this Agreement shall forthwith
become void, without liability on the part of any party hereto, except
that nothing herein shall relieve any party from liability for any
breach of this Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Survival of Representations and Warranties . All
representations and warranties contained in Articles III and IV of
this Agreement shall survive the Closing until the first (1st)
anniversary of the Closing Date, and, no party may seek indemnity
under this Article IX or any other recovery or remedy for any Loss
under this Agreement at any time after such anniversary.
Section 9.2 Indemnification by Stockholder. From and after
the Closing, the Stockholder shall indemnify and save Parent, Sub and
their respective Affiliates, directors, officers, employees, agents
and representatives and all of their successors and assigns
(collectively "Parent Claimants" and individually "Parent Claimant")
harmless from and against any and all demands, claims, actions,
liabilities, losses, costs, damages or expenses whatsoever (including
any reasonable attorneys' fees), net of any tax benefits or insurance
proceeds, (collectively, "Losses") asserted against, imposed upon or
incurred by the Parent Claimants resulting from or arising out of (a)
any breach of any representation or warranty of the Stockholder
contained herein; or (b) any breach of any covenant or obligation of
the Stockholder or CG contained herein; provided, however, that (i)
the Stockholder shall be liable only if the Merger is consummated, and
(ii) the Stockholder shall be required to indemnify Parent Claimants
only after and to the extent the aggregate amount of the Losses
exceeds $250,000 and (iii) the Stockholder shall be required to
indemnify Parent Claimants only up to a maximum aggregate amount of
$4,250,000 but such limitation on the maximum amount of
indemnification shall not apply to Losses resulting from breaches of
representations or warranties contained herein which constitute active
and fraudulent misrepresentations by Stockholder.
Section 9.3 Indemnification by Parent. From and after the
Closing, the Parent shall indemnify and save Stockholder ("Stockholder
Claimant") harmless from and against any and all Losses resulting from
or arising out of (a) any breach of any representation or warranty of
the Parent or Sub contained herein; or (b) any breach of any covenant
or obligation of the Parent or Sub contained herein.
Section 9.4 Indemnification Procedures. If any claim is
asserted or any action or proceeding is brought in respect of which
indemnity may be sought, the party seeking indemnity hereunder (the
"Indemnified Party") will promptly notify the party from whom
indemnification is being sought (the "Indemnifying Party") in writing
of such asserted claim or the institution of such action or
proceeding; provided, however, that the Indemnified Party's failure to
so notify the Indemnifying Party will not relieve the Indemnifying
Party from any liability it might otherwise have on account of this
indemnity, except to the extent that the Indemnifying Party has been
materially prejudiced by such failure to notify. The Indemnifying
Party shall have the right, but not the obligation, to assume full
responsibility for the defense of any Third-Party Claim which, if
successful, would result in an obligation of indemnity under this
Agreement. If the Indemnifying Party assumes such defense, the
Indemnifying Party may contest or settle any such claim on such terms
as the Indemnifying Party may choose, provided that the Indemnifying
Party will not have the right, without the Indemnified Party's prior
written consent, to settle any such claim if such settlement (i)
arises from or is part of any criminal action, suit or proceeding,
(ii) contains a stipulation to, confession of judgement with respect
to, or admission or acknowledgment of, any liability or wrongdoing on
the part of the Indemnified Party, (iii) provides for injunctive
relief, or other relief or finding other than money damages, which is
binding on the Indemnified Party, or (iv) does not contain an
unconditional release of the Indemnified Party. Such defense will be
conducted by reputable attorneys retained by the Indemnifying Party at
the Indemnifying Party's cost and expense, but the Indemnified Party
will have the right to participate in such proceedings and to be
separately represented by attorneys of its own choosing. The
Indemnified Party will be responsible for the costs of such separate
representation unless the Indemnified Party has been advised in
writing by outside legal counsel that the interests of the Indemnified
Party and the Indemnifying Party in the action conflict in such a
manner and to such an extent as to require, under applicable standards
of professional responsibility, the retention of separate counsel for
the Indemnified Party, in which case the Indemnifying Party will pay
for one (but not more than one) separate counsel chosen by the
Indemnified Party.
Section 9.5 Failure to Assume Defense. In the event that the
Indemnifying Party, by the 30th day after receipt of notice of any
asserted claim (or, if earlier, by the tenth day preceding the day on
which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim),
fails to assume the defense of such claim, the Indemnified Party will
(upon further notice to the Indemnifying Party) have the right to
undertake the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the Indemnifying Party. The
result of any such defense, compromise or settlement executed by the
Indemnified Party in good faith shall be binding upon the Indemnifying
Party with respect to its obligations of indemnity under this Article
IX.
Section 9.6 Cooperation. The Indemnifying Party and the
Indemnified Party shall cooperate in determining the validity of any
Third-Party Claim for any Loss for which a claim of indemnification
may be made hereunder. Each party shall also use all reasonable
efforts to minimize all Losses.
Section 9.7 Escrow of Shares of Parent Common Stock. Upon
receipt of Shares of Parent Common Stock pursuant to Article II of
this Agreement, the Stockholder shall deliver to the Escrow Agent,
pursuant to the Escrow Agreement, a number of shares of Parent Common
Stock equal to 10% of the total number of shares of Parent Common
Stock issuable pursuant to the Merger. The shares of Parent Common
Stock together with any earnings on or accretions thereto shall be
held by the Escrow Agent pursuant to the terms of the Escrow
Agreement. Except for shares of Parent Common Stock declared as
dividends or distributions on the escrowed shares in connection with a
stock split or other reorganization of Parent, all earnings on or
accretions to the shares of Parent Common Stock held by the Escrow
Agent pursuant to the terms of the Escrow Agreement shall be for the
benefit of the Stockholder. The Escrow Agreement shall provide the
Stockholder with the power to direct the sale of escrowed shares (but
not the distribution or release of the net monetary proceeds
therefrom), to invest the net proceeds from such sales in U.S.
government securities or investment grade debt securities and to
receive monthly payments of the interest from such investments. All
interest or other income to such investments shall be for the benefit
of the Stockholder. Any Parent Claimant shall be entitled to delivery
from the Escrow Agent of such number of shares of Parent Common Stock
as shall have a value equal to the amount due such Parent Claimant
pursuant to this Article IX (or an equivalent amount in cash), and the
Stockholder shall give the Escrow Agent all such notices as shall be
necessary to obtain such delivery from the Escrow Agent. For purposes
of this Section 9.7, the value of shares of Parent Common Stock shall
be equal to the average of the per share trading prices for Parent
Common Stock on NASDAQ for the ten consecutive trading days prior to
the Parent Claimant's demand for the notice for the Stockholder
provided for in the preceding sentence. Subject to any Parent Claimant
demand hereunder that may be pending at such time, the Stockholder
shall be entitled to delivery from the Escrow Agent of one-half the
escrow fund (after giving effect to the delivery, if any, of shares of
Parent Common Stock and earnings on and accretions thereto pursuant to
the preceding sentence) upon the issuance of an audit report with
respect to the consolidated financial statements of Parent for the
fiscal year ending December 31, 1997, and the balance of such escrow
fund upon the first anniversary of the Effective Time.
ARTICLE X
RESTRICTIVE COVENANTS
Section 10.1 Non-Competition. If the Merger is consummated,
neither the Stockholder nor any of his Affiliates shall, for a period
of three (3) years after the Effective Date, directly or indirectly,
engage, anywhere in the United States, in (i) the sale or offering or
promoting for sale of any product, process, good or service which is
the same as, is functionally similar to, or competes with, any
product, process, good or service which CG has sold or offered or
promoted for sale within the three years preceding the Effective Date.
Section 10.2 Non-Solicitation of Employees of Parent. If the
Merger is consummated, neither the Stockholder nor any of its
Affiliates shall directly or indirectly, for himself or itself or on
behalf of any other individual or entity, hire any employee of Parent
or any of its Subsidiaries, including, without limitation, any
employees of CG, or induce nor attempt to induce any such employee to
leave his or her employment with Parent or any of its Subsidiaries, at
any time within three (3) years from the Effective Date. If the
Merger is not consummated, neither the Stockholder nor any of its
Affiliates shall directly or indirectly, for himself or itself or on
behalf of any other individual or entity, hire any employee of Parent
or any of its Subsidiaries to whom Stockholder was introduced by
Parent during the negotiation of this Agreement or subsequent to its
signing, or induce nor attempt to induce any such employee to leave
his or her employment with Parent or any of its Subsidiaries, at any
time within one (1) year from the date of written notice of
termination of this Agreement.
Section 10.3 Non-Solicitation or Interference with Customers
and Suppliers of Parent. If the Merger is consummated, neither the
Stockholder nor any of his Affiliates shall, directly or indirectly,
for himself or itself or on behalf of any other individual or entity,
solicit, divert, take away or attempt to take away any of Parent's or
any of its Subsidiaries, current customers or suppliers or the
business or patronage of any such customers or suppliers or in any way
knowingly interfere with, disrupt or attempt to disrupt any then
existing relationships between Parent or any of its Subsidiaries, and
any of their current customers or suppliers at any time within three
(3) years from the Effective Date. If the Merger is not consummated,
neither the Stockholder nor any of his Affiliates shall, directly or
indirectly, for himself or itself or on behalf of any other individual
or entity, solicit, divert, take away or attempt to take away any
current customers or suppliers of Parent or any of its Subsidiaries
made known in writing to Stockholder by Parent during the negotiation
of this Agreement or subsequent to its signing, or the business or
patronage of any such customers or suppliers or in any way knowingly
interfere with, disrupt or attempt to disrupt any then existing
relationships between Parent or any of its Subsidiaries, and any of
such customers or suppliers at any time within one (1) year from the
date of written notice of termination of this Agreement.
Section 10.4 Non-Solicitation or Interference with Customers
and Suppliers of CG. If the Merger is not consummated, neither Parent,
nor any of its Affiliates shall, directly or indirectly, for itself or
on behalf of any other individual or entity, solicit, divert, take
away or attempt to take away any of CG's current customers or
suppliers made known in writing to Parent by CG during the negotiation
of this Agreement or subsequent to its signing, or the business or
patronage of any such customers or suppliers or in any way knowingly
interfere with, disrupt or attempt to disrupt any then existing
relationships between CG and any of such customers or suppliers at any
time within one (1) year from the date of written notice of
termination of this Agreement.
Section 10.5 Non-Solicitation of Employees of CG. If the
Merger is not consummated, neither Parent nor any of its Affiliates
shall directly or indirectly, for itself or on behalf of any other
individual or entity, hire any employee of CG or induce any such
employee to leave his or her employment with CG at any time within one
year from the date of written notice of termination of this Agreement.
Section 10.6 Acknowledgments. The Stockholder acknowledges
that, in view of the nature of CG's business and the business
objectives of Parent in acquiring CG, and the consideration paid in
the Merger to the Stockholder therefor, the restrictions contained in
this Article X are reasonably necessary to protect the legitimate
business interests of Parent and that any violation of such
restrictions will result in irreparable injury to Parent and the
business Parent has acquired hereunder for which damages will not be
an adequate remedy. The Stockholder therefore acknowledges that, if
any such restrictions are violated, Parent shall be entitled to
preliminary and injunctive relief as well as to an equitable
accounting of earnings, profits and other benefits arising from such
violation. Additionally, the parties acknowledge and agree that the
purchase price set forth in Article II includes $100,000 as
compensation for the covenants of Stockholder contained in this
Article X and agree to report the Merger consistent with such fact in
all public documents and government filings.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 Amendment and Modification. At any time prior
to the Effective Time, this Agreement may be amended, modified or
supplemented only by written agreement (referring specifically to this
Agreement) of Parent, Sub, CG and Stockholder with respect to any of
the terms contained herein.
Section 11.2 Waiver. At any time prior to the Effective
Time, Parent and Sub, on the one hand, and CG and Stockholder, on the
other hand, may (i) extend the time for the performance of any of the
obligations or other acts of the other, (ii) waive any inaccuracies in
the representations and warranties of the other contained herein or in
any documents delivered pursuant hereto and (iii) waive compliance by
the other with any of the agreements or conditions contained herein
which may legally be waived. Any such extension or waiver shall be
valid only if set forth in an instrument in writing specifically
referring to this Agreement and signed on behalf of such party.
Section 11.3 Investigations. The respective representations
and warranties of Parent, CG and Stockholder contained herein or in
any certificates or other documents delivered prior to or as of the
Effective Time shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
Section 11.4 Notices. All notices and other communications
hereunder shall be in writing and shall be delivered personally or by
next-day courier, or sent by facsimile with confirmation of receipt,
to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice; provided
that notices of a change of address shall be effective only upon
receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or sent by facsimile, or one day after delivery
to a courier for next-day delivery.
(a) If to Parent or Sub, to:
Computer Horizons Corp.
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046
Fax: (973) 402-6293
Attention: Dennis M. DiVenuta, General Counsel
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Fax: (212) 969-2900
Attention: Robert Cantone, Esq.
(b) if to CG, to:
CG Computer Services Corporation
3600 Wilshire Boulevard, Suite 326
Los Angeles, California 90010
Fax: (213) 388-9336
Attention: Alan Grushcow
with a copy to:
Guth Rothman & Christopher LLP
10866 Wilshire Blvd., Suite 1250
Los Angeles, California 90024
Fax: (310) 470-8354
Attention: Daniel G. Christopher, Esq.
(c) if to Stockholder, to:
Alan R. Grushcow
341 South Almont Drive
Beverly Hills, California 90211
and
Sabina Ephraim
16556 County Line Road
Capron, Illinois 61012
Section 11.5 Descriptive Headings; Interpretation. The
headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement. References in this Agreement to Sections, Schedules,
Exhibits or Articles mean a Section, Schedule, Exhibit or Article of
this Agreement unless otherwise indicated. References to this
Agreement shall be deemed to include the Exhibits and Schedules
hereto, unless the context otherwise requires. The term "person" shall
mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a Governmental Entity or an unincorporated
organization. The disclosure of any event or fact on a Schedule does
not constitute an admission by the disclosing party that such event or
fact is material.
Section 11.6 Entire Agreement; Assignment. This Agreement
(including the Schedules and other documents and instruments referred
to herein) constitutes the entire agreement and supersedes all other
prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof
except the Non-Disclosure Agreement dated December 9, 1996 prepared by
Broadview Associates LLC and executed by Parent for the benefit of CG.
This Agreement is not intended to confer upon any person not a party
hereto any rights or remedies hereunder. This Agreement shall not be
assigned by operation of law or otherwise; provided that Parent or Sub
may assign its rights and obligations hereunder to a direct or
indirect subsidiary of Parent, but no such assignment shall relieve
Parent or Sub, as the case may be, of its obligations hereunder.
Section 11.7 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California without giving effect to the provisions thereof relating to
conflicts of law.
Section 11.8 Severability. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect against a party hereto, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby and such
invalidity, illegality or unenforceability shall only apply as to such
party in the specific jurisdiction where such judgment shall be made.
Section 11.9 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of Parent, Sub, CG and Stockholder
has caused this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
COMPUTER HORIZONS CORP.
By:______________________________
Name:
Title:
CG COMPUTER SERVICES CORPORATION
By:______________________________
Name:
Title:
CHC ACQUISITION CORP.
By:______________________________
Name:
Title:
ALAN R. GRUSHCOW
__________________________________
SABINA EPHRAIM
__________________________________
