SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-6081
COMFORCE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2262248
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State or other jurisdiction I.R.S. Employer
of incorporation or organization Identification No.
2001 Marcus Avenue, Lake Success, New York 11042
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (516) 352-3200
Not Applicable
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
---------------------------- -------------------------------
Common stock, $.01 par value 9,615,365
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Designation of Rights and Preferences of Series D Preferred Stock.
3.2 Designation of Rights and Preferences of Series E Preferred Stock.
10.1 Stock Purchase Agreement dated May 13, 1996 among the Company,
COMFORCE Technical Services, Inc., Project Staffing Support Team,
Inc., Raphael Rashkin and Stanley Rashkin.
10.2 Asset Purchase Agreement dated May 13, 1996 among the Company,
COMFORCE Technical Services, Inc., DataTech Technical Services, Inc.,
Raphael Rashkin and Stanley Rashkin.
10.3 Asset Purchase Agreement dated May 13, 1996 among the Company,
COMFORCE Technical Services, Inc., RRA, Inc., Raphael Rashkin and
Stanley Rashkin.
10.4 Letter Agreement dated May 6, 1996 amending Asset Purchase Agreement
dated May 13, 1996 among the Company, COMFORCE Technical Services,
Inc., RRA, Inc., Raphael Rashkin and Stanley Rashkin.
10.5 Letter Agreement dated April 19, 1996 among CTS Acquisition Co. I,
COMFORCE Technical Services, Inc., Project Staffing Support Team, Inc.
and RRA, Inc.
10.6 Purchase Agreement among COMFORCE Global, Williams and Bruce Anderson
(filed as an exhibit to the Company's Current Report on Form 8-K dated
March 13, 1996 and incorporated herein by reference).
10.7 Loan Agreement among COMFORCE Global and The Chase Manhattan Bank,
N.A. (filed as an exhibit to the Company's Current Report on Form 8-K
dated March 13, 1996 and incorporated herein by reference).
11.1 Computation of Earnings (Loss) Per Share and Equivalent Share of
Common Stock.
(b) Reports on Form 8-K.
On January 11, 1996, the Company filed a Current Report on
Form 8-K to report that the Company had entered into letters
of intent to acquire RRA and Williams.
On February 6, 1996, the Company filed an Amendment to Current
Report on 8-K/A (amending its Current Report on Form 8-K filed
October 31, 1995) to include the historical financial
statements for, and the pro forma financial statements to
reflect the acquisition of, COMFORCE Global, as required by
the Commission's rules.
On March 13, 1996, the Company filed a Current Report on Form
8-K to report the consummation of the Williams acquisition and
the Company's obtaining certain revolving credit financing
with The Chase Manhattan Bank, N.A.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
COMFORCE CORPORATION
By: /s/ Andrew Reiben
-------------------------
Andrew Reiben,
Chief Financial Officer
Dated: May 16, 1996
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS
of
SERIES D SENIOR CONVERTIBLE PREFERRED STOCK
of
COMFORCE CORPORATION
(Pursuant to Section 151 of
the Delaware General Corporation Law)
COMFORCE Corporation, a corporation duly organized and existing under
and by virtue of the laws of the State of Delaware (the "Corporation"), HEREBY
CERTIFIES THAT the following Resolution was adopted by the Board of Directors of
the Corporation as required by Section 151 of the General Corporation Law of the
State of Delaware and pursuant to authority expressly vested in it by the
provisions of its Certificate of Incorporation, as amended, at a duly called
meeting of its Board of Directors held on May 6, 1996 at which a quorum was
present:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Corporation in accordance with the provisions of the
Certificate of Incorporation, as amended, the Board of Directors hereby creates
a series of Preferred Stock, par value $0.01 per share, of the Corporation and
hereby states the designations and authorized number of shares of such Preferred
Stock, and fixes the relative rights, preferences, and limitations thereof, as
follows:
Series D Senior Convertible Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series D Senior Convertible Preferred Stock" (the "Series D
Preferred Stock") and the number of shares constituting the Series D Preferred
Stock shall be Fifteen Thousand (15,000). Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series D Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights, or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series D Preferred Stock.
<PAGE>
Section 2. Dividends and Distributions.
(A) The holders of shares of Series D Preferred Stock, in preference to
the holders of Common Stock, par value $0.01 per share (the "Common Stock"), of
the Corporation, of any other series of stock that has shares issued and
outstanding on the date this Certificate of Designations is filed with the
Secretary of State of Delaware and of any other junior stock, shall be entitled
to receive, out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of February, May, August, and November in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date (the "First
Dividend Payment Date") after the date (the "First Issuance Date") of the first
issuance of a share or fraction of a share of Series D Preferred Stock, in an
amount per share equal to Fifteen Dollars ($15.00).
(B) Dividends shall be cumulative and shall begin to accrue on
outstanding shares of Series D Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series D Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series D Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series D Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series D Preferred
Stock shall have no voting rights whatsoever except as otherwise specifically
provided by the General Corporation Law of the State of Delaware.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series D Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series D Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to the
Series D Preferred Stock; provided that the Corporation may at any time
declare or pay dividends on any such junior stock payable in shares of
<PAGE>
any stock of the Corporation ranking junior (as to dividends and upon
dissolution, liquidation, or winding up) to the Series D Preferred
Stock; or
(ii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to the
Series D Preferred Stock; provided that the Corporation may at any time
redeem, purchase, or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(as to dividends and upon dissolution, liquidation, or winding up) to
the Series D Preferred Stock.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series D Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever or
converted into Common Stock in accordance with this Certificate of Designations
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock, par value $0.01 per share, or any similar
stock or as otherwise required by law.
Section 6. Liquidation, Dissolution, or Winding Up. Upon any
liquidation, dissolution, or winding up of the Corporation, no distribution
shall be made to the holder of shares of Common Stock, of any other series of
stock that has shares issued and outstanding on the date this Certificate of
Designations is filed with the Secretary of State of Delaware and of any other
stock ranking junior (upon liquidation, dissolution, or winding up) to the
Series D Preferred Stock unless, prior thereto, the holders of shares of Series
D Preferred Stock shall have received One Thousand Dollars ($1,000) per share
(the "Liquidation Value"), plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment.
If upon such liquidation, dissolution or winding up of the Corporation the
amount available for distribution to the holders of the Series D Preferred Stock
shall be insufficient to permit the payment in full to such holders of the
amounts to which they are otherwise entitled, then such amount shall be paid
ratably among the shares of Series D Preferred Stock. Written notice of such
liquidation, dissolution or winding up, stating a payment date, the amount of
the payments to be made with respect to a share of Series D Preferred Stock and
the place where said payments shall be payable, shall be given by mail, postage
prepaid, not less than Twenty (20) days prior to the payment date stated
therein, to the holders of record of the Series D Preferred Stock, such notice
to be addressed to each such holder at the holder's address as shown in the
records of the Corporation.
Section 7. Redemption. The shares of Series D Preferred Stock shall not
be redeemable.
<PAGE>
Section 8. Conversion.
(A) Optional Conversion By Holder. Each holder of a share of
Series D Preferred Stock shall have the right, at the option of the holder, at
any time and from time to time, to convert such share into fully paid and
nonassessable shares of Common Stock, based on the Conversion Price as described
herein. In order for a holder of a share of Series D Preferred Stock to exercise
the conversion option granted by this subsection with respect to any shares of
Series D Preferred Stock, the holder thereof shall surrender the certificate or
certificates therefor to the Corporation, duly endorsed in blank for transfer,
accompanied by a written notice of the election to convert such shares of Series
D Preferred Stock or a portion thereof executed on such form as may be
prescribed from time to time by the Corporation.
(B) Optional Conversion by the Corporation. At any time after
the first anniversary of the First Issuance Date, the Corporation may convert
all of shares of Series D Preferred Stock then outstanding into shares of Common
Stock based on the Conversion Price as described herein. Notwithstanding the
foregoing, the Corporation shall not have any right to convert shares under this
subsection unless during a period of at least twenty consecutive days occurring
prior to the date notice of the conversion is given, the closing sale price of
shares of Common Stock has been on each such day equal to or greater than Twenty
Dollars ($20) per share, based on the price as quoted on the American Stock
Exchange, or if the Common Stock is not listed on such exchange, on any other
exchange or the NASDAQ National Market System on which the Common Stock is
listed.
(C) Automatic Conversion. Each share of Series D Preferred
Stock outstanding on the fifth anniversary of the First Issuance Date shall
automatically, with no further action on the part of the holders thereof or the
Corporation, be converted into and become Common Stock based on the Conversion
Price as described herein.
(D) Mechanics of Conversion by the Corporation and Automatic
Conversion. In the event (i) the Corporation exercises its right to convert the
shares of Series D Preferred Stock into shares of Common Stock or (ii) the
shares of Series D Preferred Stock are automatically converted into shares of
Common Stock, written notice (the "Conversion Notice") shall be given by the
Corporation by mail, postage prepaid, to each holder of record (at the close of
business on the business day next preceding the day on which the Conversion
Notice is given) of shares of Series D Preferred Stock notifying such holder of
the conversion and specifying the number of shares of Common Stock into which
each share of Series D Preferred Stock has been converted, the place where the
certificates evidencing shares of Series D Preferred Stock should be delivered
and the procedures that should be followed in delivering the certificates so
that certificates evidencing the shares of Common Stock into which the Series D
Preferred Stock has been converted will be issued to such holder. The Conversion
Notice shall be addressed to each holder at the holder's address as shown by the
records of the Corporation. From and after the time that the shares of Series D
Preferred Stock are so converted into shares of Common Stock, certificates
evidencing the shares of Series D Preferred Stock, until they are delivered to
the Corporation in accordance with the instructions set forth in the Conversion
Notice, shall evidence the shares of Common Stock into which the shares of
Series D Preferred Stock have been converted. Following any such conversion of
the shares of Series D Preferred Stock into shares of Common Stock, the
Corporation shall not issue any more shares of Series D Preferred Stock.
(E) Conversion Price. All shares of Series D Preferred Stock
converted hereunder shall be converted into a number of shares of Common Stock
that is equal to the quotient of (i) the Liquidation Value of the shares of
Series D Preferred Stock converted and (ii) the Conversion Price, subject to
adjustment for fractional shares as provided below. The initial Conversion Price
under this Certificate of Designations shall be Twelve Dollars ($12), which
price shall be subject to adjustment as set forth below. For purposes of this
Section, to the extent that the Corporation does not at its option within
fifteen (15) days after shares of Series D Preferred Stock are converted
hereunder, pay any accrued and unpaid dividends with respect to those shares of
Series D Preferred Stock, whether or not declared, the amount of such accrued
and unpaid dividends shall be added to and be deemed to be a part of the
Liquidation Value of those shares.
(F) Issuance of Shares of Common Stock upon Conversion. Upon
any conversion of shares of Series D Preferred Stock as provided above, as soon
as practicable after the surrender of the certificates evidencing the shares and
after compliance with all other procedures relating thereto, the Corporation
shall cause to be issued and delivered, at its office or the office of its
transfer agent, to or on the order of the holder of the certificates thus
surrendered, a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such shares of Series D Preferred
Stock and, with respect to any fraction of a share otherwise issuable upon such
conversion, a dollar amount for such fraction of a share calculated based on a
per share value of Twelve Dollars ($12) per share. Except as otherwise provided
in subsection (D) of this Section, such conversion shall be deemed to have been
effected on the date on which the certificate for such shares of Series D
Preferred Stock have been surrendered and all other actions required to effect
such conversion in accordance with the terms set forth herein have been taken,
and the person in whose name any certificate or certificates for shares of
common stock are issuable upon such conversion shall be deemed to have become on
such date the holder of record of the shares of Common Stock represented
thereby.
(G) Stock Dividends, etc. In the event the Corporation shall,
at any time prior to the conversion of all outstanding shares of Series D
Preferred Stock, declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the Conversion Price
shall be adjusted effective at the time of such event by multiplying the
Conversion Price in effect immediately prior to such event by a fraction, the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event and the numerator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event. The
Corporation shall give the holders of record of Series D Preferred Stock notice
of any such adjustment to the Conversion Price by mail, postage prepaid,
addressed to each such holder at the holder's address as shown by the records of
the Corporation.
(H) Other Adjustments. If at any time after the date hereof
the Corporation shall, through merger or consolidation or otherwise, change its
shares of Common Stock into different securities or property, then the
Conversion Price per share and the other terms of conversion shall be equitably
adjusted in such manner, or such other equitable adjustments shall be made, as
the Board of Directors in its sole discretion determines to be appropriate. The
Corporation shall give the holders of record of the Series D Preferred Stock
written notice of any such adjustments made by the Board of Directors, which
notice shall be given by mail, postage prepaid, addressed to each such holder at
the holder's address as shown by the records of the Corporation.
IN WITNESS WHEREOF, COMFORCE Corporation has caused its corporate seal
to be hereunder affixed and this certificate to be executed on behalf of the
Corporation by its President and its Secretary this 7th day of May, 1996.
COMFORCE CORPORATION
By:____________________________
President
SEAL
By:____________________________
Secretary
EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS
of
SERIES E CONVERTIBLE PARTICIPATING PREFERRED STOCK
of
COMFORCE CORPORATION
(Pursuant to Section 151 of
the Delaware General Corporation Law)
Comforce Corporation, a corporation duly organized and existing under
and by virtue of the laws of the State of Delaware (the "Company"), HEREBY
CERTIFIES THAT the following Resolution was adopted by the Board of Directors of
the Company as required by Section 151 of the General Corporation Law of the
State of Delaware and pursuant to authority expressly vested in it by the
provisions of its Certificate of Incorporation, as amended, by a unanimous
written consent executed as of April 26, 1996:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company in accordance with the provisions of the
Certificate of Incorporation, as amended, the Board of Directors hereby creates
a series of Preferred Stock, par value $0.01 per share, of the Company and
hereby states the designation and authorized number of shares of such Preferred
Stock, and fixes the relative rights, preferences, and limitations thereof, as
follows:
Series E Convertible Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series E Convertible Participating Preferred Stock" (the "Series
E Preferred Stock") and the number of shares constituting the Series E Preferred
Stock shall be 10,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series E Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights, or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series E Preferred Stock.
<PAGE>
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
other series of Preferred Stock, par value $0.01 per share, of the
Corporation (or any similar stock) ranking prior and superior to the
Series E Preferred Stock with respect to dividends, the holders of
shares of Series E Preferred Stock, in preference to the holders of
Common Stock, par value $0.01 per share (the "Common Stock"), of the
Corporation, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in
cash on the first day of March, June, September, and December in each
year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series E
Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (i) $1 or (ii) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series E Preferred Stock. In the
event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which
holders of shares of Series E Preferred Stock were entitled immediately
prior to such event under clause (ii) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series E Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1 per share on the Series E Preferred
Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series E Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series E Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Series E Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. Notwithstanding the foregoing, if shares of
Series E Preferred Stock are converted into shares of Common Stock of
the Corporation before the second Quarterly Dividend Payment Date to
occur after the first issuance of a share or fractional share of Series
E Preferred Stock, then no dividends shall be deemed to have accrued or
be payable with respect to the Series E Preferred Stock other than
dividends that are determined based on the amount of dividends or other
distributions declared or paid with respect to the Common Stock. The
Board of Directors may fix a record date for the determination of
holders of shares of Series E Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series E Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series E Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in each such case the
number of votes per share to which holders of shares of Series E
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate
of Designations creating a series of Preferred Stock, par value $0.01
per share, or any similar stock, or by law, the holders of shares of
Series E Preferred Stock and the holders of shares of Common Stock and
any other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series E Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series E Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series E Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to the
Series E Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution, or winding up) with the
Series E Preferred Stock, except dividends paid ratably on the Series E
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to the
Series E Preferred Stock, provided that the Corporation may at any time
redeem, purchase, or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation, or winding
up) to the Series E Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series E Preferred Stock, or any shares of
stock ranking on a parity with the Series E Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series E Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock, par value $0.01 per share, or any similar
stock or as otherwise require by law.
Section 6. Liquidation, Dissolution, or Winding Up. Upon any
liquidation, dissolution, or winding up of the Corporation, no distribution
shall be made (A) to the holder of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to the Series E
Preferred Stock unless, prior thereto, the holders of shares of Series E
Preferred Stock shall have received the greater of (i) $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, or (ii) an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (B) to the holders of shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution, or winding up) with
the Series E Preferred Stock, except distributions made ratably on the Series E
Preferred Stock and all such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution, or winding up. In the event the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series E Preferred Stock were entitled under clause (A)(ii)
of the first sentence of this Section immediately prior to such event shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination, or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash, and/or any other property, then in any such case each share of
Series E Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash, and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series E Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption The shares of Series E Preferred Stock shall not
be redeemable.
Section 9. Rank. Unless otherwise provided in the rights , preferences
and limitations of any other series of the Corporation's Preferred Stock, par
value $0.01 per share, the Series E Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets, junior to all other
series of the Corporation's Preferred Stock, par value $0.01 per share.
Section 10. Conversion Each outstanding share of Series E Preferred
Stock shall automatically, with no further action on the part of the holders
thereof, be converted into and become, subject to the provision for adjustment
hereinafter set forth, one hundred (100) shares of Common Stock on the date (A)
the Certificate of Incorporation of the Corporation is amended so that the
Corporation has a sufficient number of authorized and unissued shares of Common
Stock to effect such conversion with respect to all of the shares of Series E
Preferred Stock outstanding after the initial issuance of such shares and prior
to such conversion and (B) all accrued and unpaid dividends on the Series E
Preferred Stock have been paid in full. In the event the Corporation shall at
any time prior to such conversion declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of shares of Common Stock into which a share of Series E Preferred Stock
is convertible pursuant to this Section shall be adjusted effective at the time
of such event by multiplying the number of shares into which a share of Series E
Preferred Stock is convertible immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
11. Conversion Mechanics. Following conversion of the shares of Series
E Preferred Stock into shares of Common Stock, written notice (the "Conversion
Notice") shall be given by the Company by mail, postage prepaid, to each holder
of record (at the close of business on the business day next preceding the day
on which the Conversion Notice is given) of shares of Series E Preferred Stock
notifying such holder of the conversion and specifying the number of shares of
Common Stock into which each share of Series E Preferred Stock has been
converted, the place where the certificates evidencing shares of Series E
Preferred Stock should be delivered and the procedures that should be followed
in delivering the certificates so that certificates evidencing the shares of
Common Stock into the Series E Preferred Stock has been converted will be issued
to such holder. The Conversion Notice shall be addressed to each holder at the
holder's address as shown by the records of the Company. From and after the time
that the shares of Series E Preferred Stock are converted into shares of Common
Stock, certificates evidencing the shares of Series E Preferred Stock, until
they are delivered to the Corporation in accordance with the instructions set
forth in the Conversion Notice, shall evidence the shares of Common Stock into
which the shares of Series E Preferred Stock have been converted. Following
conversion of the shares of Series E Preferred Stock into shares of Common
Stock, the Corporation shall not issue any more shares of Series E Preferred
Stock.
WITNESS WHEREOF, Comforce Corporation has caused its corporate seal to
be hereunder affixed and this certificate to be executed on behalf of the
Corporation by its President and its Secretary this 26th day of April, 1996.
COMFORCE CORPORATION
By:____________________________
President
SEAL
By:____________________________
Secretary
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
PSST
STOCK PURCHASE AGREEMENT, dated effective as of the 13th day
of May 1996, by and among COMFORCE TECHNICAL SERVICES, INC. hereinafter referred
to as the "Purchaser"), a Delaware corporation, with its principal office at
2001 Marcus Avenue, Lake Success, NY 11042; COMFORCE CORPORATION ("Parent"), a
Delaware corporation, with its principal office at 2001 Marcus Avenue, Lake
Success, NY 10042; PROJECT STAFFING SUPPORT TEAM, INC., an Arizona corporation
(the "Company"), with offices located at 1858 E. Southern Avenue, Suite 102,
Tempe, Arizona 85282; RAPHAEL RASHKIN, an individual residing at 117 Harbor
Lane, West Bayshore, NY 11706 ("R. Rashkin") and STANLEY RASHKIN ("S. Rashkin"
or "Stockholder"), residing at 2079 East LaVieve, Tempe, AZ 85284.
WHEREAS, the Stockholder desires to sell and the Purchaser
desires to acquire all of the issued and outstanding stock of Stockholder for
the purchase price hereinafter described and upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of such sale and of the
foregoing and of the mutual agreements hereinafter set forth, the parties hereto
do hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the terms defined throughout
this Agreement (as defined), the following terms shall have the following
meanings (such meanings to be equally applicable to the singular and plural
forms thereof):
"Affiliate" means any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person and,
without limiting the generality of the foregoing, includes (i) any Person which
beneficially owns or holds 25% or more of any class of voting securities of such
Person or 25% or more of the equity interest in such Person, (ii) any Person of
which such Person beneficially owns or holds 25% or more of any class of voting
securities or in which such Person beneficially owns or holds 25% or more of the
equity interest in such Person and (iii) any director, officer or employee of
such Person. For the purposes of this definition, the term "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agreement" means this Agreement together with all exhibits, schedules,
supplements and documents as may be attached hereto or incorporated herein by
reference and the letter agreement dated April 19, 1996 between Purchaser, the
Company, CTS Acquisition Co. I, DTS and RRA (the "Letter Agreement").
"Assets" means all of the following assets other than the Excluded
Assets of the Company to the extent the same are utilized by the Company in
connection with the operation of the Business as of the date hereof and/or at
any time prior to Closing:
(a) "General Intangibles" - (i) all Company's right, title and
interest in the names "Datatech Technical Services, Inc.", "RRA, Inc.", "Project
Staffing Support Team, Inc.", "PSST", any similar names, and, all the Company's
right, title and interest in and to utilize any and all of the following
associated with, arising out of, relating to or utilized, as of the date hereof,
in connection with the Business: any and all trade names, trademarks,
copyrights, service marks, logos and slogans (including, without limitation, all
registrations, filings and certificates and the sole and exclusive rights to
file and/or prosecute any such registrations, filings and certificates), and
(ii) all the Company's right, title and interest in computer software, programs,
know-how, trade secrets and data bases used in the Business.
(b) "Customer Materials" - any and all agreements, orders,
requirements and inquiries from or with past, current or prospective customers
arising out of or relating to the operation of the Business, including without
limitation, the contracts listed on Exhibit "C" "Contracts") and all work orders
issued pursuant thereto, and all rights of Company thereunder.
(c) "Employee Materials" - all information, in whatever medium that it
be manifested, depicted, stored or presented including, but not limited to,
paper, hardcopy, computer disks, tapes and databases, with respect to Company
Employees whose services are now provided or have been provided or
are to be
provided to Customers, and all rights of Company in such information and all
rights and remedies of the Company with respect to providing to current and
future customers the future services of Company Employees.
(d) "Real Property" - those leasehold interests described on
Exhibit "A"
annexed hereto and made a part hereof.
(e) "Records" - the originals or certified copies of those
Business or financial records of the Company, evidencing the Customer Materials,
Employee Materials, General Intangibles, Equipment and/or Company Employees,
including without limitation: (i) all files and records pertinent, relevant or
in any way connected with the performance of services under the Contracts; (ii)
all sales records and Customer listings dealing with or pertaining to former or
prospective Customers, including but not necessarily limited to records of sales
calls and follow-ups previously made in connection with the solicitation of
Business; (iii) all personnel files relating to Company Employees wherever
located, in whatever form in which they exist and whatever medium maintained or
stored, including but not necessarily limited to all payroll records, resume
files maintained by Company including those with respect to Company Employees
currently assigned to Customers and those being maintained for possible future
use by Company in the performance and conduct of its Business, all payroll
records, and year-to-date earning statements and reports; and the originals of
all permits, licenses, consents, authorizations and/or permissions for or with
respect to the Business;
(f) "Equipment" - all of the tangible personal property utilized
by the Company, including without limitation, the office furniture, fixtures,
supplies, brochures, sales material, computer equipment, and any other equipment
owned by the Company wherever located, as set forth on Exhibit "B" annexed
hereto and made a part hereof.
(g) "Vendor Contracts" - all contracts (other than the Contracts)
pursuant to which Company is furnished goods or services.
"Billable Employees" means Company Employees who are as of the Closing
Date on assignment to Company's Customers for whom a direct charge to the
Customer is made.
"Business" means providing one or more of a wide range of technical and
consulting services to customers through the use of personnel, including without
limitation qualified designers, drafters, engineers, computer programmers,
systems analysts, technicians, which personnel are generally utilized by the
customers on a temporary, project or peak period basis. Primary lines of
Business activity include information technology, design, drafting, engineering,
and technical staff augmentation services. The Business also includes the
assumption of staffing of an entire department, service center or discipline and
providing human resource and other administrative services to a customer for a
fee.
"Closing" means the consummation of the within transactions including
the execution and delivery of all documents, certificates, resolutions,
assignments and opinions contemplated in this Agreement.
"Closing Date" means the established date for the Closing, which date
shall be May 10, 1996 effective 12:00 a.m. on May 13, 1996 or such other date as
shall be agreed upon by the parties in accordance with the Letter Agreement.
"Combined Business" means the Business of Datatech, the Business of
PSST and the Business of RRA.
"Company Employees" means those persons whose services have been
provided to Customers by the Company at any time during the last 12 months
preceding the Closing Date and for whom a direct charge has been made to the
Customer. This definition shall not constitute an admission that such persons
are employees of the Company under any legal theory ascribing or allocating to
the Company responsibility or liability for the acts or omissions of such
persons.
"Contingency Escrow Agreement" means the Contingency Escrow Agreement
attached as Exhibit "BB".
"Customers" means those Persons to which Company has made sales or
rendered services during any time 12 months prior to the Closing Date.
"Employee Benefit Plans" means the employee benefit plans maintained by
Company listed
on Exhibit "W".
"GAAP" means generally accepted accounting principles in the United
States of America. "Indemnity Escrow Agreement" means the indemnity Escrow
Agreement attached as Exhibit "X".
"Medical Plan" means the plan providing medical benefits for the
Company's employees.
"PSSTSM Section 401(k) Plan" means the Section 401(k) Plan maintained
by the Company.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a business trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Profit" means the revenues of the Business less all costs directly
associated with the Business including but not limited to the cost of
collections, direct labor charges, fringes, payroll deductions, workers
compensation insurance, benefits, staff salaries, bonuses and costs, rent,
telephone, insurance, sales, marketing, and recruiting costs, other operating
expenses, legal, accounting and other professional fees, charges for reserves
and accruals and interest charges for financing the billable employee payroll
and on-going business operations, but excluding (i) any interest or finance
charges or other costs of any kind directly related to the transactions
contemplated by this Agreement, (ii) charges by a direct or indirect parent
company of the Purchaser whereby the parent allocates its corporate overhead to
the Business (excluding costs directly related to or incurred on behalf of the
Business), and (iii) any costs and revenues related to such costs over which S.
Rashkin as employee of Parent or an affiliate of Parent has no control (for
example, without limitation, the costs of and the revenues from a contract
required by Parent to be entered into or an employee required by Parent to be
hired), unless S. Rashkin has been terminated for cause pursuant to the
employment agreement attached as Exhibit "G" or has voluntarily resigned without
Purchaser, Parent or Parent's affiliate having breached its employment agreement
with S. Rashkin. Profit shall be calculated on a pre-income tax basis and before
deduction for depreciation, amortization and interest charges other than
interest and other charges associated with the financing of the Billable
Employee payroll and on-going operations.
(a) If workers compensation premium expense or any other cost directly
associated with the Business, as a percentage of total labor billings, exceeds
the cost that would have been attainable by the Rashkin Companies if this
transaction had never occurred after accounting for injuries or other
circumstances relating to the conduct of the Business before or after the
Closing Date that affect such cost (the "Company's Historic Cost"), such excess
shall be excluded for purposes of calculating Profit. For purposes of this
section, Company's Historic Cost shall exclude any excess workers' compensation
premium expense resulting because the current or future experience modification
factor of any business of the Purchaser Companies other than the Combined
Business is less favorable than that of the Rashkin Companies.
(b) If any cost directly associated with the Business represents a
change in the Business itself as a profit center, including without limitation
the acquisition of a new business from another business entity and associated
expenses of the acquired business or the addition of personnel not associated
with additional revenues such as a central processing center for all Purchaser
Company operations, the Rashkin Companies shall have the option to elect either
to include in the determination of Profit both the revenues and expenses (other
than expenses allocated to the Business on a "head-count" basis) arising from or
in connection with the change in the Business or to exclude both the revenues
and expenses arising from or in connection with the change in the Business.
Notwithstanding the foregoing, if Purchaser shall give the Rashkin Companies
written notice of any such changes, the Rashkin Companies shall have 30 days
from the receipt of such notice to elect in a written election delivered to
Purchaser whether or not to include the revenues and expenses in its profit
center for purposes of calculating Profit. Such election shall be binding for
all future calculations of Profit. If the Rashkin Companies fail to make such
election within said time period, the Rashkin Companies shall be deemed to have
elected to include the revenues and expenses in their profit center under this
Agreement, and the Asset Purchase Agreement between DTS and CTS Acquisition Co.
I and the Asset Purchase Agreement between RRA and Purchaser.
(c) In determining Profit, accrued liabilities (for example but without
limitation, vacation and sick pay) shall be determined, insofar as GAAP does not
specifically prescribe a methodology, using (i) the same methodologies currently
used by the Rashkin Companies or (ii) the methodology actually used by Purchaser
in its audited financial statements, whichever produces the lesser expense.
(d) The calculation of Profit under this definition is subject to the
dispute resolution mechanism described in Section 2.2. "Purchase Price" has the
meaning ascribed in Article 2 of this Agreement. "Purchaser" has the meaning
ascribed thereto in the Preamble. "Purchaser Company" means Parent, Purchaser,
and C TS Acquisition Co. I. "Rashkin Company" shall mean collectively RRA, Inc
("RRA"), Datatech Technical Services, Inc.("DTS") and PSST. "Receivables" shall
have the meaning ascribed in Section 4.1. "U.S. $ or $" means the currency of
the United States of America
1.2 Certain Terms. All references to Articles and Sections herein are
to the Articles and Sections of this Agreement unless otherwise specified.
ARTICLE 2
ACQUISITION PRICE
2.1 Upon the terms and subject to the conditions and the
performance of Stockholder's and Company's obligations and duties set forth in
this Agreement, and in consideration for the conveyance, transfer, assignment
and delivery of all of the issued and outstanding stock of the Company to
Purchaser, Stockholder shall receive the following (the "Acquisition Price"):
(a) An initial payment subject to adjustment as provided in
Section 2.4 ("Initial Payment") on the date of Closing of $1,900,000 in cash,
wire or certified funds (collectively, "Cash") payable to Stockholder.
(b) In addition to the Initial Payment, the Stockholder shall
receive from Purchaser or Parent a portion of the earnings of the Combined
Business (including earnings on any contracts entered into by the Combined
Business after Closing) in each annual period described below, equal to $133,333
per year as a contingent payout ("Contingent Payout"), provided that the
Combined Business earns minimum (pretax) Profits of $750,000 from the Closing
Date until December 31, 1996 (reduced by $93,750.00 for each month after April
28, 1996 or pro rata portion of such month after April 28 that the Closing Date
occurs) (first annual period) and $850,000 in calendar year 1997 (the second
annual period) and in calendar year 1997 (the third annual period) ("Minimum
Profit"). The Contingent Payout for each period shall be deposited by Purchaser
or Parent with the escrow agent under the Contingency Escrow Agreement, within
thirty (30) days after the Minimum Profit for such period has been achieved,
based on the internally prepared year-to-date income statement of the Combined
Business. Under the Contingency Escrow Agreement, funds deposited with the
escrow agent for each of the three periods for which Minimum Profit is
calculated hereunder shall be disbursed to Stockholder upon confirmation within
sixty (60) days after the end of each relevant period that the Minimum Profit
for the full annual period has been achieved as of the end of each such annual
period. It is acknowledged and agreed that forty percent (40%) of the Advance
Payments as defined in the Letter Agreement shall be allocated to PSST (the
"Allocated Amount") and the Contingent Payout for each period shall be reduced
by one third of the Allocated Amount. All other terms of the Letter Agreement
remain the same and are incorporated herein.
(c) The calculation of Profit for each annual period of the
Contingent Payout shall stand alone and the Profits and associated revenues,
costs, expenses, losses, allocations and reserves shall not be attributed to
past or future periods nor carried forward or back to another period. Any annual
contingent payment not earned hereunder shall be retained by Purchaser.
(d) If, for any annual period, there is any material change in
annualized interest expense attributable to debt-financed accounts receivable
because of a change in the percentage of accounts receivable of the Business
which are debt financed (when compared with the daily average percentage of
debt-financed accounts receivable for the one year period immediately before
Closing), then the dollar increase or decrease in the annualized interest
expense resulting therefrom (as calculated under the following sentence) will
either: (A) be subtracted from the Minimum Profit in the event of an increase;
or (B) added to the Minimum Profit, in the event of a decrease.
(e) The dollar increase or decrease in annualized interest expense
resulting from a change in the percentage of accounts receivable that are
debt-financed will be determined by multiplying the increase or decrease in the
percentage of accounts receivable that are debt-financed by the average daily
borrowing base for the one year period prior to the Closing. Exhibit D annexed
hereto sets forth for example purposes only the manner in which said calculation
would be made assuming the Company's percentage of accounts receivable that are
debt financed over the one year period immediately before Closing is thirty
percent (30%).
(f) Subject to the terms of this Agreement and Section 6(j) of S.
Rashkin's Employment Agreement with Purchaser, the Contingent Payments will be
payable without regard to S. Rashkin's continued employment with or R. Rashkin's
continued service as a consultant to the Purchaser or any Purchaser Company at
the time the Contingent Payment would otherwise be due and payable.
(g) Parent and Purchaser shall be jointly and severally obligated
to pay the Contingent Payout including the deposit of the Contingent Payout with
the Escrow Agent under the Contingency Escrow Agreement as provided in Section
2.1(b) above.
2.2 Purchaser shall provide the Stockholder with accounting
statements, in reasonable detail, which will indicate the information necessary
to make the calculations referenced in Section 2.1 above within 45 days after
the end of the respective annual period, provided that such information as may
be necessary or appropriate to make the calculations is provided to Parent by S.
Rashkin in his capacity as President of the Purchaser in accordance with the
Employment Agreement between himself and the Purchaser. The determination of
Profit and calculation of any pay-out will be made in accordance with GAAP
applied on a consistent basis for all periods before and after the Closing Date.
The statements will be deemed final and correct unless the Stockholder, by
written notice within 30 days from the date of delivery of the accounting
statements, contests the determination. If the Stockholder does not contest the
accounting statements within the 30 day period, the statements will be deemed
correct and Stockholder shall waive all right to contest the statements. Any
notice hereunder must specify the reasons for disagreement in reasonable detail.
Upon receipt of any such notice, if the parties cannot settle any disputes or
grievances relating to the calculations referred to in Section 2.1, within
thirty (30) days of the date of receipt by Purchaser of Stockholder's written
notice of dispute, Purchaser and Stockholder shall submit any such unresolved
dispute to an independent accounting firm of national reputation appointed
jointly by Purchaser and Stockholder (neither of which may unreasonably withhold
or delay such appointment) (the "Independent Accounting Firm"). The Independent
Accounting Firm, within 20 business days after appointment, shall determine
whether Profits for the annual period with respect to which the dispute has
arisen are less than, equal to or greater than the Minimum Profit for that
period. If the Independent Accounting Firm determines that Profits are equal to
or greater than Minimum Profit, the Purchaser shall pay the Contingent Payout
for the disputed period to Stockholder within three (3) business days thereafter
and shall pay the fees and disbursements of the Independent Accounting Firm. If
the Independent Accounting Firm determines that Profits are less than Minimum
Profits for the disputed period, the Stockholder shall pay the fees and
disbursements of the Independent Accounting Firm.
2.3 INTENTIONALLY OMITTED.
2.4 (a) In the event that the aggregate amount of the cash,
prepaid expenses and deposits as shown on the Closing Balance Sheet and the
collectable accounts receivable as defined in subsection (c) (the "Current
Assets") of the Company as of the Closing Date is greater than the liabilities
(the "Liabilities") of the Company as of the Closing Date, then Purchaser shall
pay to Stockholder, in accordance with subsection (d) of this Section, the
amount by which such Current Assets exceed such Liabilities. In the event that
the aggregate amount of the Liabilities of the Company as of the Closing Date as
shown on the Closing Balance Sheet is greater than the Current Assets of the
Company as of the Closing Date, then Stockholder shall pay to Purchaser, in
accordance with subsection (d) of this Section, the amount by which such
Liabilities exceed such Current Assets.
(b) In order to establish the amount of cash, prepaid expenses,
deposits and liabilities of the Company as of the Closing Date, the following
procedures shall be followed:
(i) At the Closing, the Company shall deliver to Purchaser a
balance sheet for PSST for the most recent month then ended (the "Interim
Balance Sheet") prepared in accordance with GAAP on a basis consistent with the
Financial Statements and that shall be deemed to be a part of the Financial
Statements for purposes hereof.
(ii) As promptly as practicable, and in any event not more than 60
days following the Closing Date, Purchaser shall prepare and deliver to
Stockholder a balance sheet of PSST as of the Closing Date (the "Closing Balance
Sheet"). The Closing Balance Sheet shall be prepared in accordance with GAAP
applied on a consistent basis with the Financial Statements.
(iii) (A) Stockholder may dispute the Closing Balance Sheet by
notifying Purchaser in writing setting forth, in reasonable detail to the extent
possible, the amount(s) in dispute and the basis for such dispute, within 30
days of Seller's receipt of the Closing Balance Sheet. If Stockholder does not
contest the Closing Balance Sheet within the 30 day period, the Closing Balance
Sheet shall be deemed correct and Stockholder shall waive all rights to contest
the Closing Balance Sheet. (B) If Purchaser and Stockholder are unable to
resolve a dispute regarding the Closing Balance Sheet, Purchaser and Stockholder
shall submit any such unresolved dispute to the Independent Accounting Firm. The
Independent Accounting Firm, within 20 business days after appointment, shall
determine any amount that is in dispute, which determination shall be final for
puposes of this Section. (iv) The fees and disbursements of the Independent
Accounting Firm shall be borne by the Purchaser and the Stockholder in the
proportion that the aggregate amount of disputed items submitted to the
Independent Accounting Firm that is unsuccessfully disputed by each such party
(as finally determined by the Independent Accounting Firm). (c) For purposes of
this Section, the amount of collectable accounts receivable of the Company as of
the Closing Date shall be equal to the aggregate amount of the collections
received by the Company ("Receipts") during the one hundred eighty (180) day
period (the "Receipt Period") immediately following the Closing Date with
respect to receivables on the books of the Company on the Closing Date. (d)
Within fifteen (15) days after the end of the Receipt Period, the Purchaser
shall deliver to Stockholder a statement setting forth in reasonable detail the
amount of the Receipts for the Receipt Period and stating whether any amount is
payable by Purchaser to Stockholder under subsection (a) or by Stockholder to
Purchaser under subsection (a) hereunder as a result of the amount of such
Receipts. If any amount is due from Purchaser to Stockholder as a result of such
receipts, said amount shall accompany such statement. If any amount is due from
Stockholder to Purchaser as a result of the amount of such Receipts, Stockholder
shall pay the amount due to Purchaser promptly after receipt of such statement.
ARTICLE 3 CLOSING 3.1 The Closing for the transactions contemplated by this
Agreement (the "Closing") shall take place on or before the Closing Date at the
Arizona offices of the Stockholder's counsel or such other time and place as may
be mutually approved by the parties. The parties shall adjust all expenses on a
pro rata basis as of the Closing Date. 3.2 Commencing with the execution of this
Agreement, the Company and the Stockholder agree to commence the preparation of
and make diligent application for, to follow up on, and to actively and
diligently pursue all approvals and consents reasonably requested by Purchaser
including but not limited to the consents for approval of assignment of the
Contracts in a form reasonably acceptable to Purchaser. Purchaser acknowledges
that in numerous cases such consent will require Purchaser to execute
confidentiality and nondisclosure agreements for the benefit of third parties to
the Contracts and will require Purchaser to qualify for security clearances
acceptable to such third parties. The Company and the Stockholder agree to
direct and coordinate Purchaser's preparation of and application for, such
security clearances and Purchaser agrees to use its diligent best efforts
including without limitation, taking such actions as are within its ability and
control, as the Company and the Stockholder instruct it to take to obtain the
necessary security clearances (collectively, "Purchaser Clearance
Requirements"). 3.3 At the Closing, the Company and the Stockholder as the case
may be, shall deliver to the Purchaser: (a) stock certificates duly endorsed in
blank evidencing all of the issued and outstanding stock of PSST; (b)
Assignments of the Contracts executed and approved by an authorized
representative of the Company's Customer, if required, in a form satisfactory to
Purchaser; (c) Consents to the assignment of the Company's interest in the Real
Property if required; (d) Executed counterparts, and/or copies, as the case may
be, of the instruments and documents required to be delivered to the Purchaser
at the Closing as herein provided; (e) A certified copy of resolutions adopted
unanimously by the Company's Boards of Directors authorizing the execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby, or, at Purchaser's option, a written
consent executed by the stockholder of the Company authorizing and consenting to
the transactions herein; (f) A tax compliance certificate from all states in
which the Company conducts or, within the one year preceding Closing, conducted
business; and (g) Employment agreements between S. Rashkin and Evan Burks and
Purchaser executed by them in substantially the same form as annexed hereto as
Exhibit "G" and "H". The Company and the Stockholder will from time to time at
the Purchaser's request, whether prior to, at, or after the Closing, and without
further consideration, execute and deliver such further instruments and
conveyances and transfers, and take such other action as the Purchaser may
reasonably require to more effectively convey and transfer to the Purchaser the
stock.
3.4 INTENTIONALLY OMITTED.
3.5 Purchaser will continue to employ all employees of the Company
except those employees Purchaser discloses to the Company upon completion of its
due diligence under Section 13.1(o). Purchaser does not guarantee that any such
employment will continue for a specified period and may in its discretion make
any or all such employees at will employees, except as otherwise provided in
their written employment agreements. Nothing herein express or implied shall
confer upon any such employee or any other person any rights or remedies
including without limitation, any right to employment, or continued employment
for any specified period, of any nature or kind whatsoever under or by reason of
this Agreement.
3.6 INTENTIONALLY OMITTED.
3.7 INTENTIONALLY OMITTED. ARTICLE 4
COLLECTION OF ACCOUNTS RECEIVABLE,
PAYMENT OF ACCOUNTS PAYABLE, ASSUMPTION OF
EMPLOYEE BENEFIT PLANS AND OTHER POST-CLOSING OBLIGATIONS
4.1 INTENTIONALLY OMITTED.
4.2 INTENTIONALLY OMITTED.
4.3 INTENTIONALLY OMITTED.
4.4 INTENTIONALLY OMITTED.
4.5. INTENTIONALLY OMITTED.
4.6 As of the Closing Date, S. Rashkin shall resign as Trustee
of the Retirement Plans and Purchaser shall provide evidence satisfactory to
Stockholder that a designee of Purchaser has become Trustee of the Plans.
4.7 INTENTIONALLY OMITTED.
4.8 INTENTIONALLY OMITTED.
4.9 INTENTIONALLY OMITTED.
4.10 INTENTIONALLY OMITTED.
4.11 INTENTIONALLY OMITTED.
ARTICLE 5
STOCKHOLDER'S AND COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Purchaser to execute and perform this
Agreement, the Stockholder and the Company hereby represent, warrant, covenant
and agree (which representations, survival warranties, covenants and agreements
shall be and be deemed to be continuing and survive the execution and delivery
of this Agreement and the Closing Date) as follows:
5.1 The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
with the full power and authority, corporate and otherwise, and with all
licenses, permits, certifications, registrations, approvals, consents and
franchises necessary to own or lease and operate its properties and to conduct
its Business as presently being conducted. The Company is duly qualified to do
business as a foreign corporation, and is in good standing, in all
jurisdictions, if any, wherein such qualification is necessary in order to avoid
a material adverse effect upon its Business.
5.2 The Company owns and has good and marketable title in and
to the Property and assets to be sold or transferred hereunder free and clear of
all liens, claims and encumbrances and rights and option of others except as
herein expressly provided to the contrary and except for the liens set forth on
Exhibit "L" ("Permitted Liens"). 5.3 The Stockholder owns all of the issued and
outstanding shares of stock of Company as listed on Exhibit "I" and at the
Closing there shall not be authorized and issued and outstanding any shares of
capital stock of Company and/or rights to purchase shares of capital stock of
Company except indicated on Exhibit "I". The issued and outstanding shares of
the Company have been duly authorized and validly issued, and all such
outstanding shares are fully paid and non assessable. At the Closing there will
be no outstanding trust agreements, options, warrants and similar rights to
purchase shares of capital stock. There are no preemptive rights.
5.4 (i) The Company has the full power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby; (ii) the execution, delivery and performance of this
Agreement, the consummation by the Company of the transactions herein
contemplated and the compliance by the Company with the terms of this Agreement
have been duly authorized, and this Agreement has been duly and properly
authorized, executed and delivered by the Company; (iii) this Agreement is the
valid and binding obligation of the Company, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting the rights of
creditors generally and the discretion of courts in granting equitable remedies;
(iv) the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions herein contemplated does
not, and will not, with or without the giving of notice or the lapse of time, or
both, (A) result in any violation of the articles of incorporation or bylaws of
the Company, (B) result in a breach of or conflict with any of the terms or
provisions of, or constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company and/or pursuant to, any indenture, mortgage, note, contract, commitment
or other agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are or may be bound or affected (assuming for
purposes of this provision that all consents referred to in Exhibit "J" are
obtained); (C) violate any existing applicable law, rule, regulation, judgment,
order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company any of its properties or businesses that would
have a material adverse effect on the Company, or (D) have any effect on any
agreement, permit, certification, registration, approval, consent, license or
franchise necessary for the Company to own or lease and operate any of its
properties and to conduct its businesses or the ability of the Company to make
use thereof (assuming for purposes of this provision that all consents referred
to in Exhibit "J" are obtained). No consent, approval, authorization or order of
any court, Customer, governmental agency, authority or body and/or any party to
an agreement to which the Company is a party and/or by which it is bound, is
required in connection with the execution, delivery and performance of this
Agreement, and/or the consummation by the Company of the transactions
contemplated by this Agreement except as noted on Exhibit "J".
5.5 The Company is not in violation of, or in default under,
(i) any term or provision of its articles of incorporation or bylaws; (ii) any
material term or provision or any financial covenant of any indenture, mortgage,
contract, commitment or other agreement or instrument to which it is a party or
by which it or any of its properties or business is or may be bound or affected;
or (iii) any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or any of its properties or business. The Company owns,
possesses or has obtained all governmental and other licenses, permits,
certifications, registrations, approvals or consents and other authorizations
necessary to own or lease, as the case may be, and to operate its properties and
to conduct its business or operations as presently conducted and all such
governmental and other licenses, permits, certifications, registrations,
approvals, consents and other authorizations are outstanding and in good
standing, and there are no proceedings pending or, to the best of Stockholder's
knowledge, threatened, or any basis therefore existing, seeking to cancel,
terminate or limit such licenses, permits, certifications, registrations,
approvals or consents or authorizations.
5.6 Prior to the date hereof the Company has delivered to
Purchaser the audited consolidated financial statements of the Company described
on Exhibit "K" annexed hereto and made a part hereof ("Financial Statements").
The Financial Statements fairly present the financial position of the Company as
of the respective dates thereof and the results of operations, and changes in
financial position of the Company, for each of the periods covered thereby and
are true and accurate. The Financial Statements have been prepared in conformity
with generally accepted accounting principles, applied on a consistent basis
throughout the entire periods involved. As of the date of any balance sheet
forming a part of the Financial Statements, and except as and to the extent
reflected or reserved against therein, the Company did not have any material
liabilities, debts, obligations or claims (absolute or contingent) asserted
against it and/or which should have been reflected in a balance sheet or the
notes thereto, and all assets reflected thereon are properly reported and
present fairly the value of the assets therein stated in accordance with
generally accepted accounting principles.
5.7 The financial and other books and records of the Company
(including those forming a part of the Assets) (i) are in all material respects
true, complete and correct and have, at all times, been maintained in accordance
with good business and accounting practices; (ii) contain a complete and
accurate description, and specify the location, of all trucks, machinery,
equipment, furniture, supplies, tools, drawings and all other tangible personal
property (collectively the "Personal Property") owned by, in the possession of,
or used by the Company in connection with the operation of its Business in the
normal course of business; (iii) except as set forth on Exhibit "L" annexed
hereto and made a part hereof, none of such Personal Property is leased or
subject to a security agreement, conditional sales contract or other title
retention or security agreement or is other than in the possession of and under
the control of the Company, (iv) the Personal Property reflected in such books
and records constitutes all of the tangible personal property necessary for the
conduct by the Company of its Business as now conducted; and all of the same is
in normal operating condition and the use thereof as presently employed conforms
to all applicable laws and regulations.
5.8 Annexed hereto and labeled Exhibit "A" is a schedule
setting forth a description of each parcel of improved or unimproved real
property owned by or leased to the Company. Exhibit "A" is true correct and
complete in all respect; each of such leases are in full force and effect with
no event of default in existence or event or occurrence which, with the passage
of time and/or giving of notice would or could mature into an event of default
thereunder. 5.9 The Company owns all rights to utilize its General Intangibles
free and clear of all liens, claims and encumbrances and rights and options of
third parties (including without limitation former or present officers,
directors, stockholders, employees and agent, but excluding the rights of
licensors) other than Permitted Liens; the Company has not licensed or leased
any of the General Intangibles and/or any interest therein to any person and/or
entity; to the best of the Company's knowledge the Company has not infringed,
nor is infringing, upon the rights of others with respect to the General
Intangibles; and the Company has not received any notice of conflict with the
asserted rights of others with respect to the General Intangibles and
Stockholder knows of no basis therefor; and to the best of Stockholder's
knowledge no others have infringed upon the General Intangibles. 5.10 The
Customer Materials, Employee Materials and Records represent all of such
materials at any time utilized in connection with, arising out of or relating to
the Business; and neither the Company nor, to the best of Stockholder's
knowledge, any employee, officer, director or stockholder of the Company have or
shall retain copies thereof and have not prior to the date hereof, and shall not
prior to the Closing, provide to any person or entity or authorize or permit
another to utilize any of such Customer Materials, Employee Materials or Records
and/or the information therein or thereon reflected. 5.11 The Company did not
have any material liabilities, debts, obligations or claims asserted against it,
whether accrued, absolute, contingent or otherwise, and whether due or to become
due, including, but not limited to, liabilities on account of due and unpaid
taxes, other governmental charges or lawsuits except as reflected in the
Financial Statements or as listed on Exhibit "M". 5.12 Since the date of the
most recent balance sheet included in the Financial Statements, there has been
no material adverse change to the business of the Company and the Company has
not, except as set forth on Exhibit "N" annexed hereto and made a part hereof,
(i) incurred any obligation or liability (absolute or contingent, secured or
unsecured) except obligations and liabilities incurred in the ordinary course of
the operation or business of its Business as carried on at and prior to such
date; (ii) canceled, without payment in full, any notes, loans or other
obligations receivable or other debts or claims held by it other than in the
ordinary course of business; (iii) sold, assigned, transferred, abandoned,
mortgaged, pledged or subjected to lien (other than Permitted Liens) any
contract, permit, license, franchise or other agreement other than sales or
other dispositions of goods or services in the ordinary course of business at
customary prices; (iv) increased compensation payable to any of its officers,
directors or other employees including in the term "compensation", salaries,
fringe benefits, pensions, profit participation and payment of benefits of any
kind whatsoever; (v) entered into any line of business other than that conducted
by it on such date or entered into any transaction not in the ordinary course of
its business; (vi) conducted any line of business in any manner except by
transactions customary in the operation of its business as conducted on such
date; (vii) declared, made or paid, or set aside for payment, any non-cash
dividends or other non-cash distribution on any shares of its capital stock;
(viii) changed or modified any accounting practice; (ix) waived any rights under
any Contracts that may have a material adverse effect upon the Company; (x) made
any capital expenditure except as set forth on Exhibit "M" or as permitted by
Section 3.2; (xi) paid any amounts to shareholders except the usual salary and
benefits (provided that bonuses have been paid to S. Rashkin pursuant to his
employment agreement with the Company); or (xii) entered into any agreement to
take any of the actions above referenced. 5.13 The Company has not incurred any
liability for any finder's fees or similar payments in connection with the
transactions herein contemplated except as set forth herein. 5.14 Except as set
forth on Exhibit "O" annexed hereto and made a part hereof, the Company is not
in default under the terms of any outstanding agreement which is material to the
business, operations, properties, assets or condition of the Company; and there
exists no event of default or event which, with notice and/or the passage of
time, or both, would constitute any such default. 5.15 Except as set forth on
Exhibit "P" annexed hereto and made a part hereof, there are no claims, actions,
suits, proceedings, arbitrations, investigations or inquiries against the
Company before any court or governmental agency, court or tribunal, domestic, or
foreign, or before any private arbitration tribunal, pending, or, to the best of
the knowledge of the Company, threatened against the Company or involving its
properties or businesses; nor, to the best of the knowledge of the Stockholder,
is there any basis for any such claim, action, suit, proceeding, arbitration,
investigation or inquiry to be made by any person and/or entity, including
without limitation any Customer, supplier, lender, stockholder, former or
current employee, agent or landlord. There are no outstanding orders, judgments
or decrees or any court, governmental agency or other tribunal specifically
naming the Company and/or enjoining the Company from taking, or requiring the
Company to take, any action, and/or by which the Company, and/or its properties
or businesses are bound or subject. 5.16 The Company has filed all federal,
state, municipal and local tax returns (whether relating to income, sales,
franchise, withholding, real or personal property, employment or otherwise)
required to be filed under the laws of the United States and all applicable
states, and has been paid in full all taxes which are due pursuant such returns
or claimed to be due by any taxing authority or otherwise due and owing. No
penalties or other charges are or will become due with respect to the late
filing of any such return. To the best of the knowledge of the Company, after
due investigation, each such tax return heretofore filed by the Company
correctly and accurately reflects the amount of its tax liability thereunder.
The Company has withheld, collected and paid all other levies, assessments,
license fees and taxes to the extent required and, with respect to payments, to
the extent that the same have become due and payable. 5.17 Since the date of the
most recent balance sheet included in the Financial Statements, the Company has
not sustained any material loss or interference with its business of any kind
nature or description including without limitation, from fire, storm, explosion,
flood or other casualty, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; nor have there been,
and prior to the Closing, there will not be, any material adverse change in or
affecting the general affairs, management, financial condition, stockholders'
equity, results of operations or properties of the Company.
5.18 Except as set forth in Exhibit "Q", the Company has not
experienced any actual or to the best of the Company's knowledge been threatened
with any employee strikes, work stoppages, slow-downs, or lock-outs, or had any
material change in the terms of its agreements with the employees of the Company
which would adversely affect the Company, and none are imminent.
5.19 Neither the Company nor its present or former officers,
directors, employees or agents (including any third party acting on behalf of
the Company) have: (i) directly or indirectly, made or authorized to be made,
any bribes, kickbacks or other payments of a similar nature, whether lawful or
not, to any person or entity, public or private, regardless of the form thereof,
whether in money, property or services, to obtain favorable treatment in
securing business or to obtain special concessions or to pay for favorable
treatment for business secured or for special concessions already obtained; (ii)
paid funds or property of any kind was donated, loaned or made available,
directly or indirectly, for the benefit of, or for the purpose of opposing, any
government or subdivision thereof, political party, candidate or committee,
either domestic or foreign except by natural persons in their individual
capacities; (iii) made any loans, donations, or other disbursements, directly or
indirectly, to officers or employees of the Company for contributions made, or
to be made, directly or indirectly, for the benefit of, or for the purpose of
opposing, any government or subdivision thereof, political party, candidate or
committee, either domestic or foreign; or (iv) maintained a bank account or
other account of any kind, whether domestic or foreign, which account was not
reflected in the corporate books and records or which account was not listed,
titled or identified in the name of the Company.
5.20 The corporate record books of the Company have been duly
and properly maintained, are in good order, complete, accurate, up to date and
have all necessary signatures, and set forth all meetings and actions heretofore
held and/or taken by the stockholders and/or directors of the Company, as the
case may be, and/or as set forth in all certificates of votes of stockholders or
directors heretofore furnished to anyone at any time. The Company has utilized
its best efforts to maintain the files and inventory of resumes in a current and
usable condition.
5.21 The copies of the articles of incorporation (and all
amendments thereto) and the bylaws of the Company heretofore delivered by the
Company are true, correct and complete in all respects; are, and shall remain,
in full force and effect; and shall not be altered, amended, modified,
terminated or rescinded prior to the Closing without the prior written consent
of the Purchaser in each instance.
5.22 The Stockholders, officers and members of the Boards of
Directors of the Company are as set forth on Exhibit "R" annexed hereto and made
a part hereof; and during the period from the date hereof until the Closing,
there shall be no change in such officerships and/or memberships without the
prior written consent of the Purchaser in each instance.
5.23 No officer or director of the Company (and/or any member
of their respective immediate families) has a financial interest (direct or
indirect) in any competitor, supplier or customer of the Company, DTS or RRA,
other than ownership of less than 1% of the outstanding voting stock of any
publicly traded company.
5.24 Each of the Contracts on Exhibit "C" annexed hereto and
made a part hereof are in full force and effect, have not been altered, amended,
modified, terminated or rescinded, are fully enforceable in accordance with
their respective terms.
5.25 Other than as set forth on Exhibit "S" annexed hereto
and made a part hereof, the Company is not a party (i) to any contract or
agreement calling for the payment of more than $10,000 per annum or $25,000 in
the aggregate and/or which cannot be terminated on no more than 90 days prior
written notice from the Company to the other party thereto; (ii) to any profit
sharing, bonus, deferred compensation, pension or retirement plan, severance
policy or other similar agreement or arrangement; (iii) to any collective
bargaining agreement; or (iv) to any agreement not entered into in the ordinary
course of business.
5.26 The Contracts are effective and there exists no material
breach or default with respect to same. The copies of those Contracts delivered
to Purchaser as a condition to Closing shall be accurate and complete and there
exist no amendments with respect to same which shall not be disclosed. Except as
noted as Exhibit "C", the Company knows no present condition or set of facts
with respect to either amendment of terms or performance pursuant to which the
requirements for personnel in such contracts shall materially be reduced or
changed adversely. The Company is not presently aware of any past deficiencies
in its performance of services under such contracts that might materially
adversely affect the continuation of supplying services under such contracts.
5.27 Except as set forth on Exhibit "T", there have been no
past proceedings nor are there any proceedings now pending nor, to the
Stockholder's knowledge or belief, threatened against the Company before the
National Labor Relations Board, State Department of Labor, State Commission on
Human Rights and Opportunities, State Department of Labor, Equal Employment
Opportunity Commission or any other local, state or Federal agencies having
jurisdiction over employee rights with respect to hiring, tenure, conditions of
employment within the three year period prior to the execution of this
Agreement.
5.28 The Company, to the best of its knowledge and belief,
represents that it has properly made, reported and remitted all appropriate
federal, state and local payroll related deductions and taxes including: FICA,
FUTA, SUI and income tax withholdings presently due and owing; all applicable
Sales and Use Taxes; and further warrants that it will report and remit all
withholdings and taxes due for activities prior to the Closing Date.
5.29 Except for the Contract with Westinghouse, none of the
contracts referenced or listed on Exhibit"C" were obtained or executed based in
whole or in part on the fact or representation that the Company is a minority or
woman owned or operated business or a small business enterprise as those or
similar terms are deemed by Federal or state statutes or regulations.
5.30 The Company has not been the subject of any union
organizing activity and there have been no attempts to unionize the employees of
the Company.
5.31 The Company has paid all employees in accordance with
applicable local, state and federal law. All employees have been paid
appropriate and correct premium wages where applicable.
5.32 The Company has not retained the services of any
independent contractor or consultant for assignment to Customers except as
listed on Exhibit "U," annexed hereto and made a part hereof.
5.33 There are no contracts, agreements, or arrangements,
written or oral, relating to the conduct of the business of the Company to be
sold hereunder to which the Company is a party or is bound, except as may be
referred to in this Agreement, or any schedule or exhibit annexed hereto.
5.34 Exhibit "V" contains complete, correct and current
copies of all insurance policies in effect as of the time of this agreement. The
policies in place are in full force and effect and insure against risks and
liabilities, and in amounts and under terms and conditions customary for the
business in which the Company is engaged. The Company shall keep such coverage
in effect through the date of Closing.
5.35 Each of the Company's Employee Benefit Plans is listed
on Exhibit "W".
5.36 The Company does not (and has not in the past)
maintained a defined benefit pension plan, or made any contributions to a
multiemployer pension plan, as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974.
5.37 With respect to the Employee Benefit Plans, to the
knowledge of the Company, each such Employee Benefit Plan (and each related
trust or insurance contract) complies in form and in operation in all material
respects with the applicable requirements of ERISA and the Internal Revenue Code
of 1986 (the "Code").
5.38 All contributions and insurance premiums that are due to
the Plans on or before the Closing Date have been paid in full.
5.39 A determination letter application was filed with the
Internal Revenue Service within the retroactive amendment period of Section
401(b) of the Code requesting that the Internal Revenue Service issue a
determination letter to the effect that the Plan meets the requirements of
Section 401(a) of the Code.
5.40 The Company has provided to Buyer complete and correct
copies of the Employee Benefit Plans, including each plan document and any
amendments, trust agreements, insurance contracts, summary plan descriptions,
and administrative service agreements.
5.41 The representations, warranties, covenants and agreement
of the Company contained in this Agreement are true, complete, accurate and
correct in all respects as of the date hereof and shall be true, accurate and
correct and complete, in all respects as of the Closing; and will not contain
any untrue statement of any material fact, or omit to state a material fact in
order to make any or all of such representations and warranties not materially
misleading as of this date and as of the Closing Date; and at the Closing the
Company and the Stockholder shall deliver to the Purchaser a certificate,
executed by the Company and the Stockholder remaking each of the
representations, warranties, covenants and agreement set forth in this
Agreement, including without limitation, those set forth in this Section 5.41.
ARTICLE 6
PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to Company and
Stockholder as follows:
6.1 The Purchaser is a corporation duly organized, validly
existing and in good standing under and by virtue of the laws of the State of
Delaware, and the execution and delivery of this Agreement and the purchase
contemplated hereby and the Employment Agreement with S. Rashkin and the
Consulting Agreement with R. Rashkin have been duly authorized by all necessary
corporate action on the part of the Purchaser.
6.2 The Purchaser has corporate power to execute and perform
this Agreement, and to consummate the transactions contemplated hereby.
6.3 The execution and performance of this Agreement by
Purchaser will not conflict with, or result in a breach of, any of the terms,
conditions, or provisions of any law or any regulations, order, writ,
injunction, or decree of any court or governmental instrumentality, or of the
corporate charter or by-laws of the Purchaser or of any agreement, whether
written or oral, or other instrument to which it is a party or by which it is
bound, or constitute (with the giving of notice or the passage of time, or both)
a default thereunder.
ARTICLE 7
ACCESS AND INFORMATION
7.1 From and after the Closing Date, and for a period of six
years thereafter, the Purchaser shall maintain intact and shall not remove or
destroy without the written consent of the Stockholder, the Company's records,
operating books and financial records relating to the Business (including paid
supplier invoices, customers' billings and payroll records and returns). From
and after the Closing Date, the Purchaser shall give to the Stockholder and its
representatives from time to time upon request of the Stockholder full access
during normal working hours to any and all books, contracts and other records
(including credit files) of Stockholder in the possession of the Purchaser,
including the right to make copies thereof.
7.2 INTENTIONALLY OMITTED.
ARTICLE 8
INDEMNIFICATION AND OFF SET
8.1 In addition to the indemnifications set forth in other
sections hereof and subject to the limitations provided in Section 8.2,
Stockholder and R. Rashkin, jointly and severally agree to indemnify, exonerate,
defend and save the Purchaser, its Affiliates, officers, directors, employees
and representatives (collectively the "Purchaser" for the purposes of this
Article 8) harmless from, against, for and in respect of the full amounts of any
and all damages, losses, demands, obligations, tax, interest, penalty, suit,
judgment, order, lien, liabilities, debts, claims, actions, causes of action,
encumbrances, costs and expenses, whether administrative, judicial or otherwise,
of every kind and nature, including, without limitation, reasonable attorneys',
consultants', accountants' and expert witness fees, suffered, sustained,
incurred or required to be paid at any time after the Closing by the Purchaser
based upon, arising out of, resulting from or because of the following
(collectively, "Loss"):
(a) any obligations of the Company, the other Rashkin
Companies, Stockholder, or R. Rashkin incurred in connection with the making and
performance of this Agreement or the DTS Agreement or the RRA Agreement;
(b) INTENTIONALLY OMITTED.
(c) the untruth, inaccuracy, incompleteness, violation
or breach of any representation, warranty, agreement, undertaking or covenant of
Company, Stockholder, the other Rashkin Companies or R. Rashkin;
(d) INTENTIONALLY OMITTED.
(e) INTENTIONALLY OMITTED.
(f) All reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees, interest, and penalties)
incurred by the Purchaser in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters indemnified
against.
(g) Notwithstanding anything in this Section 8 to the
contrary, R. Rashkin shall have no liability or indemnification obligation
relating to or arising from the McDonnell Douglas Contract (as defined in the
Datatech Agreement) or any Incident (as defined in the Datatech Agreement).
8.2 The indemnification obligations under Section 8.1 shall be
subject to a limit calculated with reference to all of the indemnification
obligations of DTS, RRA, S. Rashkin, and R. Rashkin under this Agreement, under
the Purchase Agreement (the "RRA Agreement") between RRA and Purchaser, and
under the Purchase Agreement (the "Datatech Agreement") between Datatech and CTS
Acquisition Co. I. as follows: the maximum aggregate personal liability of DTS,
RRA, S. Rashkin, and R. Rashkin under all such agreements shall be the aggregate
purchase price for the stock of PSST, and the assets of RRA and DTS under such
agreements. The personal liability of Stockholder and R. Rashkin under Section
8.1 shall not be effective until Purchaser has first unsuccessfully sought
recourse against the Company, unless Purchaser reasonably believes that judgment
against the Company cannot be satisfied in full or that its ability to make
collection in full from Stockholder or R. Rashkin may be impaired. Nothing in
the preceding sentence shall affect or impair Purchaser's right under Section
8.3 or under the Indemnity Escrow Agreement, which shall not be subject to said
sentence.
8.3 Stockholder hereby grants to Purchaser the right of
full offset against any monies due Stockholder, either under this Agreement or
any other agreement the Stockholder may have with Purchaser, or Purchaser's
Affiliates, other than employment agreements, for the purpose of applying same
to any sums that might become due to Purchaser as a result of the indemnities
herein made or as a result of a breach of any of the covenants, representations
or warranties herein contained. Said right of offset shall in no way limit
Purchaser's ability to collect any funds due and owing to it from the
Stockholder.
8.4 In order to establish security and a ready source of cash
in the event of any breach of any covenant, agreement, representation or
warranty contained in this Agreement or the Datatech Agreement, Stockholder will
deposit at the Closing the sum of Six Hundred Twenty-Five Thousand Dollars
($625,000) into an Escrow Fund to be maintained in accordance with the terms of
the Indemnity Escrow Agreement. The amount deposited in escrow shall not
constitute a limitation of liability of any Rashkin Company, Stockholder or R.
Rashkin.
8.5 The obligations of Stockholder and R. Rashkin to indemnify
pursuant to Section 8.1 (and the representations and warranties set forth
herein) shall be for a period of five years following the Closing Date.
8.6 Purchaser indemnifies Stockholder from all Loss incurred
as a result of any untrue representation, breach of warranty or non-fulfillment
of any covenant or agreement stated in this Agreement by Purchaser and any
liabilities and claims of the Business incurred in connection with the making
and performance of this Agreement after the Closing Date.
8.7 Promptly after any person entitled to indemnification (an
"Indemnitee") receives notice of any potential Loss, Indemnitee must give notice
in writing to the indemnifying party; provided, however, that failure to give
such notice shall not relieve the indemnifying party of its obligation hereunder
except to the extent the indemnifying party is prejudiced thereby. The
indemnifying party must assume the defense of the Loss and Indemnitee must
cooperate in connection with such defense. If Indemnitee reasonably determines
that separate counsel is necessary (whether due to the existence of different
defenses, potential conflicts of interest or otherwise), or if the indemnifying
party does not assume the defense, then Indemnitee may employ separate counsel,
and the indemnifying party will pay such counsel's reasonable fees and
disbursements as incurred.
8.8 If indemnity under this Agreement is unavailable for any
reason, then Purchaser, Stockholder and R. Rashkin will contribute to the Loss
for which such indemnity is unavailable in such proportion as is appropriate to
reflect the relative benefits to Purchaser, Stockholder and R. Rashkin in
connection with the transactions contemplated by this Agreement.
ARTICLE 9
EFFECTIVE DATES OF TRANSACTIONS
9.1 The effective date of the purchase and sale contemplated
herein shall be midnight on the Closing Date.
9.2 In amplification of the above stated general
understanding of the parties, the following provisions will govern specific
aspects of the change in ownership:
(a) INTENTIONALLY OMITTED.
(b) INTENTIONALLY OMITTED.
(c) The Purchaser shall be obligated to perform all
Contracts and purchase orders with Customers with respect to items not performed
prior to Closing Date, provided that such contracts and purchase orders were
entered into by the Company in the ordinary course of business, disclosed to
Purchaser prior to Closing, and further provided that such obligations arise
from services rendered on or after the date of Closing.
(d) INTENTIONALLY OMITTED.
(e) INTENTIONALLY OMITTED.
(f) All inquiries and communications received by the
Stockholder after the effective date will be forthwith mailed to the Purchaser
to the extent the same relate to the Business sold by the Stockholder hereunder.
ARTICLE 10
COVENANTS AND AGREEMENTS BY STOCKHOLDER AND COMPANY
10.1 Conduct of Business. From the date hereof until the
Closing Date, Stockholder and Company covenant and agree that:
(a) Stockholder and Company shall operate the Business
in the usual and ordinary course;
(b) Stockholder and Company shall not remove or transfer
any assets for less than full and fair consideration, provided there shall be no
restrictions on the payment of cash dividends;
(c) Subject to the requirement of satisfying all
Purchaser Clearance Requirements, Stockholder and Company shall permit the
officers and other authorized representatives of Purchaser (i) full and
unrestricted access, from time to time and at one or more times, to the plants,
properties, offices and books and records of the Company, during normal business
hours, and in connection with such books and records, such inspection shall be
at the offices where such records are normally maintained, and such parties
shall be entitled to make copies of and abstracts from any of such books and
records; (ii) the opportunity to meet, correspond and communicate with the
officers, directors, employees, counsel and accountants to the Company, and to
secure from each such information as such parties shall deem necessary or
appropriate; and (iii) to review and copy such other, further and additional
financial and operating data, materials and information as to the business and
operations of the Company as may be requested by such parties; provided however
that all such information and material secured by such parties in the course of
such investigation shall be and be deemed to be confidential and shall be used
solely in connection with the transactions herein described, and all written
memoranda and documents and/or other tangible evidence of such information shall
either be returned to the Stockholder and Company and/or destroyed in the event
the subject acquisition is not consummated.
(d) Company shall maintain all insurance coverages in
full force and effect.
(e) Company shall use best efforts to retain the
Business' current employees so that they will remain employable after Closing.
(f) Stockholder and Company shall take and perform any
and all actions necessary to render accurate and/or maintain the accuracy of,
all of the representations and warranties of the Company and Stockholder herein
contained and/or satisfy each covenant or condition required to be performed or
satisfied by the Company and Stockholder at or prior to the Closing and/or to
cause or permit the implementation of the within acquisition.
(g) Stockholder and Company shall not take or perform
any action which would or might cause any representation or warranty made by the
Company and Stockholder herein to be rendered inaccurate, in whole or in part
and/or which would prevent, inhibit or preclude the satisfaction, in whole or in
part of any covenant required to be performed or satisfied by the Company and
Stockholder at or prior to the Closing and/or the implementation of the within
acquisition.
(h) Company shall perform, in all material respects all
of its obligations under all material agreements, leases and documents relating
to or affecting the Business; and use its best efforts to preserve, intact, the
relationships with the Company's suppliers, customers, employees and other
having business relations with the Company so that the Business will be intact
at Closing.
(i) Stockholder and Company shall immediately advise
Purchaser of any event, condition or occurrence which constitutes or may, with
the passage of time and/or giving of notice constitute, a breach of any
representation or warranty of the Company or Stockholder herein contained and/or
which prevents, inhibits or limits or may prevent, inhibit or limit the Company
or Stockholder from satisfying, in full and on a timely basis, any covenant,
term or condition herein contained and/or implementing this Agreement.
(j) Subject to the requirement of satisfying all
Purchaser Clearance Requirements, the Company will permit access to Customer
representatives and will accompany and introduce Purchaser representatives to
the Customers as may be requested to make inquiries regarding, among other
things, the Company's performance, the existence of any defaults, prices and
prospects for further work. This access will not obviate or release Stockholder
from liability for any representation or warranty made with respect to the
Customers or Contracts. Other than obligations to preserve confidential
information as contained in this Agreement, the Purchaser shall have no
liability with respect to or arising out of meeting with the Customers, except
as set forth in Section 14.1(b).
(k) Neither Company nor Stockholder will solicit or
entertain any offers through principals, agents or brokers to purchase, sell,
encumber or otherwise transfer any or all of the stock or assets of the Company,
with the exception of the sale of goods or services in the ordinary course of
business, unless and until this agreement has been terminated in accordance with
its terms. Company and Stockholder agree to promptly notify Purchaser in the
event either of them receive any such inquiry or offer.
(l) Not take any action in the singular or aggregate
which results, or with the passage of time is likely to result in a material
adverse change to the business or the prospects of the business of the Company.
(m) Not to make any amendment in the Articles of
Incorporation or Bylaws of Seller; or enter or agree to enter into any merger or
consolidation with, or sale of all or substantially all of its assets to, any
corporation or change the character of its business in any manner;
(n) Not to make any change in the number of shares of
its capital stock issued and outstanding; or grant or make any option, warrant
or any other right to purchase or to convert any obligation into shares of its
capital stock; and
(o) Not to declare, pay or make any dividend or other
distribution or payment in respect of shares of the Company's capital stock; and
not purchase or redeem any of such shares and dispose of any evidence of
indebtedness or other security of the Seller. Notwithstanding the foregoing, the
Purchaser will permit the Company to make a cash dividend to Stockholder prior
to the Closing so long as the amount of such dividend shall not cause the
Current Assets of the Company as of the Closing Date as reasonably estimated by
the parties in good faith to be less than the sum of (i) the Liabilities of the
Company as of the Closing Date, as reasonably estimated by the parties in good
faith, and (ii) a reserve for contingencies and adjustments established by the
parties in good faith.
ARTICLE 11
COVENANTS AND AGREEMENTS BY PURCHASER AND PARENT
11.1 S. Rashkin and Purchaser shall enter into the employment
agreement in accordance with the terms contained in Exhibit "G" hereto and
Purchaser shall enter into a consulting agreement in accordance with the terms
contained in Exhibit "G-1" hereto.
11.2 Parent shall comply with the obligations with respect to
the issuance of options and the registration of the options and/or of shares
purchased pursuant to the exercise of the options set forth in S. Rashkin's
Employment Agreement.
ARTICLE 12
STOCKHOLDER'S CONDITIONS TO CLOSING
12.1 Stockholder shall have the absolute right in its sole
discretion to waive any Closing requirement at or before Closing. If Stockholder
does not waive its rights in whole or in part and Purchaser is not ready,
willing and able to perform as of Closing, Stockholder shall have the right to
terminate this Agreement upon written notice to Purchaser. In the event of such
termination, all of Stockholder's obligations shall terminate without further
loss, damage, cost, claim, right or remedy in favor of Purchaser.
The obligation of Stockholder to consummate the transactions
contemplated by this Agreement is, unless waived by Stockholder, subject to the
fulfillment, on or before the Closing, of each of the following conditions:
(a) No third party injunction or restraining order shall be
in effect which prohibits, restricts or enjoins, and no suit, action or
proceeding shall be pending which seeks to prohibit, restrict, enjoin, nullify,
seek material damages with respect to or otherwise materially adversely affect
the consummation of the transactions contemplated hereby;
(b) All covenants of Purchaser under this Agreement to be
performed prior to the Closing shall have been performed in all material
respects, except to the extent attributable to actions expressly permitted or
consented to by Stockholder in writing;
(c) At the Closing, Stockholder shall have received a
certificate, executed by the President and Secretary of the Purchaser (effective
as of the Closing), and in form and content reasonably acceptable to
Stockholder, certifying the truth and accuracy of the representations and
warranties of the Purchaser herein contained;
(d) Stockholder shall have received from Purchaser a
certificate from the Department of State of the State of Delaware to the effect
that Purchaser is in good standing in such state;
(e) All material authorizations, approvals or waivers of any
federal or state regulatory bodies shall have been obtained;
(f) Stockholder shall have received all certificates,
instruments, agreements and other documents to be delivered at or before Closing
as provided in this Agreement and a certificate signed by an officer of
Purchaser confirming the matters set forth in sections (a), (b), (c) and (e)
above;
(g) Purchaser shall tender to Stockholder the Purchase Price
required to be paid at Closing in immediately available funds by check or bank
wire to an account designated by Stockholder;
(h) Purchaser shall satisfy all Purchaser Clearance
Requirements;
(i) The lease with R. Rashkin, being assigned to Purchaser,
shall provide for a term of two years from the Closing Date;
(j) Purchaser shall provide to Stockholder evidence
reasonably acceptable to Stockholder that Purchaser has or shall have obtained
adequate capital resources, including any credit facility or borrowing
availability, sufficient to fund payroll and associated payroll taxes for all
Billable Employees for six weeks after the Closing Date (which, based on current
payroll, is $4,700,000) in addition to the Purchase Price;
(k) Purchaser shall have delivered to Stockholder evidence
that it has in place liability and worker's compensation insurance relating to
its conduct of business after the Closing Date in amounts and under terms and
conditions customary for such a business; and
(l) All conditions to the Company's and the Stockholder's,
DTS' and RRA's performance under the DTS Agreement and the RRA Agreement shall
have been satisfied or waived.
ARTICLE 13
PURCHASER'S CONDITIONS TO CLOSING
13.1 Purchaser shall have the absolute right in its sole
discretion to waive any Closing requirement at or before Closing. If Purchaser
does not waive its rights in whole or in part and Stockholder and Company are
not ready, willing and able to perform as of Closing, Purchaser shall have the
right to terminate this Agreement upon written notice to Stockholder and
Company. In the event of such termination, except as provided in Section
14.1(b), all of Purchaser's obligations shall terminate without further loss,
damage, cost, claim, right or remedy in favor of the Company or Stockholder.
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is, unless waived by Purchaser, subject to the
fulfillment, on or before the Closing, of each of the following conditions:
(a) All required consents shall have been received by the
Purchaser, including, but not limited to, all consents and approvals required to
permit the Purchaser to enjoy after the Closing Date all rights and benefits
presenting enjoyed by Company; provided, however, if Company and the Stockholder
are unable to obtain a consent prior to Closing, Purchaser shall receive
assurances as it deems reasonable in its discretion that it will receive
such consents in a reasonable time after the Closing Date;
(b) No injunction or restraining order shall be in effect
which prohibits,restricts or enjoins, and no suit, action or proceeding shall be
pending which seeks to prohibit, restrict, enjoin, nullify, seek material
damages with respect to or otherwise materially adversely affect the
consummation of the transactions contemplated hereby;
(c) All covenants of Company and the Stockholder under this
Agreement to be performed prior to the Closing shall have been performed in all
material respects, except to the extent attributable to actions expressly
permitted or consented to by Purchaser in writing;
(d) At the Closing, Purchaser shall have received a
certificate, executed by the President and Secretary of the Company and the
Stockholder (effective as of the Closing), and in form and content reasonably
acceptable to Purchaser, certifying the truth and accuracy of the
representations and warranties of the Company and the Stockholder herein
contained;
(e) Purchaser shall have received from the Stockholder a
certificate from the Arizona Corporation Commission to the effect that the
Company is in good standing in such state;
(f) Purchaser has received such documentation as may be
necessary to establish that Purchaser is not required to withhold any portion of
the Purchase Price pursuant to Section 1445 of the Code (substantially in the
form of Exhibit Y hereto);
(g) Purchaser shall have received all certificates,
instruments, agreements and other documents to be delivered by Stockholder at or
before Closing as provided in 5.2 and elsewhere in this Agreement, including a
certificate signed by an officer of the Company and the Stockholder confirming
the matters set forth in sections (b), (c), (e) and (f) above;
(h) Prior to the Closing there shall not have occurred any
material adverse change in the Business, nor shall any event have occurred or
condition exist which, with the passage of time or the giving of notice, may
cause or create any such adverse material change;
(i) Prior to the Closing, all corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be in form and
content reasonably satisfactory to Purchaser and its counsel, and Purchaser and
its counsel shall have received all counterpart originals or certified or other
copies of such documents and instruments as they may reasonably request;
(j) All statutory requirements for the valid consummation by
the Stockholder and Company of the transactions herein described shall have been
fully and timely satisfied; all authorizations, consents and approvals of all
federal, state and local governmental agencies and authorities required to be
obtained in order to permit consummation by Stockholder of the transactions
herein described, and/or to permit the Business to continue unimpaired in all
material respects immediately following the Closing shall have been obtained and
shall be in full force and effect; and no action or proceeding to suspend,
revoke, cancel, terminate, modify or alter any of such authorizations, consents
or approvals shall be pending or threatened;
(k) Purchaser shall have received all the documentation
required to be delivered to it pursuant the provisions of the Agreement;
(l) Purchaser shall have received an opinion of counsel to
Stockholder and the Company with respect to those matters set forth on Exhibit
"Z" hereto;
(m) The lease with R. Rashkin shall be amended to provide for
a term of two years from the Closing Date;
(n) Purchaser, its lawyers and accountants shall have
conducted a review of the Company and its contracts, business and operations and
the Purchaser shall be satisfied with such review, provided that Purchaser shall
have completed its due diligence by April 19, 1996, except to the extent that
Purchaser shall have advised Stockholder and Company by April 19, 1996 of all
open matters regarding such due diligence; and
(o) All conditions to Purchaser's performance under the DTS
Agreement and the RRA Agreement shall have been satisfied or waived.
ARTICLE 14
TERMINATION
14.1 Termination. (a) Anything herein or elsewhere to the
contrary notwithstanding, this Agreement and any agreement ancillary hereto may
be terminated and the transactions contemplated hereby abandoned at any time
prior to or at the Closing by:
(i) mutual consent of Stockholder and Purchaser;
(ii) Stockholder, if any of the conditions set forth in
Article 12 shall not have been met and shall not have been waived by Stockholder
as of the Closing Date, and at such time Stockholder and Company are not in
material breach or default of their obligations contained in this Agreement; or
(iii) Purchaser, if any of the conditions set forth in
Article 13 shall not have been met and shall not have been waived by Purchaser
as of the Closing
Date, and at such time Purchaser is not in material breach or default of any of
its obligations contained in this Agreement.
(b) In the event the transactions hereunder are not
consummated by Purchaser (i) solely because it fails to obtain financing as
provided in Section 12.1(j), or (ii) the Company and the Stockholder fail to
obtain consents to the assignment of Contracts, as provided in Section 13.1(a)
solely because the customer is not satisfied with Purchaser's financial
condition and has so stated in writing, and Purchaser is not willing to close
without such consents, Purchaser shall pay the Company's and Stockholder's legal
expenses incurred in connection herewith and under the Purchase Agreement with
RRA and DTS in an aggregate amount not to exceed Forty Thousand Dollars
($40,000).
(c) Any party desiring to terminate this Agreement pursuant to
this Article 14 shall give notice of such termination to the other party hereto
in accordance with Section 19.7.
14.2 Effect of Termination.
(a) If this Agreement is terminated in accordance with
Section 14.1, then all rights and obligations of the parties hereunder shall
terminate and be of no further effect; provided, however, that no such
termination shall relieve any party of liability for any breach of its
obligations under this Agreement prior to such termination.
ARTICLE 15
PUBLIC ANNOUNCEMENT
The Company and Stockholder recognize and agree that the
Purchaser is a public company and that the Company and the Stockholder will not
make any public announcement concerning this Agreement or the negotiations and
to keep same confidential unless given written permission from the Purchaser to
make any announcement or otherwise disclose the information except as
contemplated by Section 3.2. Purchaser shall have the right to announce the
transaction contemplated hereby and/or the negotiations between the parties upon
prior notice to the Company and whether or not the announcement is required by
law regulation or the rules of any public stock exchange on which Purchaser's
stock is listed. Purchaser will give the Company prior notice of any
announcement it believes is necessary or proper.
ARTICLE 16
NEGATIVE COVENANTS
16.1 It is understood by the parties herein that the negative
covenants contained in this Section and the one following are a prime and
essential consideration on which Purchaser will rely prior to and after the
Closing Date in consummating this Agreement
16.2 Stockholder agrees that in consideration of the sale of
its stock to Purchaser that for a period of five (5) years after the Closing
Date, he will not:
(a) directly or indirectly, own, manage, operate, control, be
employed by, participate in, render service to, solicit customers for, or be
connected with any business which competes with Purchaser, or any of its
affiliated corporations within the states where Seller does business;
(b) either directly or indirectly, either for themselves or
for any other person, partnership, firm, company, corporation or other entity,
contact, solicit, accept any business from, purchase from, divert, or take away
any of the customers or potential customers of Seller or customers known from
previous employment or association of Seller by or with the Rashkin Companies or
any predecessor in interest of the Rashkin Companies or that any employee or
former shareholder, director or officer of the Rashkin Companies may have
contacted or been assigned at any time during the three (3) year period prior to
the date hereof; or
(c) approach directly or indirectly any employee (billable or
staff) without regard to location for the purpose of attempting to or actually
soliciting or hiring that employee from its/his account or the account of
another.
16.3 It is recognized by the Company and Stockholder that an
action for damages may not be an adequate remedy for Purchaser in the event of
the breach of any of the negative covenants contained in this Agreement, and
therefore, it is agreed that in addition to any other rights Purchaser may have
in the event of a breach of this Agreement, Purchaser shall have the right to
judicial enforcement of said covenants by way of injunction, restraining order
or any other similar equitable relief. If any portion of the foregoing covenants
is invalid or unenforceable due to area or time, such fact shall not affect the
validity or enforceability of the remaining portions or prevent enforcement of
restrictions to the extent a court of competent jurisdiction may consider
reasonable. The parties agree that in any event said restrictions shall be
enforced to the maximum extent permitted by law.
16.4 The time period of the negative covenant shall be
extended for a period of time equal to that time period utilized during the
pendency of any action for enforcement
16.5 The Company will deliver negative covenant agreements in
the form annexed as Exhibit "AA" for those employees designated by Purchaser at
least ten days prior to Closing.
ARTICLE 17 NO BROKERS
17.1 Each party represents and warrants to the other that
there are no claims for brokerage commissions or finders' fees in connection
with the transactions contemplated hereby with the exception of Marc D.
Freedman. Marc D. Freedman will be paid by Purchaser in accordance with a
separate agreement by and among Marc D. Freedman, the Rashkin Companies, S.
Rashkin, R. Rashkin and the Purchaser.
ARTICLE 18
FEES AND EXPENSES
18.1 Except as herein otherwise provided, each of the parties
hereto shall pay its own legal and accounting charges and other expenses
incident to the execution of this Agreement and the consummation of the
transactions contemplated hereby.
ARTICLE 19
MISCELLANEOUS
19.1 This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. All covenants and
agreements made by or on behalf of any of the parties hereto shall be binding
upon and inure to the benefit of their respective successors and assigns, unless
otherwise specifically set forth herein. The terms and provisions of this
Agreement may not be modified or amended, except in writing signed by all
parties hereto. No representations, warranties, or covenants, express or
implied, have been made by any party to this Agreement in connection with the
subject matter hereof, except as expressly set forth in this Agreement and the
exhibits hereto. The headings in this Agreement are for the convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19.2 No terms and provisions hereof, including, without
limitation, the terms and provisions contained in this sentence, shall be
waived, modified or altered so as to impose any additional obligations or
liability or grant any additional right or remedy, and no custom, payment, act,
knowledge, extension of time, favor or indulgence, gratuitous or otherwise, or
words or silence at any time, shall impose any additional obligation or
liability or grant any additional right or remedy or be deemed a waiver or
release of any obligation, liability, right or remedy except as set forth in a
written instrument properly executed and delivered by the party sought to be
charged, expressly stating that it is, and the extent to which it is, intended
to be so effective. No assent, express or implied, by either party, or waiver by
either party, to or of any breach of any term or provision of this Agreement or
of the exhibits or schedules shall be deemed to be an assent or waiver to or of
such or any succeeding breach of the same or any other such term or provision.
19.3 The captions of this Agreement are for convenience and
reference only, and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provisions hereof.
19.4 Stockholder agrees that he will, at any time before and
after the Closing, execute and deliver all additional documents, and do any
other acts or things that may be reasonably requested by Purchaser in order to
further perfect Purchaser's rights and interests contemplated hereunder and that
they will aid in the prosecution, defense or other litigation with third persons
of any rights arising from this Agreement, all without further consideration.
19.5 Jurisdiction. This Agreement shall be governed by laws of
the State of New York. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of New York or
the State of Arizona or in the United States District Court for the Eastern
District of New York, District of Arizona (or the Bankruptcy Courts), and, by
execution and delivery of this Agreement, each of the parties to this Agreement
accepts for itself or himself the process in any action or proceeding by the
mailing of copies of such process to such party at its or his address as set
forth in Section 19.7, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement. Each party hereto
irrevocably waives to the fullest extent permitted by law any objection that it
or her may nor or hereafter have to the laying of the venue of any judicial
proceeding brought in such courts and any claim that any such judicial
proceeding has been brought in an inconvenient forum. The foregoing consent to
jurisdiction shall not constitute general consent to service of process in the
State of New York or the State of Arizona for any purpose except as provided
above and shall not be deemed to confer rights on any person other than the
respective parties to this Agreement. EACH PARTY HERETO WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING UNDER THIS AGREEMENT.
19.6 Captions. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
19.7 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
sending such notice by certified mail, return receipt requested, or (c) the next
business day if sent by facsimile transmission or by an over night courier
service, and in each case of mailing, postage prepaid and at the respective
addresses or numbers set forth below:
To Company: Stanley Rashkin
President
Project Staffing Support Team, Inc.
1858 E. Southern Avenue, #102
Tempe, Arizona 85282
Facsimile 602-345-1469
With a copy to: David E. Manch, Esq.
Lewis and Roca
40 N. Central Avenue
Phoenix, Arizona 85004
Facsimile 602-262-5747
To Purchaser: COMFORCE Technical Services, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Attn: President
Facsimile 516/352-3362
With a copy to: David J. Hirsch, Esq.
Doepken Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
Facsimile 412-355-2609
To Stockholder: Stanley Rashkin
2079 East LaVieve
Tempe, Arizona 85284
With a copy to: David E. Manch, Esq.
Lewis and Roca
40 N. Central Avenue
Phoenix, Arizona 85004
To Raphael
Rashkin: Raphael Rashkin
117 Harbour Lane
West Bayshore, NY 11706
19.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by Company, Stockholder or Purchaser other
than by operation of law or with the prior written consent of the other party,
and any purported transfer, assignment, pledge or hypothecation in violation of
this Section shall be void. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective administrators,
successors and permitted assigns. Notwithstanding the foregoing the Purchaser
may assign its rights and obligations hereunder to one or more affiliate or
subsidiary companies whether now or hereinafter formed upon notice to
Stockholder if Stockholder's rights would not be diminished thereby.
19.9 Severability. In the event any provision of this Agreement
is found to be void and unenforceable by a court of competent jurisdiction or
arbitration panel, the remaining provisions of this Agreement shall nevertheless
be binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.
19.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
taken together shall constitute one instrument.
19.11 Entire Agreement. This Agreement including the other
documents referred to herein, contains the entire understanding of the parties
hereto with respect to the purchase of the assets under this Agreement and
supersedes all other prior agreements, correspondence, conversation,
negotiations and understandings between the parties with respect to such subject
matter except as otherwise incorporated herein.
19.12 Amendments. This Agreement may not be changed orally, but
only by an agreement in writing signed by all of the parties hereto, and no
waiver of compliance with any provision or condition hereof and no consent
provided for herein shall be effective unless evidenced by an instrument in
writing duly executed by the party hereto seeking to be charged with such waiver
or consent.
19.13 Third Party Beneficiaries. Each party hereto intends that
this agreement shall not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 19.8.
19.14 Gender. As used in this Agreement, any gender includes a
reference to all other genders and the singular includes a reference to the
plural and vice versa.
ARTICLE 20
EFFECT OF CLOSING
20.1 The terms of this Agreement shall survive the Closing
and shall not become merged therein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ATTEST: PROJECT STAFFING SUPPORT
TEAM, INC.
______________________________ By: _____________________________
Title: President
COMFORCE CORPORATION
By _______________________________
Title
- -------------------------------
ATTEST: COMFORCE TECHNICAL
SERVICES, INC.
- ---------------------------
By:_________________________________
Title:_______________________________
- ------------------------------------
Stanley Rashkin, individually
-----------------------------
Raphael Rashkin, individually
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
DTS
ASSET PURCHASE AGREEMENT, dated effective as of the 13th day of
May 1996, by and among CTS ACQUISITION CO. I (hereinafter referred to as the
"Purchaser"), a Delaware corporation, with its principal office at 2001 Marcus
Avenue, Lake Success, NY 11042; COMFORCE CORPORATION ("Parent"), a Delaware
corporation, with its principal office at 2001 Marcus Avenue, Lake Success, NY
10042; DATATECH TECHNICAL SERVICES, INC., an Arizona corporation ("Datatech" or
"Seller"), with its principal offices located at 1858 E. Southern Avenue, Suite
102, Tempe, Arizona 85282; RAPHAEL RASHKIN, an individual residing at 117 Harbor
Lane, West Bayshore, NY 11706 ("R. Rashkin") and STANLEY RASHKIN ("S. Rashkin"
or "Stockholder"), residing at 2079 East LaVieve, Tempe, AZ 85284.
WHEREAS, the Seller desires to sell and the Purchaser desires to
acquire certain of the assets of Seller for the purchase price hereinafter
described and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of such sale and of the
foregoing and of the mutual agreements hereinafter set forth, the parties hereto
do hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the terms defined
throughout this Agreement (as defined), the following terms shall have the
following meanings (such meanings to be equally applicable to the singular and
plural forms thereof):
"Affiliate" means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and, without limiting the generality of the foregoing, includes (i) any
Person which beneficially owns or holds 25% or more of any class of voting
securities of such Person or 25% or more of the equity interest in such Person,
(ii) any Person of which such Person beneficially owns or holds 25% or more of
any class of voting securities or in which such Person beneficially owns or
holds 25% or more of the equity interest in such Person and (iii) any director,
officer or employee of such Person. For the purposes of this definition, the
term "control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Agreement" means this Agreement together with all exhibits,
schedules, supplements and documents as may be attached hereto or incorporated
herein by reference and the letter agreement dated April 19, 1996 between
Purchaser, Seller, Comforce Technical Services, Inc., RRA and PSST (the "Letter
Agreement").
"Assets" means all of the following assets other than the
Excluded Assets of the Seller to the extent the same are utilized by the Seller
in connection with the operation of the Business as of the date hereof and/or at
any time prior to Closing: (a)"General Intangibles" - (i) all Seller's right,
title and interest in the names "Datatech Technical Services, Inc.", "RRA,
Inc.", "Project Staffing Support Team, Inc.", "PSST", any similar names, and,
all Seller's right, title and interest in and to utilize any and all of the
following associated with, arising out of, relating to or utilized, as of the
date hereof, in connection with the Business: any and all trade names,
trademarks, copyrights, service marks, logos and slogans (including, without
limitation, all registrations, filings and certificates and the sole and
exclusive rights to file and/or prosecute any such registrations, filings and
certificates), and (ii) all Seller's right, title and interest in computer
software, programs, know-how, trade secrets and data bases used in the Business.
(b)"Customer Materials" - any and all agreements, orders, requirements and
inquiries from or with past, current or prospective customers arising out of or
relating to the operation of the Business, including without limitation, the
contracts listed on Exhibit "C" "Contracts") and all work orders issued pursuant
thereto, and all rights of Seller thereunder. (c)"Employee Materials" - all
information, in whatever medium that it be manifested, depicted, stored or
presented including, but not limited to, paper, hardcopy, computer disks, tapes
and databases, with respect to Company Employees whose services are now provided
or have been provided or are to be provided to Customers, and all rights of
Seller in such information and all rights and remedies of Seller with respect to
providing to current and future customers the future services of Company
Employees. (d)"Real Property" - those leasehold interests described on Exhibit
"A" annexed hereto and made a part hereof. (e)"Records" - the originals or
certified copies of those Business or financial records of the Seller,
evidencing the Customer Materials, Employee Materials, General Intangibles,
Equipment and/or Company Employees, including without limitation: (i) all files
and records pertinent, relevant or in any way connected with the performance of
services under the Contracts; (ii) all sales records and Customer listings
dealing with or pertaining to former or prospective Customers, including but not
necessarily limited to records of sales calls and follow-ups previously made in
connection with the solicitation of Business; (iii) all personnel files relating
to Company Employees wherever located, in whatever form in which they exist and
whatever medium maintained or stored, including but not necessarily limited to
all payroll records, resume files maintained by Seller including those with
respect to Company Employees currently assigned to Customers and those being
maintained for possible future use by Seller in the performance and conduct of
its Business, all payroll records, and year-to-date earning statements and
reports; and the originals of all permits, licenses, consents, authorizations
and/or permissions for or with respect to the Business; (f)"Equipment" - all of
the tangible personal property utilized by the Company, including without
limitation, the office furniture, fixtures, supplies, brochures, sales material,
computer equipment, and any other equipment owned by the Seller wherever
located, as set forth on Exhibit "B" annexed hereto and made a part hereof.
(g)"Vendor Contracts" - all contracts (other than the Contracts) pursuant to
which Seller is furnished goods or services.
"Billable Employees" means Company Employees who are as of
the Closing Date on assignment to Seller's Customers for whom a direct charge to
the Customer is made.
"Business" means providing one or more of a wide range of
technical and consulting services to customers through the use of personnel,
including without limitation qualified designers, drafters, engineers, computer
programmers, systems analysts, technicians, which personnel are generally
utilized by the customers on a temporary, project or peak period basis. Primary
lines of Business activity include information technology, design, drafting,
engineering, and technical staff augmentation services. The Business also
includes the assumption of staffing of an entire department, service center or
discipline and providing human resource and other administrative services to a
Customer for a fee.
"Closing" means the consummation of the within transactions
including the execution and delivery of all Assets, funds, documents,
certificates, resolutions, assignments and opinions contemplated in this
Agreement.
"Closing Date" means the established date for the Closing,
which date shall be May 10, 1996, effective 12:00 a.m. on May 13, 1996 or such
other date as shall be agreed upon by the parties in accordance with the Letter
Agreement.
"Combined Business" means the Business of DTS, the Business
of PSST and the Business of RRA. "Company Employees" means those persons whose
services have been provided to Customers by the Seller at any time during the
last 12 months preceding the Closing Date and for whom a direct charge has been
made to the Customer. This definition shall not constitute an admission that
such persons are employees of Seller under any legal theory ascribing or
allocating to Seller responsibility or liability for the acts or omissions of
such persons.
"Contingency Escrow Agreement" means the Contingency Escrow
Agreement attached as Exhibit "BB".
"Customers" means those Persons to which Seller has made
sales or rendered services during any time 12 months prior to the Closing Date.
"Employee Benefit Plans" means the employee benefit plans
maintained by Seller listed on Exhibit "W".
"Excluded Assets" means (i) the accounts receivable of Seller
at Closing ; (ii) cash in banks; (iii) deposits and prepaid expenses as set
forth in the Seller's financial statements; and (iv) the McDonnell Douglas
Contract described in Section 3.6.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Indemnity Escrow Agreement" means the Indemnity Escrow
Agreement attached as Exhibit "X".
"Medical Plan" means the plan providing medical benefits for
Seller's employees.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a business trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Profit" means the revenues of the Business less all costs
directly associated with the Business including but not limited to the cost of
collections, direct labor charges, fringes, payroll deductions, workers
compensation insurance, benefits, staff salaries, bonuses and costs, rent,
telephone, insurance, sales, marketing, and recruiting costs, other operating
expenses, legal, accounting and other professional fees, charges for reserves
and accruals and interest charges for financing the billable employee payroll
and on-going business operations, but excluding (i) any interest or finance
charges or other costs of any kind directly related to the transactions
contemplated by this Agreement, (ii) charges by a direct or indirect parent
company of the Purchaser whereby the parent allocates its corporate overhead to
the Business (excluding costs directly related to or incurred on behalf of the
Business), and (iii) any costs and revenues related to such costs over which S.
Rashkin as employee of Parent or an affiliate of Parent has no control (for
example, without limitation, the costs of and the revenues from a contract
required by Parent to be entered into or an employee required by Parent to be
hired), unless S. Rashkin has been terminated for cause pursuant to the
employment agreement attached as Exhibit "G" or has voluntarily resigned without
Purchaser, Parent or Parent's affiliate having breached its employment agreement
with S. Rashkin. Profit shall be calculated on a pre- income tax basis and
before deduction for depreciation, amortization and interest charges other than
interest and other charges associated with the financing of the Billable
Employee payroll and on-going operations. (a)If workers compensation premium
expense or any other cost directly associated with the Business, as a percentage
of total labor billings, exceeds the cost that would have been attainable by the
Rashkin Companies if this transaction had never occurred after accounting for
injuries or other circumstances relating to the conduct of the Business before
or after the Closing Date that affect such cost (the "Seller's Historic Cost"),
such excess shall be excluded for purposes of calculating Profit. For purposes
of this section, Seller's Historic Cost shall exclude any excess workers'
compensation premium expense resulting because the current or future experience
modification factor of any business of the Purchaser Companies other than the
Combined Business is less favorable than that of the Rashkin Companies. (b)If
any cost directly associated with the Business represents a change in the
Business itself as a profit center, including without limitation the acquisition
of a new business from another business entity and associated expenses of the
acquired business or the addition of personnel not associated with additional
revenues such as a central processing center for all Purchaser Company
operations, the Rashkin Companies shall have the option to elect either to
include in the determination of Profit both the revenues and expenses (other
than expenses allocated to the Business on a "head-count" basis) arising from or
in connection with the change in the Business or to exclude both the revenues
and expenses arising from or in connection with the change in the Business.
Notwithstanding the foregoing, if Purchaser shall give the Rashkin Companies
written notice of any such changes, the Rashkin Companies shall have 30 days
from the receipt of such notice to elect in a written election delivered to
Purchaser whether or not to include the revenues and expenses in its profit
center for purposes of calculating Profit. Such election shall be binding for
all future calculations of Profit. If the Rashkin Companies fail to make such
election within said time period, the Rashkin Companies shall be deemed to have
elected to include the revenues and expenses in their profit center under this
Agreement, and the Asset Purchase Agreement between RRA and Comforce Technical
Services, Inc. and the Stock Purchase Agreement between PSST and Comforce
Technical Services, Inc. . (c)In determining Profit, accrued liabilities (for
example but without limitation, vacation and sickpay) shall be determined,
insofar as GAAP does not specifically prescribe a methodology, using (i) the
same methodologies currently used by the Rashkin Companies or (ii) the
methodology actually used by Purchaser in its audited financial statements,
whichever produces the lesser expense. (d)The calculation of Profit under this
definition is subject to the dispute resolution mechanism described in Section
2.2.
"Purchase Price" has the meaning ascribed in Article 2 of
this Agreement.
"Purchaser" has the meaning ascribed thereto in the Preamble.
"Purchaser Company" means Parent, Purchaser, and Comforce
Technical Services, Inc .
"Rashkin Company" shall mean collectively RRA, Inc.
("RRA"), DTS, and Project Staffing Support Team, Inc. ("PSST").
"Receivables" shall have the meaning ascribed in Section 4.1.
"Section 401(k) Plan" means the DTS, Inc. 401(k) Plan.
"U.S. $ or $" means the currency of the United States of
America
1.2 Certain Terms. All references t o Articles and Sections
herein are to the Articles and Sections of this Agreement unless otherwise
specified.
ARTICLE 2
ACQUISITION PRICE
2.1 Upon the terms and subject to the conditions and the
performance of Seller's obligations and duties set forth in this Agreement, and
in consideration for the conveyance, transfer and assignment of the Assets of
Seller to Purchaser, Seller shall receive the following (the "Acquisition
Price"): (a) An initial payment ("Initial Payment") on the date of Closing of
$475,000 in cash, wire or certified funds (collectively, "Cash") payable to
Seller. (b) In addition to the Initial Payment, the Seller shall receive from
Purchaser or Parent a portion of the earnings of the Combined Business
(including earnings on any contracts entered into by the Combined Business after
Closing) in each annual period described below, equal to $33,333 per year as a
contingent payout ("Contingent Payout"), provided that the Combined Business
earns minimum (pretax) Profits of $750,000 from the Closing Date until December
31, 1996 (reduced by $93,750.00 for each month after April 28, 1996 or pro rata
portion of such month after April 28 that the Closing Date occurs) (first annual
period) and $850,000 in calendar year 1997 (the second annual period) and in
calendar year 1997 (the third annual period) ("Minimum Profit"). The Contingent
Payout for each period shall be deposited by Purchaser or Parent with the escrow
agent under the Contingency Escrow Agreement, within thirty (30) days after the
Minimum Profit for such period has been achieved, based on the internally
prepared year-to-date income statement of the Combined Business. Under the
Contingency Escrow Agreement, funds deposited with the escrow agent for each of
the three annual periods for which Minimum Profit is calculated hereunder shall
be disbursed to Seller upon confirmation within sixty (60) days after the end of
each relevant annual period that the Minimum Profit for the full annual period
has been achieved as of the end of each such annual period. It is acknowledged
and agreed that ten percent (10%) of the Advance Payments as defined in the
Letter Agreement shall be allocated to Seller (the "Allocated Amount") and the
Contingent Payout for each period shall be reduced by one third of the Allocated
Amount. All other terms of the Letter Agreement remain the same and are
incorporated herein (c) The calculation of Profit for each annual period of the
Contingent Payout shall stand alone and the Profits and associated revenues,
costs, expenses, losses, allocations and reserves shall not be attributed to
past or future periods nor carried forward or back to another period. Any annual
contingent payment not earned hereunder shall be retained by Purchaser. It is
acknowledged and agreed that one half of the Advance Payments as defined in the
Letter Agreement shall be allocated to RRA (the "Allocated Amount") and the
Contingent Payout for each period shall be reduced by one third of the Allocated
Amount. All other terms of the Letter Agreement remain the same and are
incorporated herein. (d) If, for any annual period, there is any material change
in annualized interest expense attributable to debt-financed accounts receivable
because of a change in the percentage of accounts receivable of the Business
which are debt financed (when compared with the daily average percentage of
debt-financed accounts receivable for the one year period immediately before
Closing), then the dollar increase or decrease in the annualized interest
expense resulting therefrom (as calculated under the following sentence) will
either: (A) be subtracted from the Minimum Profit in the event of an increase;
or (B) added to the Minimum Profit, in the event of a decrease. (e) The dollar
increase or decrease in annualized interest expense resulting from a change in
the percentage of accounts receivable that are debt-financed will be determined
by multiplying the increase or decrease in the percentage of accounts receivable
that are debt-financed by the average daily borrowing base for the one year
period prior to the Closing. Exhibit D annexed hereto sets forth for example
purposes only the manner in which said calculation would be made assuming
Seller's percentage of accounts receivable that are debt financed over the one
year period immediately before Closing is thirty percent (30%). (f) Subject to
the terms of this Agreement, and Section 6(j) of S. Rashkin's Employment
Agreement with Purchaser, the Contingent Payments will be payable without regard
to S. Rashkin's continued employment with or R. Rashkin's continued service as a
consultant to the Purchaser or any Purchaser Company at the time the Contingent
Payment would otherwise be due and payable. (g) Parent and Purchaser shall be
jointly and severally obligated to pay the Contingent Payout including the
deposit of the Contingent Payout with the Escrow Agent under the Contingency
Escrow Agreement as provided in Section 2.1(b) above.
2.2 Purchaser shall provide the Seller with accounting
statements, in reasonable detail, which will indicate the information necessary
to make the calculations referenced in Section 2.1 above within 45 days after
the end of the respective annual period, provided that such information as may
be necessary or appropriate to make the calculations is provided to Parent by S.
Rashkin in his capacity as President of the Purchaser in accordance with the
Employment Agreement between himself and the Purchaser. The determination of
Profit and calculation of any pay-out will be made in accordance with GAAP
applied on a consistent basis for all periods before and after the Closing Date.
The statements will be deemed final and correct unless the Seller, by written
notice within 30 days from the date of delivery of the accounting statements,
contests the determination. If the Seller does not contest the accounting
statements within the 30 day period, the statements will be deemed correct and
Seller shall waive all right to contest the statements. Any notice hereunder
must specify the reasons for disagreement in reasonable detail. Upon receipt of
any such notice, if the parties cannot settle any disputes or grievances
relating to the calculations referred to in Section 2.1, within thirty (30) days
of the date of receipt by Purchaser of Seller's written notice of dispute,
Purchaser and Seller shall submit any such unresolved dispute to an independent
accounting firm of national reputation appointed jointly by Purchaser and Seller
(neither of which may unreasonably withhold or delay such appointment) (the
"Independent Accounting Firm"). The Independent Accounting Firm, within 20
business days after appointment, shall determine whether Profits for the annual
period with respect to which the dispute has arisen are less than, equal to or
greater than the Minimum Profit for that period. If the Independent Accounting
Firm determines that Profits are equal to or greater than Minimum Profit, the
Purchaser shall pay the Contingent Payout for the disputed period to Seller
within three (3) business days thereafter and shall pay the fees and
disbursements of the Independent Accounting Firm. If the Independent Accounting
Firm determines that Profits are less than Minimum Profits for the disputed
period, the Seller shall pay the fees and disbursements of the Independent
Accounting Firm.
2.3 Notwithstanding any contrary provision in this Agreement,
except as set forth in Exhibit "E", Purchaser shall not assume any liabilities
of Seller, whether disclosed, undisclosed, liquidated, contingent or otherwise,
except (i) liabilities under the Contracts, Vendor Contracts and leases which
are assigned to Purchaser under this Agreement, (ii) liabilities pursuant to
employment of Company Employees and other employees for which Purchaser is
obligated pursuant to Section 3.5; and (iii) liabilities in connection with the
Employee Benefit Plans as provided in Section 4.7.
ARTICLE 3
CLOSING
3.1 The Closing for the transactions contemplated by this
Agreement (the "Closing") shall take place on or before the Closing Date at the
Arizona offices of the Seller's counsel or such other time and place as may be
mutually approved by the parties. The parties shall adjust all expenses on a pro
rata basis as of the Closing Date.
3.2 Commencing with the execution of this Agreement, Seller agrees to
commence the preparation of and make diligent application for, to follow up on,
and to actively and diligently pursue all approvals and consents reasonably
requested by Purchaser including but not limited to the consents for approval of
assignment of the Contracts in a form reasonably acceptable to Purchaser.
Purchaser acknowledges that in numerous cases such consent will require
Purchaser to execute confidentiality and nondisclosure agreements for the
benefit of third parties to the Contracts and will require Purchaser to qualify
for security clearances acceptable to such third parties. Seller agrees to
direct and coordinate Purchaser's preparation of and application for, such
security clearances and Purchaser agrees to use its diligent best efforts
including without limitation, taking such actions as are within its ability and
control, as Seller instructs it to take to obtain the necessary security
clearances (collectively, "Purchaser Clearance Requirements").
3.3 At the Closing, the Seller shall deliver the Assets to
the Purchaser. Specifically, Seller shall deliver the following:
(a) All Contracts, Records and physical embodiments of the
Assets;
(b) Assignments of the Contracts executed and approved by an
authorized representative of Seller's Customer, in a form satisfactory to
Purchaser;
(c) All documents necessary to convey to Purchaser the
General Intangibles;
(d) All keys, combinations, security devices and codes for or
with respect to all offices, storage units, vaults, safety deposit boxes of the
Seller; (e) All computer software and programs, licenses, data bases utilized in
connection with the operation of the Business;
(f) An assignment of Seller's interest in the Real Property,
in the form of Exhibit F-1;
(g) Executed counterparts, and/or copies, as the case may be,
of the instruments and documents required to be delivered to the Purchaser at
the Closing as herein provided;
(h) A Bill of Sale conveying title to the Equipment listed in
Exhibit "B", in the form annexed hereto as Exhibit "F";
(i) A certified copy of resolutions adopted unanimously by
the Seller's Boards of Directors authorizing the execution, delivery and
performance by the Seller of this Agreement and the consummation of the sale
contemplated hereby, or, at Purchaser's option, a written consent executed by
all of the stockholders of the Seller authorizing and consenting to the sale
herein;
(j) A tax compliance certificate from all states in which the
Seller conducts or, within the one year preceding Closing, conducted business;
and
(k) Employment agreements between S. Rashkin and Evan Burks
and Purchaser executed by them in substantially the same form as annexed hereto
as Exhibit "G" and "H". The Seller will from time to time at the Purchaser's
request, whether prior to, at, or after the Closing, and without further
consideration, execute and deliver such further instruments and conveyances and
transfers, and take such other action as the Purchaser may reasonably require to
more effectively convey and transfer to the Purchaser any of the assets being
sold hereunder.
3.4 Immediately upon the Closing Date, Seller and its Stockholder
will cease and refrain from using the name "Datatech Technical Services, Inc.",
"RRA, Inc.", "Project Staffing Support Team, Inc.", "PSST", or any similar name
or derivation thereof except as provided in Section 3.6.
3.5 Purchaser will upon Closing offer employment to all employees
of Seller except those employees Purchaser discloses to Seller upon completion
of its due diligence under Section 13.1(o). Purchaser does not guarantee that
any such employment will continue for a specified period and may in its
discretion make any or all such employees at will employees, except as otherwise
provided in their written employment agreements. Nothing herein express or
implied shall confer upon any such employee or any other person any rights or
remedies including without limitation, any right to employment, or continued
employment for any specified period, of any nature or kind whatsoever under or
by reason of this Agreement. Such employees who become employees of Purchaser on
the Closing Date shall be called "Transferred Employees."
3.6 (a) Purchaser and Seller acknowledge that the contract
between Seller and McDonnell Douglas Systems, Inc. formerly known as McDonnell
Douglas Helicopter Company ("McDonnell Douglas") referenced by letter dated
March 1, 1994 and purchase order issued February 8, 1994 under P.O. Number
543749 (the "McDonnell Douglas Contract") is excluded from the assets purchased
by Purchaser under this Agreement, that Seller shall retain the right to provide
to McDonnell Douglas all Company Employees necessary in order to perform under
the McDonnell Douglas Contract, and that Purchaser will provide services to
Seller in order to enable it to continue to perform under the McDonnell Douglas
Contract until its expiration, all as further provided in this section and
notwithstanding any other provision to the contrary contained in this Agreement.
In return for providing services to Seller under this section, Seller shall pay
to Purchaser an amount equal
to its Net Margin (as defined in this section) from the McDonnell Douglas
Contract. In addition, Seller shall assist Purchaser in submitting a bid for any
contract from McDonnell Douglas to be let at or prior to the expiration of the
McDonnell Douglas Contract.
(b) Net Margin from the McDonnell Douglas Contract shall mean net
revenues from such contract less all direct payroll and payroll-related
expenses, including without limitation taxes, workers' compensation, employee
benefits, per diem, travel, interest and other costs of financing applied to
payroll financed by Seller based on Purchaser's borrowing rate and calculated in
the same manner as required under Purchaser's financing agreement with its bank,
and directly related benefits administration costs (for costs of 401(k) and
medical and liability insurance, among others with respect to the performance
under the McDonnell Douglas Contract).
(c) In order to permit Seller to perform under the McDonnell
Douglas Contract, Purchaser shall provide to Seller payroll services typically
provided by payroll service firms, including without limitation tax
administration, calculation of pay and providing management reports. In
addition, the employees performing services under the McDonnell Douglas Contract
shall be permitted to continue as participants under the RRA, Inc. 401(k) Plan.
(d) In order to permit Seller to perform under the McDonnell
Douglas Contract, Purchaser hereby grants, effective as of the Closing Date, a
license to use the names "DTS" and "Datatech Technical Services, Inc." solely in
connection with Seller's performance under the McDonnell Douglas Contract, and
Purchaser agrees that Seller's activities under this section shall be exempt
from the prohibitions of Article 16 for such time as the McDonnell Douglas
Contract is in effect.
(e) This Section 3.6 shall apply to the McDonnell Douglas
Contract only. It shall not apply to any extension, renewals or replacement
thereof. Seller shall not amend, modify, supplement or extend the terms of the
McDonnell Douglas Contract. Seller shall use its reasonable best efforts to
assist Purchaser in bidding for and/or retaining the business subject to the
McDonnell Douglas Contract after the McDonnell Douglas Contract expires or is
otherwise terminated.
(f) Seller shall maintain in effect throughout the term of the
McDonnell Douglas Contract all of the liability and workers compensation
insurance coverages it has in effect on the date hereof.
(g) Notwithstanding anything herein to the contrary, in lieu of
the arrangement described in 3.6(a) and (b), to the extent possible, Seller
shall pay Purchaser the gross revenues under the McDonnell Douglas Contract and
Purchaser shall pay to Seller the gross revenues minus the Net Margin.
3.7 On the Closing Date, Seller shall deliver to Purchaser a
statement of all prepaid expenses and deposits that relate to Contracts and
Vendor Contracts and leases which are assigned to Purchaser under this Agreement
and of other prepaid items (collectively, the "Prepaid Items"), together with a
certificate of Seller certifying that all of the Prepaid Items have been booked
as a refundable deposit or accrued as prepaid expenses on the books and records
of Seller maintained in accordance with GAAP and that, to the extent any such
item has been billed to or is chargeable to a customer, that the charge or
billing is not a receivable of Seller and has not been paid to Seller as of the
Closing. Purchaser shall at the Closing pay to Seller the amount of the Prepaid
Items accrued as of the Closing.
ARTICLE 4
COLLECTION OF ACCOUNTS RECEIVABLE,
PAYMENT OF ACCOUNTS PAYABLE, ASSUMPTION OF
EMPLOYEE BENEFIT PLANS AND OTHER POST-CLOSING OBLIGATIONS
4.1 Purchaser agrees to invoice Seller's Customers for all
outstanding sums legally due and owing Seller in connection with the Business
prior to the Closing Date ("Receivables"). Seller agrees to cooperate in this
effort and shall provide notice to such Customers to remit directly to Purchaser
and to provide Purchaser with complete and accurate information and
documentation of the Receivables. Purchaser shall pay to Seller all Receivables
collected, less any documented actual and reasonable expenses of collection,
including the hourly rate of labor associated with such collection, within three
days of receipt. Purchaser shall use all reasonable efforts to collect the
Receivables and shall provide Seller with monthly reports indicating the amounts
billed, amounts received, date of payment, amounts outstanding, expenses of
collection in reasonable detail and any notice of any
counterclaim, denial, set-off or refusal to pay. Seller shall have the right to
take reasonable actions to collect any Receivable; provided, however that such
actions do not materially interfere with or adversely impact Purchaser's
relationship with the Customer having the Receivable.
4.2 Seller shall promptly pay all employee wages and payroll
charges, trade and other accounts payable upon which it is obligated as of the
Closing Date. If Seller does not pay such non-assumed liability accounts payable
on the later of the due date thereof or the tenth day following notice from
Purchaser to pay such accounts or give Purchaser notice that it has a dispute as
to the amount due Purchaser may pay or assume such accounts payable, and
thereafter, such amounts shall be reimbursed by Seller to Purchaser, or, at the
Purchaser's option, may be applied by Purchaser against any monies due Seller.
4.3 As of the Closing Date, Purchaser shall be substituted for
the Seller as the employer and plan sponsor under the Employee Benefit Plans,
and Seller shall take all corporate action and shall execute all agreements and
instruments necessary to accomplish such substitution. From and after the
Closing Date, Purchaser shall have full responsibility and liability for the
maintenance and operation of the Employee Benefit Plans and shall make all
contributions and pay all claims and benefits under such Employee Benefit Plans
that arise on account of service of employees covered under such plan and after
the Closing Date.
4.4 Seller shall be relieved from furnishing Forms W-2 to any
Transferred Employee and Purchaser shall issue such Forms W-2 to the Transferred
Employees at the end of the 1996 calendar year. Such forms shall be issued as
required by law, and shall reflect the wages paid and taxes withheld by Seller
and by Purchaser for such calendar year. Seller, in accordance with Revenue
Procedure 84-77, shall attach a statement to its Forms 941 explaining any
discrepancy reflected in the Seller's reports on Form W-3 and on Form 941. Such
statement shall include the name, address and employer identification number of
Purchaser, as the successor employer, and a reference to Revenue Procedure
84-77. Purchaser shall implement the same procedures and provide the same
information to explain the corresponding differences on its Form 941. In
accordance with Rev. Proc. 84-77, all Forms W-4 that were provided to Seller by
the Transferred Employees shall be transferred to Purchaser. Purchaser shall
retain all such transferred Forms W-4 on file and shall deduct and
<PAGE>
withhold from the wages it pays to the Transferred Employees in accordance with
the information provided in those forms, unless a Transferred Employee submits a
changed Form W-4. Purchaser shall submit to the Internal Revenue Service, in
accordance with Treasury Regulation ss. 31.3402(f)(2)-l(g), copies of all Forms
W-4 received by Seller during the current and preceding calendar quarters. All
Form W-4's provided to Seller by any of the Transferred Employees for the
current calendar year will be transferred to Purchaser, and Purchaser will
accept and retain such reports. Seller shall provide Purchaser with all
information necessary to implement this provision and fulfill the requirements
of Revenue Procedure 84-77, including, without limitation, information relating
to the wages paid and taxes withheld for each Transferred Employee. Seller shall
not destroy any payroll or employment records it maintains for any of the
Transferred Employees without Purchaser's prior written consent. Seller shall
transfer to Purchaser all Form I-9s and related materials it has for Transferred
Employees.
4.5 Purchaser shall also take all steps necessary to be
considered a successor employer to the Seller for FICA, FUTA and SUTA tax
purposes, as described in Treasury Regulations ss. 31.3121(a)(1)-1(b) and ss.
31.3302(e)-1 and applicable state laws and regulations.
4.6 As of the Closing Date, S. Rashkin shall resign as Trustee of
the Retirement Plans and Purchaser shall provide evidence satisfactory to Seller
that a designee of Purchaser has become Trustee of the Plans.
4.7 INTENTIONALLY OMITTED.
4.8 INTENTIONALLY OMITTED.
4.9 INTENTIONALLY OMITTED.
4.10 Seller shall (i) cure any breaches or defaults that may
exist on the Closing Date, with respect to any of the contracts or agreements
assumed by Purchaser hereunder, and (ii) make all payments due or to become due
thereunder attributable to periods ending on or before the Closing Date. In the
event Seller fails to cure any such breach or default or make any such payment
when requested to do so by Purchaser, Purchaser will have the right to cure any
such breach or default or make any such payment on or after the tenth day
following Purchaser's request that Seller do so. Any amounts so paid by
Purchaser to cure any such
<PAGE>
breach or default shall be reimbursed by Seller to Purchaser, or at Purchaser's
option, may be applied against any moneys due Seller under the right of offset
granted in Section 8.3.
4.11 INTENTIONALLY OMITTED.
ARTICLE 5
SELLER'S REPRESENTATIONS AND WARRANTIES
In order to induce Purchaser to execute and perform this
Agreement, the Seller hereby represents, warrants, covenants and agrees (which
representations, survival warranties, covenants and agreements shall be and be
deemed to be continuing and survive the execution and delivery of this Agreement
and the Closing Date) as follows:
5.1 Seller is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, with the full
power and authority, corporate and otherwise, and with all licenses, permits,
certifications, registrations, approvals, consents and franchises necessary to
own or lease and operate its properties and to conduct its Business as presently
being conducted. Seller is duly qualified to do business as a foreign
corporation, and is in good standing, in all jurisdictions, if any, wherein such
qualification is necessary in order to avoid a material adverse effect upon its
Business.
5.2 Seller owns and has good and marketable title in and to the
Property and assets to be sold or transferred hereunder free and clear of all
liens, claims and encumbrances and rights and option of others except as herein
expressly provided to the contrary and except for the liens set forth on Exhibit
"L" ("Permitted Liens").
5.3 The Stockholder owns all of the issued and outstanding
shares of stock of Seller as listed on Exhibit "I" and at the Closing there
shall not be authorized and issued and outstanding any shares of capital stock
of Seller and/or rights to purchase shares of capital stock of Seller except
indicated on Exhibit "I". The issued and outstanding shares of Seller have been
duly authorized and validly issued, and all such outstanding shares are fully
paid and non assessable. At the Closing there will be no outstanding trust
agreements, options, warrants and similar rights to purchase shares of capital
stock. There are no preemptive rights. During the period from the date hereof
through the Closing, there will be no shares of the capital stock of Seller
issued. Except for cash dividends, as to which there shall be no restriction,
and except as herein provided, no dividends or other distributions of the assets
of
<PAGE>
Seller have or will be declared and/or paid prior to the Closing on or with
respect to the capital stock of any Seller.
5.4 (i) The Seller has the full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby; (ii) the execution, delivery and performance of this
Agreement, the consummation by Seller of the transactions herein contemplated
and the compliance by Seller with the terms of this Agreement have been duly
authorized, and this Agreement has been duly and properly authorized, executed
and delivered by Seller; (iii) this Agreement is the valid and binding
obligation of Seller, enforceable in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies; (iv) the execution,
delivery and performance of this Agreement by Seller and the consummation by
Seller of the transactions herein contemplated does not, and will not, with or
without the giving of notice or the lapse of time, or both, (A) result in any
violation of the articles of incorporation or bylaws of Seller, (B) result in a
breach of or conflict with any of the terms or provisions of, or constitute a
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Seller and/or pursuant to, any
indenture, mortgage, note, contract, commitment or other agreement or instrument
to which Seller is a party or by which it or any of its properties or assets are
or may be bound or affected (assuming for purposes of this provision that all
consents referred to in Exhibit "J" are obtained); (C) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over Seller any of its
properties or businesses that would have a material adverse effect on the
Seller, or (D) have any effect on any agreement, permit, certification,
registration, approval, consent, license or franchise necessary for Seller to
own or lease and operate any of its properties and to conduct its businesses or
the ability of Seller to make use thereof (assuming for purposes of this
provision that all consents referred to in Exhibit "J" are obtained). No
consent, approval, authorization or order of any court, Customer, governmental
agency, authority or body and/or any party to an agreement to which Seller is a
party and/or by which it is bound, is required in
<PAGE>
connection with the execution, delivery and performance of this Agreement,
and/or the consummation by Seller of the transactions contemplated by this
Agreement except as noted on Exhibit "J".
5.5 Seller is not in violation of, or in default under, (i) any
term or provision of its articles of incorporation or bylaws; (ii) any material
term or provision or any financial covenant of any indenture, mortgage,
contract, commitment or other agreement or instrument to which it is a party or
by which it or any of its properties or business is or may be bound or affected;
or (iii) any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or any of its properties or business. Seller owns,
possesses or has obtained all governmental and other licenses, permits,
certifications, registrations, approvals or consents and other authorizations
necessary to own or lease, as the case may be, and to operate its properties and
to conduct its business or operations as presently conducted and all such
governmental and other licenses, permits, certifications, registrations,
approvals, consents and other authorizations are outstanding and in good
standing, and there are no proceedings pending or, to the best of Seller's
knowledge, threatened, or any basis therefore existing, seeking to cancel,
terminate or limit such licenses, permits, certifications, registrations,
approvals or consents or authorizations.
5.6 Prior to the date hereof Seller has delivered to Purchaser
the audited consolidated financial statements of Seller described on Exhibit "K"
annexed hereto and made a part hereof ("Financial Statements"). The Financial
Statements fairly present the financial position of Seller as of the respective
dates thereof and the results of operations, and changes in financial position
of the Seller, for each of the periods covered thereby and are true and
accurate. The Financial Statements have been prepared in conformity with
generally accepted accounting principles, applied on a consistent basis
throughout the entire periods involved. As of the date of any balance sheet
forming a part of the Financial Statements, and except as and to the extent
reflected or reserved against therein, Seller did not have any material
liabilities, debts, obligations or claims (absolute or contingent) asserted
against it and/or which should have been reflected in a balance sheet or the
notes thereto, and all assets reflected thereon are
<PAGE>
properly reported and present fairly the value of the assets therein stated in
accordance with generally accepted accounting principles.
5.7 The financial and other books and records of Seller
(including those forming a part of the Assets) (i) are in all material respects
true, complete and correct and have, at all times, been maintained in accordance
with good business and accounting practices; (ii) contain a complete and
accurate description, and specify the location, of all trucks, machinery,
equipment, furniture, supplies, tools, drawings and all other tangible personal
property (collectively the "Personal Property") owned by, in the possession of,
or used by Seller in connection with the operation of its Business in the normal
course of business; (iii) except as set forth on Exhibit "L" annexed hereto and
made a part hereof, none of such Personal Property is leased or subject to a
security agreement, conditional sales contract or other title retention or
security agreement or is other than in the possession of and under the control
of Seller, (iv) the Personal Property reflected in such books and records
constitutes all of the tangible personal property necessary for the conduct by
Seller of its Business as now conducted; and all of the same is in normal
operating condition and the use thereof as presently employed conforms to all
applicable laws and regulations.
5.8 Annexed hereto and labeled Exhibit "A" is a schedule setting
forth a description of each parcel of improved or unimproved real property owned
by or leased to Seller. Exhibit "A" is true correct and complete in all respect;
each of such leases are in full force and effect with no event of default in
existence or event or occurrence which, with the passage of time and/or giving
of notice would or could mature into an event of default thereunder.
5.9 Seller owns all rights to utilize its General Intangibles
free and clear of all liens, claims and encumbrances and rights and options of
third parties (including without limitation former or present officers,
directors, stockholders, employees and agent, but excluding the rights of
licensors) other than Permitted Liens; Seller has not licensed or leased any of
the General Intangibles and/or any interest therein to any person and/or entity;
to the best of Seller's knowledge Seller has not infringed, nor is infringing,
upon the rights of others with respect to the General Intangibles; and Seller
has not received any notice of conflict with the asserted rights of others with
respect to the General Intangibles and Seller knows of no
<PAGE>
basis therefor; and to the best of Seller's knowledge no others have infringed
upon the General Intangibles.
5.10 The Customer Materials, Employee Materials and Records
represent all of such materials at any time utilized in connection with, arising
out of or relating to the Business; and neither Seller nor, to the best of
Seller's knowledge, any employee, officer, director or stockholder of Seller
have or shall retain copies thereof and have not prior to the date hereof, and
shall not prior to the Closing, provide to any person or entity or authorize or
permit another to utilize any of such Customer Materials, Employee Materials or
Records and/or the information therein or thereon reflected.
5.11 Seller did not have any material liabilities, debts,
obligations or claims asserted against it, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, including, but not limited to,
liabilities on account of due and unpaid taxes, other governmental charges or
lawsuits except as reflected in the Financial Statements or as listed on Exhibit
"M".
5.12 Since the date of the most recent balance sheet included in
the Financial Statements, there has been no material adverse change to the
business of Seller and Seller has not, except as set forth on Exhibit "N"
annexed hereto and made a part hereof, (i) incurred any obligation or liability
(absolute or contingent, secured or unsecured) except obligations and
liabilities incurred in the ordinary course of the operation or business of its
Business as carried on at and prior to such date; (ii) canceled, without payment
in full, any notes, loans or other obligations receivable or other debts or
claims held by it other than in the ordinary course of business; (iii) sold,
assigned, transferred, abandoned, mortgaged, pledged or subjected to lien (other
than Permitted Liens) any contract, permit, license, franchise or other
agreement other than sales or other dispositions of goods or services in the
ordinary course of business at customary prices; (iv) increased compensation
payable to any of its officers, directors or other employees including in the
term "compensation", salaries, fringe benefits, pensions, profit participation
and payment of benefits of any kind whatsoever; (v) entered into any line of
business other than that conducted by it on such date or entered into any
transaction not in the ordinary course of its business; (vi) conducted any line
of business in any manner except by transactions customary in the operation of
its business as conducted on such date;
<PAGE>
(vii) declared, made or paid, or set aside for payment, any non-cash dividends
or other non-cash distribution on any shares of its capital stock; (viii)
changed or modified any accounting practice; (ix) waived any rights under any
Contracts that may have a material adverse effect upon Seller; (x) made any
capital expenditure except as set forth on Exhibit "M" or as permitted by
Section 3.2; (xi) paid any amounts to shareholders except the usual salary and
benefits (provided that bonuses have been paid to S. Rashkin pursuant to his
employment agreement with Seller); or (xii) entered into any agreement to take
any of the actions above referenced.
5.13 Seller has not incurred any liability for any finder's fees
or similar payments in connection with the transactions herein contemplated
except as set forth herein.
5.14 Except as set forth on Exhibit "O" annexed hereto and made a
part hereof, the Seller is not in default under the terms of any outstanding
agreement which is material to the business, operations, properties, assets or
condition of Seller; and there exists no event of default or event which, with
notice and/or the passage of time, or both, would constitute any such default.
5.15 Except as set forth on Exhibit "P" annexed hereto and made a
part hereof, there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries against Seller before any court or governmental
agency, court or tribunal, domestic, or foreign, or before any private
arbitration tribunal, pending, or, to the best of the knowledge of Seller,
threatened against Seller or involving its properties or businesses; nor, to the
best of the knowledge of Seller, is there any basis for any such claim, action,
suit, proceeding, arbitration, investigation or inquiry to be made by any person
and/or entity, including without limitation any Customer, supplier, lender,
stockholder, former or current employee, agent or landlord. There are no
outstanding orders, judgments or decrees or any court, governmental agency or
other tribunal specifically naming Seller and/or enjoining Seller from taking,
or requiring Seller to take, any action, and/or by which Seller, and/or its
properties or businesses are bound or subject.
5.16 Seller has filed all federal, state, municipal and local tax
returns (whether relating to income, sales, franchise, withholding, real or
personal property, employment or otherwise) required to be filed under the laws
of the United States and all applicable states,
<PAGE>
and has been paid in full all taxes which are due pursuant to such returns or
claimed to be due by any taxing authority or otherwise due and owing. No
penalties or other charges are or will become due with respect to the late
filing of any such return. To the best of the knowledge of Seller, after due
investigation, each such tax return heretofore filed by Seller correctly and
accurately reflects the amount of its tax liability thereunder. Seller has
withheld, collected and paid all other levies, assessments, license fees and
taxes to the extent required and, with respect to payments, to the extent that
the same have become due and payable.
5.17 Since the date of the most recent balance sheet included in
the Financial Statements, Seller has not sustained any material loss or
interference with its business of any kind nature or description including
without limitation, from fire, storm, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; nor have there been, and prior to the
Closing, there will not be, any material adverse change in or affecting the
general affairs, management, financial condition, stockholders' equity, results
of operations or properties of Seller.
5.18 Except as set forth in Exhibit "Q", Seller has not
experienced any actual or to the best of Seller's knowledge been threatened with
any employee strikes, work stoppages, slow-downs, or lock-outs, or had any
material change in the terms of its agreements with the employees of Seller
which would adversely affect Seller, and none are imminent.
5.19 Neither Seller nor its present or former officers,
directors, employees or agents (including any third party acting on behalf of
Seller) have: (i) directly or indirectly, made or authorized to be made, any
bribes, kickbacks or other payments of a similar nature, whether lawful or not,
to any person or entity, public or private, regardless of the form thereof,
whether in money, property or services, to obtain favorable treatment in
securing business or to obtain special concessions or to pay for favorable
treatment for business secured or for special concessions already obtained; (ii)
paid funds or property of any kind was donated, loaned or made available,
directly or indirectly, for the benefit of, or for the purpose of opposing, any
government or subdivision thereof, political party, candidate or committee,
either domestic or foreign except by natural persons in their individual
capacities; (iii) made any loans, donations, or other disbursements, directly or
indirectly, to officers or employees
<PAGE>
of the Seller for contributions made, or to be made, directly or indirectly, for
the benefit of, or for the purpose of opposing, any government or subdivision
thereof, political party, candidate or committee, either domestic or foreign; or
(iv) maintained a bank account or other account of any kind, whether domestic or
foreign, which account was not reflected in the corporate books and records or
which account was not listed, titled or identified in the name of Seller.
5.20 The corporate record books of Seller have been duly and
properly maintained, are in good order, complete, accurate, up to date and have
all necessary signatures, and set forth all meetings and actions heretofore held
and/or taken by the stockholders and/or directors of Seller, as the case may be,
and/or as set forth in all certificates of votes of stockholders or directors
heretofore furnished to anyone at any time. Seller has utilized its best efforts
to maintain the files and inventory of resumes in a current and usable
condition.
5.21 The copies of the articles of incorporation (and all
amendments thereto) and the bylaws of Seller heretofore delivered by the Seller,
are true, correct and complete in all respects; are, and shall remain, in full
force and effect; and shall not be altered, amended, modified, terminated or
rescinded prior to the Closing without the prior written consent of the
Purchaser in each instance.
5.22 The Stockholders, officers and members of the Boards of
Directors of Seller are as set forth on Exhibit "R" annexed hereto and made a
part hereof; and during the period from the date hereof until the Closing, there
shall be no change in such officerships and/or memberships without the prior
written consent of the Purchaser in each instance.
5.23 No officer or director of Seller (and/or any member of
their respective immediate families) has a financial interest (direct or
indirect) in any competitor, supplier or customer of Seller, RRA or PSST, other
than ownership of less than 1% of the outstanding voting stock of any publicly
traded company.
5.24 Each of the Contracts on Exhibit "C" annexed hereto and
made a part hereof are in full force and effect, have not been altered, amended,
modified, terminated or rescinded, are fully enforceable in accordance with
their respective terms.
5.25 Other than as set forth on Exhibit "S" annexed hereto and
made a part hereof, Seller is not a party (i) to any contract or agreement
calling for the payment of more
<PAGE>
than $10,000 per annum or $25,000 in the aggregate and/or which cannot be
terminated on no more than 90 days prior written notice from Seller to the other
party thereto; (ii) to any profit sharing, bonus, deferred compensation, pension
or retirement plan, severance policy or other similar agreement or arrangement;
(iii) to any collective bargaining agreement; or (iv) to any agreement not
entered into in the ordinary course of business.
5.26 The Contracts are effective and there exists no material
breach or default with respect to same. The copies of those Contracts delivered
to Purchaser as a condition to Closing shall be accurate and complete and there
exist no amendments with respect to same which shall not be disclosed. Except as
noted as Exhibit "C", Seller knows no present condition or set of facts with
respect to either amendment of terms or performance pursuant to which the
requirements for personnel in such contracts shall materially be reduced or
changed adversely. Seller is not presently aware of any past deficiencies in its
performance of services under such contracts that might materially adversely
affect the continuation of supplying services under such contracts.
5.27 Except as set forth on Exhibit "T", there have been no past
proceedings nor are there any proceedings now pending nor, to Seller's knowledge
or belief, threatened against Seller before the National Labor Relations Board,
State Department of Labor, State Commission on Human Rights and Opportunities,
State Department of Labor, Equal Employment Opportunity Commission or any other
local, state or Federal agencies having jurisdiction over employee rights with
respect to hiring, tenure, conditions of employment within the three year period
prior to the execution of this Agreement.
5.28 Seller, to the best of its knowledge and belief, represents
that it has properly made, reported and remitted all appropriate federal, state
and local payroll related deductions and taxes including: FICA, FUTA, SUI and
income tax withholdings presently due and owing; all applicable Sales and Use
Taxes; and further warrants that it will report and remit all withholdings and
taxes due for activities prior to the Closing Date.
5.29 None of the contracts referenced or listed on Exhibit"C"
were obtained or executed based in whole or in part on the fact or
representation that Seller is a minority or woman owned or operated business or
a small business enterprise as those or similar terms are deemed by Federal or
state statutes or regulations.
<PAGE>
5.30 Seller has not been the subject of any union organizing
activity and there have been no attempts to unionize the employees of Seller.
5.31 Seller has paid all employees in accordance with applicable
local, state and federal law. All employees have been paid appropriate and
correct premium wages where applicable.
5.32 Seller has not retained the services of any independent
contractor or consultant for assignment to Customers except as listed on Exhibit
"U," annexed hereto and made a part hereof.
5.33 There are no contracts, agreements, or arrangements,
written or oral, relating to the conduct of the business of Seller to be sold
hereunder to which Seller is a party or is bound, except as may be referred to
in this Agreement, or any schedule or exhibit annexed hereto.
5.34 Exhibit "V" contains complete, correct and current copies
of all insurance policies in effect as of the time of this agreement. The
policies in place are in full force and effect and insure against risks and
liabilities, and in amounts and under terms and conditions customary for the
business in which Seller is engaged. Seller shall keep such coverage in effect
through the date of Closing.
5.35 Each of Seller's Employee Benefit Plans is listed on
Exhibit "W".
5.36 Seller does not (and has not in the past) maintained a
defined benefit pension plan, or made any contributions to a multiemployer
pension plan, as thatterm is defined in Section 3(3) of the Employee Retirement
Income Security Act
of 1974.
5.37 With respect to the Employee Benefit Plans, to the knowledge
of Seller, each such Employee Benefit Plan (and each related trust or insurance
contract) complies in form and in operation in all material respects with the
applicable requirements of ERISA and the Internal Revenue Code of 1986 (the
"Code").
5.38 All contributions and insurance premiums that are due to the
Plans on or before the Closing Date have been paid in full.
5.39 INTENTIONALLY OMITTED.
5.40 Seller has provided to Buyer complete and correct copies of
the Employee Benefit Plans, including each plan document and any amendments,
trust agreements, insurance
<PAGE>
contracts, summary plan descriptions, and administrative service agreements and
IRS determination letters.
5.41 The representations, warranties, covenants and agreement of
the Seller contained in this Agreement are true, complete, accurate and correct
in all respects as of the date hereof and shall be true, accurate and correct
and complete, in all respects as of the Closing; and will not contain any untrue
statement of any material fact, or omit to state a material fact in order to
make any or all of such representations and warranties not materially misleading
as of this date and as of the Closing Date; and at the Closing the Seller shall
deliver to the Purchaser a certificate, executed by Seller remaking each of the
Seller's representations, warranties, covenants and agreement set forth in this
Agreement, including without limitation, those set forth in this Section 5.41.
5.42 The Assets and the Excluded Assets constitute all of the
assets owned by Seller which are used in the Business.
ARTICLE 6
PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to Seller as follows:
6.1 The Purchaser is a corporation duly organized, validly
existing and in good standing under and by virtue of the laws of the State of
Delaware, and the execution and delivery of this Agreement and the purchase
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Purchaser.
6.2 The Purchaser has corporate power to execute and perform this
Agreement, and to consummate the transactions contemplated hereby.
6.3 The execution and performance of this Agreement by Purchaser
will not conflict with, or result in a breach of, any of the terms, conditions,
or provisions of any law or any regulations, order, writ, injunction, or decree
of any court or governmental instrumentality, or of the corporate charter or
by-laws of the Purchaser or of any agreement, whether written or oral, or other
instrument to which it is a party or by which it is bound, or constitute (with
the giving of notice or the passage of time, or both) a default thereunder.
<PAGE>
ARTICLE 7
ACCESS AND INFORMATION
7.1 From and after the Closing Date, and for a period of six
years thereafter, Seller shall give to the Purchaser, and the Purchaser shall
maintain the same intact and shall not remove or destroy the same without the
written consent of the Seller for its records, operating books and financial
records (other than corporate records) relating to the Business (including paid
supplier invoices, customers' billings and payroll records and returns). From
and after the Closing Date, the Purchaser shall give to the Seller and its
representatives from time to time upon request of the Seller full access during
normal working hours to any and all books, contracts and other records
(including credit files) of Seller left in the possession of the Purchaser,
including the right to make copies thereof.
7.2 From and after the Closing Date, the Seller shall give to
the Purchaser and its representatives from time to time upon request of the
Purchaser full access during normal working hours to all books, contracts and
other records, including credit files, which are not to be conveyed to the
Purchaser hereunder and which are relevant to the present Business which have
been retained in the Seller's possession, including the right to make copies of
relevant portions thereof. The Seller shall be obligated to give reasonable
notice of not less than thirty (30) days in writing to the Purchaser of the
Seller's intention to dispose of or destroy any such books, contracts or other
records related to the Business and shall, at the Purchaser's request, turn over
to the Purchaser any of the books contracts, or other records set forth in any
such notice to the extent that they relate to the Business.
ARTICLE 8
INDEMNIFICATION AND OFF SET
8.1 In addition to the indemnifications set forth in other
sections hereof and subject to the limitations provided in Section 8.2, Seller,
Stockholder and R. Rashkin, jointly and severally agree to indemnify, exonerate,
defend and save the Purchaser, its Affiliates, officers, directors, employees
and representatives (collectively the "Purchaser" for the purposes of this
Article 8) harmless from, against, for and in respect of the full amounts of any
and all damages, losses, demands, obligations, tax, interest, penalty, suit,
judgment,
<PAGE>
order, lien, liabilities, debts, claims, actions, causes of action,
encumbrances, costs and expenses, whether administrative, judicial or otherwise,
of every kind and nature, including, without limitation, reasonable attorneys',
consultants', accountants' and expert witness fees, suffered, sustained,
incurred or required to be paid at any time after the Closing by the Purchaser
based upon, arising out of, resulting from or because of the following
(collectively, "Loss"):
(a) any obligations of the Seller, the other Rashkin
Companies, Stockholder or R. Rashkin incurred in connection with the making and
performance of this Agreement or the RRA Agreement or the PSST Agreement ;
(b) all obligations and liabilities of Seller or any
other Rashkin Company whatsoever, whether disclosed or undisclosed, absolute
or contingent, direct or indirect due or to become due, now existing or arising
hereafter, not assumed by Purchaser pursuant to this Agreement or the RRA
Agreement or the PSST Agreement;
(c) the untruth, inaccuracy, incompleteness, violation
or breach of any representation, warranty, agreement, undertaking or covenant of
Seller, Stockholder, the other Rashkin Companies or R. Rashkin;
(d) any claims made against or expense incurred by Purchaser
including, but not limited to, those with respect to the conditions or
operations of Seller or the other Rashkin Companies made by regulatory or
administrative agencies having jurisdiction over Seller or the other Rashkin
Companies resulting from violations of local, state or federal laws or
regulations by Seller or the other Rashkin Companies or any of their respective
agents, servants or employees, or resulting from a failure to collect or remit
state or local taxes, arising prior to the Closing;
(e) any claims, actions, proceeding, suit, demand,
assessment, settlement or judgment incident to, arising out of, or related to
(i) that certain accident in Mesa, Arizona on September 27, 1994 between two
helicopters, one of which was piloted by James Hilligardt (the "Incident") or
(ii) the McDonnell Douglas Contract including but not limited to, the following
claims or potential claims: (i) Sylvia Hilligardt's workers' compensation claim
for widow's benefits; (ii) McDonnell Douglas' potential indemnity claim for any
workers' compensation benefits it may be obligated to pay; (iii) Sylvia
Hilligardt's wrongful death claim; (iv) McDonnell Douglas' potential indemnity
claim for any wrongful death damages it may be obligated to pay; (v) Phil
Smith's personal injury lawsuit; (vi) McDonnell Douglas' and/or the United
States Army's potential claim for property damage to the Apache helicopter
involved in the accident; (vii) McDonnell Douglas' potential claim for property
damage to its NOTAR helicopter involved in the accident; and (viii) McDonnell
Douglas' potential claim for incidental and miscellaneous expenses related to
the helicopter accident.
(f) Any loss to PSST in connection with the wage and hour
audit by the Department of Labor related to involvement with Cable Systems
International, Inc. regarding exempt vs. non-exempt classification issues.
(g) All reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees, interest, and penalties) incurred by the
Purchaser in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against.
(h) Notwithstanding anything in this Section 8 to the
contrary, R. Rashkin shall have no liability or indemnification obligation
relating to or arising from the McDonnell Douglas Contract or the Incident. 8.2
The indemnification obligations under Section 8.1 shall be subject to a limit
calculated with reference to all of the indemnification obligations of Seller,
PSST, RRA, S. Rashkin, and R. Rashkin under this Agreement, under the Purchase
Agreement (the "RRA Agreement") between RRA and Comforce Technical Services,
Inc., and under the Purchase Agreement (the "PSST Agreement") between PSST and
Comforce Technical Services, Inc. as follows: the maximum aggregate personal
liability of Seller, PSST, RRA, S. Rashkin, and R. Rashkin under all such
agreements shall be the aggregate purchase price for the Assets of PSST, RRA and
DTS under such agreements. The personal liability of Stockholder and R.
Rashkin under Section 8.1 shall not be effective until Purchaser has first
unsuccessfully sought recourse against the Seller, unless Purchaser reasonably
believes that judgement against the Seller cannot be satisfied in full or that
its ability to make collection in full from Stockholder or R. Rashkin may be
impaired. Nothing in the preceding sentence shall affect or impair Purchaser's
right under Section 8.3 or under the Escrow Agreement, which shall not be
subject to said sentence.
8.3 Seller hereby grants to Purchaser the right of full offset
against any monies due Seller, either under this Agreement or any other
agreement the Seller may have with Purchaser, or Purchaser's Affiliates, other
than employment agreements, for the purpose of applying same to any sums that
might become due to Purchaser as a result of the indemnities herein made or as a
result of a breach of any of the covenants, representations or warranties herein
contained. Said right of offset shall in no way limit Purchaser's ability to
collect any funds due and owing to it from the Seller.
8.4 In order to establish security and a ready source of cash in
the event of any breach of any covenant, agreement, representation or warranty
contained in this Agreement or the Datatech Agreement, Stockholder agrees to
deposit at the Closing the sum of Six Hundred Twenty-Five Thousand Dollars
($625,000) into an Escrow Fund to be maintained in accordance with the terms the
Indemnity Escrow Agreement. The amount deposited in escrow shall not constitute
a limitation of liability of any Rashkin Company, Stockholder or R. Rashkin.
8.5 The obligations of Seller, Stockholder and R. Rashkin to
indemnify pursuant to Section 8.1 (and the representations and warranties set
forth herein) shall be for a period of five years following the Closing Date
provided; however that the indemnification under 8.1(e) shall extend until the
expiration of the applicable statute of limitations or to the extent any claims
are pending of such time, the date that there is a final settlement agreement or
a final nonappealable order of a court with respect to such claims.
8.6 Purchaser indemnifies Seller and Shareholder from all Loss
incurred as a result of any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement stated in this Agreement by
Purchaser and any liabilities and claims of the Business incurred in connection
with the making and performance of this Agreement after the Closing Date.
8.7 Promptly after any person entitled to indemnification (an
"Indemnitee") receives notice of any potential Loss, Indemnitee must give notice
in writing to the indemnifying party; provided, however, that failure to give
such notice shall not relieve the indemnifying party of its obligation hereunder
except to the extent the indemnifying party is prejudiced thereby. The
indemnifying party must assume the defense of the Loss and Indemnitee must
cooperate in connection with such defense. If Indemnitee reasonably determines
that separate counsel is necessary (whether due to the existence of different
defenses, potential conflicts of interest or otherwise), or if the indemnifying
party does not assume the defense, then Indemnitee may employ separate counsel,
and the indemnifying party will pay such counsel's reasonable fees and
disbursements as incurred.
8.8 If indemnity under this Agreement is unavailable for any
reason, then Purchaser, Seller, Stockholder and R. Rashkin will contribute to
the Loss for which such indemnity is unavailable in such proportion as is
appropriate to reflect the relative benefits to Purchaser, Seller, Stockholder
and R. Rashkin in connection with the transactions contemplated by this
Agreement.
ARTICLE 9
EFFECTIVE DATES OF TRANSACTIONS
9.1 The effective date of the purchase and sale contemplated
herein shall be midnight on the Closing Date.
9.2 In amplification of the above stated general
understanding of the parties, the following provisions will govern specific
aspects of the change in ownership: (a) In accordance with Section 4.1 and 4.2
the Seller will retain all of Seller's accounts receivable (including unbilled
amounts which will only consist of billable days or hours worked prior to the
Closing Date) and the proceeds therefrom for all business conducted on or before
that date, and Seller will remain liable for all of its accounts payable, for
items actually delivered or services actually rendered, all payroll obligations
including the deduction and payment to the appropriate Federal state and local
authorities for income tax withholdings, FICA, FUTA, SUI and all other payroll
deductions, and sales and use taxes accrued or incurred on or before the Closing
Date ("Payables"). (b) The Purchaser shall pay for all supplies and equipment
actually delivered or services actually rendered after the effective date,
provided, however, that such supplies and equipment or such services were
purchased or rendered and delivered in the ordinary course of the business and
are necessary for the continuation of the business. (c) The Purchaser shall be
obligated to perform all Contracts and purchase orders with Customers with
respect to items not performed prior to Closing Date, provided that such
contracts and purchase orders were entered into by Seller in the ordinary course
of business, disclosed to Purchaser prior to Closing, and further provided that
such obligations arise from services rendered on or after the date of Closing.
(d) All expenses paid or obligations incurred by Seller, if any, as a result of
which Purchaser will receive after Closing Date the benefit of a portion of the
consideration for such expenses shall be prorated between the parties in an
equitable manner reflecting the relative benefit received by each. All expenses
paid or obligations incurred by Purchaser (other than Payables and prepaid
expenses and deposits under Section 3.7) as a result of which Seller has
received on or before Closing Date the benefit of a portion of the consideration
for such expenses shall be prorated between the parties in an equitable manner
reflecting the relative benefit received by each. All of such prorations shall
be made in accordance with normal business practice. (e) All obligations of
Seller for commissions payable to commission sales agents which relate to sales
made on or before effective date shall remain the obligation of the Seller. (f)
All inquiries and communications received by the Seller after the effective date
will be forthwith mailed to the Purchaser to the extent the same relate to the
Business sold by the Seller hereunder.
ARTICLE 10
COVENANTS AND AGREEMENTS BY SELLER
10.1 Conduct of Business. From the date hereof until the
Closing Date, Seller covenants and agrees that: (a) Seller shall operate the
Business in the usual and ordinary course; (b) Seller shall not remove or
transfer any assets for less than full and fair consideration, provided there
shall be no restrictions on the payment of cash dividends; (c) Subject to the
requirement of satisfying all Purchaser Clearance Requirements, Seller shall
permit the officers and other authorized representatives of Purchaser (i) full
and unrestricted access, from time to time and at one or more times, to the
plants, properties, offices and books and records of Seller, during normal
business hours, and in connection with such books and records, such inspection
shall be at the offices where such records are normally maintained, and such
parties shall be entitled to make copies of and abstracts from any of such books
and records; (ii) the opportunity to meet, correspond and communicate with the
officers, directors, employees, counsel and accountants to Seller, and to secure
from each such information as such parties shall deem necessary or appropriate;
and (iii) to review and copy such other, further and additional financial and
operating data, materials and information as to the business and operations of
Seller as may be requested by such parties; provided however that all such
information and material secured by such parties in the course of such
investigation shall be and be deemed to be confidential and shall be used solely
in connection with the transactions herein described, and all written memoranda
and documents and/or other tangible evidence of such information shall either be
returned to the Seller and/or destroyed in the event the subject acquisition is
not consummated. (d) Seller shall maintain all insurance coverages in full force
and effect. (e) Seller shall use best efforts to retain the Business' current
employees so that they will remain employable after Closing. (f) Seller shall
take and perform any and all actions necessary to render accurate and/or
maintain the accuracy of, all of the representations and warranties of the
Seller and Stockholder herein contained and/or satisfy each covenant or
condition required to be performed or satisfied by the Seller and Stockholder at
or prior to the Closing and/or to cause or permit the implementation of the
within acquisition. (g) Seller shall not take or perform any action which would
or might cause any representation or warranty made by the Seller and Stockholder
herein to be rendered inaccurate, in whole or in part and/or which would
prevent, inhibit or preclude the satisfaction, in whole or in part of any
covenant required to be performed or satisfied by the Seller and Stockholder at
or prior to the Closing and/or the implementation of the within acquisition. (h)
Seller shall perform, in all material respects all of its obligations under all
material agreements, leases and documents relating to or affecting the Assets
and the Business; and use its best efforts to preserve, intact, the
relationships with Seller's suppliers, customers, employees and other having
business relations with Seller so that the Business will be intact at Closing.
(i) Seller shall immediately advise Purchaser of any event, condition or
occurrence which constitutes or may, with the passage of time and/or giving of
notice constitute, a breach of any representation or warranty of any Seller or
Stockholder herein contained and/or which prevents, inhibits or limits or may
prevent, inhibit or limit Seller or Stockholder from satisfying, in full and on
a timely basis, any covenant, term or condition herein contained and/or
implementing this Agreement. (j) Subject to the requirement of satisfying all
Purchaser Clearance Requirements, Seller will permit access to Customer
representatives and will accompany and introduce Purchaser representatives to
the Customers as may be requested to make inquiries regarding, among other
things, Seller's performance, the existence of any defaults, prices and
prospects for further work. This access will not obviate or release Seller or
Stockholder from liability for any representation or warranty made with respect
to the Customers or Contracts. Other than obligations to preserve confidential
information as contained in this Agreement, the Purchaser shall have no
liability with respect to or arising out of meeting with the Customers, except
as set forth in Section 14.1(b). (k) Neither Seller nor Stockholder will solicit
or entertain any offers through principals, agents or brokers to purchase, sell,
encumber or otherwise transfer any or all of the stock or assets of Seller, with
the exception of the sale of goods or services in the ordinary course of
business, unless and until this agreement has been terminated in accordance with
its terms. Seller and Stockholder agree to promptly notify Purchaser in the
event either of them receive any such inquiry or offer. (l) Not take any action
in the singular or aggregate which results, or with the passage of time is
likely to result in a material adverse change to the business or the prospects
of the business of Seller.
ARTICLE 11 COVENANTS AND AGREEMENTS BY PURCHASER AND PARENT
11.1 S. Rashkin and Purchaser shall enter into the employment
agreement in accordance with the terms contained in Exhibit "G" hereto and
Purchaser shall enter into a consulting agreement in accordance with the terms
contained in Exhibit "G-1" hereto.
11.2 Parent shall comply with the obligations with respect to
the issuance of options and the registration of the options and/or of shares
purchased pursuant to the exercise of the options set forth in S. Rashkin's
Employment Agreement.
ARTICLE 12 SELLER'S CONDITIONS TO CLOSING
12.1 Seller shall have the absolute right in its sole
discretion to waive any Closing requirement at or before Closing. If Seller does
not waive its rights in whole or in part and Purchaser is not ready, willing and
able to perform as of Closing, Seller shall have the right to terminate this
Agreement upon written notice to Purchaser. In the event of such termination,
all of Seller's obligations shall terminate without further loss, damage, cost,
claim, right or remedy in favor of Purchaser. The obligation of Seller to
consummate the transactions contemplated by this Agreement is, unless waived by
Seller, subject to the fulfillment, on or before the Closing, of each of the
following conditions: (a) No third party injunction or restraining order shall
be in effect which prohibits, restricts or enjoins, and no suit, action or
proceeding shall be pending which seeks to prohibit, restrict, enjoin, nullify,
seek material damages with respect to or otherwise materially adversely affect
the consummation of the transactions contemplated hereby; (b) All covenants of
Purchaser under this Agreement to be performed prior to the Closing shall have
been performed in all material respects, except to the extent attributable to
actions expressly permitted or consented to by Seller in writing; (c) At the
Closing, Seller shall have received a certificate, executed by the President and
Secretary of the Purchaser (effective as of the Closing), and in form and
content reasonably acceptable to Seller, certifying the truth and accuracy of
the representations and warranties of the Purchaser herein contained; (d) Seller
shall have received from Purchaser a certificate from the Department of State of
the State of Delaware to the effect that Purchaser is in good standing in such
state; (e) All material authorizations, approvals or waivers of any federal or
state regulatory bodies shall have been obtained; (f) Seller shall have received
all certificates, instruments, agreements and other documents to be delivered at
or before Closing as provided in this Agreement and a certificate signed by an
officer of Purchaser confirming the matters set forth in sections (a), (b), (c)
and (e) above; (g) Purchaser shall tender to Seller the Purchase Price required
to be paid at Closing in immediately available finds by check or bank wire to an
account designated by Seller; (h) Purchaser shall satisfy all Purchaser
Clearance Requirements; (i) The lease with R. Rashkin, being assigned to
Purchaser, shall provide for a term of two years from the Closing Date; (j)
Purchaser shall provide to Seller evidence reasonably acceptable to Seller that
Purchaser has or shall have obtained adequate capital resources, including any
credit facility or borrowing availability, sufficient to fund payroll and
associated payroll taxes for all Billable Employees for six weeks after the
Closing Date (which, based on current payroll, is $4,700,000) in addition to the
Purchase Price; (k) Purchaser shall have delivered to Seller evidence that it
has in place liability and worker's compensation insurance relating to its
conduct of business with the Assets after the Closing Date in amounts and under
terms and conditions customary for such a business; and (l) All conditions to
Seller's performance under the PSST Agreement and the RRA Agreement shall have
been satisfied or waived.
ARTICLE 13 PURCHASER'S CONDITIONS TO CLOSING
13.1 Purchaser shall have the absolute right in its sole
discretion to waive any Closing requirement at or before Closing. If Purchaser
does not waive its rights in whole or in part and Seller is not ready, willing
and able to perform as of Closing, Purchaser shall have the right to terminate
this Agreement upon written notice to Seller. In the event of such termination,
except as provided in Section 14.1(b), all of Purchaser's obligations shall
terminate without further loss, damage, cost, claim, right or remedy in favor of
Seller or Stockholder. The obligation of Purchaser to consummate the
transactions contemplated by this Agreement is, unless waived by Purchaser,
subject to the fulfillment, on or before the Closing, of each of the following
conditions: (a) All required consents shall have been received by the Purchaser,
including, but not limited to, all consents and approvals required to permit the
Purchaser to enjoy after the Closing Date all rights and benefits presenting
enjoyed by Seller; provided, however, if Seller is unable to obtain a consent
prior to Closing, Purchaser shall receive assurances as it deems reasonable in
its discretion that it will receive such consents in a reasonable time after the
Closing Date; (b) No injunction or restraining order shall be in effect which
prohibits, restricts or enjoins, and no suit, action or proceeding shall be
pending which seeks to prohibit, restrict, enjoin, nullify, seek material
damages with respect to or otherwise materially adversely affect the
consummation of the transactions contemplated hereby; (c) All covenants of
Seller under this Agreement to be performed prior to the Closing shall have been
performed in all material respects, except to the extent attributable to actions
expressly permitted or consented to by Purchaser in writing; (d) At the Closing,
Purchaser shall have received a certificate, executed by the President and
Secretary of the Seller (effective as of the Closing), and in form and content
reasonably acceptable to Purchaser, certifying the truth and accuracy of the
representations and warranties of the Seller herein contained; (e) Purchaser
shall have received from the Seller a certificate from the Arizona Corporation
Commission to the effect that Seller is in good standing in such state; (f)
Purchaser has received such documentation as may be necessary to establish that
Purchaser is not required to withhold any portion of the Purchase Price pursuant
to Section 1445 of the Code (substantially in the form of Exhibit "Y" hereto);
(g) Purchaser shall have received all Assets, certificates, instruments,
agreements and other documents to be delivered by Seller at or before Closing as
provided in 5.2 and elsewhere in this Agreement, including a certificate signed
by an officer of Seller confirming the matters set forth in sections (b), (c),
(e) and (f) above; (h) Prior to the Closing there shall not have occurred any
material adverse change-in the Business, nor shall any event have occurred or
condition exist which, with the passage of time or the giving of notice, may
cause or create any such adverse material change; (i) Prior to the Closing, all
corporate and other proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident to such
transactions shall be in form and content reasonably satisfactory to Purchaser
and its counsel, and Purchaser and its counsel shall have received all
counterpart originals or certified or other copies of such documents and
instruments as they may reasonably request; (j) All statutory requirements for
the valid consummation by the Sellers of the transactions herein described shall
have been fully and timely satisfied; all authorizations, consents and approvals
of all federal, state and local governmental agencies and authorities required
to be obtained in order to permit consummation by Seller of the transactions
herein described, and/or to permit the Business to continue unimpaired in all
material respects immediately following the Closing shall have been obtained and
shall be in full force and effect; and no action or proceeding to suspend,
revoke, cancel, terminate, modify or alter any of such authorizations, consents
or approvals shall be pending or threatened; (k) Purchaser shall have received
all the documentation required to be delivered to it pursuant the provisions of
the Agreement; (l) Purchaser shall have received an opinion of counsel to Seller
with respect to those matters set forth on Exhibit "Z" hereto; (m) The lease
with R. Rashkin shall be amended to provide for a term of two years from the
Closing Date; (n) Purchaser, its lawyers and accountants shall have conducted a
review of the Seller and its contracts, business and operations and the
Purchaser shall be satisfied with such review, provided that Purchaser shall
have completed its due diligence by April 19, 1996, except to the extent that
Purchaser shall have advised Seller by April 19, 1996 of all open matters
regarding such due diligence; and (o) All conditions to Purchaser's performance
under the PSST Agreement and the RRA Agreement shall have been satisfied or
waived.
ARTICLE 14
TERMINATION
14.1 Termination. (a) Anything herein or elsewhere to the
contrary notwithstanding, this Agreement and any agreement ancillary hereto may
be terminated and the transactions contemplated hereby abandoned at any time
prior to or at the Closing by: (i) mutual consent of Seller and Purchaser; (ii)
Seller, if any of the conditions set forth in Article 12 shall not have been met
and shall not have been waived by Seller as of the Closing Date, and at such
time Seller is not in material breach or default of its obligations contained in
this Agreement; or (iii) Purchaser, if any of the conditions set forth in
Article 13 shall not have been met and shall not have been waived by Purchaser
as of the Closing Date, and at such time Purchaser is not in material breach or
default of any of its obligations contained in this Agreement. (b) In the event
the transactions hereunder are not consummated by Purchaser (i) solely because
it fails to obtain financing as provided in Section 12.1(j), or (ii) Seller
fails to obtain consents to the assignment of Contracts, as provided in Section
13.1(a) solely because the customer is not satisfied with Purchaser's financial
condition and has so stated in writing, and Purchaser is not willing to close
without such consents, Purchaser shall pay Seller's legal expenses incurred in
connection herewith and under the Purchase Agreement with RRA and DTS in an
amount not to exceed Forty Thousand Dollars ($40,000). (c) Any party desiring to
terminate this Agreement pursuant to this Article 14 shall give notice of such
termination to the other party hereto in accordance with Section 19.7.
14.2 Effect of Termination. (a) If this Agreement is
terminated in accordance with Section 14.1, then all rights and obligations of
the parties hereunder shall terminate and be of no further effect; provided,
however, that no such termination shall relieve any party of liability for any
breach of its obligations under this Agreement prior to such termination.
ARTICLE 15 PUBLIC ANNOUNCEMENT
Seller and Stockholder recognize and agree that the Purchaser
is a public company and that the Seller and the Stockholder will not make any
public announcement concerning this Agreement or the negotiations and to keep
same confidential unless given written permission from the Purchaser to make any
announcement or otherwise disclose the information except as contemplated by
Section 3.2. Purchaser shall have the right to announce the transaction
contemplated hereby and/or the negotiations between the parties upon prior
notice to the Seller and whether or not the announcement is required by law
regulation or the rules of any public stock exchange on which Purchaser's stock
is listed. Purchaser will give Seller prior notice of any announcement it
believes is necessary or proper.
ARTICLE 16 NEGATIVE COVENANTS
16.1 It is understood by the parties herein that the negative
covenants contained in this Section and the one following are a prime and
essential consideration on which Purchaser will rely prior to and after the
Closing Date in consummating this Agreement
16.2 Seller and Stockholder agree that in consideration of
the sale of its business to Purchaser that for a period of five (5) years after
the Closing Date, they jointly and individually will not: (a) directly or
indirectly, own, manage, operate, control, be employed by, participate in,
render service to, solicit customers for, or be connected with any business
which competes with Purchaser, or any of its affiliated corporations within the
states where Seller does business; (b) either directly or indirectly, either for
themselves or for any other person, partnership, firm, company, corporation or
other entity, contact, solicit, accept any business from, purchase from, divert,
or take away any of the customers or potential customers of Purchaser or
customers known from previous employment or association of Seller by or with the
Rashkin Companies or any predecessor in interest of the Rashkin Companies or
that any employee or former shareholder, director or officer of the Rashkin
Companies may have contacted or been assigned at any time during the three (3)
year period prior to the date hereof; or (c) approach directly or indirectly any
employee (billable or staff) without regard to location for the purpose of
attempting to or actually soliciting or hiring that employee from its/his
account or the account of another.
16.3 It is recognized by Seller and Stockholder that an
action for damages may not be an adequate remedy for Purchaser in the event of
the breach of any of the negative covenants contained in this Agreement, and
therefore, it is agreed that in addition to any other rights Purchaser may have
in the event of a breach of this Agreement, Purchaser shall have the right to
judicial enforcement of said covenants by way of injunction, restraining order
or any other similar equitable relief. If any portion of the foregoing covenants
is invalid or unenforceable due to area or time, such fact shall not affect the
validity or enforceability of the remaining portions or prevent enforcement of
restrictions to the extent a court of competent jurisdiction may consider
reasonable. The parties agree that in any event said restrictions shall be
enforced to the maximum extent permitted by law. 16.4 The time period of the
negative covenant shall be extended for a period of time equal to that time
period utilized during the pendency of any action for enforcement 16.5 Seller
will deliver negative covenant agreements in the form annexed as Exhibit "AA"
for those employees designated by Purchaser at least ten days prior to Closing.
<PAGE>
ARTICLE 17
NO BROKERS
17.1 Each party represents and warrants to the other that
there are no claims for brokerage commissions or finders' fees in connection
with the transactions contemplated hereby with the exception of Marc D.
Freedman. Marc D. Freedman will be paid by Purchaser in accordance with a
separate agreement by and among Marc D. Freedman, the Rashkin Companies, S.
Rashkin, R. Rashkin and the Purchaser. ARTICLE 18
FEES AND EXPENSES
18.1 Except as herein otherwise provided, each of the parties
hereto shall pay its own legal and accounting charges and other expenses
incident to the execution of this Agreement and the consummation of the
transactions contemplated hereby.
ARTICLE 19
MISCELLANEOUS
19.1 This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. All covenants and
agreements made by or on behalf of any of the parties hereto shall be binding
upon and inure to the benefit of their respective successors and assigns, unless
otherwise specifically set forth herein. The terms and provisions of this
Agreement may not be modified or amended, except in writing signed by all
parties hereto. No representations, warranties, or covenants, express or
implied, have been made by any party to this Agreement in connection with the
subject matter hereof, except as expressly set forth in this Agreement and the
exhibits hereto. The headings in this Agreement are for the convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19.2 No terms and provisions hereof, including, without
limitation, the terms and provisions contained in this sentence, shall be
waived, modified or altered so as to impose any additional obligations or
liability or grant any additional right or remedy, and no custom, payment, act,
knowledge, extension of time, favor or indulgence, gratuitous or otherwise, or
words or silence at any time, shall impose any additional obligation or
liability or grant any additional right or remedy or be deemed a waiver or
release of any obligation, liability, right or remedy except as set forth in a
written instrument properly executed and delivered by the party sought to be
charged, expressly stating that it is, and the extent to which it is, intended
to be so effective. No assent, express or implied, by either party, or waiver by
either party, to or of any breach of any term or provision of this Agreement or
of the exhibits or schedules shall be deemed to be an assent or waiver to or of
such or any succeeding breach of the same or any other such term or provision.
19.3 The captions of this Agreement are for convenience and
reference only, and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provisions hereof.
19.4 Seller agrees that it will, at any time before and after the
Closing, execute and deliver all additional documents, and do any other acts or
things that may be reasonably requested by Purchaser in order to further perfect
Purchaser's rights and interests contemplated hereunder and that they will aid
in the prosecution, defense or other litigation with third persons of any rights
arising from this Agreement, all without further consideration.
19.5 Jurisdiction. This Agreement shall be governed by laws of
the State of New York. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of New York or
the State of Arizona or in the United States District Court for the Eastern
District of New York, District of Arizona (or the Bankruptcy Courts), and, by
execution and delivery of this Agreement, each of the parties to this Agreement
accepts for itself or himself the process in any action or proceeding by the
mailing of copies of such process to such party at its or his address as set
forth in Section 19.7, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement Each party hereto irrevocably
waives to the fullest extent permitted by law any objection that it or her may
nor or hereafter have to the laying of the venue of any judicial proceeding
brought in such courts and any claim that any such judicial proceeding has been
brought in an inconvenient forum. The foregoing consent to jurisdiction shall
not constitute general consent to service of process in the State of New York or
the State of Arizona for any purpose except as provided above and shall not be
deemed to confer rights on any person other than the respective parties to this
Agreement. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
UNDER THIS AGREEMENT.
19.6 Captions. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
19.7 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
sending such notice by certified mail, return receipt requested, or (c) the next
business day if sent by facsimile transmission or by an over night courier
service, and in each case of mailing, postage prepaid and at the respective
addresses or numbers set forth below:
To Seller and
Stockholder: Stanley Rashkin
1858 E. Southern Avenue, #102
Tempe, Arizona 85282
Facsimile 602-345-1469
With a copy to: David E. Manch, Esq.
Lewis and Roca
40 N. Central Avenue
Phoenix, Arizona 85004
Facsimile 602-262-5747
To Raphael
Rashkin: Raphael Rashkin
117 Harbour Lane
West Bayshore, NY 11706
To Purchaser: CTS Acquisition Co, I.
2001 Marcus Avenue
Lake Success, New York 11042
Attn: President
Facsimile 516/352-3362
<PAGE>
With a copy to: David J. Hirsch, Esq.
Doepken Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
Facsimile 412-355-2609
19.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by either Seller or Purchaser other than by
operation of law or with the prior written consent of the other party, and any
purported transfer, assignment, pledge or hypothecation in violation of this
Section shall be void. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective administrators,
successors and permitted assigns. Notwithstanding the foregoing the Purchaser
may assign its rights and obligations hereunder to one or more affiliate or
subsidiary companies whether now or hereinafter formed upon notice to Seller if
Seller's rights would not be diminished thereby.
19.9 Severability. In the event any provision of this Agreement
is found to be void and unenforceable by a court of competent jurisdiction or
arbitration panel, the remaining provisions of this Agreement shall nevertheless
be binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.
19.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which taken together shall constitute one instrument.
19.11 Entire Agreement. This Agreement, including the other
documents referred to herein, contains the entire understanding of the parties
hereto with respect to the purchase of the assets under this Agreement and
supersedes all other prior agreements, correspondence, conversation,
negotiations and understandings between the parties with respect to such subject
matter except as otherwise incorporated herein.
19.12 Amendments. This Agreement may not be changed orally, but
only by an agreement in writing signed by all of the parties hereto, and no
waiver of compliance with any provision or condition hereof and no consent
provided for herein shall be effective unless evidenced by an instrument in
writing duly executed by the party hereto seeking to be charged with such waiver
or consent.
19.13 Third Party Beneficiaries. Each party hereto intends
that this agreement shall not benefit or create any right or cause of action in
or on behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 19.8.
19.14 Gender. As used in this Agreement, any gender include
a reference to all other genders and the singular includes a reference to the
plural and vice versa.
ARTICLE 20
EFFECT OF CLOSING
20.1 The terms of this Agreement shall survive the Closing
and shall not become merged therein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ATTEST: DATATECH TECHNICAL
SERVICES, INC.
______________________________ By: _____________________________
Title: President
COMFORCE CORPORATION
By _______________________________
Title _______________________________
ATTEST: CTS ACQUISITION CO. I
___________________________ By:_________________________________
Title:_______________________________
------------------------------------
Stanley Rashkin, individually
-----------------------------
Raphael Rashkin, individually
EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
RRA
ASSET PURCHASE AGREEMENT, dated effective as of the 13th day of
May 1996, by and among COMFORCE TECHNICAL SERVICES, INC. (hereinafter referred
to as the "Purchaser"), a Delaware corporation, with its principal office at
2001 Marcus Avenue, Lake Success, NY 11042; COMFORCE CORPORATION ("Parent"), a
Delaware corporation, with its principal office at 2001 Marcus Avenue, Lake
Success, NY 10042; RRA, INC., a New York corporation ("RRA" or "Seller"), with
offices located at 1858 East Southern Avenue, Suite 102, Tempe, AZ 85282;
RAPHAEL RASHKIN, an individual residing at 117 Harbor Lane, West Bayshore, NY
11706 ("R. Rashkin" or "Stockholder") and STANLEY RASHKIN ("S. Rashkin"),
residing at 2079 East LaVieve, Tempe, AZ 85284.
WHEREAS, the Seller desires to sell and the Purchaser desires to
acquire certain of the assets of Seller for the purchase price
hereinafter described and upon the terms and conditions
hereinafter set forth; NOW, THEREFORE, in consideration of such
sale and of the foregoing and of the mutual agreements
hereinafter set forth, the parties hereto do hereby agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to the terms defined
throughout this Agreement (as defined), the following terms shall have the
following meanings (such meanings to be equally applicable to the singular and
plural forms thereof): "Accrual Escrow Account" means the account established
under the Accrual Escrow Agreement.
"Accrual Escrow Agreement" means the Agreement described on
Exhibit "CC".
"Affiliate" means any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and, without limiting the generality of the foregoing, includes (i) any
Person which beneficially owns or holds 25% or more of any class
of voting securities of such Person or 25% or more of the equity interest in
such Person, (ii) any Person of which such Person
beneficially owns or holds 25%
or more of any class of voting securities or in which such Person beneficially
owns or holds 25% or more of the equity interest in such Person and (iii) any
director, officer or employee of such Person. For the purposes of this
definition, the term "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" means this Agreement together with all exhibits,
schedules, supplements and documents as may be attached hereto or incorporated
herein by reference and the letter agreement dated April 19, 1996 between
Purchaser, Seller, CTS Acquisition Co. I, DTS and PSST (the " Letter
Agreement").
"Assets" means all of the following assets other than the
Excluded Assets of the Seller to the extent the same are utilized by the Seller
in connection with the operation of the Business as of the date hereof and/or at
any time prior to Closing: (a) "General Intangibles" - (i) all Seller's right,
title and interest in the names "Datatech Technical Services, Inc.", "RRA,
Inc.", "Project Staffing Support Team, Inc.", "PSST", any similar names, and,
all Seller's right, title and interest in and to utilize any
and all of the following associated with, arising out of,
relating to or utilized, as of the date hereof, in connection with the Business:
any and all trade names, trademarks, copyrights, service marks, logos and
slogans (including, without limitation, all registrations, filings and
certificates and the sole and exclusive rights to file and/or prosecute any such
registrations, filings and certificates), and (ii) all Seller's right, title and
interest in computer software, programs, know-how, trade secrets and data bases
used in the Business. (b) "Customer Materials" - any and all agreements, orders,
requirements and inquiries from or with past, current or prospective customers
arising out of or relating to the operation of the Business, including without
limitation, the contracts listed on Exhibit C" " Contracts") and all work orders
issued pursuant thereto, and all rights of Seller thereunder. (c) "Employee
Materials" - all information, in whatever medium that it be manifested,
depicted, stored or presented including, but not limited to, paper, hardcopy,
computer disks, tapes and databases, with respect to Company Employees whose
services are now provided or have been provided or are to be provided to
Customers, and all rights of Seller in such information and all rights and
remedies of Seller with respect to providing to current and future customers the
future services of Company Employees. (d) "Real Property" - those leasehold
interests described on Exhibit "A" annexed hereto and made a part hereof. (e)
"Records" - the originals or certified copies of those Business or financial
records of the Seller, evidencing the Customer Materials, Employee Materials,
General Intangibles, Equipment and/or Company Employees, including without
limitation: (i) all files and records pertinent, relevant or in any way
connected with the performance of services under the Contracts; (ii) all sales
records and Customer listings dealing with or pertaining to former or
prospective Customers, including but not necessarily limited to records of sales
calls and follow-ups previously made in connection with the solicitation of
Business; (iii) all personnel files relating to Company Employees wherever
located, in whatever form in which they exist and whatever medium maintained or
stored, including but not necessarily limited to all payroll records, resume
files maintained by Seller including those with respect to Company Employees
currently assigned to Customers and those being maintained for possible future
use by Seller in the performance and conduct of its Business, all payroll
records, and year-to-date earning statements and reports; and the originals of
all permits, licenses, consents, au thorizations and/or permissions for or with
respect to the Business; (f) "Equipment" - all of the tangible personal property
utilized by the Company, including without limitation, the office furniture,
fixtures, supplies, brochures, sales material, computer equipment, and any other
equipment owned by the Seller wherever located, as set forth on
Exhibit "B" annexed heret o and made a part hereof. (g) "Vendor Contracts" - all
contracts (other than the Contracts) pursuant to which Seller is furnished goods
or services.
"Billable Employees" means Company Employees who are as of
the Closing Date on assignment to Seller's Customers for whom a direct charge to
the Customer is made.
"Business" means providing one or more of a wide range of
technical and consulting services to customers through the use of personnel,
including without limitation qualified designers, drafters, engineers, computer
programmers, systems analysts, technicians, which personnel are generally
utilized by the customers on a temporary, project or peak period basis. Primary
lines of Business activity include information technology, design, drafting,
engineering, and technical staff augmentation services. The Business also
includes the assumption of staffing of an entire department, service center or
discipline and providing human resource and other administrative services to a
customer for a fee.
"Closing" means the consummation of the within transactions
including the execution and delivery of all Assets, funds, documents,
certificates, resolutions, assignments and opinions contemplated in this
Agreement.
"Closing Date" means the established date for the Closing,
which date shall be May 10, 1996, effective 12:00 a.m. on May 13, 1996 or such
other date as shall be agreed upon by the parties in accordance with the Letter
Agreement.
"Combined Business" means the Business of Datatech, the
Business of PSST and the Business of RRA.
"Company Employees" means those persons whose services have
been provided to Customers by the Seller at any time during the last 12 months
preceding the Closing Date and for whom a direct charge has been made to the
Customer. This definition shall not constitute an e admission that such persons
are employees of Seller under any legal theory ascribing or allocating to Seller
responsibility or liability for the acts or omissions of such persons.
"Contingency Escrow Agreement" means the Contingency Escrow
Agreement attached as Exhibit "BB".
"Customers" means those Persons to which
Seller has made sales or rendered services during any time 12 months prior to
the Closing Date. e "Employee Benefit Plans" means the employee benefit plans
maintained by Seller listed on Exhibit "W".
"Excluded Assets" means (i) the accounts receivable of Seller
at Closing excluding the note payable to Seller in the principal amount of
$10,000.00 to Robin Sherwood; (ii) cash in banks; and (iii) deposits and prepaid
expenses as set forth in the Seller's financial e statements.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Indemnity Escrow Agreement" means the Indemnity Escrow
Agreement attached as Exhibit "X"
"Medical Plan" means the plan providing medical benefits for
Seller's employees.
"Money Purchase Plan" means the RRA, Inc. Pension Plan.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a business trust or any other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
"Profit" means the revenues of the Business less all costs
directly associated with the Business including but not limited to the cost of
collections, direct labor charges, fringes, payroll deductions, workers
compensation insurance, benefits, staff salaries, bonuses and costs, rent,
telephone, insurance, sales, marketing, and recruiting costs, other operating
expenses, legal, accounting and other professional fees, charges for reserves
and accruals and interest charges for financing the billable employee payroll
and on-going business operations, but excluding (i) any interest or finance
charges or other costs of any kind directly related to the transactions
contemplated by this Agreement, (ii) charges by a direct or indirect parent
company of the Purchaser whereby the parent allocates its corporate overhead to
the Business (excluding costs directly related to or incurred on behalf of the
Business), and (iii) any costs and revenues related to such costs over which S.
Rashkin as employee of Parent or an affiliate of Parent has no control (for
example, without limitation, the costs of and the revenues from a contract
required by Parent to be entered into or an employee required by Parent to be
hired), unless S. Rashkin has been terminated for cause pursuant to the
employment agreement attached as Exhibit "G" or has voluntarily resigned without
Purchaser, Parent or Parent's affiliate having breached its employment agreement
with S. Rashkin. Profit shall be calculated on a pre-income tax basis and before
deduction for depreciation, amortization and interest charges, other than
interest and other charges associated with the financing of the Billable
Employee payroll and on-going operations. (a) If workers compensation premium
expense or any other cost directly associated with the Business, as a percentage
of total labor billings, exceeds the cost that would have been attainable by the
Rashkin Companies if this transaction had never occurred after accounting for
injuries or other circumstances relating to the conduct of the Business before
or after the Closing Date that affect such cost (the "Seller's Historic Cost"),
such excess shall be excluded for purposes of calculating Profit. For purposes
of this section, Seller's Historic Cost shall exclude any excess workers'
compensation premium expense resulting because the current or future experience
modification factor of any business of the Purchaser Companies other than the
Combined Business is less favorable than that of the Rashkin Companies. (b) If
any cost directly associated with the Business represents a change in the
Business itself as a profit center, including without limitation the acquisition
of a new business from another business entity and associated expenses of the
acquired business or the addition of personnel not associated with additional
revenues such as a central processing center for Purchaser Company operations,
the Rashkin Companies shall have the option to elect either to include in the
determination of Profit both the revenues and expenses (other than expenses
allocated to the Business on a "head-count" basis) arising from or in connection
with the change in the Business or to exclude both the revenues and expenses
arising from or in connection with the change in the Business. Notwithstanding
the foregoing, if Purchaser shall give the Rashkin Companies written notice of
any such changes, the Rashkin Companies shall have 30 days from the receipt of
such notice to elect in a written election delivered to Purchaser whether or not
to include the revenues and expenses in its profit center for purposes of
calculating Profit. Such election shall be binding for all future calculations
of Profit. If the Rashkin Companies fail to make such election within said time
period, the Rashkin Companies shall be deemed to have elected to include the
revenues and expenses in their profit center under this Agreement, and the Asset
Purchase Agreement between DTS and CTS Acquisition Co., I, and the Stock
Purchase Agreement between PSST and Purchaser. (c) In determining Profit,
accrued liabilities (for example but without limitation, vacation and sick pay)
shall be determined, insofar as GAAP does not specifically prescribe a
methodology, using (i) the same methodologies currently used by the Rashkin
Companies or (ii) the methodology actually used by Purchaser in its audited
financial statements, whichever produces the lesser expense. (d) The calculation
of Profit under this definition is subject to the dispute resolution mechanism
described in Section 2.2.
"Purchase Price" has the meaning ascribed in Article 2 of
this Agreement.
"Purchaser" has the meaning ascribed thereto in the Preamble.
"Purchaser Company" means Parent, Purchaser, and CTS
Acquisition Co.I.
"Rashkin Company" shall mean collectively RRA, Datatech
Technical Services, Inc. ("DTS") and Project Staffing Support Team, Inc.
("PSST").
"Receivables" shall have the meaning ascribed in Section 4.1.
"Retirement Plans" means the Money Purchase Plan and the
Section 401(k) Plan.
"Section 401(k) Plan" means the RRA, Inc. 401(k) Plan.
"U.S. $ or $" means the currency of the United States of
America
1.2 Certain Terms. All references to Articles and Sections
herein are to the Articles and Sections of this Agreement unless otherwise
specified.
ARTICLE 2
ACQUISITION PRICE
2.1 Upon the terms and subject to the conditions and the
performance of Seller's obligations and duties set forth in this Agreement, and
in consideration for the conveyance, transfer and assignment of the Assets of
Seller to Purchaser, Seller shall receive the following (the "Acquisition
Price"): (a) An initial payment ("Initial Payment") on the date of Closing of:
$2,375,000 in cash, wire or certified funds (collectively, "Cash") payable to
Seller; and (b) In addition to the Initial Payment, the Seller shall receive
from Purchaser or Parent a portion of the earnings of the Combined Business
(including earnings on any contracts entered into by the Combined Business after
Closing) in each annual period described below, equal to $166,667 per year as a
contingent payout ("Contingent Payout"), provided that the Combined Business
earns minimum (pretax) Profits of $750,000 from the Closing Date until December
31, 1996 (reduced by $93,750.00 for each month after April 28, 1996 or pro rata
portion of such month after April 28 that the Closing Date occurs) (first annual
period) and $850,000 in calendar year 1997 (the second annual period) and in
calendar year 1997 (the third annual period) ("Minimum Profit"). The Contingent
Payout for each period shall be deposited by Purchaser or Parent with the escrow
agent under the Contingency Escrow Agreement, within thirty (30) days after the
Minimum Profit for such period has been achieved, based on the internally
prepared year-to-date income statement of the Combined Business. Under the
Contingency Escrow Agreement, funds deposited with the escrow agent for each of
the three annual periods for which Minimum Profit is calculated hereunder shall
be disbursed to Seller upon confirmation within sixty (60) days after the end of
each relevant annual period that the Minimum Profit for the full annual period
has been achieved as of the end of each such annual period. It is acknowledged
and agreed that one half of the Advance Payments as defined in the Letter
Agreement shall be allocated to RRA (the "Allocated Amount") and the Contingent
Payout for each period shall be reduced by one third of the Allocated Amount.
All other terms of the Letter Agreement remain the same and are incorporated
herein. (c) The calculation of Profit for each annual period of the Contingent
Payout shall stand alone and the Profits and associated revenues, costs,
expenses, losses, allocations and reserves shall not be attributed to past or
future periods nor carried forward or back to another period. Any annual
contingent payment not earned hereunder shall be retained by Purchaser. (d) If,
for any annual period, there is any material change in annualized interest
expense attributable to debt-financed accounts receivable because of a change in
the percentage of accounts receivable of the Business which are debt financed
(when compared with the daily average percentage of debt-financed accounts
receivable for the one year period immediately before Closing), then the dollar
increase or decrease in the annualized interest expense resulting therefrom (as
calculated under the following sentence) will either: (A) be subtracted from the
Minimum Profit in the event of an increase; or (B) added to the Minimum Profit,
in the event of a decrease. (e) The dollar increase or decrease in annualized
interest expense resulting from a change in the percentage of accounts
receivable that are debt-financed will be determined by multiplying the increase
or decrease in the percentage of accounts receivable that are debt- financed by
the average daily borrowing base for the one year period prior to the Closing.
Exhibit D annexed hereto sets forth for example purposes only the manner in
which said calculation would be made assuming Seller's percentage of accounts
receivable that are debt financed over the one year period immediately before
Closing is thirty percent (30%). (f) Subject to the terms of this Agreement, the
Contingent Payments will be payable without regard to S. Rashkin's continued
employment with or R. Rashkin's continued service as a consultant to the
Purchaser or any Purchaser Company at the time the Contingent Payment would
otherwise be due and payable. (g) Parent and Purchaser shall be jointly and
severally obligated to pay the Contingent Payout including the deposit of the
Contingent Payout with the Escrow Agent under the Contingency Escrow Agreement
as provided in Section 2.1(b) above.
2.2 Purchaser shall provide the Seller with accounting
statements, in reasonable detail, which will indicate the information necessary
to make the calculations referenced in Section 2.1 above within 45 days after
the end of the respective annual period, provided that such information as may
be necessary or appropriate to make the calculations is provided to Parent by S.
Rashkin in his capacity as President of the Purchaser in accordance with the
Employment Agreement between himself and the Purchaser. The determination of
Profit and calculation of any pay-out will be made in accordance with GAAP
applied on a consistent basis for all periods before and after the Closing Date.
The statements will be deemed final and correct unless the Seller, by written
notice within 30 days from the date of delivery of the accounting statements,
contests the determination. If the Seller does not contest the accounting
statements within the 30 day period, the statements will be deemed correct and
Seller shall waive all right to contest the statements. Any notice hereunder
must specify the reasons for disagreement in reasonable detail. Upon receipt of
any such notice, if the parties cannot settle any disputes or grievances
relating to the calculations referred to in Section 2.1, within thirty (30) days
of the date of receipt by Purchaser of Seller's written notice of dispute,
Purchaser and Seller shall submit any such unresolved dispute to an independent
accounting firm of national reputation appointed jointly by Purchaser and Seller
(neither of which may unreasonably withhold or delay such appointment) (the
"Independent Accounting Firm"). The Independent Accounting Firm, within 20
business days after appointment, shall determine whether Profits for the annual
period with respect to which the dispute has arisen are less than, equal to or
greater than the Minimum Profit for that period. If the Independent Accounting
Firm determines that Profits are equal to or greater than Minimum Profit, the
Purchaser shall pay the Contingent Payout for the disputed period to Seller
within three (3) business days thereafter and shall pay the fees and
disbursements of the Independent Accounting Firm. If the Independent Accounting
Firm determines that Profits are less than Minimum Profits for the disputed
period, the Seller shall pay the fees and disbursements of the Independent
Accounting Firm.
2.3 Notwithstanding any contrary provision in this Agreement,
except as set forth in Exhibit "E", Purchaser shall not assume any liabilities
of Seller, whether disclosed, undisclosed, liquidated, contingent or otherwise,
except (i) liabilities under the Contracts, Vendor Contracts and leases which
are assigned to Purchaser under this Agreement, (ii) liabilities pursuant to
employment of Company Employees and other employees for which Purchaser is
obligated pursuant to Section 3.5; and (iii) liabilities in connection with the
Employee Benefit Plans as provided in Sections 4.3, 4.7 and 4.8.
ARTICLE 3
CLOSING
3.1 The Closing for the transactions contemplated by this
Agreement (the "Closing") shall take place on or before the Closing Date at the
Arizona offices of the Seller's counsel or such other time and place as may be
mutually approved by the parties. The parties shall adjust all expenses on a pro
rata basis as of the Closing Date. 3.2 Commencing with the execution of this
Agreement, Seller agrees to commence the preparation of and make diligent
application for, to follow up on, and to actively and diligently pursue all
approvals and consents reasonably requested by Purchaser including but not
limited to the consents for approval of assignment of the Contracts in a form
reasonably acceptable to Purchaser. Purchaser acknowledges that in numerous
cases such consent will require Purchaser to execute confidentiality and
nondisclosure agreements for the benefit of third parties to the Contracts and
will require Purchaser to qualify for security clearances acceptable to such
third parties. Seller agrees to direct and coordinate Purchaser's preparation of
and application for, such security clearances and Purchaser agrees to use its
diligent best efforts including without limitation, taking such actions as are
within its ability and control, as Seller instructs it to take to obtain the
necessary security clearances (collectively, "Purchaser Clearance
Requirements"). 3.3 At the Closing, the Seller shall deliver the Assets to the
Purchaser. Specifically, Seller shall deliver the following: (a) All Contracts,
Records and physical embodiments of the Assets; (b) Assignments of the Contracts
executed and approved by an authorized representative of Seller's Customer, in a
form satisfactory to Purchaser; (c) All documents necessary to convey to
Purchaser the General Intangibles; (d) All keys, combinations, security devices
and codes for or with respect to all offices, storage units, vaults, safety
deposit boxes of the Seller; (e) All computer software and programs, licenses,
data bases utilized in connection with the operation of the Business; (f) An
assignment of Seller's interest in the Real Property, in the form of Exhibit
F-1; (g) Executed counterparts, and/or copies, as the case may be, of the
instruments and documents required to be delivered to the Purchaser at the
Closing as herein provided; (h) A Bill of Sale conveying title to the Equipment
listed in Exhibit "B", in the form annexed hereto as Exhibit "F"; (i) A
certified copy of resolutions adopted unanimously by the Seller's Board of
Directors authorizing the execution, delivery and performance by the Seller of
this Agreement and the consummation of the sale contemplated hereby, or, at
Purchaser's option, a written consent executed by all of the stockholders of the
Seller authorizing and consenting to the sale herein; (j) A tax compliance
certificate from all states in which the Seller conducts or, within the one year
preceding Closing, conducted business; and (k) Employment agreements between S.
Rashkin and Evan Burks and Purchaser executed by them in substantially the same
form as annexed hereto as Exhibit "G" and "H". The Seller will from time to time
at the Purchaser's request, whether prior to, at, or after the Closing, without
further consideration, execute and deliver such further instruments and
conveyances and transfers, and take such other action as the Purchaser may
reasonably require to more effectively convey and transfer to the Purchaser any
of the assets being sold hereunder. 3.4 Immediately upon the Closing Date,
Seller and its Stockholder will cease and refrain from using the name "Datatech
Technical Services, Inc.", "RRA, Inc.", "Project Staffing Support Team, Inc.",
"PSST", or any similar name or derivation thereof. 3.5 Purchaser will upon
Closing offer employment to all employees of Seller except those employees
Purchaser discloses to Seller upon completion of its due diligence under Section
13.1(o). Purchaser does not guarantee that any such employment will continue for
a specified period and may in its discretion make any or all such employees at
will employees, except as otherwise provided in their written employment
agreements. Nothing herein express or implied shall confer upon any such
employee or any other person any rights or remedies including without
limitation, any right to employment, or continued employment for any specified
period, of any nature or kind whatsoever under or by reason of this Agreement.
Such employees who become employees of Purchaser on the Closing Date shall be
called "Transferred Employees."
3.6 INTENTIONALLY OMITTED.
3.7 On the Closing Date, Seller shall deliver to Purchaser a
statement of all prepaid expenses and deposits that relate to Contracts and
Vendor Contracts and leases which are assigned to Purchaser under this Agreement
and of other prepaid items (collectively, the "Prepaid Items" ), together with a
certificate of Seller certifying that all of the Prepaid Items have been booked
as a refundable deposit (including for this purpose the monies held by Los
Alamos from accounts receivable) or accrued as prepaid expenses on the books and
records of Seller maintained in accordance with GAAP and that, to the extent any
such item has been billed to or is chargeable to a customer, that the charge or
billing is not a receivable of Seller and has not been paid to Seller as of the
Closing. Purchaser shall at the Closing pay to Seller the amount of the Prepaid
Items accrued as of the Closing.
ARTICLE 4
COLLECTION OF ACCOUNTS RECEIVABLE,
PAYMENT OF ACCOUNTS PAYABLE, ASSUMPTION OF
EMPLOYEE BENEFIT PLANS AND OTHER POST-CLOSING OBLIGATIONS
4.1 Purchaser agrees to invoice Seller's Customers for all
outstanding sums legally due and owing Seller in connection with the Business
prior to the Closing Date ("Receivables"). Seller agrees to cooperate in this
effort and shall provide notice to such Customers to remit directly to Purchaser
and to provide Purchaser with complete and accurate information and
documentation of the Receivables. Purchaser shall pay to Seller all Receivables
collected, less any documented actual and reasonable expenses of collection,
including the hourly rate of labor associated with such collection, within three
days of receipt except for such Receivables that the Purchaser and Seller have
agreed are to be used to fund the Accrual Escrow Account, which Receivables
shall be paid to the Escrow Fund under the Accrual Escrow Agreement. Purchaser
shall use all reasonable efforts to collect the Receivables and shall provide
Seller with monthly reports indicating the amounts billed, amounts received,
date of payment, amounts outstanding, expenses of collection in reasonable
detail and any notice of any counterclaim, denial, set-off or refusal to pay.
Seller shall have the right to take reasonable actions to collect any
Receivable; provided, however that such actions do not materially interfere with
or adversely impact Purchaser's relationship with the Customer having the
Receivable. 4.2 Seller shall promptly pay all employee wages and payroll
charges, trade and other accounts payable upon which it is obligated as of the
Closing Date. If Seller does not pay such non-assumed liability accounts payable
on the later of the due date thereof or the tenth day following notice from
Purchaser to pay such accounts or give Purchaser notice that it has a dispute as
to the amount due Purchaser may pay or assume such accounts payable, and
thereafter, such amounts shall be reimbursed by Seller to Purchaser, or, at the
Purchaser's option, may be applied by Purchaser against any monies due Seller.
4.3 As of the Closing Date, Purchaser shall be substituted for the Seller as the
employer and plan sponsor under the Employee Benefit Plans, and Seller shall
take all corporate action and shall execute all agreements and instruments
necessary to accomplish such substitution. From and after the Closing Date,
Purchaser shall have full responsibility and liability for the maintenance and
operation of the Employee Benefit Plans (including, but not limited to, the
payment of retirement plan benefits held in trust attributable to services
before the Closing Date) and shall make all contributions and pay all claims and
benefits under such Employee Benefit Plans that arise on account of service of
employees covered under such plan and after the Closing Date. 4.4 Seller shall
be relieved from furnishing Forms W-2 to any Transferred Employee and Purchaser
shall issue such Forms W-2 to the Transferred Employees at the end of the 1996
calendar year. Such forms shall be issued as required by law, and shall reflect
the wages paid and taxes withheld by Seller and by Purchaser for such calendar
year. Seller, in accordance with Revenue Procedure 84-77, shall attach a
statement to its Forms 941 explaining any discrepancy reflected in the Seller's
reports on Form W-3 and on Form 941. Such statement shall include the name,
address and employer identification number of Purchaser, as the successor
employer, and a reference to Revenue Procedure 84-77. Purchaser shall implement
the same procedures and provide the same information to explain the
corresponding differences on its Form 941. In accordance with Rev. Proc. 84-77,
all Forms W-4 that were provided to Seller by the Transferred Employees shall be
transferred to Purchaser. Purchaser shall retain all such transferred Forms W-4
on file and shall deduct and withhold from the wages it pays to the Transferred
Employees in accordance with the information provided in those forms, unless a
Transferred Employee submits a changed Form W-4. Purchaser shall submit to the
Internal Revenue Service, in accordance with Treasury Regulation ss.
31.3402(f)(2)-l(g), copies of all Forms W-4 received by Seller during the
current and preceding calendar quarters. All Form W-4's provided to Seller by
any of the Transferred Employees for the current calendar year will be
transferred to Purchaser, and Purchaser will accept and retain such reports.
Seller shall provide Purchaser with all information necessary to implement this
provision and fulfill the requirements of Revenue Procedure 84-77, including,
without limitation, information relating to the wages paid and taxes withheld
for each Transferred Employee. Seller shall not destroy any payroll or
employment records it maintains for any of the Transferred Employees without
Purchaser's prior written consent. Seller shall transfer to Purchaser all Form
I-9s and related materials it has for Transferred Employees. 4.5 Purchaser shall
also take all steps necessary to be considered a successor employer to the
Seller for FICA, FUTA and SUTA tax purposes, as described in Treasury
Regulations ss. 31.3121(a)(1)-1(b) and ss. 31.3302(e)-1 and applicable state
laws and regulations.
4.6 As of the Closing Date, S. Rashkin shall resign as
Trustee of the Retirement Plans and Purchaser shall provide evidence
satisfactory to Seller that a designee of Purchaser has become Trustee of the
Plans.
4.7 After the Closing Date, Seller shall continue to be
responsible for the payment of all claims under the Medical Plan that arise on
account of expenses covered by the Medical Plan incurred by Company Employees,
employees of Seller, DTS Company Employees and PSST Company Employees on or
before the Closing Date. On or before the Closing Date, Purchaser and Seller
shall agree on the amount of funds that will be required to pay all such claims
that arise on account of service up to the Closing Date. Seller shall transfer
such agreed amount to the Accrual Escrow Account. Such funds shall be disbursed
from the Accrual Escrow Account in accordance with the terms and conditions of
the Accrual Escrow Agreement.
4.8 The plan year for the Money Purchase Plan is the twelve month
period beginning on June 1 of each year and ending on the following May 31.
Under the terms of the Money Purchase Plan, the contributions to the Money
Purchase Plan for the Plan Year that includes the Closing Date are due and
payable not later than September 15, 1996. On or before the Closing Date,
Purchaser and Seller shall agree on the amount of funds required to be paid to
the Money Purchase Plan for the Plan Year ending May 31, 1996 on account of
services rendered by Company Employees from June 1, 1995 through the Closing
Date, and Seller shall transfer such agreed amount to the Accrual Escrow
Account. Such funds shall be disbursed from the Accrual Escrow Account in
accordance with the terms of the Accrual Escrow Agreement.
4.9 Some of the Billable Employees become entitled to vacation
and sick pay that accrues based on service. On or before the Closing Date,
Purchaser and Seller shall agree on the maximum amount of funds required to
discharge Seller's liability to pay vacation and sick pay benefits that have
accrued on account of service rendered up to the Closing Date, and Seller shall
transfer such agreed amount to the Accrual Escrow Account. Such funds shall be
disbursed from the Accrual Escrow Account in accordance with the terms and
conditions of the Accrual Escrow Agreement.
4.10 Seller shall (i) cure any breaches or defaults that may
exist on the Closing Date, with respect to any of the contracts or agreements
assumed by Purchaser hereunder, and (ii) make all payments due or to become due
thereunder attributable to periods ending on or before the Closing Date. In the
event Seller fails to cure any such breach or default or make any such payment
when requested to do so by Purchaser, Purchaser will have the right to cure any
such breach or default or make any such payment on or after the tenth day
following Purchaser's request that Seller do so. Any amounts so paid by
Purchaser to cure any such breach or default shall be reimbursed by Seller to
Purchaser, or at Purchaser's option, may be applied against any moneys due
Seller under the right of offset granted in Section 8.3.
4.11 Purchaser agrees that a capital expenditure in the amount of
$40,000 for computer equipment and associated software and consulting services
is contemplated by RRA and subject to Purchaser's approval of the description of
such computer equipment, Purchaser shall at the Closing reimburse RRA for the
cost of the same.
ARTICLE 5
SELLER'S REPRESENTATIONS AND WARRANTIES
In order to induce Purchaser to execute and perform this
Agreement, the Seller hereby represents, warrants, covenants and agrees (which
representations, survival warranties, covenants and agreements shall be and be
deemed to be continuing and survive the execution and delivery of this Agreement
and the Closing Date) as follows:
5.1 Seller is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation, with the full
power and authority, corporate and otherwise, and with all licenses, permits,
certifications, registrations, approvals, consents and franchises necessary to
own or lease and operate its properties and to conduct its Business as presently
being conducted. Seller is duly qualified to do business as a foreign
corporation, and is in good standing, in all jurisdictions, if any, wherein such
qualification is necessary in order to avoid a material adverse effect upon its
Business.
5.2 Seller owns and has good and marketable title in and to the
Property and assets to be sold or transferred hereunder free and clear of all
liens, claims and encumbrances and rights and option of others except as herein
expressly provided to the contrary and except for the liens set forth on Exhibit
L ("Permitted Liens").
5.3 The Stockholder owns all of the issued and outstanding
shares of stock of Seller as listed on Exhibit "I" and at the Closing there
shall not be authorized and issued and outstanding any shares of capital stock
of Seller and/or rights to purchase shares of capital stock of Seller except
indicated on Exhibit "I". The issued and outstanding shares of Seller have been
duly authorized and validly issued, and all such outstanding shares are fully
paid and non assessable. At the Closing there will be no outstanding trust
agreements, options, warrants and similar rights to purchase shares of capital
stock. There are no preemptive rights. During the period from the date hereof
through the Closing, there will be no shares of the capital stock of Seller
issued. Except for cash dividends, as to which there shall be no restriction,
and except as herein provided, no dividends or other distributions of the assets
of Seller have or will be declared and/or paid prior to the Closing on or with
respect to the capital stock of any Seller.
5.4 (i) The Seller has the full power and authority to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated hereby; (ii) the execution, delivery and performance of this
Agreement, the consummation by Seller of the transactions herein contemplated
and the compliance by Seller with the terms of this Agreement have been duly
authorized, and this Agreement has been duly and properly authorized, executed
and delivered by Seller; (iii) this Agreement is the valid and binding
obligation of Seller, enforceable in accordance with its terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies; (iv) the execution,
delivery and performance of this Agreement by Seller and the consummation by
Seller of the transactions herein contemplated does not, and will not, with or
without the giving of notice or the lapse of time, or both, (A) result in any
violation of the articles of incorporation or bylaws of Seller, (B) result in a
breach of or conflict with any of the terms or provisions of, or constitute a
default under, or result in the modification or termination of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Seller and/or pursuant to, any
indenture, mortgage, note, contract, commitment or other agreement or instrument
to which Seller is a party or by which it or any of its properties or assets are
or may be bound or affected (assuming for purposes of this provision that all
consents referred to in Exhibit "J" are obtained); (C) violate any existing
applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over Seller any of its
properties or businesses that would have a material adverse effect on the
Seller, or (D) have any effect on any agreement, permit, certification,
registration, approval, consent, license or franchise necessary for Seller to
own or lease and operate any of its properties and to conduct its businesses or
the ability of Seller to make use thereof (assuming for purposes of this
provision that all consents referred to in Exhibit J
are obtained). No consent, approval, authorization or order of any court,
Customer, governmental agency, authority or body and/or any party to an
agreement to which Seller is a party and/or by which it is bound, is required in
connection with the execution, delivery and performance of this Agreement,
and/or the consummation by Seller of the transactions contemplated by this
Agreement except as noted on Exhibit "J".
5.5 Seller is not in violation of, or in default under, (i) any
term or provision of its articles of incorporation or bylaws; (ii) any material
term or provision or any financial covenant of any indenture, mortgage,
contract, commitment or other agreement or instrument to which it is a party or
by which it or any of its properties or business is or may be bound or affected;
or (iii) any existing applicable law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, having
jurisdiction over it or any of its properties or business. Seller owns,
possesses or has obtained all governmental and other licenses, permits,
certifications, registrations, approvals or consents and other authorizations
necessary to own or lease, as the case may be, and to operate its properties and
to conduct its business or operations as presently conducted and all such
governmental and other licenses, permits, certifications, registrations,
approvals, consents and other authorizations are outstanding and in good
standing, and there are no proceedings pending or, to the best of Seller's
knowledge, threatened, or any basis therefore existing, seeking to cancel,
terminate or limit such licenses, permits, certifications, registrations,
approvals or consents or authorizations.
5.6 Prior to the date hereof Seller has delivered to Purchaser
the audited consolidated financial statements of Seller described on Exhibit "K"
annexed hereto and made a part hereof ("Financial Statements"). The Financial
Statements fairly present the financial position of Seller as of the respective
dates thereof and the results of operations, and changes in financial position
of the Seller, for each of the periods covered thereby and are true and
accurate. The Financial Statements have been prepared in conformity with
generally accepted accounting principles, applied on a consistent basis
throughout the entire periods involved. As of the date of any balance sheet
forming a part of the Financial Statements, and except as and to the extent
reflected or reserved against therein, Seller did not have any material
liabilities, debts, obligations or claims (absolute or contingent) asserted
against it and/or which should have been reflected in a balance sheet or the
notes thereto, and all assets reflected thereon are properly reported and
present fairly the value of the assets therein stated in accordance with
generally accepted accounting principles.
5.7 The financial and other books and records of Seller
(including those forming a part of the Assets) (i) are in all material respects
true, complete and correct and have, at all times, been maintained in accordance
with good business and accounting practices; (ii) contain a complete and
accurate description, and specify the location, of all trucks, machinery,
equipment, furniture, supplies, tools, drawings and all other tangible personal
property (collectively the "Personal Property") owned by, in the possession of,
or used by Seller in connection with the operation of its Business in the normal
course of business; (iii) except as set forth on Exhibit "L" annexed hereto and
made a part hereof, none of such Personal Property is leased or subject to a
security agreement, conditional sales contract or other title retention or
security agreement or is other than in the possession of and under the control
of Seller, (iv) the Personal Property reflected in such books and records
constitutes all of the tangible personal property necessary for the conduct by
Seller of its Business as now conducted; and all of the same is in normal
operating condition and the use thereof as presently employed conforms to all
applicable laws and regulations.
5.8 Annexed hereto and labeled Exhibit "A" is a schedule
setting forth a description of each parcel of improved or unimproved real
property owned by or leased to Seller. Exhibit "A" is true correct and complete
in all respect; each of such leases are in full force and effect with no event
of default in existence or event or occurrence which, with the passage of time
and/or giving of notice would or could mature into an event of default
thereunder.
5.9 Seller owns all rights to utilize its General Intangibles
free and clear of all liens, claims and encumbrances and rights and options of
third parties (including without limitation former or present officers,
directors, stockholders, employees and agent, but excluding the rights of
licensors) other than Permitted Liens; Seller has not licensed or leased any of
the General Intangibles and/or any interest therein to any person and/or entity;
to the best of Seller's knowledge Seller has not infringed, nor is infringing,
upon the rights of others with respect to the General Intangibles; and Seller
has not received any notice of conflict with the asserted rights of others with
respect to the General Intangibles and Seller knows of no basis therefor; and to
the best of Seller's knowledge no others have infringed upon the General
Intangibles.
5.10 The Customer Materials, Employee Materials and Records
represent all of such materials at any time utilized in connection with, arising
out of or relating to the Business; and neither Seller nor, to the best of
Seller's knowledge, any employee, officer, director or stockholder of Seller
have or shall retain copies thereof and have not prior to the date hereof, and
shall not prior to the Closing, provide to any person or entity or authorize or
permit another to utilize any of such Customer Materials, Employee Materials or
Records and/or the information therein or thereon reflected.
5.11 Seller did not have any material liabilities, debts,
obligations or claims asserted against it, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, including, but not limited to,
liabilities on account of due and unpaid taxes, other governmental charges or
lawsuits except as reflected in the Financial Statements or as listed on Exhibit
"M".
5.12 Since the date of the most recent balance sheet included in
the Financial Statements, there has been no material adverse change to the
business of Seller and Seller has not, except as set forth on Exhibit "N"
annexed hereto and made a part hereof, (i) incurred any obligation or liability
(absolute or contingent, secured or unsecured) except obligations and
liabilities incurred in the ordinary course of the operation or business of its
Business as carried on at and prior to such date; (ii) canceled, without payment
in full, any notes, loans or other obligations receivable or other debts or
claims held by it other than in the ordinary course of business; (iii) sold,
assigned, transferred, abandoned, mortgaged, pledged or subjected to lien (other
than Permitted Liens) any contract, permit, license, franchise or other
agreement other than sales or other dispositions of goods or services in the
ordinary course of business at customary prices; (iv) increased compensation
payable to any of its officers, directors or other employees including in the
term "compensation", salaries, fringe benefits, pensions, profit participation
and payment of benefits of any kind whatsoever; (v) entered into any line of
business other than that conducted by it on such date or entered into any
transaction not in the ordinary course of its business; (vi) conducted any line
of business in any manner except by transactions customary in the operation of
its business as conducted on such date; (vii) declared, made or paid, or set
aside for payment, any non-cash dividends or other non-cash distribution on any
shares of its capital stock; (viii) changed or modified any accounting practice;
(ix) waived any rights under any Contracts that may have a material adverse
effect upon Seller; (x) made any capital expenditure except as set forth on
Exhibit "M" or as permitted by Section 3.2; (xi) paid any amounts to
shareholders except the usual salary and benefits (provided that bonuses have
been paid to S. Rashkin pursuant to his employment agreement with Seller); or
(xii) entered into any agreement to take any of the actions above referenced.
5.13 Seller has not incurred any liability for any finder's
fees or similar payments in connection with the transactions herein contemplated
except as set forth herein.
5.14 Except as set forth on Exhibit "O" annexed hereto and
made a part hereof, the Seller is not in default under the terms of any
outstanding agreement which is material to the business, operations, properties,
assets or condition of Seller; and there exists no event of default or event
which, with notice and/or the passage of time, or both, would constitute any
such default.
5.15 Except as set forth on Exhibit "P" annexed hereto and made a
part hereof, there are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries against Seller before any court or governmental
agency, court or tribunal, domestic, or foreign, or before any private
arbitration tribunal, pending, or, to the best of the knowledge of Seller,
threatened against Seller or involving its properties or businesses; nor, to the
best of the knowledge of Seller, is there any basis for any such claim, action,
suit, proceeding, arbitration, investigation or inquiry to be made by any person
and/or entity, including without limitation any Customer, supplier, lender,
stockholder, former or current employee, agent or landlord. There are no
outstanding orders, judgments or decrees or any court, governmental agency or
other tribunal specifically naming Seller and/or enjoining Seller from taking,
or requiring Seller to take, any action, and/or by which Seller, and/or its
properties or businesses are bound or subject.
5.16 Seller has filed all federal, state, municipal and local tax
returns (whether relating to income, sales, franchise, withholding, real or
personal property, employment or otherwise) required to be filed under the laws
of the United States and all applicable states, and has been paid in full all
taxes which are due pursuant to such returns or claimed to be due by any taxing
authority or otherwise due and owing. No penalties or other charges are or will
become due with respect to the late filing of any such return. To the best of
the knowledge of Seller, after due investigation, each such tax return
heretofore filed by Seller correctly and accurately reflects the amount of its
tax liability thereunder. Seller has withheld, collected and paid all other
levies, assessments, license fees and taxes to the extent required and, with
respect to payments, to the extent that the same have become due and payable.
5.17 Since the date of the most recent balance sheet included in
the Financial Statements, Seller has not sustained any material loss or
interference with its business of any kind nature or description including
without limitation, from fire, storm, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree; nor have there been, and prior to the
Closing, there will not be, any material adverse change in or affecting the
general affairs, management, financial condition, stockholders' equity, results
of operations or properties of Seller.
5.18 Except as set forth in Exhibit "Q", Seller has not
experienced any actual or to the best of Seller's knowledge been threatened with
any employee strikes, work stoppages, slow-downs, or lock-outs, or had any
material change in the terms of its agreements with the employees of Seller
which would adversely affect Seller, and none are imminent.
5.19 Neither Seller nor its present or former officers,
directors, employees or agents (including any third party acting on behalf of
Seller) have: (i) directly or indirectly, made or authorized to be made, any
bribes, kickbacks or other payments of a similar nature, whether lawful or not,
to any person or entity, public or private, regardless of the form thereof,
whether in money, property or services, to obtain favorable treatment in
securing business or to obtain special concessions or to pay for favorable
treatment for business secured or for special concessions already obtained; (ii)
paid funds or property of any kind was donated, loaned or made available,
directly or indirectly, for the benefit of, or for the purpose of opposing, any
government or subdivision thereof, political party, candidate or committee,
either domestic or foreign except by natural persons in their individual
capacities; (iii) made any loans, donations, or other disbursements, directly or
indirectly, to officers or employees of the Seller for contributions made, or to
be made, directly or indirectly, for the benefit of, or for the purpose of
opposing, any government or subdivision thereof, political party, candidate or
committee, either domestic or foreign; or (iv) maintained a bank account or
other account of any kind, whether domestic or foreign, which account was not
reflected in the corporate books and records or which account was not listed,
titled or identified in the name of Seller.
5.20 The corporate record books of Seller have been duly and
properly maintained, are in good order, complete, accurate, up to date and have
all necessary signatures, and set forth all meetings and actions heretofore held
and/or taken by the stockholders and/or directors of Seller, as the case may be,
and/or as set forth in all certificates of votes of stockholders or directors
heretofore furnished to anyone at any time. Seller has utilized its best efforts
to maintain the files and inventory of resumes in a current and usable
condition.
5.21 The copies of the articles of incorporation (and all
amendments thereto) and the bylaws of Seller heretofore delivered by the Seller
are true, correct and complete in all respects; are, and shall remain, in full
force and effect; and shall not be altered, amended, modified, terminated or
rescinded prior to the Closing without the prior written consent of the
Purchaser in each instance.
5.22 The Stockholders, officers and members of the Boards of
Directors of Seller are as set forth on Exhibit "R" annexed hereto and made a
part hereof; and during the period from the date hereof until the Closing, there
shall be no change in such officerships and/or memberships without the prior
written consent of the Purchaser in each instance.
5.23 No officer or director of Seller (and/or any member of
their respective immediate families) has a financial interest (direct or
indirect) in any competitor, supplier or customer of Seller, DTS or PSST, other
than ownership of less than 1% of the outstanding voting stock of any publicly
traded company.
5.24 Each of the Contracts on Exhibit "C" annexed hereto and
made a part hereof are in full force and effect, have not been altered,
amended, modified, terminated or rescinded, are fully enforceable in accordance
with their respective terms.
5.25 Other than as set forth on Exhibit "S" annexed hereto and
made a part hereof, Seller is not a party (i) to any contract or agreement
calling for the payment of more than $10,000 per annum or $25,000 in the
aggregate and/or which cannot be terminated on no more than 90 days prior
written notice from Seller to the other party thereto; (ii) to any profit
sharing, bonus, deferred compensation, pension or retirement plan, severance
policy or other similar agreement or arrangement; (iii) to any collective
bargaining agreement; or (iv) to any agreement not entered into in the ordinary
course of business.
5.26 The Contracts are effective and there exists no material
breach or default with respect to same. The copies of those Contracts delivered
to Purchaser as a condition to Closing shall be accurate and complete and there
exist no amendments with respect to same which shall not be disclosed. Except as
noted as Exhibit "C", Seller knows no present condition or set of facts with
respect to either amendment of terms or performance pursuant to which the
requirements for personnel in such contracts shall materially be reduced or
changed adversely. Seller is not presently aware of any past deficiencies in its
performance of services under such contracts that might materially adversely
affect the continuation of supplying services under such contracts.
5.27 Except as set forth on Exhibit "T", there have been no past
proceedings nor are there any proceedings now pending nor, to Seller's knowledge
or belief, threatened against Seller before the National Labor Relations Board,
State Department of Labor, State Commission on Human Rights and Opportunities,
State Department of Labor, Equal Employment Opportunity Commission or any other
local, state or Federal agencies having jurisdiction over employee rights with
respect to hiring, tenure, conditions of employment within the three year period
prior to the execution of this Agreement.
5.28 Seller, to the best of its knowledge and belief,
represents that it has properly made, reported and remitted all appropriate
federal, state and local payroll related deductions and taxes including: FICA,
FUTA, SUI and income tax withholdings presently due and owing; all applicable
Sales and Use Taxes; and further warrants that it will report and remit all
withholdings and taxes due for activities prior to the Closing Date.
5.29 None of the contracts referenced or listed on Exhibit"C"
were obtained or executed based in whole or in part on the fact or
representation that Seller is a minority or woman owned or operated business or
a small business enterprise as those or similar terms are deemed by Federal or
state statutes or regulations.
5.30 Seller has not been the subject of any union organizing
activity and there have been no attempts to unionize the employees of Seller.
5.31 Seller has paid all employees in accordance with
applicable local, state and federal law. All employees have been paid
appropriate and correct premium wages where applicable. 5.32 Seller has not
retained the services of any independent contractor or consultant for assignment
to Customers except as listed on Exhibit "U," annexed hereto and made a part
hereof. 5.33 There are no contracts, agreements, or arrangements, written or
oral, relating to the conduct of the business of Seller to be sold hereunder to
which Seller is a party or is bound, except as may be referred to in this
Agreement, or any schedule or exhibit annexed hereto. 5.34 Exhibit "V" contains
complete, correct and current copies of all insurance policies in effect as of
the time of this agreement. The policies in place are in full force and effect
and insure against risks and liabilities, and in amounts and under terms and
conditions customary for the business in which Seller is engaged. Seller shall
keep such coverage in effect through the date of Closing.
5.35 Each of Seller's Employee Benefit Plans is listed on
Exhibit "W".
5.36 Seller does not (and has not in the past) maintained a
defined benefit pension plan, or made any contributions to a multiemployer
pension plan, as that term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974.
5.37 With respect to the Employee Benefit Plans, to the knowledge
of Seller, each such Employee Benefit Plan (and each related trust or insurance
contract) complies in form and in operation in all material respects with the
applicable requirements of ERISA and the Internal Revenue Code of 1986 (the
"Code").
5.38 All contributions and insurance premiums that are due to
the Plans on or before the Closing Date have been paid in full.
5.39 INTENTIONALLY OMITTED.
5.40 Seller has provided to Buyer complete and correct copies
of the Employee Benefit Plans, including each plan document and any amendments,
trust agreements, insurance contracts, summary plan descriptions, and
administrative service agreements and IRS determination letters. 5.41 The
representations, warranties, covenants and agreement of the Seller contained in
this Agreement are true, complete, accurate and correct in all respects as of
the date hereof and shall be true, accurate and correct and complete, in all
respects as of the Closing; and will not contain any untrue statement of any
material fact, or omit to state a material fact in order to make any or all of
such representations and warranties not materially misleading as of this date
and as of the Closing Date; and at the Closing the Seller shall deliver to the
Purchaser a certificate, executed by Seller remaking each of the Seller's
representations, warranties, covenants and agreement set forth in this
Agreement, including without limitation, those set forth in this Section 5.41.
5.42 The Assets and the Excluded Assets constitute all of
the assets owned by Seller which are used in the Business.
ARTICLE 6
PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to Seller as follows:
6.1 The Purchaser is a corporation duly organized, validly
existing and in good standing under and by virtue of the laws of the State of
Delaware, and the execution and delivery of this Agreement and the purchase
contemplated hereby and the Employment Agreement with S. Rashkin and the
Consulting Agreement with R. Rashkin have been duly authorized by all necessary
corporate action on the part of the Purchaser.
6.2 The Purchaser has corporate power to execute and perform
this Agreement, and to consummate the transactions contemplated hereby.
6.3 The execution and performance of this Agreement by Purchaser
will not conflict with, or result in a breach of, any of the terms, conditions,
or provisions of any law or any regulations, order, writ, injunction, or decree
of any court or governmental instrumentality, or of the corporate charter or
by-laws of the Purchaser or of any agreement, whether written or oral, or other
instrument to which it is a party or by which it is bound, or constitute (with
the giving of notice or the passage of time, or both) a default thereunder.
ARTICLE 7
ACCESS AND INFORMATION
7.1 From and after the Closing Date, and for a period of six
years thereafter, Seller shall give to the Purchaser, and the Purchaser shall
maintain the same intact and shall not remove or destroy the same without the
written consent of the Seller for its records, operating books and financial
records (other than corporate records and corporate tax records) relating to the
Business (including paid supplier invoices, customers' billings and payroll
records and returns). From and after the Closing Date, the Purchaser shall give
to the Seller and its representatives from time to time upon request of the
Seller full access during normal working hours to any and all books, contracts
and other records (including credit files) of Seller left in the possession of
the Purchaser, including the right to make copies thereof.
7.2 From and after the Closing Date, the Seller shall give to
the Purchaser and its representatives from time to time upon request of the
Purchaser full access during normal working hours to all books, contracts and
other records, including credit files, which are not to be conveyed to the
Purchaser hereunder and which are relevant to the present Business which have
been retained in the Seller's possession, including the right to make copies of
relevant portions thereof. The Seller shall be obligated to give reasonable
notice of not less than thirty (30) days in writing to the Purchaser of the
Seller's intention to dispose of or destroy any such books, contracts or other
records related to the Business and shall, at the Purchaser's request, turn over
to the Purchaser any of the books contracts, or other records set forth in any
such notice to the extent that they relate to the Business.
ARTICLE 8
INDEMNIFICATION AND OFF SET
8.1 In addition to the indemnifications set forth in other
sections hereof and subject to the limitations provided in Section 8.2, Seller,
Stockholder and S. Rashkin, jointly and severally agree to indemnify, exonerate,
defend and save the Purchaser, its Affiliates, officers, directors, employees
and representatives (collectively the "Purchaser" for the purposes of this
Article 8) harmless from, against, for and in respect of the full amounts of any
and all damages, losses, demands, obligations, tax, interest, penalty, suit,
judgment, order, lien, liabilities, debts, claims, actions, causes of action,
encumbrances, costs and expenses, whether administrative, judicial or otherwise,
of every kind and nature, including, without limitation, reasonable attorneys',
consultants', accountants' and expert witness fees, suffered, sustained,
incurred or required to be paid at any time after the Closing by the Purchaser
based upon, arising out of, resulting from or because of the following
(collectively, "Loss"):
(a) any obligations of the Seller, the other Rashkin
Companies, Stockholder or S. Rashkin incurred in connection with the making and
performance of this Agreement or the Datatech Agreement or the PSST Agreement;
(b) all obligations and liabilities of Seller or any
other Rashkin Company whatsoever, whether disclosed or undisclosed, absolute or
contingent, direct or indirect, due or to become due, now existing or arising
hereafter, not assumed by Purchaser pursuant to this
Agreement or the Datatech Agreement or the PSST Agreement;
(c) the untruth, inaccuracy, incompleteness,
violation or breach of any representation, warranty, agreement, undertaking or
covenant of Seller, Stockholder, the other Rashkin Companies or S. Rashkin;
(d) any claims made against or expense incurred by Purchaser
including, but not limited to, those with respect to the conditions or
operations of Seller or the other Rashkin Companies made by regulatory or
administrative agencies having jurisdiction over Seller or the other Rashkin
Companies resulting from violations of local, state or federal laws or
regulations by Seller or the other Rashkin Companies or any of their respective
agents, servants or employees, or resulting from a failure to collect or remit
state or local taxes, arising prior to the Closing;
(e) INTENTIONALLY OMITTED.
(f) All reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees, interest, and penalties) incurred by the
Purchaser in connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against.
(g) Notwithstanding anything in this Section 8 to the
contrary, Stockholder shall have no liability or indemnification obligation
relating to or arising from the McDonnell Douglas Contract (as defined in the
Datatech Agreement) or the Incident (as defined in the
Datatech
Agreement).
8.2 The indemnification obligations under Section 8.1 shall be
subject to a limit calculated with reference to all of the indemnification
obligations of Seller, DTS, PSST, S. Rashkin, and R. Rashkin under this
Agreement, under the Purchase Agreement (the "PSST Agreement") between PSST and
Purchaser, and under the Purchase Agreement (the "Datatech Agreement") between
Datatech and CTS Acquisition Co. I. as follows: the maximum aggregate personal
liability of Seller, DTS, PSST, S. Rashkin, and R. Rashkin under all such
agreements shall be the aggregate purchase price for the Assets of PSST, RRA and
DTS under such agreements. The personal liability of Stockholder and S. Rashkin
under Section 8.1 shall not be effective until Purchaser has first
unsuccessfully sought recourse against the Seller, unless Purchaser reasonably
believes that judgement against the Seller cannot be satisfied in full or that
its ability to make collection in full from Stockholder or S. Rashkin may be
impaired. Nothing in the preceding sentence shall affect or impair Purchaser's
right under Section 8.3 or under the Indemnity Escrow Agreement, which shall not
be subject to said sentence.
8.3 Seller hereby grants to Purchaser the right of full offset
against any monies due Seller, either under this Agreement or any other
agreement the Seller may have with Purchaser, or Purchaser's Affiliates, other
than employment agreements, for the purpose of applying same to any sums that
might become due to Purchaser as a result of the indemnities herein made or as a
result of a breach of any of the covenants, representations or warranties herein
contained. Said right of offset shall in no way limit Purchaser's ability to
collect any funds due and owing to it from the Seller.
8.4 In order to establish security and a ready source of cash in
the event of any breach of any covenant, agreement, representation or warranty
contained in the PSST Agreement or the Datatech Agreement, DTS will deposit at
the Closing the sum of Six Hundred Twenty-Five Thousand Dollars ($625,000) into
an Escrow Fund to be maintained in accordance with the terms the Indemnity
Escrow Agreement. The amount deposited in escrow shall not constitute a
limitation of liability of any Rashkin Company, Stockholder or S. Rashkin.
8.5 The obligations of Seller, Stockholder and S. Rashkin
to indemnify pursuant to Section 8.1 (and the representations and warranties set
forth herein) shall be for a period of five years following the Closing Date.
8.6 Purchaser indemnifies Seller and Stockholder from all Loss
incurred as a result of any untrue representation, breach of warranty or
non-fulfillment of any covenant or agreement stated in this Agreement by
Purchaser and any liabilities and claims of the Business incurred in connection
with the making and performance of this Agreement after the Closing Date.
8.7 Promptly after any person entitled to indemnification (an
"Indemnitee") receives notice of any potential Loss, Indemnitee must give notice
in writing to the indemnifying party; provided, however, that failure to give
such notice shall not relieve the indemnifying party of its obligation hereunder
except to the extent the indemnifying party is prejudiced thereby. The
indemnifying party must assume the defense of the Loss and Indemnitee must
cooperate in connection with such defense. If Indemnitee reasonably determines
that separate counsel is necessary (whether due to the existence of different
defenses, potential conflicts of interest or otherwise), or if the indemnifying
party does not assume the defense, then Indemnitee may employ separate counsel,
and the indemnifying party will pay such counsel's reasonable fees and
disbursements as incurred.
8.8 If indemnity under this Agreement is unavailable for any
reason, then Purchaser, Seller, Stockholder and S. Rashkin will contribute to
the Loss for which such indemnity is unavailable in such proportion as is
appropriate to reflect the relative benefits to Purchaser, Seller, Stockholder
and S. Rashkin in connection with the transactions contemplated by this
Agreement.
ARTICLE 9
EFFECTIVE DATES OF TRANSACTIONS
9.1 The effective date of the purchase and sale contemplated
herein shall be midnight on the Closing Date.
9.2 In amplification of the above stated general
understanding of the parties, the following provisions will govern specific
aspects of the change in ownership: (a) In accordance with Sections 4.1 and 4.2
the Seller will retain all of Seller's accounts receivable (including unbilled
amounts which will only consist of billable days or hours worked prior to the
Closing Date) and the proceeds therefrom for all business conducted on or before
that date, and Seller will remain liable for all of its accounts payable, except
amounts relating to computer equipment approved by Purchaser pursuant to Section
4.11, for items actually delivered or services actually rendered, all payroll
obligations including the deduction and payment to the appropriate Federal state
and local authorities for income tax withholdings, FICA, FUTA, SUI and all other
payroll deductions, and sales and use taxes accrued or incurred on or before the
Closing Date ("Payables"). (b) The Purchaser shall pay for all supplies and
equipment actually delivered or services actually rendered after the effective
date, provided, however, that such supplies and equipment or such services were
purchased or rendered and delivered in the ordinary course of the business and
are necessary for the continuation of the business. (c) The Purchaser shall be
obligated to perform all Contracts and purchase orders with Customers with
respect to items not performed prior to Closing Date, provided that such
contracts and purchase orders were entered into by Seller in the ordinary course
of business, disclosed to Purchaser prior to Closing, and further provided that
such obligations arise from services rendered on or after the date of Closing.
(d) All expenses paid or obligations incurred by Seller, if any, as a result of
which Purchaser will receive after Closing Date the benefit of a portion of the
consideration for such expenses shall be prorated between the parties in an
equitable manner reflecting the relative benefit received by each. All expenses
paid or obligations incurred by Purchaser (other than Payables and prepaid
expenses and deposits under Section 3.7) as a result of which Seller has
received on or before Closing Date the benefit of a portion of the consideration
for such expenses shall be prorated between the parties in an equitable manner
reflecting the relative benefit received by each. All of such prorations shall
be made in accordance with normal business practice. (e) All obligations of
Seller for commissions payable to commission sales agents which relate to sales
made on or before effective date shall remain the obligation of the Seller. (f)
All inquiries and communications received by the Seller after the effective date
will be forthwith mailed to the Purchaser to the extent the same relate to the
Business sold by the Seller hereunder.
ARTICLE 10
COVENANTS AND AGREEMENTS BY SELLER
10.1 Conduct of Business. From the date hereof until the
Closing Date, Seller covenants and agrees that: (a) Seller shall operate the
Business in the usual and ordinary course; (b) Seller shall not remove or
transfer any assets for less than full and fair consideration, provided there
shall be no restrictions on the payment of cash dividends; (c) Subject to the
requirement of satisfying all Purchaser Clearance Requirements, Seller shall
permit the officers and other authorized representatives of Purchaser (i) full
and unrestricted access, from time to time and at one or more times, to the
plants, properties, offices and books and records of Seller, during normal
business hours, and in connection with such books and records, such inspection
shall be at the offices where such records are normally maintained, and such
parties shall be entitled to make copies of and abstracts from any of such books
and records; (ii) the opportunity to meet, correspond and communicate with the
officers, directors, employees, counsel and accountants to Seller, and to secure
from each such information as such parties shall deem necessary or appropriate;
and (iii) to review and copy such other, further and additional financial and
operating data, materials and information as to the business and operations of
Seller as may be requested by such parties; provided however that all such
information and material secured by such parties in the course of such
investigation shall be and be deemed to be confidential and shall be used solely
in connection with the transactions herein described, and all written memoranda
and documents and/or other tangible evidence of such information shall either be
returned to the Seller and/or destroyed in the event the subject acquisition is
not consummated. (d) Seller shall maintain all insurance coverages in full force
and effect. (e) Seller shall use best efforts to retain the Business' current
employees so that they will remain employable after Closing. (f) Seller shall
take and perform any and all actions necessary to render accurate and/or
maintain the accuracy of, all of the representations and warranties of the
Seller and Stockholder herein contained and/or satisfy each covenant or
condition required to be performed or satisfied by the Seller and Stockholder at
or prior to the Closing and/or to cause or permit the implementation of the
within acquisition. (g) Seller shall not take or perform any action which would
or might cause any representation or warranty made by the Seller and Stockholder
herein to be rendered inaccurate, in whole or in part and/or which would
prevent, inhibit or preclude the satisfaction, in whole or in part of any
covenant required to be performed or satisfied by the Seller and Stockholder at
or prior to the Closing and/or the implementation of the within acquisition. (h)
Seller shall perform, in all material respects all of its obligations under all
material agreements, leases and documents relating to or affecting the Assets
and the Business; and use its best efforts to preserve, intact, the
relationships with Seller's suppliers, customers, employees and other having
business relations with Seller so that the Business will be intact at Closing.
(i) Seller shall immediately advise Purchaser of any event, condition or
occurrence which constitutes or may, with the passage of time and/or giving of
notice constitute, a breach of any representation or warranty of any Seller or
Stockholder herein contained and/or which prevents, inhibits or limits or may
prevent, inhibit or limit Seller or Stockholder from satisfying, in full and on
a timely basis, any covenant, term or condition herein contained and/or
implementing this Agreement. (j) Subject to the requirement of satisfying all
Purchaser Clearance Requirements, Seller will permit access to Customer
representatives and will accompany and introduce Purchaser representatives to
the Customers as may be requested to make inquiries regarding, among other
things, Seller's performance, the existence of any defaults, prices and
prospects for further work. This access will not obviate or release Seller or
Stockholder from liability for any representation or warranty made with respect
to the Customers or Contracts. Other than obligations to preserve confidential
information as contained in this Agreement, the Purchaser shall have no
liability with respect to or arising out of meeting with the Customers, except
as set forth in Section 14.1(b). (k) Neither Seller nor Stockholder will solicit
or entertain any offers through principals, agents or brokers to purchase, sell,
encumber or otherwise transfer any or all of the stock or assets of Seller, with
the exception of the sale of goods or services in the ordinary course of
business, unless and until this agreement has been terminated in accordance with
its terms. Seller and Stockholder agree to promptly notify Purchaser in the
event either of them receive any such inquiry or offer. (l) Not take any action
in the singular or aggregate which results, or with the passage of time is
likely to result in a material adverse change to the business or the prospects
of the business of Seller.
ARTICLE 11
COVENANTS AND AGREEMENTS BY PURCHASER AND PARENT
11.1 S. Rashkin and Purchaser shall enter into the employment agreement
in accordance with the terms contained in Exhibit "G" hereto and R. Rashkin and
Purchaser shall enter into a consulting agreement in accordance with the terms
contained in Exhibit "G-1" hereto. 11.2 Parent shall comply with the obligations
with respect to the issuance of options and the registration of the options
and/or of shares purchased pursuant to the exercise of the options set forth in
R. Rashkin's Consulting Agreement.
ARTICLE 12
SELLER'S CONDITIONS TO CLOSING
12.1 Seller shall have the absolute right in its sole
discretion to waive any Closing requirement at or before Closing. If Seller does
not waive its rights in whole or in part and Purchaser is not ready, willing and
able to perform as of Closing, Seller shall have the right to terminate this
Agreement upon written notice to Purchaser. In the event of such termination,
all of Seller's obligations shall terminate without further loss, damage, cost,
claim, right or remedy in favor of Purchaser. The obligation of Seller to
consummate the transactions contemplated by this Agreement is, unless waived by
Seller, subject to the fulfillment, on or before the Closing, of each of the
following conditions: (a) No third party injunction or restraining order shall
be in effect which prohibits, restricts or enjoins, and no suit, action or
proceeding shall be pending which seeks to prohibit, restrict, enjoin, nullify,
seek material damages with respect to or otherwise materially adversely affect
the consummation of the transactions contemplated hereby; (b) All covenants of
Purchaser under this Agreement to be performed prior to the Closing shall have
been performed in all material respects, except to the extent attributable to
actions expressly permitted or consented to by Seller in writing; (c) At the
Closing, Seller shall have received a certificate, executed by the President and
Secretary of the Purchaser (effective as of the Closing), and in form and
content reasonably acceptable to Seller, certifying the truth and accuracy of
the representations and warranties of the Purchaser herein contained; (d) Seller
shall have received from Purchaser a certificate from the Department of State of
the State of Delaware to the effect that Purchaser is in good standing in such
state; (e) All material authorizations, approvals or waivers of any federal or
state regulatory bodies shall have been obtained; (f) Seller shall have received
all certificates, instruments, agreements and other documents to be delivered at
or before Closing as provided in this Agreement and a certificate signed by an
officer of Purchaser confirming the matters set forth in sections (a), (b), (c)
and (e) above; (g) Purchaser shall tender to Seller the Purchase Price required
to be paid at Closing in immediately available funds by check or bank wire to an
account designated by Seller; (h) Purchaser shall satisfy all Purchaser
Clearance Requirements; (i) The lease with R. Rashkin, being assigned to
Purchaser, shall provide for a term of two years from the Closing Date; (j)
Purchaser shall provide to Seller evidence reasonably acceptable to Seller that
Purchaser has or shall have obtained adequate capital resources, including any
credit facility or borrowing availability, sufficient to fund payroll and
associated payroll taxes for all Billable Employees for six weeks after the
Closing Date (which, based on current payroll, is $4,700,000) in addition to the
Purchase Price; (k) Purchaser shall have delivered to Seller evidence that it
has in place liability and worker's compensation insurance relating to its
conduct of business with the Assets after the Closing Date in amounts and under
terms and conditions customary for such a business; and (l) All conditions to
Seller's performance under the DTS Agreement and the PSST Agreement shall have
been satisfied or waived.
ARTICLE 13
PURCHASER'S CONDITIONS TO CLOSING
13.1 Purchaser shall have the absolute right in its sole
discretion to waive any Closing requirement at or before Closing. If Purchaser
does not waive its rights in whole or in part and Seller is not ready, willing
and able to perform as of Closing, Purchaser shall have the right to terminate
this Agreement upon written notice to Seller. In the event of such termination,
except as provided in Section 14.1(b), all of Purchaser's obligations shall
terminate without further loss, damage, cost, claim, right or remedy in favor of
Seller or Stockholder. The obligation of Purchaser to consummate the
transactions contemplated by this Agreement is, unless waived by Purchaser,
subject to the fulfillment, on or before the Closing, of each of the following
conditions: (a) All required consents shall have been received by the Purchaser,
including, but not limited to, all consents and approvals required to permit the
Purchaser to enjoy after the Closing Date all rights and benefits presenting
enjoyed by Seller; provided, however, if Seller is unable to obtain a consent
prior to Closing, Purchaser shall receive assurances as it deems reasonable in
its discretion that it will receive such consents in a reasonable time after the
Closing Date; (b) No injunction or restraining order shall be in effect which
prohibits, restricts or enjoins, and no suit, action or proceeding shall be
pending which seeks to prohibit, restrict, enjoin, nullify, seek material
damages with respect to or otherwise materially adversely affect the
consummation of the transactions contemplated hereby; (c) All covenants of
Seller under this Agreement to be performed prior to the Closing shall have been
performed in all material respects, except to the extent attributable to actions
expressly permitted or consented to by Purchaser in writing; (d) At the Closing,
Purchaser shall have received a certificate, executed by the President and
Secretary of the Seller (effective as of the Closing), and in form and content
reasonably acceptable to Purchaser, certifying the truth and accuracy of the
representations and warranties of the Seller herein contained; (e) Purchaser
shall have received from the Seller a certificate from the Arizona Corporation
Commission to the effect that Seller is in good standing in such state; (f)
Purchaser has received such documentation as may be necessary to establish that
Purchaser is not required to withhold any portion of the Purchase Price pursuant
to Section 1445 of the Code (substantially in the form of Exhibit "Y" hereto);
(g) Purchaser shall have received all Assets, certificates, instruments,
agreements and other documents to be delivered by Seller at or before Closing as
provided in 5.2 and elsewhere in this Agreement, including a certificate signed
by an officer of Seller confirming the matters set forth in sections (b), (c),
(e) and (f) above; (h) Prior to the Closing there shall not have occurred any
material adverse change in the Business, nor shall any event have occurred or
condition exist which, with the passage of time or the giving of notice, may
cause or create any such adverse material change; (i) Prior to the Closing, all
corporate and other proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident to such
transactions shall be in form and content reasonably satisfactory to Purchaser
and its counsel, and Purchaser and its counsel shall have received all
counterpart originals or certified or other copies of such documents and
instruments as they may reasonably request; (j) All statutory requirements for
the valid consummation by the Sellers of the transactions herein described shall
have been fully and timely satisfied; all authorizations, consents and approvals
of all federal, state and local governmental agencies and authorities required
to be obtained in order to permit consummation by Seller of the transactions
herein described, and/or to permit the Business to continue unimpaired in all
material respects immediately following the Closing shall have been obtained and
shall be in full force and effect; and no action or proceeding to suspend,
revoke, cancel, terminate, modify or alter any of such authorizations, consents
or approvals shall be pending or threatened; (k) Purchaser shall have received
all the documentation required to be delivered to it pursuant the provisions of
the Agreement; (l) Purchaser shall have received an opinion of counsel to Seller
with respect to those matters set forth on Exhibit "Z" hereto; (m) The lease
with R. Rashkin shall be amended to provide for a term of two years from the
Closing Date; (n) Purchaser, its lawyers and accountants shall have conducted a
review of the Seller and its contracts, business and operations and the
Purchaser shall be satisfied with such review, provided that Purchaser shall
have completed its due diligence by April 19, 1996, except to the extent that
Purchaser shall have advised Seller by April 19, 1996 of all open matters
regarding such due diligence; and (o) All conditions to Purchaser's performance
under the DTS Agreement and the PSST Agreement shall have been satisfied or
waived.
ARTICLE 14
TERMINATION
14.1 Termination. (a) Anything herein or elsewhere to the
contrary notwithstanding, this Agreement and any agreement ancillary hereto may
be terminated and the transactions contemplated hereby abandoned at any time
prior to or at the Closing by: (i) mutual consent of Seller and Purchaser; (ii)
Seller, if any of the conditions set forth in Article 12 shall not have been met
and shall not have been waived by Seller as of the Closing Date, and at such
time Seller is not in material breach or default of its obligations contained in
this Agreement; or (iii) Purchaser, if any of the conditions set forth in
Article 13 shall not have been met and shall not have been waived by Purchaser
as of the Closing Date, and at such time Purchaser is not in material breach or
default of any of its obligations contained in this Agreement. (b) In the event
the transactions hereunder are not consummated by Purchaser (i) solely because
it fails to obtain financing as provided in Section 12.1(j), or (ii) Seller
fails to obtain consents to the assignment of Contracts, as provided in Section
13.1(a) solely because the customer is not satisfied with Purchaser's financial
condition and has so stated in writing, and Purchaser is not willing to close
without such consents, Purchaser shall pay Seller's legal expenses incurred in
connection herewith and under the Purchase Agreement with RRA and DTS in an
amount not to exceed Forty Thousand Dollars ($40,000). (c) Any party desiring to
terminate this Agreement pursuant to this Article 14 shall give notice of such
termination to the other party hereto in accordance with Section 19.7.
14.2 Effect of Termination. (a) If this Agreement is
terminated in accordance with Section 14.1, then all rights and obligations of
the parties hereunder shall terminate and be of no further effect; provided,
however, that no such termination shall relieve any party of liability for any
breach of its obligations under this Agreement prior to such termination
ARTICLE 15
PUBLIC ANNOUNCEMENT
Seller and Stockholder recognize and agree that the Purchaser
is a public company and that the Seller and the Stockholder will not make any
public announcement concerning this Agreement or the negotiations and to keep
same confidential unless given written permission from the Purchaser to make any
announcement or otherwise disclose the information except as contemplated by
Section 3.2. Purchaser shall have the right to announce the transaction
contemplated hereby and/or the negotiations between the parties upon prior
notice to the Seller and whether or not the announcement is required by law
regulation or the rules of any public stock exchange on which Purchaser's stock
is listed. Purchaser will give Seller prior notice of any announcement it
believes is necessary or proper.
ARTICLE 16
NEGATIVE COVENANTS
16.1 It is understood by the parties herein that the negative
covenants contained in this Section and the one following are a prime and
essential consideration on which Purchaser will rely prior to and after the
Closing Date in consummating this Agreement
16.2 Seller and Stockholder agree that in consideration of
the sale of its business to Purchaser that for a period of five (5) years after
the Closing Date, they jointly and individually will not: (a) directly or
indirectly, own, manage, operate, control, be employed by, participate in,
render service to, solicit customers for, or be connected with any business
which competes with Purchaser, or any of its affiliated corporations with
respect to the business of supplying technical personnel and services to others
within the United States; (b) solicit or accept any business from clients or
potential clients of Seller that any employee or former shareholder, director or
officer of Seller may have contacted or been assigned at any time during the
three (3) year period prior to Closing; or (c) approach directly or indirectly
any employee (billable or staff) without regard to location for the purpose of
attempting to or actually soliciting or hiring that employee from its/his
account or the account of another.
16.3 It is recognized by Seller and Stockholder that an
action for damages may not be an adequate remedy for Purchaser in the event of
the breach of any of the negative covenants contained in this Agreement, and
therefore, it is agreed that in addition to any other rights Purchaser may have
in the event of a breach of this Agreement, Purchaser shall have the right to
judicial enforcement of said covenants by way of injunction, restraining order
or any other similar equitable relief. If any portion of the foregoing covenants
is invalid or unenforceable due to area or time, such fact shall not affect the
validity or enforceability of the remaining portions or prevent enforcement of
restrictions to the extent a court of competent jurisdiction may consider
reasonable. The parties agree that in any event said restrictions shall be
enforced to the maximum extent permitted by law.
16.4 The time period of the negative covenant shall be
extended for a period of time equal to that time period utilized during the
pendency of any action for enforcement
16.5 Seller will deliver negative covenant agreements in the
form annexed as Exhibit "AA" for those employees designated by Purchaser at
least ten days prior to Closing.
ARTICLE 17
NO BROKERS
17.1 Each party represents and warrants to the other that
there are no claims for brokerage commissions or finders' fees in connection
with the transactions contemplated hereby with the exception of Marc D.
Freedman. Marc D. Freedman will be paid by Purchaser in accordance with a
separate agreement by and among Marc D. Freedman, the Rashkin Companies, S.
Rashkin, R. Rashkin and the Purchaser.
ARTICLE 18
FEES AND EXPENSES
18.1 Except as herein otherwise provided, each of the parties
hereto shall pay its own legal and accounting charges and other expenses
incident to the execution of this Agreement and the consummation of the
transactions contemplated hereby.
ARTICLE 19
MISCELLANEOUS
19.1 This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. All covenants and
agreements made by or on behalf of any of the parties hereto shall be binding
upon and inure to the benefit of their respective successors and assigns, unless
otherwise specifically set forth herein. The terms and provisions of this
Agreement may not be modified or amended, except in writing signed by all
parties hereto. No representations, warranties, or covenants, express or
implied, have been made by any party to this Agreement in connection with the
subject matter hereof, except as expressly set forth in this Agreement and the
exhibits hereto. The headings in this Agreement are for the convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
19.2 No terms and provisions hereof, including, without
limitation, the terms and provisions contained in this sentence, shall be
waived, modified or altered so as to impose any additional obligations or
liability or grant any additional right or remedy, and no custom, payment, act,
knowledge, extension of time, favor or indulgence, gratuitous or otherwise, or
words or silence at any time, shall impose any additional obligation or
liability or grant any additional right or remedy or be deemed a waiver or
release of any obligation, liability, right or remedy except as set forth in a
written instrument properly executed and delivered by the party sought to be
charged, expressly stating that it is, and the extent to which it is, intended
to be so effective. No assent, express or implied, by either party, or waiver by
either party, to or of any breach of any term or provision of this Agreement or
of the exhibits or schedules shall be deemed to be an assent or waiver to or of
such or any succeeding breach of the same or any other such term or provision.
19.3 The captions of this Agreement are for convenience and reference only, and
in no way define, describe, extend or limit the scope or intent of this
Agreement or the intent of any provisions hereof.
19.4 Seller agrees that it will, at any time before and after
the Closing, execute and deliver all additional documents, and do any other acts
or things that may be reasonably requested by Purchaser in order to further
perfect Purchaser's rights and interests contemplated hereunder and that they
will aid in the prosecution, defense or other litigation with third persons of
any rights arising from this Agreement, all without further consideration.
19.5 Jurisdiction. This Agreement shall be governed by laws
of the State of New York. Any judicial proceeding brought against any of the
parties to this Agreement on any dispute arising out of this Agreement or any
matter related hereto shall be brought in the courts of the State of New York or
the State of Arizona or in the United States District Court for the Eastern
District of New York, District of Arizona (or the Bankruptcy Courts), and, by
execution and delivery of this Agreement, each of the parties to this Agreement
accepts for itself or himself the process in any action or proceeding by the
mailing of copies of such process to such party at its or his address as set
forth in Section 19.7, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement Each party hereto irrevocably
waives to the fullest extent permitted by law any objection that it or her may
nor or hereafter have to the laying of the venue of any judicial proceeding
brought in such courts and any claim that any such judicial proceeding has been
brought in an inconvenient forum. The foregoing consent to jurisdiction shall
not constitute general consent to service of process in the State of New York or
the State of Arizona for any purpose except as provided above and shall not be
deemed to confer rights on any person other than the respective parties to this
Agreement. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
UNDER THIS AGREEMENT.
19.6 Captions. The Article and Section captions used herein
are for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
19.7 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to any
other party shall be in writing and shall be deemed to have been given (a) upon
personal delivery, if delivered by hand, (b) three days after the date of
sending such notice by certified mail, return receipt requested, or (c) the next
business day if sent by facsimile transmission or by an over night courier
service, and in each case of mailing, postage prepaid and at the respective
addresses or numbers set forth below: To Seller and Stockholder: Raphael Rashkin
117 Harbor Lane West Bayshore, NY 11706
With a copy to: David E. Manch, Esq.
Lewis and Roca
40 N. Central Avenue
Phoenix, Arizona 85004
Facsimile 602-262-5747
To Purchaser: COMFORCE Technical Services, Inc.
2001 Marcus Avenue
Lake Success, New York 11042
Attn: President
Facsimile 516/352-3362
With a copy to: David J. Hirsch, Esq.
Doepken Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
Facsimile 412-355-2609
19.8 Parties in Interest. This Agreement may not be transferred,
assigned, pledged or hypothecated by either Seller or Purchaser other than by
operation of law or with the prior written consent of the other party, and any
purported transfer, assignment, pledge or hypothecation in violation of this
Section shall be void. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective administrators,
successors and permitted assigns. Notwithstanding the foregoing the Purchaser
may assign its rights and obligations hereunder to one or more affiliate or
subsidiary companies whether now or hereinafter formed upon notice to Seller if
Seller's rights would not be diminished thereby.
19.9 Severability. In the event any provision of this Agreement
is found to be void and unenforceable by a court of competent jurisdiction or
arbitration panel, the remaining provisions of this Agreement shall nevertheless
be binding upon the parties with the same effect as though the void or
unenforceable part had been severed and deleted.
19.10 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which taken together shall constitute one instrument.
19.11 Entire Agreement. This Agreement, including the other
documents referred to herein, contains the entire understanding of the parties
hereto with respect to the purchase of the assets under this Agreement and
supersedes all other prior agreements, correspondence, conversation,
negotiations and understandings between the parties with respect to such subject
matter except as otherwise incorporated herein.
19.12 Amendments. This Agreement may not be changed orally, but
only by an agreement in writing signed by all of the parties hereto, and no
waiver of compliance with any provision or condition hereof and no consent
provided for herein shall be effective unless evidenced by an instrument in
writing duly executed by the party hereto seeking to be charged with such waiver
or consent.
19.13 Third Party Beneficiaries. Each party hereto intends
that this agreement shall not benefit or create any right or cause of action in
or on behalf of any person other than the parties hereto and their respective
successors and assigns as permitted under Section 19.8.
19.14 Gender. As used in this Agreement, any gender includes
a reference to all other genders and the singular includes a reference to the
plural and vice versa.
ARTICLE 20
EFFECT OF CLOSING
20.1 The terms of this Agreement shall survive the Closing
and shall not become merged therein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
ATTEST: RRA, INC.
_________________________ By: ___________________________
Title: President
COMFORCE CORPORATION
By ____________________________
Title: ________________________
ATTEST: COMFORCE TECHNICAL
SERVICES, INC.
_________________________ By:____________________________
Title:_________________________
_____________________________
Stanley Rashkin, individually
_____________________________
Raphael Rashkin, individually
EXHIBIT 10.4
May 6, 1996
Raphael Rashkin
RRA, Inc.
1858 E. Southern Avenue
Tempe, AZ 85282
Re: Asset Purchase Agreement between RRA, Inc.
and Comforce Technical Services, Inc.
Dear Ray:
This letter shall serve to confirm our agreement that Section 2.1(b) of
the Asset Purchase Agreement (the "RRA Agreement") between RRA, Inc. ("RRA") and
Comforce Technical Services, Inc. ("CTS") is amended to provide that the amount
of the contingency payout that may be paid for each of the three annual periods
described in Section 2.1(b) of the RRA Agreement shall be $83,333.50 subject to
reduction by the Allocated Amount of the Advance Payment as described in the RRA
Agreement. In addition to any Contingency Payout, CTS and Comforce Corporation
are required to pay RRA under Section 2.1(b) of the RRA Agreement, CTS and
Comforce Corporation shall pay as additional purchase price to RRA under the RRA
Agreement the amount of $83,333.50 on the first, second and third anniversary of
the Closing Date under the RRA Agreement. In consideration of the foregoing,
Raphael Rashkin, as the sole stockholder of RRA, hereby agrees that the number
of options to be issued to him at the price of $7 3/8 at the closing shall be
12,500 and he waives any and all rights he may have to receive any additional
options to purchase stock of COMFORCE Corporation. All of the other terms and
conditions of the RRA Agreement shall remain the same.
Very truly yours,
Comforce Technical Services, Inc.
By:________________________
Comforce Corporation
By:________________________
Accepted and agreed to and intending
to be legally bound hereby this 6th day
of May, 1996
RRA, Inc.
By:_______________________
_____________________________
Raphael Rashkin (individually)
EXHIBIT 10.5
April 19, 1996
VIA FACSIMILE
Raphael Rashkin
RRA, Inc.
17 Conklin Street, Suite 2B
Farmingdale, NY 11735
Re: Acquisition by Comforce Technical Services, Inc. ("CTS") and CTS
Acquisition Co. I ("Acquisition Co.") of the assets of Datatech
Technical Services, Inc. ("Datatech") and RRA, Inc. ("RRA") and
the stock of Project Staffing Support Team, Inc. ("PSST")
Dear Ray:
This letter sets forth the agreement of CTS and Acquisition Co. to wire
to Marc D. Freedman, to be held by him in escrow, the amount of $100,000 as an
advance payment of the Contingent Payout described in Section 2.1(b) of the
Datatech Asset Purchase Agreement, the PSST Stock Purchase Agreement and the RRA
Asset Purchase Agreement (collectively, the "Agreements"), to be released by Mr.
Freedman and paid to RRA, Datatech and the Stockholder of PSST upon the
execution by CTS, Acquisition Co., Datatech, PSST and its stockholder and RRA of
the Agreements. In the event the closing does not occur for any reason on or
before May 27, 1996, CTS and Acquisition Co. shall have the option to pay an
additional Advance Payment of $100,000 to extend the date of closing to June 30,
1996. In the event the closing does not occur for any reason on or prior to June
30, 1996, RRA, Datatech and PSST shall be entitled to keep the Advance Payments.
Notwithstanding the foregoing, in the event CTS and Acquisition Co. are ready,
willing and able to close the transactions contemplated under the Agreements on
June 30, 1996 and RRA, Datatech and PSST elect not to close because of Section
12.1 (a) (and the third party action contemplated therein is not brought by an
Affilitate (as defined in the Agreements) of any party to the Agreements), 12.1
(e) or 12.1 (i), the Advance Payments in the aggregate of $200,000 shall be
refunded to CTS and Acquisition Co. on July 1, 1996. One third of the Advance
Payments paid to RRA, Datatech and the Stockholder of PSST shall be offset
against the Contingent Payout due for each of the periods, ending December 31,
1996 , 1997 and 1998, if any.
Notwithstanding anything herein, CTS, Acquisition Co., Datatech, PSST
and RRA agree to work diligently in good faith towards a closing under the
Agreements as soon as possible, and the parties agree to begin the process of
obtaining the necessary consent to the assignment of contracts on Monday, April
22, 1996.
Very truly yours,
Comforce Technical Services, Inc.
By:________________________
CTS Acquisition Co. I
By: _______________________
Accepted and agreed to and intending to be legally bound hereby this 19th day of
April, 1996.
Datatech Technical Services, Inc.
By:________________________
Project Staffing Support Team, Inc.
By:_________________________
RRA, Inc.
By:_________________________
EXHIBIT 11.1
COMFORCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
AND EQUIVALENT SHARE OF COMMON STOCK
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
Line 1996 1995
---------------- ----------------
AVERAGE SHARES OUTSTANDING
<S> <C> <C> <C>
1 Weighted average number of shares of common stock
outstanding during the period 9,310 3,203
2 Net additional shares assuming stock options and warrants
exercised and proceeds used to purchase treasury shares 1,574 528
3 Weighted average number of shares and equivalent shares
---------------- ----------------
of common stock outstanding during the period 10,884 3,731
================ ================
EARNINGS (LOSS)
4 Earnings (loss) before extraordinary credit $100 ($250)
---------------- ----------------
5 Amount for per share computation $100 ($250)
================ ================
6 Net earnings (loss) $100 $6,407
---------------- ----------------
7 Amount for per share computation $100 $6,407
================ ================
PER SHARE AMOUNTS
Earnings (loss) before extraordinary credit
(line 5 / line 3) $0.01 ($0.07)
================ ================
Net Earnings
(line 7 / line 3) $0.01 $1.72
================ ================
</TABLE>
Earnings (loss) per share is computed by dividing net earnings (loss), less
preferred stock dividends, by the weighted average number of shares of common
stock and common stock equivalents (stock options and warrants), unless
anti-dilutive, outstanding during the period. Fully diluted earnings (loss) per
share is not presented since the result is equivalent to primary earnings (loss)
per share.