SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-11876
-------
Uniforce Services, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-1996648
- -------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
415 Crossways Park Drive, Woodbury, NY 11797
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 437-3300
------------------------------
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 .
---------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practical date. 3,016,543 (as of August 1, 1996).
---------
<PAGE>
UNIFORCE SERVICES, INC.
INDEX
Page No.
Part I Financial Information: --------
- -----------------------------
Item 1. Consolidated Condensed Financial Statements
Consolidated condensed statements of earnings -
three months and six months ended
June 30, 1996 and 1995 (unaudited) 1
Consolidated condensed balance sheets -
June 30, 1996 (unaudited) and December
31, 1995 2
Consolidated condensed statements of cash flows -
six months ended June 30, 1996 and 1995
(unaudited) 3
Notes to consolidated condensed financial
statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II Other Information:
- --------------------------
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales of supplemental
staffing services $32,113,435 $30,444,171 $62,876,763 $59,638,872
Service revenues and fees 1,932,960 1,704,764 3,648,965 3,193,113
----------- ----------- ----------- -----------
Total revenues 34,046,395 32,148,935 66,525,728 62,831,985
----------- ----------- ----------- -----------
Costs and expenses:
Cost of supplemental
staffing services 24,922,410 23,695,693 49,035,777 46,403,540
Licensees' share of gross
margin 1,900,934 2,349,617 3,711,309 4,569,090
General and administrative 4,838,423 4,393,510 9,689,771 8,872,723
Depreciation & amortization 261,197 236,093 472,981 466,335
----------- ----------- ----------- ----------
Total costs and expenses 31,922,964 30,674,913 62,909,838 60,311,688
----------- ----------- ----------- ----------
Earnings from operations 2,123,431 1,474,022 3,615,890 2,520,297
Other income (expense):
Interest - net (536,629) (165,170) (972,216) (249,295)
Other - net 15,740 25,590 17,696 34,433
----------- ----------- ----------- ----------
Earnings before provision for
income taxes 1,602,542 1,334,442 2,661,370 2,305,435
Provision for income taxes 609,000 506,000 1,011,000 874,000
----------- ----------- ----------- ---------
NET EARNINGS $ 993,542 $ 828,442 $ 1,650,370 $ 1,431,435
=========== =========== =========== ===========
Weighted average number
of shares outstanding 3,242,548 4,301,178 3,297,943 4,365,416
NET EARNINGS PER SHARE $ .31 $ .19 $ .50 $ .33
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
1
<PAGE>
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
Current assets:
- ---------------
Cash and cash equivalents $ 2,044,775 $ 6,444,859
Accounts receivable - net 15,756,313 14,827,862
Funding and service fees
receivable - net 22,861,047 20,918,753
Current maturities of notes
receivable from licensees - net 104,695 132,258
Prepaid expenses and other
current assets 934,332 1,270,268
Deferred income taxes 347,149 347,149
----------- -----------
Total current assets 42,048,311 43,941,149
----------- -----------
Notes receivable from licensees - net 144,579 182,642
Fixed assets - net 3,443,112 2,125,413
Deferred costs and other assets - net 1,754,013 821,244
Cost in excess of fair value of net
assets acquired 6,552,631 3,525,741
----------- -----------
$53,942,646 $50,596,189
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
- --------------------
Loan payable $ 875,000 $ 750,000
Payroll and related taxes payable 7,492,176 7,540,947
Payable to licensees and clients 1,850,404 2,025,563
Income taxes payable 163,481 351,690
Accrued expenses and
other liabilities 3,255,177 4,092,058
----------- -----------
Total current liabilities 13,636,238 14,760,258
----------- -----------
Loan payable - non-current 27,166,700 11,250,000
Capital lease obligation - non-current 829,117 426,109
Stockholders' equity:
- ---------------------
Common stock $.01 par value 51,008 49,912
Additional paid-in capital 8,751,843 7,789,598
Retained earnings 25,458,334 23,990,043
----------- -----------
34,261,185 31,829,553
Treasury stock, at cost, 2,084,245
shares in 1996 and 829,500
shares in 1995 (21,950,594) (7,669,731)
----------- -----------
Total stockholders' equity 12,310,591 24,159,822
----------- -----------
$53,942,646 $50,596,189
=========== ===========
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1996 1995
------------ ------------
Cash flows from operating activities:
Net earnings $ 1,650,370 $ 1,431,435
Adjustments to reconcile net
earnings to net cash provided (used)
by operating activities:
Depreciation and amortization 472,981 466,335
(Increase) in receivables
and prepaid expenses (1,686,800) (7,897,025)
Stock option compensation expense 9,000 9,000
(Decrease) increase in liabilities (1,652,027) 686,922
------------ ------------
Net cash (used) by operating activities (1,206,476) (5,303,333)
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets (516,602) (628,443)
(Increase) decrease in deferred costs
and other investments (509,297) 13,311
Net assets acquired from Montare (4,618,037) --
Decrease in notes receivable
from licensees 65,626 157,760
------------ ------------
Net cash (used) by investing activities (5,578,310) (457,372)
------------ ------------
Cash flows from financing activities:
Principal payments on capital lease
obligations (148,397) --
Increase in loan payable 16,041,700 4,000,000
Cash dividends paid (182,079) (272,174)
Purchase of treasury stock (14,280,863) (2,087,741)
Proceeds from issuance of
common stock 954,341 233,750
------------ ------------
Net cash provided by financing
activities 2,384,702 1,873,835
------------ ------------
Net (decrease) in cash and cash
equivalents (4,400,084) (3,886,870)
Cash and cash equivalents at
beginning of period 6,444,859 7,298,823
------------ ------------
Cash and cash equivalents at
end of period $ 2,044,775 $ 3,411,953
============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 902,105 $ 273,016
------------ ------------
Income taxes $ 1,019,962 $ 669,087
------------ ------------
Non-cash financing activities:
During 1996, the Company entered into capital leases in the amount of
$551,405.
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
UNIFORCE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of
Uniforce Services, Inc. and its wholly-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
2. Consolidated condensed financial statements
-------------------------------------------
The consolidated condensed financial statements, as shown in
the accompanying index, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at June 30, 1996, and for all periods presented have
been made.
Certain information and footnote disclosures, normally
included in financial statements prepared in accordance with generally accepted
accounting principles, have been condensed, reclassified or omitted. It is
suggested that these be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's December 31, 1995
financial statements. The results of operations for the period ended June 30,
1996 are not necessarily indicative of the operating results which may be
achieved for the full year.
Tax accruals have been made based on estimated effective
annual tax rates for the periods presented.
3. Acquisition
-----------
On May 17, 1996, the Company acquired the assets of Montare
International, Inc. ("Montare"), a provider of IT (Information Technology)
contract professionals. The purchase price was $3,600,000, in cash. In addition,
the Company acquired certain accounts receivable for $845,486. The purchase
price and accounts receivable acquired were financed through borrowings
available under the Company's credit facility.
This acquisition has been accounted for as a purchase and
accordingly, the purchase price has been allocated to identifiable assets based
on their estimated fair values as of the date of acquisition; $625,633 was
allocated to such assets. The excess of the consideration paid, including the
direct costs of the acquisition, over the estimated fair value of net assets
acquired amounted to $3,147,917 and has been recorded as goodwill and will be
amortized over 20 years on the straight-line basis. The operating results of
Montare have been included with those of the Company from the date of
acquisition.
4
<PAGE>
4. Contingencies
-------------
In April 1994, various insurance carriers and their
not-for-profit trade association filed an action against the Company, certain
officers and various other parties; in May 1996, the plaintiffs filed their
Third Amended Complaint. The plaintiffs allege causes of action for breach of
contracts of insurance, negligence, fraud, conspiracy to defraud and fraudulent
inducement. The Company has filed answers, affirmative defenses and
counterclaims directed to the Third Amended Complaint. The Company and its
subsidiaries have filed actions against the trade association alleging violation
of the antitrust laws and against various prior workers' compensation carriers
alleging claims mismanagement. The plaintiffs were granted summary judgment in
the antitrust action and such grant was affirmed upon appeal. The action
alleging claims mismanagement is in the discovery stage. Management believes
that the ultimate outcome of these matters will not have a material adverse
effect upon the financial position of the Company.
In January 1996, various vendors of training films filed an
action against the Company, alleging that the Company improperly used and/or
copied plaintiffs' tapes. Motions have been filed to have the plaintiffs' claims
dismissed and/or severed. Management is engaged in settlement discussions. If
the case is not settled, management intends to vigorously defend the claims and
believes that the claims, even if resolved in plaintiffs' favor, will not have a
material adverse effect upon the financial position of the Company.
5. Tender offer
------------
On December 11, 1995, the Company made an offer to purchase
for cash up to 1,250,000 shares of its Common Stock at $11.25 net per share (the
"Offer"). The 1,250,000 shares that the Company offered to purchase represented
approximately 30% of the Shares outstanding as of December 11, 1995. In January
1996, the Offer was successfully completed.
The total amount required to purchase the 1,250,000 shares was
$14,062,500, exclusive of related fees and other expenses. The purchase price
and related expenses were funded with available borrowings under the Company's
credit facility.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Total revenues increased by $1,897,460, or 5.9%, from
$32,148,935 in the second quarter of 1995 to $34,046,395 in the second quarter
of 1996. For the first six months, total revenues increased by $3,693,743 or
5.9% from $62,831,985 in 1995 to $66,525,728 in 1996.
Sales of supplemental staffing services increased by
$1,669,264 and $3,237,891, respectively, for the second quarter and first six
months of 1996 as compared to 1995. Sales of two of the Company's subsidiaries,
PrO Unlimited(R), Inc. and Brannon & Tully/ Uniforce Information Services(R)
continued to increase during the second quarter of 1996. PrO Unlimited sales
increased by $3,435,437 or 58.6% and $6,761,128 or 61.1%, respectively, for the
second quarter and first six months of 1996 as compared to 1995. Brannon &
Tully/Uniforce Information Services sales increased by $971,265 or 15.9% and
$2,946,724 or 25.0%, respectively, for the second quarter and first six months
of 1996 as compared to 1995. Further contributing to the increase in sales was
the Company's acquisition in May 1996 of certain assets of Montare, a provider
of information technology ("IT") contract professionals. This acquisition
contributed $883,183 of sales in the second quarter of 1996 and has had a
favorable impact on the Company's results of operations. These increases were
partially offset by lower sales by licensees, which were due to a reduction in
the number of licensed offices in the second quarter and first six months of
1996 as compared to the second quarter and first six months of 1995.
The Company's strategy is to expand through the development of
higher margin professional services such as IT, technical, automated office and
other professional support services as well as its PrO Unlimited subsidiary,
while continuing to reduce the percentage of its sales derived from light
industrial assignments. In addition, the Company intends to continue to pursue
acquisitions of established independent supplemental staffing service companies
that offer specialty services.
Service revenues and fees increased by 13.4% from $1,704,764
in the second quarter of 1995 to $1,932,960 in the second quarter of 1996 and
increased 14.3% from $3,193,113 for the first six months of 1995 to $3,648,965
for the first six months of 1996. This reflects increased revenues and fees
generated by existing and new clients of Temporary Help Industry Servicing
Company, Inc. ("THISCO(R)"), one of the Company's subsidiaries. The Company
intends to continue to expand this portion of its business through THISCO and
Brentwood Service Group(R), Inc. ("BSG"). In addition, system-wide sales, which
include sales of associated offices serviced by THISCO and BSG, increased
$9,710,283 or 12.9% from $75,154,458 in the second quarter of 1995 to
$84,864,741 in the second quarter of 1996. In the first six months, system-wide
sales increased by $20,893,186 or 14.7% from $142,287,984 in 1995 to
$163,181,170 in 1996.
6
<PAGE>
Cost of supplemental staffing services was 77.6% of sales of
supplemental staffing services in the second quarter of 1996 compared to 77.8%
in the second quarter of 1995. For the first six months, cost of supplemental
staffing services was 78.0% of sales of supplemental staffing services in 1996
and 77.8% in 1995.
Licensees' share of gross margin is principally based upon a
percentage of the gross margin generated from sales by licensed offices. The
gross margin from sales of supplemental staffing services amounted to $7,191,025
and $6,748,478 for the second quarter of 1996 and 1995, respectively. For the
first six months, gross margin from such sales amounted to $13,840,986 in 1996
and $13,235,332 in 1995. Licensees' share of gross margin was 26.4% in the
second quarter of 1996 as compared to 34.8% for the second quarter 1995. For the
first six months, licensees' share of gross margin was 26.8% in 1996 and 34.5%
in 1995. The lower share as a percentage of total gross margin in 1996 is due to
lower licensee sales, increased sales of Brannon & Tully/Uniforce Information
Services and Montare for which there are no related licensee distributions and
to the increased sales of PrO Unlimited for which there are limited
distributions.
General and administrative expenses increased by $444,913 or
10.1% during the second quarter of 1996 as compared to the second quarter of
1995. For the first six months of 1996, general and administrative expenses
increased by $817,048 or 9.2% in 1996 compared to 1995. As a percentage of
revenues, general and administrative expenses were 14.2% and 13.7% for the
second quarter of 1996 compared to 1995, respectively, and 14.6% and 14.1% in
1996 and 1995 for the first six months periods. These increases resulted
principally from higher expenses in payroll and recruiting costs with respect to
permanent staff, the addition of Montare and increased professional fees related
to the litigation described in Note 4 to the consolidated condensed financial
statements.
Net interest expense increased by $371,459 during the second
quarter of 1996 as compared to the second quarter of 1995 and increased by
$722,921 for the first six months of 1996 compared to the first six months of
1995. The increase in interest expense for the 1996 periods compared to 1995 is
a direct result of increased borrowings used for the repurchase of 1,250,000
shares of the Company's common stock described in Note 5 to the consolidated
condensed financial statements and the acquisition of Montare described in Note
3 to the consolidated condensed financial statements.
As a result of the factors discussed above, net earnings
increased by 19.9% from $828,442 ($.19 per share) in the second quarter of 1995
to $993,542 ($.31 per share) in the second quarter of 1996. For the first six
months, net earnings increased by 15.3% from $1,431,435 ($.33 per share) in 1995
to $1,650,370 ($.50 per share) in 1996.
7
<PAGE>
FINANCIAL CONDITION
As of June 30, 1996, the Company's working capital decreased
to $28,412,073 as compared to $29,180,891 at December 31, 1995. This decrease
was due primarily to the continuing profitable operations of the Company being
more than offset by an increase in accounts receivable. In addition, cash was
further reduced by acquisitions of fixed assets, the payment of cash dividends,
the acquisition of Montare and the purchase of treasury stock which was largely
financed through the credit facility.
During the first six months of 1996, the Company paid
quarterly cash dividends on shares of its common stock at the quarterly rate of
$.03 per share ($182,079).
On December 8, 1995, the Company entered in an agreement with
a financial institution creating a three-year $35,000,000 credit facility (the
"Credit Facility"). The Credit Facility comprises a term loan in the amount of
$3,000,000 (the "Term Loan") to be paid in monthly installments of $62,500 in
1996, $83,333 in 1997 and $104,167 in 1998, with the balance outstanding due on
December 1, 1998, and a $32,000,000 revolving credit facility (the "Revolving
Facility"), which expires on December 1, 1998. The Company may borrow against
the Revolving Facility up to 85% of eligible accounts receivable and eligible
service and funding fees receivable. The Term Loan bears interest at the
Company's election at either the lender's floating base rate plus .25%, or LIBOR
(London Interbank Offered Rate) plus 2.25%. Borrowings under the Revolving
Facility bear interest at the Company's election at either the lender's floating
base rate, or LIBOR plus 2.125%. Borrowings under the Credit Facility are
secured by a first priority security interest in all owned and after-acquired
real and personal property of the Company.
At June 30, 1996, the Company had outstanding borrowings of
$2,625,000 under the Term Loan bearing interest at an average rate of 7.96% and
$25,416,700 of borrowings under the Revolving Facility bearing interest at an
average rate of 7.81%.
The Credit Facility contains a variety of affirmative and
negative covenants of types customary in an asset-based lending facility,
including those relating to reporting requirements, maintenance of records,
properties and corporate existence, compliance with laws, incurrence of other
indebtedness and liens, restrictions on certain payments and transactions and
extraordinary corporate events. The Credit Facility also contains financial
covenants relating to maintenance of levels of minimum tangible net worth,
EBITDA (earnings before interest, taxes, depreciation and amortization), net
income and fixed charge coverage and restricting the amount of capital
expenditures. In addition, the Credit Facility contains certain events of
default of types customary in an asset-based lending facility. Generally, if the
Credit Facility is terminated (i) during the first nine months of its term, a
fee of 1% of the amount thereof is payable, or (ii) during the succeeding nine
months of its term, a fee of .5% of the amount thereof is payable. The Company
was in compliance with all covenants at June 30, 1996.
8
<PAGE>
Prior to December 8, 1995, the Company had maintained with two
banks a working capital credit facility and a revolving credit and term loan
facility. Amounts outstanding under these facilities were repaid with borrowings
available under the Credit Facility.
In January 1996, the Company successfully completed its offer
to purchase 1,250,000 shares of its common stock at $11.25 net per share. The
total amount required to purchase such shares was $14,062,500, exclusive of
related fees and other expenses. The purchase price and related expenses were
funded with borrowings available under the Credit Facility.
As described elsewhere herein, on May 17, 1996, the Company
acquired the assets of Montare, a provider of IT contract professionals. The
purchase price was $3,600,000, in cash. The Company also acquired from Montare
certain accounts receivable for $845,486. The purchase price and accounts
receivable were financed through borrowings available under the Credit Facility.
The Company moved its corporate headquarters in April 1996.
The cost of the move, including purchases of fixed assets, was approximately
$750,000 and was financed from cash flow from operations and financing from the
Credit Facility. The Company believes that internally generated cash flow and
funding from the Credit Facility will be adequate to meet its current operating
requirements for at least the next twelve months. The Company intends to expand
its business through the further development of higher margin professional
services as well as through PrO Unlimited, Montare and Brannon & Tully/Uniforce
Information Services. Additionally, the Company continues to pursue expansion by
acquisition of established independent supplemental staffing service companies
that offer specialty services. The Company anticipates that internal expansion
will also be financed from its cash flow and available borrowings under the
Credit Facility. The magnitude of future acquisitions will determine whether
they can be financed in the same manner or whether additional external sources
of financing will be required. While the Company believes that such sources
would be available on terms satisfactory to it, there can be no assurance in
this regard.
In October 1995, the Financial Accounting Standards Board
(FASB) issued Statement No. 123, "Accounting for Stock-Based Compensation,"
which must be adopted by the Company in 1996. The Company has elected not to
implement the fair value based accounting method for employee stock options, but
has elected to disclose commencing in its 1996 Form 10-K the pro-forma net
income and earnings per share as if such method had been used to account for
stock-based compensation cost as described in Statement No. 123.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to ITEM 3. LEGAL PROCEEDINGS of the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, and
to the description therein of a civil action commenced in the Circuit Court for
the Fifteenth Judicial Circuit, Palm Beach County, Florida by National Council
on Compensation Insurance, Inc., National Workers' Compensation Reinsurance
Pool, Insurance Company of North America, The Travelers Insurance Company and
Liberty Mutual Insurance Company.
In May 1996 the plaintiffs filed a Third Amended Complaint,
adding as a plaintiff, The Aetna Casualty and Surety Company. The plaintiffs
also added several defendants unrelated to the Company and two licensees of
Uniforce and discontinued the action against Gordon Robinett, the Company's
Director and former Chief Financial Officer and two other licensees. Harry
Maccarrone, a Director of the Company and its current Chief Financial Officer,
was not named as a defendant because of his motion to dismiss the earlier
complaint in the action for lack of personal jurisdiction had been granted by
the Court. This decision has been appealed by the plaintiffs.
The plaintiffs allege causes of action for breach of contracts
of insurance, negligence, fraud, conspiracy to defraud and fraudulent
inducement. The plaintiffs allege that by virtue of the manner in which the
Company conducted its business, the Company secured workers' compensation
coverage for its temporary employees at premiums below those that should have
been paid. The plaintiffs seek an audit, accounting and damages in an
unspecified amount not less than $11,500,000. Defendants have filed answers,
affirmative defenses and counterclaims directed to the Third Amended Complaint.
Discovery is on-going and no trial date has been set.
Reference is also made to ITEM 3. LEGAL PROCEEDINGS of such
Annual Report on Form 10-K for a description of a civil action filed by the
Company in the United States District Court for the Southern District of
Florida, West Palm Beach Division, against the National Council on Compensation
Insurance, Inc., the National Workers' Compensation Reinsurance Pool and others
alleging violations of the antitrust laws, in which action such defendants had
been granted summary judgment. On July 18, 1996, the United States Court of
Appeals, Eleventh Circuit, affirmed such grant.
Management continues to believe that the ultimate outcome of
these actions will not have a material adverse effect upon the financial
position of the Company.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on
June 11, 1996. Votes were cast with respect to the reelection of the six
incumbent Directors as follows:
Number of Shares
of Common Stock
Number of Shares as to Which
of Common Stock Authority to
Nominees Voted in Favor Vote was Withheld
- -------- -------------- -----------------
John Fanning 2,766,856 4,859
Rosemary Maniscalco 2,766,659 5,056
Harry V. Maccarrone 2,766,959 4,756
John H. Brinckerhoff III 2,766,656 5,059
Gordon Robinett 2,767,156 4,559
Joseph A. Driscoll 2,766,656 5,059
The Shareholders also approved the grant of stock options to
Ms. Maniscalco and Mr. Maccarrone, two executive officers of the Company. The
proposal received the affirmative vote of 2,695,561 shares and 41,559 shares
were voted against. The holders of 25,264 shares abstained from voting and there
were 9,331 broker non-votes.
In addition, the Shareholders ratified the appointment of KPMG
Peat Marwick LLP as independent auditors for the Company for the year ending
December 31, 1996 by a vote of 2,760,767 shares in favor and 2,962 against. The
holders of 7,986 shares abstained from voting.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2 Asset Purchase Agreement, dated May 10, 1996, by
and among Uniforce Information Services of Texas,
Inc. ("UIS-TX"), Montare International, Inc.
("Montare"), Joseph Armitage ("Armitage"), David
Mulvaney ("Mulvaney") and Douglas Staley ("Staley")
10.1 Receivables Purchase Agreement, dated May 17, 1996,
by and among UIS-TX, Montare, Armitage, Mulvaney
and Staley
10.2 First Amendment to Loan and Security Agreement and
Other Loan Documents, dated as of March 27, 1996,
by and among Brentwood Service Group, Inc.
("Brentwood"), Computer Consultants Funding &
Support, Inc. ("CCFS"), LabForce of America, Inc.
("LabForce"), PrO Unlimited, Inc. ("PrO"),
Temporary Help Industry Servicing Company, Inc.
("THISCO"), Uniforce MIS Services of Georgia, Inc.
("UMIS-GA"), Uniforce Staffing Services, Inc.
("USSI"), Professional Staffing Funding & Support,
Inc. ("PSFS"), Uniforce Services, Inc.
("Holdings"), Heller Financial, Inc. (in its
individual capacity, "Heller"), for itself, as
Lender, and as Agent for Lenders ("Agent"), and
United Jersey Bank, as a Lender ("UJB")
10.3 Second Amendment to Loan and Security Agreement and
Consent, dated as of May 17, 1996, by and among
Brentwood, CCFS, LabForce, PrO, THISCO, UMIS-GA,
USSI, PSFS, UIS-TX, Holdings, Heller, Agent, UJB,
Brannon & Tully, Inc., E.O. Operations Corp., E.O.
Servicing Co., Inc., Staffing Industry Funding &
Support, Inc., Tempfunds International, Inc.,
THISCO of Canada, Inc., Uniforce Information
Services, Inc., Uniforce Medical Office Support,
Inc., Uniforce Payrolling Services, Inc., USI Inc.
of California, UTS of Delaware, Inc. and UTS Corp.
of Minnesota
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended June 30, 1996.
12
<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 thereunto duly authorized.
Dated: August 13, 1996 UNIFORCE SERVICES, INC.
By: /s/ John Fanning
-------------------------------------
John Fanning, Chairman of the Board
and President
By: /s/ Harry Maccarrone
-------------------------------------
Harry Maccarrone, V.P. of Finance,
Principal Financial and Accounting
Officer
13
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
UNIFORCE INFORMATION SERVICES OF TEXAS, INC.
MONTARE INTERNATIONAL, INC.
JOSEPH ARMITAGE
DAVID MULVANEY
DOUGLAS STALEY
May 10, 1996
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
----
ARTICLE I. ASSETS TO BE PURCHASED............................................1
Section 1.1. Description of Assets................................1
Section 1.2. Non-Assignment of Certain Property...................3
ARTICLE II. ASSUMPTION OF OBLIGATIONS........................................4
Section 2.1. Assumption of Certain Liabilities....................4
Section 2.2. Liabilities Not Assumed..............................4
ARTICLE III. PURCHASE PRICE..................................................4
Section 3.1. Consideration........................................4
Section 3.2. Purchase Price Allocation............................5
Section 3.3. Prorations...........................................5
ARTICLE IV. REPRESENTATIONS AND WARRANTIES...................................5
Section 4.1..........................................................5
(a) Corporate Existence................................5
(b) Authorization; Validity............................5
(c) Litigation.........................................6
(d) No Breach of Statute or Contract...................6
(e) Brokers............................................6
Section 4.2..........................................................6
(a) Corporate Existence................................7
(b) Authorization; Validity............................7
(c) No Breach of Statute or Contract...................7
(d) Subsidiaries.......................................8
(e) Capitalization.....................................8
(f) Financial Statements...............................8
(g) Absence of Certain Changes in Events...............9
(h) Liabilities.......................................10
(i) Taxes.............................................10
(j) Proprietary Rights................................11
(k) Insurance.........................................12
(l) Litigation........................................12
(m) Compliance with Laws..............................12
(n) Brokers...........................................13
(o) Employee Benefit Plans............................13
(p) Labor Matters.....................................16
(q) Title to Properties...............................17
(r) Contracts and Commitments.........................17
(s) Accounts Receivable...............................18
(t) Books of Account; Records.........................19
(u) Credit Terms......................................19
(v) Complete Disclosure...............................19
Section 4.3.........................................................19
(a) Corporate Existence...............................19
(b) Authorization; Validity...........................19
(c) No Breach of Statute or Contract..................20
(d) Capitalization....................................20
-i-
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS (cont'd)
Page
----
(e) Absence of Certain Changes in Events...............21
(f) Taxes..............................................21
(g) Litigation.........................................21
(h) Labor Matters......................................22
ARTICLE V. COVENANTS.........................................................22
Section 5.1. Covenant Against Disclosure..........................22
Section 5.2. Covenant Against Hiring..............................22
Section 5.3. Injunctive Relief....................................23
Section 5.4. Access to Records....................................23
Section 5.5. Conduct of Business Prior to Closing.................23
Section 5.6. Transition of Clients................................25
Section 5.7. Insurance............................................25
Section 5.8. Severability.........................................25
Section 5.9. Further Assurances...................................25
Section 5.10. Announcements........................................26
Section 5.11. Consents.............................................26
Section 5.12. Name Change..........................................26
ARTICLE VI. CLOSING..........................................................26
Section 6.1. Closing..............................................26
Section 6.2. Deliveries by Seller.................................26
Section 6.3. Deliveries by Buyer..................................28
ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS.............................29
Section 7.1. Conditions to Obligations of Buyer...................29
(a) Representations and Warranties.....................29
(b) Performance of Agreement...........................29
(c) No Adverse Proceeding..............................29
(d) Certificate........................................29
(e) Approval of Board of Directors and each of the
Shareholders.......................................29
(f) Audit..............................................29
(g) Due Diligence......................................29
(h) No Material Adverse Affect.........................30
(i) Operation of the Business..........................30
Section 7.2. Conditions to Obligations of Seller..................30
(a) Representations and Warranties.....................30
(b) Performance of Agreement...........................30
(c) No Adverse Proceeding..............................30
(d) Certificate........................................30
(e) Approval of Board of Directors.....................30
ARTICLE VIII. INDEMNIFICATION................................................31
Section 8.1. Survival of Representations, Warranties
and Agreements.......................................31
Section 8.2. Indemnification......................................31
Section 8.3. Limitations on Indemnification.......................33
-ii-
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS (cont'd)
Page
----
Section 8.4. Procedure for Indemnification with
Respect to Third-Party Claims.......................34
Section 8.5. Procedure For Indemnification with
Respect to Non-Third-Party Claims...................35
ARTICLE IX. CERTAIN SHAREHOLDER INDEMNIFICATION.............................35
Section 9.1. Survival of Representations, Warranties
and Agreements......................................35
Section 9.2. Indemnification.....................................36
Section 9.3. Limitations on Indemnification......................37
Section 9.4. Procedure for Indemnification with
Respect to Third-Party Claims.......................38
Section 9.5. Procedure For Indemnification with
Respect to Non-Third-Party Claims...................39
ARTICLE X. TERMINATION......................................................39
Section 10.1. Termination by Any Party Hereto.....................39
Section 10.2. Termination by Buyer................................40
ARTICLE XI. MISCELLANEOUS PROVISIONS........................................40
Section 11.1. Notices.............................................40
Section 11.2. Entire Agreement....................................41
Section 11.3. Binding Effect; Assignment..........................41
Section 11.4. Captions............................................41
Section 11.5. Expenses of Transaction.............................41
Section 11.6. Waiver; Consent.....................................42
Section 11.7. No Third Party Beneficiaries........................42
Section 11.8. Counterparts........................................42
Section 11.9. Gender..............................................42
Section 11.10. Remedies of Buyer...................................42
Section 11.11. Arbitration.........................................42
Section 11.12. Governing Law.......................................43
-iii-
<PAGE>
INDEX OF DEFINITIONS
Term Section
- ---- -------
Acquisition Proposal...................................................5.5(xv)
Additional Documents................................................8.2(a)(iv)
Armitage...............................................Introductory Paragraphs
Armitage Agreement......................................................6.2(l)
Assumption Agreement....................................................6.2(b)
Bill of Sale............................................................6.2(a)
Business...............................................Introductory Paragraphs
Buyer..................................................Introductory Paragraphs
Causes of Action........................................................1.1(j)
Closing....................................................................6.1
Closing Date...............................................................2.2
Code...............................................................4.2(o)(iii)
Contest Notice.............................................................8.5
Contracts...............................................................1.1(g)
Damages.................................................................8.2(a)
Employee Benefit Plans..................................................4.2(o)
Employees..................................................................1.1
Employment Agreement....................................................6.2(j)
Environmental Laws...................................................4.2(m)(i)
ERISA...................................................................4.2(o)
Estoppel Certificate....................................................6.2(n)
Financial Statements....................................................4.2(f)
Indemnifiable Claim(s)............................................8.2(a) & (b)
Indemnification Notice.....................................................8.4
Indemnified Party.......................................................8.3(d)
Material Adverse Effect..............................................4.2(g)(i)
Miscellaneous Assets....................................................1.1(i)
Mulvaney...............................................Introductory Paragraphs
Mulvaney Agreement......................................................6.2(k)
Non-Third Party Claim Indemnification Notice...............................8.5
Perkins.................................................................7.1(j)
Permits.................................................................1.1(d)
Personal Property.......................................................1.1(b)
Personal Property Leases................................................1.1(f)
Property...................................................................1.1
Proprietary Rights......................................................1.1(e)
Real Property Leases....................................................1.1(a)
Receivables.............................................................1.1(c)
Receivables Purchase Agreement..........................................1.1(c)
Seller.................................................Introductory Paragraphs
Seller Confidentiality and Non-Competition Agreement....................6.2(m)
Service............................................................4.2(o)(iii)
Shareholders...........................................Introductory Paragraphs
Staley.................................................Introductory Paragraphs
-iv-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
- -------
A.......................................................Allocation Certificate
B..............................Special Conveyance, Assignment and Bill of Sale
C........................................................ Assumption Agreement
D...............................Legal Opinion of Seller's and Staley's Counsel
E-1........................................Legal Opinion of Armitage's Counsel
E-2........................................Legal Opinion of Mulvaney's Counsel
F...............................................Receivables Purchase Agreement
G.........................................................Employment Agreement
H...........................................................Mulvaney Agreement
...........................................................Armitage Agreement
.........................Seller Confidentiality and Non-Competition Agreement
I.........................................................Estoppel Certificate
J.............................................Legal Opinion of Buyer's Counsel
-v-
<PAGE>
INDEX TO SCHEDULES
SCHEDULES TO ASSET PURCHASE AGREEMENT
1.1(a)....................................................Real Property Leases
1.1(b).......................................................Personal Property
1.1(d).................................................................Permits
1.1(e)......................................................Proprietary Rights
1.1(f)................................................Personal Property Leases
1.1(g)...............................................................Contracts
1.1(i)....................................................Miscellaneous Assets
1.1(j)........................................................Causes of Action
2.1.........................................................Retained Employees
4.1(c)..............................................................Litigation
4.2(b)...............................................Authorization or Validity
4.2(c)...........................................Breach of Statute or Contract
4.2(e)..........................................................Capitalization
4.2(f)....................................................Financial Statements
4.2(g).................................................Material Adverse Events
4.2(h).............................................................Liabilities
4.2(i)...................................................................Taxes
4.2(j)............................................................Encumbrances
4.2(k)...............................................................Insurance
4.2(l)..............................................................Litigation
4.2(m)....................................................Compliance with Laws
4.2(o)..................................................Employee Benefit Plans
4.2(p)...........................................................Labor Matters
4.2(q).....................................................Title to Properties
4.2(s).....................................................Accounts Receivable
4.2(u)............................................................Credit Terms
5.2.........................................................Excluded Employees
-vi-
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT dated May 10, 1996, is by and among Uniforce
Information Services of Texas, Inc., a New York corporation ("Buyer"), Montare
International, Inc., a Texas corporation ("Seller"), Joseph Armitage
("Armitage"), David Mulvaney ("Mulvaney") and Douglas Staley ("Staley," and,
together with Armitage and Mulvaney, referred to collectively as the
"Shareholders").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the temporary employment
business (hereinafter referred to as the "Business"); and
WHEREAS, the Shareholders own all of the issued and
outstanding capital stock of Seller; and
WHEREAS, Buyer desires to purchase and Seller desires to sell
substantially all of the operating assets of the Business upon the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein contained, Buyer, Seller and each of the Shareholders
hereby agree as follows:
ARTICLE I. ASSETS TO BE PURCHASED
SECTION 1.1. DESCRIPTION OF ASSETS. Upon the terms and subject
to the conditions set forth in this Agreement, at the Closing (as hereinafter
defined), Seller shall convey, sell, transfer, assign and deliver to Buyer, and
Buyer shall purchase from Seller, all right, title and interest of Seller at the
Closing in and to substantially all of the operating assets, properties, rights
(contractual or otherwise) and business of Seller that are owned by Seller and
are used in connection with the Business including, without limitation, those
set forth below:
(a) The leases of real property listed on Schedule 1.1(a) (1)
(the "Real Property Leases"), along with all appurtenant rights,
easements and privileges appertaining or relating thereto and
construction in progress, if any, and improvements relating to the real
property subject to such lease;
- ----------
(1) Each reference in this Agreement to an Exhibit or Schedule shall
mean an Exhibit or Schedule annexed to this Agreement and shall be
incorporated into this Agreement by such reference.
<PAGE>
(b) All machinery, equipment, tooling, parts, furniture,
supplies, and other tangible personal property used in conducting the
Business (the "Personal Property") including, without limitation, the
Personal Property listed on Schedule 1.1(b);
(c) All accounts receivable relating to or arising out of the
operation of the Business (the "Receivables") including, without
limitation, the Receivables listed on Schedule 2.1 of that certain
Receivables Purchase Agreement to be entered into by and among Buyer,
Seller and each of the Shareholders (the "Receivables Purchase
Agreement");
(d) All franchises, licenses, permits, consents,
authorizations, approvals and certificates of any regulatory,
administrative or other governmental agency or body used in conducting
the Business (to the extent the same are transferable) (the "Permits")
including, without limitation, the Permits listed on Schedule l.l(d);
(e) All patents, inventions, trade secrets, processes,
proprietary rights, proprietary knowledge, computer software,
trademarks, names, service marks, trade names, copyrights, symbols,
logos, franchises and permits used in conducting the Business and all
applications therefor, registrations thereof and licenses, sublicenses
or agreements in respect thereof, which Seller owns or has the right to
use or to which Seller is a party and all filings, registrations or
issuances of any of the foregoing with or by any federal, state, local
or foreign regulatory, administrative or governmental office
(collectively, the "Proprietary Rights") including, without limitation,
the Proprietary Rights listed on Schedule 1.1(e);
(f) All leases of equipment or other tangible personal
property used in conducting the Business and listed on Schedule 1.1(f)
(the "Personal Property Leases");
(g) All contracts, agreements, contract rights, license
agreements, franchise rights and agreements, purchase and sales orders,
quotations and executory commitments, instruments, third party
guaranties, indemnifications, arrangements, and understandings, whether
oral or written, to which Seller is a party (whether or not legally
bound thereby) and used in conducting the Business (other than
insurance policies) (the "Contracts") including, without limitation,
the Contracts listed on Schedule 1.1(g);
(h) All unbilled services and work in process relating to or
arising out of the operation of the Business;
(i) All security deposits, prepaid expenses and other
miscellaneous assets of the Business (the "Miscellaneous
-2-
<PAGE>
Assets") including, without limitation, the Miscellaneous
Assets listed on Schedule 1.1(i);
(j) All causes of action, judgments, claims or demands of
whatever kind or description relating to the Business which Seller has
or may have against any other person or entity other than the
Shareholders (the "Causes of Action") including, without limitation,
the Causes of Action listed on Schedule 1.1(j);
(k) All books of account, customer lists, client lists,
employee lists, files, papers, records and telephone numbers used in
conducting the Business; and
(l) All goodwill relating to the Business.
All references in this Agreement to "employees" when used with
respect to Seller shall mean its regular and contract employees. All of the
assets, properties, rights (contractual and otherwise) and business to be
conveyed, sold, transferred, assigned and delivered to Buyer pursuant to
subsection (a) through (l) of this Section 1.1 are hereinafter collectively
referred to as the "Property."
Notwithstanding the foregoing, there shall be excluded from
the assets, properties, rights (contractual and otherwise) and business of
Seller to be conveyed, sold, transferred, assigned and delivered to Buyer under
this Agreement (i) all cash and cash equivalents and investment securities, (ii)
all tax refunds paid or payable to Seller and (iii) all corporate minute books,
stock records, tax returns and supporting schedules, books of original financial
entry and internal accounting documents and records (all which shall be subject
to Buyer's right to inspect and copy).
SECTION 1.2. NON-ASSIGNMENT OF CERTAIN PROPERTY. To the extent
that the assignment hereunder of any of the Real Property Leases, Permits,
Personal Property Leases or Contracts shall require the consent of any other
party (or in the event that any of the same shall be nonassignable), neither
this Agreement nor any action taken pursuant to its provisions shall constitute
an assignment or an agreement to assign if such assignment or attempted
assignment would constitute a breach thereof or result in the loss or diminution
thereof; PROVIDED, HOWEVER, that in each such case, Seller shall use its good
faith efforts to obtain the consents of such other party to an assignment to
Buyer without being obligated to pay any fees or to make any other payments to
any party to obtain any such consents. If such consent is not obtained, Seller
shall cooperate with Buyer in any reasonable arrangement designed to provide for
Buyer the full benefits of any such Real Property Lease, Permit, Personal
Property Lease or Contract including, without limitation, enforcement, for the
account and benefit of Buyer, of any and all rights of Seller
-3-
<PAGE>
against any other person with respect to any such Real Property Lease, Permit,
Personal Property Lease or Contract; PROVIDED, HOWEVER, that all expenses
related thereto shall be borne by Buyer.
ARTICLE II. ASSUMPTION OF OBLIGATIONS
SECTION 2.1. ASSUMPTION OF CERTAIN LIABILITIES. Buyer shall
assume only those liabilities and obligations (i) arising under the Real
Property Leases, Permits, Personal Property Leases and the Contracts and (ii) in
respect of employees of Seller that are offered and accept employment by Buyer
following the Closing and are identified on Schedules 2.1 hereto (the "Retained
Employees"), but only to the extent that the liabilities and obligations set
forth in clauses (i) and (ii) above relate to periods commencing on or after the
date of the Closing (the "Closing Date"). The liabilities of Seller being
assumed by Buyer are hereinafter collectively referred to as the "Assumed
Liabilities."
SECTION 2.2. LIABILITIES NOT ASSUMED. With the exception of
the Assumed Liabilities, Buyer shall not by execution and performance of this
Agreement or otherwise, assume or otherwise be responsible for any liability or
obligation of any nature of Seller, whether relating to any of Seller's other
assets, operations, businesses or activities, or claims of such liability or
obligation, matured or unmatured, liquidated or unliquidated, fixed or
contingent, or known or unknown, whether arising out of occurrences prior to, at
or after the Closing Date including, without limitation (i) any liability in
respect of periods ending on or prior to the Closing Date for wages, salaries,
commissions, severance, pension or welfare benefits including, without
limitation, with respect to any 401(k) plans, accrued sick days or accrued
vacation days for employees or former employees of Seller, (ii) any liability in
respect of periods ending on or prior to the Closing Date for employee medical
benefits based upon claims arising prior to the Closing Date, whether or not
notice of such claim is received prior to or after Closing, (iii) any liability
for retroactive premium adjustments for workers' compensation and (iv) any
liability under any workers' compensation claims based upon claims in respect of
periods ending on or prior to the Closing Date, whether or not notice of such
claim is received prior to or after the Closing.
ARTICLE III. PURCHASE PRICE
SECTION 3.1. CONSIDERATION. Upon the terms and subject to the
conditions set forth in this Agreement, in consideration for the Property and
the covenants not to compete and with respect to confidentiality set forth in
each of the Mulvaney Agreement, Armitage Agreement and Seller Confidentiality
and Non-Competition Agreement (as each are hereinafter defined) and in full
payment therefor, at the Closing Buyer shall (a) assume the Assumed
-4-
<PAGE>
Liabilities as provided in Section 2.1 hereof and (b) pay to Seller in cash by
wire transfer of immediately available funds in accordance with Seller's written
instructions (i) the sum of Three Million Six Hundred Thousand Dollars
($3,600,000) and (ii) an amount determined in accordance with the Receivables
Purchase Agreement.
SECTION 3.2. PURCHASE PRICE ALLOCATION. Seller and Buyer
hereby agree that the aggregate purchase price for the Property shall be
allocated for purposes of this Agreement and for federal, state and local tax
purposes as set forth on an allocation certificate in the form attached hereto
as Exhibit A (the "Allocation Certificate") to be executed by Buyer and Seller
at the Closing. Buyer and Seller shall file all federal, state and local tax
returns, including Internal Revenue Form 8594, in accordance with the allocation
set forth in such Allocation Certificate.
SECTION 3.3. PRORATIONS. Seller and Buyer shall pro-rate
between them, as of the Closing Date, all sewer, water, gas, electrical and
similar utility charges applicable to the Business (collectively, the "Pro Rated
Items"). The Pro Rated Items shall be calculated by Seller and Buyer as soon as
practical after the Closing Date but in no event later than 60 days after the
Closing Date and the appropriate party shall be paid within five business days
after the determination thereof.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Buyer represents and warrants to Seller and each
of the Shareholders that:
(a) CORPORATE EXISTENCE. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York. Complete and correct copies of the Certificate of
Incorporation of Buyer and all amendments thereto, certified by the
Secretary of State of the State of New York, and the By-laws of Buyer,
and all amendments thereto, certified by the Secretary of Buyer, have
been heretofore delivered to Seller.
(b) AUTHORIZATION; VALIDITY. Buyer has all requisite corporate
power and authority to enter into this Agreement and all documents and
instruments required to be executed by Buyer hereunder (collectively,
"Buyer's Documents"), to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. All necessary corporate action has been taken by Buyer with
respect to the execution, delivery and performance by Buyer of this
Agreement and the Buyer's Documents and the consummation of the
transaction contemplated hereby and thereby. Assuming the due execution
and delivery of this Agreement by Seller and each of the Shareholders
and the due execution and delivery of the
-5-
<PAGE>
Seller's Documents by Seller, this Agreement and the Buyer's Documents
are legal, valid and binding obligations of Buyer, enforceable against
Buyer in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general application affecting the enforcement of creditors'
rights generally, and the discretion of the court before which any
proceeding therefor may be brought.
(c) LITIGATION. Except as set forth on Schedule 4.1(c), there
is no claim, litigation, action, suit, proceeding, investigation or
inquiry, administrative or judicial, pending or, to the knowledge of
Buyer, threatened against Buyer, at law or in equity, before any
federal, state or local court or regulatory agency or other
governmental authority, which might have an adverse effect on Buyer's
ability to perform any of its obligations under this Agreement and the
Buyer's Documents or upon the consummation of the transactions
contemplated hereby and thereby.
(d) NO BREACH OF STATUTE OR CONTRACT. Neither the execution
and delivery of this Agreement or any of the Buyer's Documents nor the
consummation by Buyer of the transactions contemplated hereby and
thereby, nor compliance by Buyer with any of the provisions hereof and
thereof will violate or cause a default under any statute (domestic or
foreign), judgment, order, writ, decree, rule or regulation of any
court or governmental authority applicable to Buyer or any of its
material properties; breach or conflict with any of the terms,
provisions or conditions of the Certificate of Incorporation or By-laws
of Buyer; or violate, conflict with or breach any agreement, contract,
mortgage, instrument, indenture or license to which Buyer is party or
by which Buyer is or may be bound, or constitute a default (in and of
itself or with the giving of notice, passage of time or both)
thereunder, or result in the creation or imposition of any encumbrance
upon, or give to any other party or parties, any claim, interest or
right, including rights of termination or cancellation in, or with
respect to any of Buyer's properties.
(e) BROKERS. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by or on
behalf of Buyer in such a manner as not to give rise to any claim
against Buyer, Seller, the Shareholders or the Property for a finder's
fee, brokerage commission, advisory fee or other similar payment.
SECTION 4.2. Each of Seller and Staley jointly and severally
represents and warrants to Buyer that:
(a) CORPORATE EXISTENCE. Seller is a corporation duly
organized, validly existing and in good standing under the
-6-
<PAGE>
laws of the State of Texas and has the corporate power to own, operate
or lease the Property and to carry on the Business as now being
conducted. Complete and correct copies of the Articles of Incorporation
of Seller and all amendments thereto, certified by the Secretary of
State of the State of Texas, and of the By-Laws of Seller, and all
amendments thereto, certified by the Secretary of Seller, have been
heretofore delivered to Buyer. Seller is not qualified to transact
business as a foreign corporation in any jurisdiction and transacts no
business in any jurisdiction other than the United States of America.
(b) AUTHORIZATION; VALIDITY. Seller and Staley have all
requisite power and authority to enter into this Agreement and all
documents and instruments required to be executed by Seller or the
Shareholders, as the case may be, (collectively, the "Seller's
Documents"), to perform their respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby without the approval of any third party except as listed on
Schedule 4.2(b). All necessary action has been taken by Seller and
Staley with respect to the execution, delivery and performance by
Seller and Staley of this Agreement and the Seller's Documents and the
consummation of the transactions contemplated hereby and thereby.
Assuming the due execution and delivery of this Agreement and the
Buyer's Documents by Buyer, this Agreement and the Seller's Documents
are legal, valid and binding obligations of Seller and Staley, as the
case may be, enforceable against Seller and Staley in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general
application affecting the enforcement of creditors' rights generally,
and the discretion of the court before which any proceeding therefor
may be brought.
(c) NO BREACH OF STATUTE OR CONTRACT. Except as set forth on
Schedule 4.2(c), neither the execution and delivery of this Agreement
or any of the Seller's Documents nor the consummation by Seller and
Staley of the transactions contemplated hereby and thereby, nor
compliance by Seller and Staley with any of the provisions hereof and
thereof will violate or cause a default under any statute (domestic or
foreign), judgment, order, writ, decree, rule or regulation of any
court or governmental authority applicable to Seller or any of its
properties; breach or conflict with any of the terms, provisions or
conditions of the Articles of Incorporation or By-Laws of Seller; or
violate, conflict with or breach any agreement, contract, mortgage,
instrument, indenture or license to which Seller or Staley is a party
or by which Seller is or may be bound with respect to the Property or
the Business, or constitute a default (in and of itself or with the
giving of notice, passage of time or both)
-7-
<PAGE>
thereunder, or result in the creation or imposition of any encumbrance
upon, or give to any other party or parties any claim, interest or
right, including rights of termination or cancellation in, or with
respect to, the Property.
(d) SUBSIDIARIES. Seller has no subsidiaries which conduct or
carry on the Business, or equity investments in any other corporation,
association, partnership, joint venture or other entity.
(e) CAPITALIZATION. Seller's authorized capital stock consists
of 1,000 shares of common stock, par value $1.00 per share (the "Common
Stock"), of which 900 shares are issued and outstanding. The
Shareholders own of record and, to the knowledge of Seller and Staley,
beneficially all of the issued and outstanding capital stock of Seller
as listed on Schedule 4.2(e), to the knowledge of Seller and Staley,
free and clear of all liens, claims, charges or other encumbrances and
restrictions of any kind or nature. There are no subscriptions,
options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements of any kind relating to
the issuance, sale or transfer of any shares of capital stock of
Seller, including any rights of conversion or exchange under any
outstanding securities or other instruments. There are no voting trusts
or other agreements or understandings of any kind with respect to
Seller's outstanding capital stock.
(f) FINANCIAL STATEMENTS. The following financial statements
of Seller, which have been furnished previously to Buyer by Seller and
initialed for identification by officers of Seller and Buyer are true,
correct and complete in all material respects, have been prepared from
and are in accordance with the books and records of Seller, and fairly
present the financial condition of Seller in all material respects as
at the dates stated and the results of operations of Seller for the
periods then ended: (i) the balance sheet and income statement of
Seller as at and for the year ended December 31, 1995, including
footnotes (the "Audited Financial Statements"); and (ii) the balance
sheet and income statement of Seller as at March 31, 1996 and for the
three-month period then ended (the "Interim Financial Statements" and,
together with the Audited Financial Statements, the "Financial
Statements"). The Audited Financial Statements are in conformity with
generally accepted accounting principals applied on a consistent basis
throughout the period presented using an accrual basis method except as
stated therein or as set forth on Schedule 4.2(f).
(g) ABSENCE OF CERTAIN CHANGES IN EVENTS. Except as set
forth on Schedule 4.2(g) since December 31, 1995, there has
not been with respect to Seller:
-8-
<PAGE>
(i) Any material adverse change in its business
operations (as now conducted or as presently proposed to be
conducted), assets, properties or rights, prospects or
condition (financial or otherwise), or combination thereof
which reasonably could be expected to result in any such
material adverse change (a "Material Adverse Effect");
(ii) Other than in the usual and ordinary course of
business, any increase in amounts payable by Seller to or for
the benefit of or committed to be paid by Seller to or for the
benefit of any officer, consultant, agent or employee of
Seller, in any capacity, or in any benefits granted under any
bonus, stock option, profit sharing, pension, retirement,
deferred compensation, insurance, or other direct or indirect
benefit plan with respect to any such person;
(iii) Any transaction entered into or carried out
other than in the ordinary and usual course of its business
including, without limitation, any transaction resulting in
the incurrence of liabilities or obligations;
(iv) Any material change made in the methods of doing
business or in the accounting principles or practices or the
method of application of such principles or practices;
(v) Any mortgage, pledge, lien, security interest,
hypothecation, charge or other encumbrance imposed or agreed
to be imposed on or with respect to the Property which will
not be discharged prior to the Closing except for financing
statements filed by personal property lessors as a matter of
notification only;
(vi) Any sale, lease or other disposition of, or any
agreement to sell, lease or otherwise dispose of any of its
properties or assets, individually or in the aggregate, in
excess of $5,000;
(vii) Any purchase of or any agreement to purchase
capital assets or any lease or any agreement to lease, as
lessee, any capital assets, individually or in the aggregate,
in excess of $5,000;
(viii) Any modification, waiver, change, amendment,
release, rescission or termination of, or accord and
satisfaction with respect to any material term, condition or
provision of any contract, agreement, license or other
instrument to which Seller is a party, other than any
-9-
<PAGE>
satisfaction by performance in accordance with the terms
thereof in the usual and ordinary course of its business;
(ix) Any declaration of, or dividend or other
distribution to the Shareholders, purchase, redemption or
reclassification of any of Seller's capital stock or stock
split, stock dividend, exchange or recapitalization or
execution of any agreement in respect of the foregoing; or
(x) Any damage, destruction or similar loss, whether
or not covered by insurance, adversely affecting the Business.
(h) LIABILITIES. Except as set forth on Schedule 4.2(h),
Seller has no liability or obligation of any nature (whether
liquidated, unliquidated, accrued, absolute, contingent or otherwise
and whether due or to become due) in respect of the Business except:
(i) those set forth or reflected in the Financial
Statements which have not been paid or discharged since the
date thereof;
(ii) those arising under agreements or other
commitments expressly identified in any Schedule hereto
including, but not limited to, the Real Property Leases,
Permits, Personal Property Leases and Contracts; and
(iii) current liabilities arising in the ordinary and
usual course of the Business subsequent to December 31, 1995
which are accurately reflected on its books and records in a
manner consistent with past practice.
(i) TAXES. Except as set forth on Schedule 4.2(i):
(1) Seller has duly filed all federal, state and
local tax returns and tax reports required to be filed by it as of the
Closing Date, all such returns and reports are true, correct and
complete, none of such returns and reports has been amended, and all
taxes, assessments, fees and other governmental charges arising under
such returns and reports have been fully paid for all periods prior to
May 1, 1993 or will be timely paid;
(2) Schedule 4.2(i) sets forth the dates and results
of any and all audits of federal, state and local tax returns of Seller
performed by federal, state or local taxing authorities. No waivers of
any applicable statutes of limitations are outstanding. All
deficiencies proposed as a result of any audits have been paid or
settled. There is no pending or, to the knowledge of Seller and Staley,
threatened
-10-
<PAGE>
federal, state or local tax audit of Seller and no agreement with any
federal, state or local tax authority that may affect the subsequent
tax liabilities of Seller;
(3) Seller has no liabilities for taxes other than as
shown on the Financial Statements and no federal, state or local tax
authority is now asserting or, to the knowledge of Seller and Staley,
threatening to assert any deficiency or assessment for additional taxes
with respect to Seller; and
(4) Without limiting the foregoing, (A) the books and
records of Seller include adequate provision (in accordance with
generally accepted accounting principles) for all taxes, assessments,
fees, penalties and governmental charges which have been or may, in the
future, be assessed against Seller for all periods ending on or prior
to the Closing Date, and (B) Seller is not as of the Closing Date, and
will not be as of the Closing Date, liable for taxes, assessments, fees
or governmental charges for which Seller has not made adequate
provision on its books and records.
(j) PROPRIETARY RIGHTS. Schedule 1.1(e) sets forth all
patents, inventions, trade secrets, processes, proprietary rights,
proprietary knowledge, computer software, trademarks, names, service
marks, trade names, copyrights, symbols, logos, franchises and permits
used in conducting the Business and all applications therefor,
registrations thereof and licenses (other than incidental office
software licenses), sublicenses or agreements in respect thereof which
Seller owns or has the right to use or to which Seller is a party and
all filings, registrations or issuances of any of the foregoing with or
by any federal, state, local or foreign regulatory, administrative or
governmental office or offices. Except as set forth on Schedule 4.2(j),
Seller is the sole and exclusive owner of all right, title and interest
in and to all Proprietary Rights free and clear of all liens, claims,
charges, equities, rights of use, encumbrances and restrictions
whatsoever. Except as disclosed herein, the Business as conducted prior
to the Closing, and the sale by Seller and ownership by Buyer of any of
the Property was not, is not and will not be in contravention of any
patent, trademark, copyright or other proprietary right of any third
party.
Except as listed on Schedule 4.2(j), none of the Proprietary Rights has
been hypothecated, sold, assigned or licensed by Seller or any other
person, corporation, firm or other legal entity; or knowingly infringe
upon or violate the rights of any person, firm, corporation, or other
legal entity, except where such infringement or violation could not
reasonably be expected to result in a Material Adverse Effect. Except
as listed on Schedule 4.2(j), Seller has not given any
-11-
<PAGE>
indemnification against patent, trademark or copyright infringement as
to any equipment, materials, products, services or supplies which
Seller uses, licenses or sells; there is not pending or threatened in
writing any claim to sell, engage in or employ any such product,
process, method or operation.
(k) INSURANCE. Schedule 4.2(k) lists all policies of life,
casualty, liability and other forms of insurance owned or held by
Seller and all such policies are currently in full force and effect.
Seller has not received any notice from such insurer with respect to
the cancellation of any such insurance. All premiums due and payable on
such policies have been paid. Seller is not a co-insurer under any term
of any insurance policy. Seller will use good faith efforts to keep
such policies duly in force through the Closing Date.
(l) LITIGATION. Except as set forth on Schedule 4.2(l), there
is no claim, action, suit or proceeding, investigation or inquiry,
administrative or judicial, pending or threatened in writing against or
affecting Seller (or any officer or director of Seller in connection
with the Business) or the Property, at law or in equity, before any
federal, state, local or foreign court or regulatory agency or other
governmental body. Seller is not subject to or in default with respect
to any judgment, order, writ, injunction or decree or any governmental
restriction, which is reasonably likely to have a Material Adverse
Effect.
(m) COMPLIANCE WITH LAWS.
(i) Except as listed on Schedule 4.2(m), Seller is in
compliance in all material respects with all laws, ordinances,
regulations and orders applicable to the Business and the
Property and has no notice of knowledge of any violations,
whether actual, claimed or alleged, thereof. In connection
with conducting the Business during its period of ownership,
Seller has complied in all material respects with, and Seller
has no knowledge or reason to know that the Business was
conducted during the period prior to its ownership other than
in compliance in all material respects with, all federal,
state and local laws, ordinances, rules and regulations
pertaining to environmental matters including, without
limitation, solid waste disposal, toxic substances, hazardous
substances, hazardous materials, hazardous waste, toxic
chemicals, pollutants, contaminants and air, water, ground or
subsurface pollution and to the storage, use, handling,
transportation, discharge, and disposal (including spills and
leaks) of gaseous, liquid, semi-solid or solid materials
(collectively, "Environmental Laws"). There has been no
on-site disposal
-12-
<PAGE>
or discharge by Seller of chemicals, oil or solid wastes on
any property owned, leased or used by Seller and Seller has no
knowledge or reason to know of any disposal or discharge
during the period prior to its ownership of the Business.
Seller has not received a summons, citation, order, letter or
other written communication from any federal, state or local
governmental agency or body under any of the Environmental
Laws during the five-year period ending on the date hereof.
Seller is not the subject of any order or directive of any
federal, state or local governmental agency or body relating
to asbestos-containing material.
(ii) Schedule 1.1(d) lists all franchises, licenses,
permits, consents, authorizations, approvals and certificates
of any regulatory, administrative or other governmental agency
or body used in conducting the Business. Each of the Permits
is currently valid and in full force and effect and the
Permits constitute all franchises, licenses, permits,
consents, authorizations, approvals, and certificates of any
regulatory, administrative or other governmental agency or
body necessary to the conduct of the Business. Seller is not
in violation of any of the Permits. There is no pending or
threatened proceeding which could result in the revocation or
cancellation of, or inability of Seller to renew, any Permit.
(n) BROKERS. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried on by or on
behalf of Seller in such a manner as not to give rise to any claim
against Buyer, Seller, any of the Shareholders or the Property for a
finder's fee, brokerage commission, advisory fee or other similar
payment.
(o) EMPLOYEE BENEFIT PLANS.
(i) Listed on Schedule 4.2(o) is a true, accurate and
complete list of all pension, retirement, profit-sharing,
deferred compensation, bonus, stock option or other incentive
plan, or other employee benefit program, arrangement,
agreement or understanding, or medical, vision, dental or
other health plan, or life insurance or disability plan, or
any other employee benefit plan as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (whether or not any such employee benefit
plans are otherwise exempt from the provisions of ERISA,
whether or not legally binding), adopted, established,
maintained or contributed to by Seller or under which it would
otherwise be a party or have liability and under which
employees or former employees (whether or not
-13-
<PAGE>
retired employees) of Seller (or their beneficiaries) are
eligible to participate or derive a benefit (collectively, the
"Employee Benefit Plans"). There shall be included within the
meaning of Seller, for this purpose and for the purpose of the
representations in this Section 4.2(o), all "affiliates,"
whether or not incorporated, within the meaning of Section
407(d)(7) of ERISA.
(ii) Full payment has been made of all amounts which
Seller is required, under applicable law or under any Employee
Benefit Plan or any agreement relating to any Employee Benefit
Plan to which it is a party, to have paid as contributions to
or benefits under any Employee Benefit Plan as of the last day
of the most recent fiscal year of such Employee Benefit Plan
ended prior to the date hereof. Seller has made adequate
provisions in accordance with generally accepted accounting
principles for liabilities to meet current contributions or
benefit payments.
(iii) Except as provided in Schedule 4.2(o), a
favorable determination letter has been issued by the Internal
Revenue Service (the "Service") with respect to the qualified
status of each of the Employee Benefit Plans intended to be
qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and with respect to the tax
exempt status under Section 501(a) of the Code of (A) any
trust through which such Employee Benefit Plans are funded and
(B) any trust or other entity established with respect to an
Employee Benefit Plan and intended to be qualified as a tax
exempt organization under Section 501(c) of the Code. Since
the date of the most recent determination letter, each such
qualified Employee Benefit Plan has been, or can be (within
120 days of Closing), filed with the Service within the time
required to preserve the rights of Seller to adopt such
amendment as may be required by the Service in order to issue
a favorable determination letter with respect to each such
Plan's continued tax-qualified and/or exempt status. No act or
omission has occurred since the date of the last favorable
determination letter issued with respect to an Employee
Benefit Plan which resulted or is likely to result in the
revocation of the Plan's tax-qualified or exempt status.
(iv) Seller has performed all obligations required to
be performed by it under the Employee Benefit Plans. Seller
has not engaged in any transaction with respect to the
Employee Benefit Plans which would subject it or Buyer to a
tax, penalty or liability for a prohibited transaction under
Sections 406, 407 or 502(i) of ERISA or
-14-
<PAGE>
Section 4975 of the Code, nor have its directors, officers,
employees or agents, to the extent they or any of them are
fiduciaries under Title I of ERISA. Excepting only changes
necessary to preserve an Employee Benefit Plan's tax-qualified
or exempt status under the Code or to otherwise comply with
applicable provisions of ERISA and the Code (and in each case
effective only as of the date necessary to do so), Seller will
not, and has no plan or commitment, whether formal or
informal, written or oral, and whether or not legally binding,
to modify or change any Employee Benefit Plan in any material
manner prior to the Closing. Seller and any "administrator(s)"
(as described in Section 3(16)(A) of ERISA) of the Employee
Benefit Plans have complied in all material respects with the
applicable requirements of ERISA, the Code and all other
statutes, orders, rules or regulations, specifically
including, without limitation, material compliance with all
reporting and disclosure requirements of Part 1 of Title 1 of
ERISA and of the Code in a timely and accurate manner, and no
penalties have been or will be imposed, nor is Seller or any
administrator liable for any penalties imposed, under ERISA,
the Code or otherwise with respect to the Employee Benefit
Plans or any related trusts. Seller is not delinquent in the
payment of any federal, state or local taxes with respect to
the Employee Benefit Plans. There is no pending litigation,
arbitration, or disputed claim, settlement adjudication or
proceeding with respect to the Employee Benefit Plans, and
neither Seller nor any administrator is aware of any
threatened litigation, arbitration or disputed claim,
adjudication proceeding, or any governmental or other
proceeding, or investigation with respect to the Employee
Benefit Plans or with respect to any fiduciary or
administrator thereof (in their capacities as such), or any
party-in-interest thereto (with respect to their relationship
as such). There is no multiemployer plan to which Seller has
been a party or has been required to make any contributions at
any time during the last ten (10) years.
(v) Seller has delivered or caused to be delivered to
Buyer, or will deliver upon request of Buyer prior to the
Closing, true and complete copies of (A) all Employee Benefit
Plans and any related trust agreements, custodial agreements,
investment management agreements, insurance contracts or
policies, and administrative service contracts, all as in
effect, together with all amendments thereto which will become
effective at a later date; (B) the latest Summary Plan
Description and any modifications thereto for each Employee
Benefit Plan requiring same under ERISA; (C) the latest
Service determination letter obtained with respect to any such
Employee Benefit Plan
-15-
<PAGE>
qualified under Section 401 or 501 of the Code; (D) the
Summary Annual Report for the current and prior fiscal years
for each Employee Benefit Plan requiring same under ERISA; (E)
each Form 5500 and/or Form 990 series filing (including
required schedules and financial statements) for the current
and prior fiscal years for each Employee Benefit Plan required
to file such form; and (F) the most recent actuarial
evaluation, analysis or other report issued with respect to
any Employee Benefit Plan. From the date of the most recent
actuarial evaluation to the Closing, for each defined benefit
plan, there has been no increase in the unfunded actuarial
liability under any such defined benefit plan, assuming the
years of the same actuarial assumptions as used in the most
recent applicable actuarial evaluation. Neither Seller nor any
officer, employee representative or agent thereof, has made
any written or oral representations or statements to any
current or former employees, dependents, participants or
beneficiaries or other persons which are inconsistent in any
material manner with the provisions of these documents.
(vi) With respect to any of Seller's employee welfare
plans (as defined in Section 3(1) of ERISA and including those
Employee Benefits Plans which qualify as such) which are
"group health plans" under Section 162(k) or Section 4980B of
the Code and Section 607(1) of ERISA and related regulations
(relating to the benefit continuation rights imposed by
COBRA), there has been timely compliance in all material
respects with all requirements imposed thereunder, as and when
applicable to such plans, so that Seller has no (or will not
incur) any loss, assessment, penalty, loss of federal income
tax deduction or other sanction, arising on account of or in
respect of any failure to comply with any COBRA benefit
continuation requirement, which is capable of being assessed
or asserted directly or indirectly against Seller or against
Buyer or any of its subsidiaries or other member of Buyer's
corporate control group, with respect to any such plan.
(p) LABOR MATTERS. Seller has not received any notice from any
labor union or group that it represents or intends to represent
Seller's employees. Seller has complied in all material respects with
all applicable laws affecting employment and employment practices,
terms and conditions of employment and wages and hours. Seller has not
received any notice of and there is no complaint alleging unfair labor
practices against Seller pending, or to the knowledge of Seller,
threatened before the National Labor Relations Board or any other
charges or complaints pending, or to the knowledge of Seller,
threatened before the Equal Employment
-16-
<PAGE>
Opportunity Commission, any state or local Human Rights Commission or
any other state or local agency in respect of labor or employment
matters. Except as set forth on Schedule 4.2(p), no labor strike,
material dispute, slowdown or stoppage has occurred with respect to
Seller's employees and there is no labor strike, material dispute,
slowdown or stoppage pending or threatened with respect to Seller's
employees. Schedule 4.2(p) sets forth all pending grievances or
arbitration proceedings against Seller with respect to Seller's
operation of the Business.
(q) TITLE TO PROPERTIES. Except as listed on Schedule 4.2(q),
and except with respect to personal property leased pursuant to the
Personal Property Leases, Seller has marketable title to the Property.
Except as listed on Schedule 4.2(q), all such properties are held free
and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions of any nature whatsoever.
Except for the liens listed on Schedule 4.2(q), which liens
shall be discharged by Seller prior to the Closing Date, no financing
statement under the Uniform Commercial Code or similar law naming the
Seller as debtor has been filed in any jurisdiction in respect of the
Property, and Seller is not a party to or bound under any agreement or
legal obligation authorizing any party to file any such financing
statement.
Schedule 1.1(a) contains a complete legal description of each
parcel of real property owned or used by Seller in the conduct of the
Business. Seller has furnished or made available to Buyer, copies of
all engineering, geologic and environmental reports prepared by or for
Seller, if any, with respect to the real property owned, leased or used
by Seller.
Schedule 1.1(b) contains a complete and accurate list of all
machinery, equipment, tooling, parts, furniture, supplies and other
tangible personal property owned or used by Seller in the conduct of
the Business including, without limitation, the equipment capitalized
for financial statement reporting purposes on the Financial Statements.
(r) CONTRACTS AND COMMITMENTS. Schedules 1.1(a), 1.1(f) and
1.1(g) list all real property leases, personal property leases,
contracts, agreements, contract rights, license agreements, franchise
rights and agreements, policies, purchase and sales orders, quotations
and executory commitments, instruments, third party guaranties,
indemnifications, arrangements, obligations and understandings, whether
oral or written, to which Seller is a party (whether or not legally
bound thereby) and used in conducting the Business, other than
insurance policies and purchase and sale orders, quotations and
executory commitments
-17-
<PAGE>
incurred in the ordinary course of business of Seller which are
currently in effect and do not exceed $5,000. Each of the Real Property
Leases, Personal Property Leases and the Contracts are valid and
binding, in full force and effect and enforceable against Seller in
accordance with their respective provisions. Seller has not assigned,
mortgaged, pledged, encumbered, or otherwise hypothecated any of its
right, title or interest under the Real Property Leases, Personal
Property Leases or the Contracts. Neither Seller nor, to the knowledge
of Seller or Staley, any other party thereto is in material violation
of, in default in respect of nor has there occurred an event or
condition which, with the passage of time or giving of notice (or
both), would constitute a material violation or a default of any Real
Property Lease, Personal Property Lease or Contract. No notice has been
received by Seller claiming any such default by Seller.
(s) ACCOUNTS RECEIVABLE.
(i) All Receivables and notes receivable reflected in the
Financial Statements and any Receivable and notes receivable arising
between the date hereof and the Closing Date are or will be, to the
extent not collected between the date hereof and the Closing Date,
subsisting; arose or will arise in the ordinary and usual course of the
Business; and except for the reserves set forth in the Financial
Statements and reserves established thereafter in accordance with
Seller's prior practice, credit experience and generally accepted
accounting principles consistently applied, are not and will not be
subject to any discount, counterclaim, set-off or defense, are not and
will not be subject to any lien, charge or encumbrance of any nature
and neither Seller nor Staley has received any notice, written or oral,
from any client of Seller (collectively, the "Clients") or
representative thereof of such Client's intention to assert any
counterclaim, set-off or defense.
(ii) Except as set forth on Schedule 4.2(s), all of the
Receivables are valid, binding and legally enforceable obligations of
the Clients for services rendered for the entire Face Amounts (as
hereinafter defined) thereof and are payable in accordance with their
respective terms. For purposes of this Agreement, "Face Amount" shall
mean the lesser of (x) the dollar amount of any of the Receivables
reflected in Seller's invoices to Clients as of the Closing Date or (y)
the dollar amount of such invoices as of the Closing Date, reduced by
(A) any payments received by Seller with respect to such invoices prior
to the Closing Date or (B) adjustments with respect to such invoices
agreed to by Seller prior to the Closing Date.
-18-
<PAGE>
(iii) On the Closing Date the Receivables will consist of all
of the Receivables of Seller, except those previously written off as
uncollectible on Seller's books.
(iv) The obligations represented by the Receivables conform to
all applicable laws and regulations in all material respects.
(t) BOOKS OF ACCOUNT; RECORDS. The general ledgers, books of
account and other records of Seller in respect of the Business are
complete and correct in all material respects and have been maintained
in accordance with good business practices and on a consistent basis
from period to period reflected therein.
(u) CREDIT TERMS. Schedule 4.2(u) sets forth all the terms and
conditions of credit greater than "net 30" given to any customer of
Seller and all discounts given by Seller to its customers.
(v) COMPLETE DISCLOSURE. No representation or warranty made by
Seller or Staley in this Agreement, and no exhibit, schedule,
statement, certificate or other writing furnished to Buyer by or on
behalf of Seller or Staley pursuant to this Agreement or in connection
with the transactions contemplated hereby, contains or will contain,
any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein and
therein not misleading.
SECTION 4.3. Each of Armitage and Mulvaney, severally and not
jointly, individually and not for the other, represents and warrants to Buyer
that:
(a) CORPORATE EXISTENCE. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas and has the corporate power to own, operate or lease the
Property and to carry on the Business as now being conducted.
(b) AUTHORIZATION; VALIDITY. Seller and each of Armitage and
Mulvaney have all requisite capacity to enter into this Agreement and
such of the Seller's Documents to which they are a party, perform their
respective obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby without the approval of
any third party except as listed on Schedule 4.2(b). All necessary
action has been taken by Seller and each of Armitage and Mulvaney with
respect to the execution, delivery and performance by Seller and each
of Armitage and Mulvaney of this Agreement and such of the Seller's
Documents to which they are a party and the consummation of the
transactions contemplated hereby and
-19-
<PAGE>
thereby. Assuming the due execution and delivery of this Agreement and
the Buyer's Documents by Buyer, this Agreement and such of the Seller's
Documents to which Seller, Armitage and Mulvaney are a party are the
legal, valid and binding obligations of Seller and each of Armitage and
Mulvaney, enforceable against Seller and each of Armitage and Mulvaney
in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general application affecting the enforcement of creditors'
rights generally, and the discretion of the court before which any
proceeding therefor may be brought.
(c) NO BREACH OF STATUTE OR CONTRACT. Except as set forth on
Schedule 4.2(c), neither the execution and delivery of this Agreement
nor the consummation by Seller and each of Armitage and Mulvaney of the
transactions contemplated hereby, nor compliance by Seller and each of
Armitage and Mulvaney with any of the provisions hereof will, to the
knowledge of Armitage and Mulvaney, violate or cause a default under
any judgment, order, writ or decree of any court or governmental
authority applicable to Seller or any of its properties; breach or
conflict with any of the terms, provisions or conditions of the
Articles of Incorporation or By-Laws of Seller; or, to the knowledge of
Armitage and Mulvaney, violate, conflict with or breach any agreement,
contract, mortgage, instrument, indenture or license to which Seller,
Armitage or Mulvaney is a party or by which Seller is or may be bound
with respect to the Property or the Business, or constitute a default
(in and of itself or with the giving of notice, passage of time or
both) thereunder, or result in the creation or imposition of any
encumbrance upon, or give to any other party or parties any claim,
interest or right, including rights of termination or cancellation in,
or with respect to, the Property.
(d) CAPITALIZATION. Seller's authorized capital stock consists
of 1,000 shares of Common Stock, of which 900 shares are issued and
outstanding. To their knowledge, the Shareholders own all of the issued
and outstanding capital stock of Seller as listed on Schedule 4.2(e),
free and clear of all liens, claims, charges or other encumbrances and
restrictions of any kind or nature. There are no subscriptions,
options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements of any kind relating to
the issuance, sale or transfer of any shares of capital stock of Seller
owned by Armitage or Mulvaney or, to the knowledge of Armitage and
Mulvaney, any other shares of Seller's capital stock, including any
rights of conversion or exchange under any outstanding securities or
other instruments. There are no voting trusts or other agreements or
understandings of any kind with respect to the
-20-
<PAGE>
capital stock of Seller owned by Armitage or Mulvaney or, to the
knowledge of Armitage and Mulvaney, any other outstanding shares of
Seller's capital stock.
(e) ABSENCE OF CERTAIN CHANGES IN EVENTS. Except as set forth
on Schedule 4.2(g), since December 31, 1995, to the knowledge of
Armitage and Mulvaney, there has not been any Material Adverse Effect.
(f) TAXES. Except as set forth on Schedule 4.2(i), to the
knowledge of Armitage and Mulvaney:
(1) Seller has duly filed all federal, state and
local tax returns and tax reports required to be filed by it as of the
Closing Date, all such returns and reports are true, correct and
complete, none of such returns and reports has been amended, and all
taxes, assessments, fees and other governmental charges arising under
such returns and reports have been fully paid for all periods prior to
May 1, 1993 or will be timely paid;
(2) Seller has no liabilities for taxes other than as
shown on the Financial Statements and no federal, state or local tax
authority is now asserting or threatening to assert any deficiency or
assessment for additional taxes with respect to Seller; and
(3) Without limiting the foregoing, (A) the books and
records of Seller include adequate provision (in accordance with
generally accepted accounting principles) for all taxes, assessments,
fees, penalties and governmental charges which have been or may, in the
future, be assessed against Seller for all periods ending on or prior
to the Closing Date, and (B) Seller is not as of the Closing Date, and
will not be as of the Closing Date, liable for taxes, assessments, fees
or governmental charges for which Seller has not made adequate
provision on its books and records.
(g) LITIGATION. Except as set forth on Schedule 4.2(l), to the
knowledge of Armitage and Mulvaney there are no claims, actions, suits
or proceedings pending or threatened against or affecting Seller (or
any officer or director of Seller in connection with the Business) or
the Property, before any federal, state, local or foreign court or
other governmental body. To the knowledge of Armitage and Mulvaney,
Seller is not subject to or in default with respect to any judgment,
order, writ, injunction or decree or any governmental restriction,
which is reasonably likely to have a Material Adverse Effect.
(h) LABOR MATTERS. To the knowledge of Armitage and Mulvaney,
Seller has not received any notice from any labor
-21-
<PAGE>
union or group that it represents or intends to represent Seller's
employees. Except as set forth on Schedule 4.2(p), to the knowledge of
Armitage and Mulvaney, no labor strike, material dispute, slowdown or
stoppage has occurred with respect to Seller's employees and there is
no labor strike, material dispute, slowdown or stoppage pending or
threatened with respect to Seller's employees.
ARTICLE V. COVENANTS
SECTION 5.1. COVENANT AGAINST DISCLOSURE. Seller shall not (a)
disclose to any person, association, firm, corporation or other entity (other
than Buyer or those designated in writing by Buyer) in any manner, directly or
indirectly, any confidential information or data relevant to the Business,
whether of a technical or commercial nature, or (b) use, or permit or assist, by
acquiescence or otherwise, any person, association, firm, corporation or other
entity (other than Buyer or those designated in writing by Buyer) to use, in any
manner, directly or indirectly, any such information or data, excepting only use
of such data or information as is at the time generally known to the public and
which did not become generally known through any breach by Seller of any
provision of this Section 5.1. The parties further agree to be bound by the
terms of that certain Confidentiality Agreement, dated March 17, 1996, by and
between Seller and Buyer.
SECTION 5.2. COVENANT AGAINST HIRING. Seller and each of the
Shareholders understand and acknowledge that in Buyer's view it is essential to
the successful operation of the Business to be acquired from Seller that Buyer
retain substantially unimpaired Seller's operating organization. Neither Seller
nor any of the Shareholders shall take any action which could reasonably be
expected to induce any employee or representative of Seller not to become or
continue as an employee or representative of Buyer; PROVIDED, HOWEVER, that
neither Seller nor any of the Shareholders shall be liable for the failure of
any of Seller's employees to continue their employment with Buyer after the
Closing Date. Without limiting the generality of the foregoing, Seller shall
not, whether directly or indirectly, through any subsidiary or affiliate,
employ, whether as an employee, officer, agent, consultant or independent
contractor, or enter into any partnership, joint venture or other business
association with, any person (i) who was at any time during the twelve (12)
months preceding the Closing Date a consultant placed by Seller, or (ii) who was
at any time during the six (6) months preceding the Closing Date a permanent
employee, representative or officer of Seller, for a period of twelve (12)
months after the Closing Date other than those employees listed on Schedule 5.2;
PROVIDED, HOWEVER, that any employee listed on Schedule 5.2 must not have
received an offer of employment from Buyer, as opposed to those employees of
Seller that received such an offer and opted not to accept it. All obligations
-22-
<PAGE>
under this Section 5.2 shall expire on May 9, 1997, excepting only those that
relate to actions of Seller and the Shareholders taken on or before May 9, 1997.
SECTION 5.3. INJUNCTIVE RELIEF. Seller and each of the
Shareholders acknowledge and agree that Buyer's remedy at law for any breach of
any of Seller's or any of the Shareholders' obligations under Section 5.1 or 5.2
hereof would be inadequate, and agree and consent that temporary and permanent
injunctive relief may be granted in a proceeding which may be brought to enforce
any provision of Section 5.1 or 5.2 without the necessity of proof of actual
damage.
SECTION 5.4. ACCESS TO RECORDS. Between the date hereof and
the Closing Date, Seller shall provide Buyer and its agents with full access to
the properties and records of Seller upon reasonable notice during normal
business hours and shall allow Buyer and its agents, at Buyer's expense, to make
copies of such documents, records and other information pertaining to the
Business as Buyer may request for the purpose of performing due diligence;
PROVIDED, HOWEVER, that such due diligence shall not disrupt the Business. The
furnishing of any information to Buyer or any investigation made by Buyer or its
authorized representatives shall not affect or otherwise diminish or obviate the
representations and warranties made in this Agreement by Seller or any of the
Shareholders, as the case may be, and Buyer's right to rely thereon.
SECTION 5.5. CONDUCT OF BUSINESS PRIOR TO CLOSING. Seller
agrees that on and or after the date hereof and prior to the Closing, except as
set forth on Schedule 4.2(g), neither Seller nor any of the Shareholders shall
in respect of the Business without the consent of Buyer:
(i) incur or become subject to, or agree to incur or
become subject to, any obligation or liability (absolute or
contingent) except current liabilities incurred, and
obligations under contracts entered into, in the ordinary
course of business;
(ii) discharge or satisfy any lien or encumbrance or
pay any obligation or liability (absolute or contingent) other
than liabilities payable in the ordinary course of business;
(iii) mortgage, pledge or subject to lien, charge or
any encumbrance, any of the Property or agree so to do;
(iv) sell or transfer or agree to sell or transfer
any of its assets, or cancel or agree to cancel
-23-
<PAGE>
any debt or claim, except in each case in the ordinary
course of business;
(v) consent or agree to a waiver of any right of
substantial value;
(vi) enter into any transaction other than in the
ordinary course of its business;
(vii) increase the rate of compensation payable or to
become payable by it to any officers, employees or agents of
Seller by more than 5% of the rate being paid to them at
January 1, 1996;
(viii) terminate any material contract, agreement,
license or other instrument to which it is a party;
(ix) through negotiation or otherwise, make any
commitment or incur any liability or obligation to any labor
organization except in the ordinary course of business
consistent with past practice;
(x) make or agree to make any accrual or arrangement
for or payment of bonuses or special compensation of any kind
to any officer, employee or agent;
(xi) terminate any employee of Seller earning in
excess of $25,000 per annum or directly or indirectly pay or
make a commitment to pay any severance or termination pay to
any officer, employee or agent except in the ordinary course
of business consistent with past practice;
(xii) introduce any new method of management,
operation or accounting with respect to its business or any of
the assets, properties or rights applicable thereto;
(xiii) offer or extend more favorable prices,
discounts or allowances than were offered or extended
regularly on and prior to the date hereof, other than in the
ordinary course of business or as reasonably required by
competitive conditions;
(xiv) make capital expenditures or commitments
therefor in excess of $5,000 except for repairs and
maintenance in the ordinary course of business consistent with
past practice; or
(xv) directly or indirectly, solicit or encourage
(including by way of furnishing any nonpublic information
-24-
<PAGE>
concerning the business, properties or assets of Seller), or
enter into any negotiations or discussions concerning, any
Acquisition Proposal (as defined below). Seller will notify
Buyer promptly by telephone, and thereafter promptly confirm
in writing, if any such information is requested from, or any
Acquisition Proposal is received by, Seller. As used in this
Agreement, "Acquisition Proposal" shall mean any offer or
proposal received by Seller or any of the Shareholders prior
to the Closing for a merger or other business combination
involving Seller or any of the Shareholders in respect of
Seller, or for the acquisition of, or the acquisition of a
substantial equity interest in, or a substantial portion of
the assets of Seller, other than the one contemplated by this
Agreement.
SECTION 5.6. TRANSITION OF CLIENTS. Seller and each of the
Shareholders shall use reasonable commercial efforts to insure the smooth
transfer from Seller to Buyer of all of Seller's present clients who, prior to
the date hereof, utilized Seller's services; PROVIDED, HOWEVER, that neither
Seller nor any of the Shareholders (i) shall be liable for the failure of any of
Seller's clients to continue their utilization of such services after the
Closing, or (ii) shall be obligated to pay any amount or incur any expense to
prevent or to ameliorate such failure.
SECTION 5.7. INSURANCE. Prior to the Closing Date, Seller
shall (i) cause to be conducted an audit with respect to the insurance policies
relating to the Business and any premium payments owed by Seller in respect
thereof and (ii) pay in full all such premiums in respect of periods ending on
or prior to the Closing Date.
SECTION 5.8. SEVERABILITY. With respect to any provision of
this Article V finally determined by a court of competent jurisdiction to be
unenforceable, Seller, each of the Shareholders and Buyer hereby agree that such
court shall have jurisdiction to reform such provision so that it is enforceable
to the maximum extent permitted by law, and the parties agree to abide by such
court's determination. In the event that any provision of this Article V cannot
be reformed, such provision shall be deemed to be severed from this Agreement,
but every other provision of Article V of this Agreement shall remain in full
force and effect.
SECTION 5.9. FURTHER ASSURANCES. On and after the Closing,
Seller shall prepare, execute and deliver, at Buyer's expense, such further
instruments of conveyance, sale, assignment or transfer, and shall take or cause
to be taken such other or further action as Buyer's counsel shall reasonably
request at any time or from time to time in order to perfect, confirm or
evidence in Buyer title to all or any part of the Property or to consummate, in
any other manner, the terms and conditions of this Agreement. On
-25-
<PAGE>
and after the Closing, Buyer shall prepare, execute and deliver, at Seller's
expense, such further instruments, and shall take or cause to be taken such
other or further action as Seller's counsel shall reasonably request at any time
or from time to time in order to confirm or evidence Buyer's assumption of the
Assumed Liabilities or to consummate, in any other manner, the terms and
conditions of this Agreement.
SECTION 5.10. ANNOUNCEMENTS. None of the parties to this
Agreement shall make any public announcements prior to the Closing with respect
to this Agreement or the transactions contemplated hereby without the written
consent of the other parties hereto, except as required by law.
SECTION 5.11. CONSENTS. Seller and each of the Shareholders
shall use their good faith efforts to take or cause to be taken all action and
do or cause to be done all things necessary, proper or advisable to consummate
the transactions contemplated by this Agreement, including, without limitation,
to obtain all permits, approvals (regulatory, governmental or otherwise),
authorizations and consents of all third parties and to make all filings with
and give all notices to third parties which may be necessary or required in
order to effectuate the transactions contemplated hereby, provided that neither
Seller nor the Shareholders shall be obligated to pay any amount or incur any
expense to obtain any such consent or approval.
SECTION 5.12. NAME CHANGE. Within two business days following
the Closing, Seller shall change its name to a name not confusingly similar to
"Montare International, Inc." and thereafter neither Seller nor any of the
Shareholders shall use a name confusingly similar to such name; PROVIDED,
HOWEVER, that Seller shall coordinate with Buyer all action taken or caused to
be taken by Seller to effectuate such name change.
ARTICLE VI. CLOSING
SECTION 6.1. CLOSING. This transaction shall close and all
deliveries to be made at the time of closing shall take place at 10:00 a.m.,
Dallas time, on or before May 17, 1996, at the offices of Clements & Allen,
P.C., 15303 Dallas Parkway, Suite 750, Dallas Texas, or at such other place or
date as may be agreed upon from time to time in writing by Seller, each of the
Shareholders and Buyer (the "Closing").
SECTION 6.2. DELIVERIES BY SELLER. At or prior to the Closing,
Seller shall deliver to Buyer, duly and properly executed, the following:
(a) Good and sufficient Special Conveyance, Assignment and
Bill of Sale, in the form attached hereto as Exhibit B, conveying,
selling, transferring and assigning to Buyer title
-26-
<PAGE>
to all of the Property, the Real Property Leases, the Permits, the
Personal Property Leases and the Contracts, free and clear of all
security interests, liens, charges, encumbrances whatsoever, except for
those assumed by Buyer pursuant to this Agreement or approved in
writing by Buyer prior to the Closing (the "Bill of Sale"), together
with the written consents of all parties necessary in order to duly
transfer such title to the extent obtained.
(b) Assumptions of the Assumed Liabilities, in the form
attached hereto as Exhibit C (the "Assumption Agreement").
(c) Resolutions of the board of directors of Seller
authorizing the execution and delivery of this Agreement by Seller and
the performance of its obligations hereunder, certified by the
Secretary of Seller.
(d) A certificate of the Secretary of State of Texas dated as
of a recent date as to the existence of Seller in such state.
(e) A certificate of the Texas Comptroller of Public Accounts,
dated as of a recent date as to the good standing of Seller in each
such state.
(f) The legal opinion of counsel to Seller and Staley
substantially in the form attached hereto as Exhibit D (the
"Seller/Staley Opinion"); PROVIDED, HOWEVER, that the form of the
Seller/Staley Opinion attached hereto is unacceptable to Buyer but
shall be acceptable to Buyer on or prior to Closing.
(g) The legal opinion of counsel to Armitage in the form
attached hereto as Exhibit E-1 and the legal opinion of counsel to
Mulvaney substantially in the form attached hereto as Exhibit E-2 (the
"Mulvaney Opinion"); PROVIDED, HOWEVER, that the form of the Mulvaney
Opinion attached hereto is unacceptable to Buyer but shall be
acceptable to Buyer on or prior to Closing.
(h) A Certificate of the President and Secretary of Seller in
accordance with Section 7.1(d).
(i) The Receivables Purchase Agreement to be entered into by
and between Buyer and Seller, in the form attached hereto as Exhibit F.
(j) The Employment Agreement to be entered into by and between
Buyer and Staley, in the form attached hereto as Exhibit G (the
"Employment Agreement").
-27-
<PAGE>
(k) The Confidentiality and Non-Competition Agreement to be
entered into by and between Buyer and Mulvaney, in substantially the
form attached hereto as Exhibit H (the "Mulvaney Agreement").
(l) The Confidentiality and Non-Competition Agreement to be
entered into by and between Buyer and Armitage, in substantially the
form attached hereto as Exhibit H (the "Armitage Agreement").
(m) The Confidentiality and Non-Competition Agreement to be
entered into by and between Buyer and Seller, in substantially the form
attached hereto as Exhibit H (the "Seller Confidentiality and
Non-Competition Agreement").
(n) An Estoppel Certificate in the form attached hereto as
Exhibit I, from the lessor of the Real Property Lease described therein
(the "Estoppel Certificate").
(o) Such other separate instruments of sale, assignment or
transfer that Buyer may reasonably deem necessary or appropriate in
order to perfect, confirm or evidence title to all or any part of the
Property.
SECTION 6.3. DELIVERIES BY BUYER. On or prior to the Closing,
Buyer shall deliver to Seller the purchase price in accordance with Section 3.1,
and shall deliver to Seller, all duly and properly executed, the following:
(a) The Assumption Agreement.
(b) Resolutions of the board of directors of Buyer authorizing
the execution and delivery of this Agreement by Buyer and the
performance of its obligations hereunder, certified by the Secretary of
Buyer.
(c) A certificate of the Secretary of State of New York dated
as of a recent date as to the good standing of Buyer in such state.
(d) The legal opinion of counsel to Buyer in the form attached
hereto as Exhibit J.
(e) A certificate of the President and Secretary of Buyer in
accordance with Section 7.2(d).
(f) The Receivables Purchase Agreement and the promissory note
to be delivered thereunder.
(g) The Employment Agreement.
(h) The Mulvaney Agreement.
-28-
<PAGE>
(i) The Armitage Agreement.
(j) The Seller Confidentiality and Non-Competition Agreement.
(k) Such other separate instruments of assumption that Seller
may reasonably deem necessary or appropriate in order to confirm or
evidence Buyer's assumption of the Assumed Liabilities.
ARTICLE VII. CONDITIONS PRECEDENT TO OBLIGATIONS
SECTION 7.1. CONDITIONS TO OBLIGATIONS OF BUYER. Each and
every obligation of Buyer to be performed at the Closing shall be subject to the
satisfaction as of or before the Closing Date of the following conditions
(unless waived in writing by Buyer):
(a) REPRESENTATIONS AND WARRANTIES. Seller's and each
Shareholder's representations and warranties set forth in Section 4.2
or 4.3 of this Agreement, as the case may be, shall have been true and
correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing as if such
representations and warranties were made as of the Closing.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and
other obligations under this Agreement which are to be performed or
complied with by Seller and each of the Shareholders, shall have been
performed and complied with in all material respects on or prior to the
Closing including, without limitation, the delivery of the fully
executed instruments and documents in accordance with Section 6.2.
(c) NO ADVERSE PROCEEDING. There shall be no pending or
threatened claim, action, litigation or proceeding, judicial or
administrative, or governmental investigation against Buyer, Seller,
any of the Shareholders or the Property for the purpose of enjoining or
preventing the consummation of this Agreement, or otherwise claiming
that this Agreement or the consummation hereof is illegal.
(d) CERTIFICATE. Seller shall have delivered to Buyer a
certificate, dated the date of the Closing, executed by Seller's
President and Secretary, to the effect that (i) the conditions set
forth in subsections (a) and (b) and, to the best knowledge of such
officers, (c), of this Section 7.1 have been satisfied, (ii) the
Articles of Incorporation and By-laws of the Seller shall have not been
amended since the date upon which certified copies of each had been
delivered to Buyer and remain in full force and effect and (iii) the
officers executing the Seller's Documents are duly elected and hold the
offices set forth therein.
-29-
<PAGE>
(e) APPROVAL OF BOARD OF DIRECTORS AND EACH OF THE
SHAREHOLDERS. The Board of Directors of Seller and each of the
Shareholders shall have duly approved this Agreement and the
consummation of the transactions contemplated hereby.
(f) AUDIT. The satisfactory completion of an audit of the
Business by KPMG Peat Marwick LLP.
(g) DUE DILIGENCE. The satisfactory completion of a due
diligence review of the Business and the Property by Buyer and its
agents.
(h) NO MATERIAL ADVERSE AFFECT. The determination by Buyer, in
its sole discretion, that there are no facts or circumstances that
materially and adversely affect the value of the Property.
(i) OPERATION OF THE BUSINESS. The continuation of the
operation of the Business in the ordinary course without material
adverse change, as determined by Buyer in its sole discretion.
SECTION 7.2. CONDITIONS TO OBLIGATIONS OF SELLER. Each and
every obligation of Seller and each of the Shareholders to be performed at the
Closing shall be subject to the satisfaction as of or before the Closing Date of
the following conditions (unless waived in writing by Seller and each of the
Shareholders):
(a) REPRESENTATIONS AND WARRANTIES. Buyer's representations
and warranties set forth in Section 4.1 of this Agreement shall have
been true and correct in all material respects when made and shall be
true and correct in all material respects at and as of the Closing as
if such representations and warranties were made as of the Closing.
(b) PERFORMANCE OF AGREEMENT. All covenants, conditions and
other obligations under this Agreement which are to be performed or
complied with by Buyer shall have been performed and complied with in
all material respects on or prior to the Closing including the delivery
of funds and the fully executed instruments and documents in accordance
with Section 6.3.
(c) NO ADVERSE PROCEEDING. There shall be no pending or
threatened claim, action, litigation or proceeding, judicial or
administrative, or governmental investigation against Buyer, Seller,
any of the Shareholders or the Property for the purpose of enjoining or
preventing the consummation of this Agreement, or otherwise claiming
that this Agreement or the consummation hereof is illegal.
(d) CERTIFICATE. Buyer shall have delivered to Seller a
certificate, dated the date of the Closing, executed by
-30-
<PAGE>
Buyer's President and Secretary to the effect that (i) the conditions
set forth in subsections (a) and (b) and, to the best knowledge of such
officers, (c), of this Section 7.2 have been satisfied, (ii) the
Certificate of Incorporation and Bylaws of Buyer shall have not been
amended since the date upon which certified copies of each had been
delivered to Seller and remain in full force and effect and (iii) the
officers executing the Buyer's Document are duly elected and hold the
offices set forth therein.
(e) APPROVAL OF BOARD OF DIRECTORS. The Board of Directors of
Buyer shall have duly approved this Agreement and the consummation of
the transactions contemplated herein.
ARTICLE VIII. INDEMNIFICATION
SECTION 8.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS.
Subject to the limitations set forth in this Article VIII and
notwithstanding any investigation conducted at any time with regard thereto by
or on behalf of Buyer, Seller or Staley all representations, warranties,
covenants and agreements of Buyer, Seller and Staley in this Agreement and in
the Additional Documents (as hereinafter defined) shall survive the execution,
delivery and performance of this Agreement and shall be deemed to have been made
again by Buyer, Seller and Staley at and as of the Closing. All statements
contained in any Additional Document shall be deemed representations and
warranties of Buyer, Seller and Staley, as the case may be, set forth in this
Agreement within the meaning of this Article.
SECTION 8.2. INDEMNIFICATION.
(a) Subject to the limitations set forth in this Article VIII,
Seller and Staley, jointly and severally, shall indemnify and hold
harmless Buyer from and against any and all losses, liabilities,
damages, demands, claims, suits, actions, judgments or causes of
action, assessments, costs and expenses including, without limitation,
interest, penalties, reasonable attorneys' fees, any and all reasonable
expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any
and all amounts paid in settlement of any claim or litigation
(collectively, "Damages"), asserted against, resulting to, imposed
upon, or incurred or suffered by Buyer, directly or indirectly, as a
result of or arising from the following (individually an "Indemnifiable
Claim" and collectively "Indemnifiable Claims" when used in the context
of Buyer as the Indemnified Party (as defined below)):
-31-
<PAGE>
(i) Any inaccuracy in or breach of any of
the representations, warranties or agreements made in
this Agreement by Seller or Staley or the
non-performance of any covenant or obligation to be
performed by Seller or Staley;
(ii) Any liability imposed upon Buyer as
transferee of the Business or the Property, or
otherwise relating to the conduct of the Business in
respect of any period ending on or prior to the
Closing, except to the extent such liability has been
expressly assumed by Buyer pursuant to Section 2.1
hereof;
(iii) Any liability imposed upon Buyer and
arising out of or relating to any of Seller's or
Staley's other assets, operations, businesses or
activities that are not a part of the Business.
(iv) Any misrepresentation in or any
omission from any exhibit, certificate, schedule or
other material document (collectively, the
"Additional Documents") furnished or to be furnished
by or on behalf of Seller or Staley under this
Agreement; and
(v) Seller's misapplication of the proceeds
of the purchase price of the Property in fraud of its
creditors.
(b) Subject to the limitations set forth in this Article VIII,
Buyer shall indemnify and hold harmless Seller and each of the
Shareholders from and against any and all Damages asserted against,
resulting to, imposed upon, or incurred or suffered by Seller or any of
the Shareholders, directly or indirectly, as a result of or arising
from the following (individually an "Indemnifiable Claim" and
collectively "Indemnifiable Claims" when used in the context of Seller
or any of the Shareholders as the Indemnified Party):
(i) Any inaccuracy in or breach of any of
the representations, warranties or agreements made by
Buyer in this Agreement or the non-performance of any
covenant or obligation to be performed by Buyer;
(ii) Any misrepresentation in or any
omission from any Additional Document furnished or to
be furnished by or on behalf of Buyer under this
Agreement;
-32-
<PAGE>
(iii) Any liability imposed upon Seller or
any of the Shareholders as a result of Buyer's
conduct of the Business after the Closing; and
(iv) The nonperformance or nonpayment by
Buyer of any of the Assumed Liabilities.
(c) For purposes of this Article VIII, all Damages shall be
computed net of any insurance coverage (from the amount of which
coverage there shall be deducted all costs and expenses, including
attorneys' fees, of the Indemnified Party not reimbursed by such
coverage) with respect thereto which reduces the Damages that would
otherwise be sustained; provided, however, that in all cases, the
timing of the receipt or realization of insurance proceeds shall be
taken into account in determining the amount of reduction of Damages.
(d) Without duplication of Damages, Buyer, Seller or any of
the Shareholders as the case may be, shall be deemed to have suffered
Damages arising out of or resulting from the matters referred to in
subsections (a) and (b) above if the same shall be suffered by any
parent, subsidiary or affiliate of Buyer, Seller, or any of the
Shareholders respectively.
SECTION 8.3. LIMITATIONS ON INDEMNIFICATION. Rights to
indemnification hereunder are subject to the following limitations:
(a) Neither Buyer nor Seller nor any of the Shareholders shall
be entitled to indemnification hereunder with respect to an
Indemnifiable Claim (or, if more than one Indemnifiable Claim is
asserted, with respect to all Indemnifiable Claims) unless the
aggregate amount of Damages with respect to such Indemnifiable Claim or
Claims on behalf of Seller and each of the Shareholders on the one
hand, and Buyer on the other hand, exceeds $25,000 in which event the
indemnity provided for in Section 8.2 hereof shall be effective with
respect to only so much of such Damages as exceeds $25,000; PROVIDED,
HOWEVER, that if such Damages arise from, are related to or are in
connection with obligations of Seller or Staley that were not expressly
assumed by Buyer pursuant to Section 2.1 hereof, the preceding
limitation shall be inapplicable with respect to Buyer's Damages.
(b) The obligation of indemnity provided herein with respect
to the representations and warranties set forth in Section 4.2(i) of
this Agreement shall terminate on:
(i) the expiration of the periods of limitations and
any extensions thereof applicable to assessment and collection
of federal taxes under the Code with respect to the
representations as to the absence of unpaid or
-33-
<PAGE>
undisclosed federal taxes (including any interest, penalties
or expenses) of Seller; and
(ii) the expiration of the periods of limitations and
any extensions thereof applicable to assessment and collection
of state or local taxes, with respect to the representations
as to the absence of unpaid or undisclosed state or local
taxes (including any interest, penalties or expenses) of
Seller.
(c) The obligation of indemnity provided herein resulting from
the assertion of liability by third parties with respect to the
representations and warranties set forth in Sections 4.1 and Section
4.2 (except Section 4.2(i)) shall terminate 24 months after the
Closing.
(d) If, prior to the termination of any obligation to
indemnify as provided for herein, written notice of a claimed breach is
given by the party seeking indemnification including in detail the
basis therefor (the "Indemnified Party") to the party from whom
indemnification is sought (the "Indemnifying Party") or a suit or
action based upon a claimed breach is commenced against the Indemnified
Party, the Indemnified Party shall not be precluded from pursuing such
claimed breach or suit or action, or from recovering from the
Indemnifying Party (whether through the courts or otherwise) on the
claim, suit or action, by reason of the termination otherwise provided
for above.
(e) Anything set forth in this Agreement to the contrary
notwithstanding, the liability of any one of Seller and Staley to Buyer
on the one hand, and of Buyer to Seller and Staley on the other hand,
pursuant to this Article VIII shall not exceed $1,250,000.
SECTION 8.4. PROCEDURE FOR INDEMNIFICATION WITH
RESPECT TO THIRD-PARTY CLAIMS.
The Indemnified Party will give the Indemnifying Party prompt
written notice of any third party claim, demand, assessment, suit or proceeding
to which the indemnity set forth in Section 8.2 applies, which notice to be
effective must describe said claim in reasonable detail (the "Indemnification
Notice"). Notwithstanding the foregoing, the Indemnified Party shall not have
any obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing and the rights of the Indemnified Party to
be indemnified hereunder in respect of any third party claim shall not be
adversely affected by its failure to give notice pursuant to the foregoing
unless and, if so, only to the extent that, the Indemnifying Party is materially
prejudiced thereby. The Indemnifying Party will have the right to control the
defense or settlement of any such action subject to the provisions
-34-
<PAGE>
set forth below, but the Indemnified Party may, at its election, participate in
the defense of any action or proceeding at its sole cost and expense. Should the
Indemnifying Party fail to defend any such action (except for failure resulting
from the Indemnified Party's failure to timely give the Indemnification Notice),
then, in addition to any other remedy, the Indemnified Party may settle or
defend such action or proceeding through counsel of its own choosing and may
recover from the Indemnifying Party the amount of such settlement, demand, or
any judgment or decree and all of its costs and expenses, including reasonable
fees and disbursements of counsel. The Indemnified Party will not compromise or
settle any claim without the prior written consent of the Indemnifying Party
which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, if such
approval is unreasonably withheld, the liability of the Indemnified Party will
be limited to the total sum represented in the amount of the proposed compromise
or settlement and the amount of the Indemnified Party's reasonable counsel fees
incurred in defending such claim, as permitted by the preceding sentence,
accrued at the time said approval is unreasonably withheld. Notwithstanding the
preceding sentence, the foregoing limitation on the liability of the Indemnified
Party shall only be applicable if (i) a complete release of the Indemnifying
Party is contemplated to be part of the proposed compromise or settlement of
such third party claim and (ii) the Indemnifying Party withholds its consent to
such compromise or settlement.
SECTION 8.5. PROCEDURE FOR INDEMNIFICATION WITH
RESPECT TO NON-THIRD-PARTY CLAIMS.
In the event that the Indemnified Party asserts the existence
of an Indemnifiable Claim (but excluding claims resulting from the assertion of
liability by third parties), it shall give prompt written notice to the
Indemnifying Party specifying the nature and amount of the claim asserted (the "
Non-Third Party Claim Indemnification Notice"). If the Indemnifying Party,
within 30 days (or such greater time as may be necessary for the Indemnifying
Party to investigate such Indemnifiable Claim not to exceed 60 days), after
receiving the Non-Third Party Claim Indemnification Notice from the Indemnified
Party, shall not give written notice to the Indemnified Party announcing their
intent to contest such assertion of the Indemnified Party (the "Contest
Notice"), such assertion shall be deemed accepted and the amount of claim shall
be deemed a valid Indemnifiable Claim. During the time period set forth in the
preceding sentence, the Indemnified Party shall cooperate fully with the
Indemnifying Party in respect of such Indemnifiable Claim. In the event,
however, that the Indemnifying Party contests the assertion of a claim by giving
a Contest Notice to the Indemnified Party within said period, then if the
parties hereto, acting in good faith, cannot reach agreement with respect to
such claim within ten days after such notice, the contested assertion of a claim
shall be referred to arbitration in accordance with Section 11.11 hereof.
-35-
<PAGE>
ARTICLE IX. CERTAIN SHAREHOLDER INDEMNIFICATION
SECTION 9.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES
AND AGREEMENTS.
Subject to the limitations set forth in this Article IX and
notwithstanding any investigation conducted at any time with regard thereto by
or on behalf of Armitage and Mulvaney, all representations, warranties,
covenants and agreements of each of Armitage and Mulvaney in this Agreement and
in any Additional Documents delivered by Armitage or Mulvaney, as the case may
be, shall survive the execution, delivery and performance of this Agreement and
shall be deemed to have been made again by each of Armitage and Mulvaney at and
as of the Closing. All statements of Armitage or Mulvaney contained in any
Additional Document delivered by Armitage or Mulvaney, as the case may be, shall
be deemed representations and warranties of Armitage or Mulvaney, as the case
may be, set forth in this Agreement within the meaning of this Article.
SECTION 9.2. INDEMNIFICATION.
(a) Subject to the limitations set forth in this Article IX,
Armitage and Mulvaney, severally and not jointly, shall indemnify and
hold harmless Buyer from and against any and all Damages asserted
against, resulting to, imposed upon, or incurred or suffered by Buyer,
directly or indirectly, as a result of or arising from an Indemnifiable
Claim, it being understood that each of Armitage and Mulvaney,
respectively, shall only indemnify and hold harmless Buyer for Damages
solely resulting or arising from the Indemnifiable Claims of each of
them and shall not indemnify and hold harmless Buyer for Damages
resulting or arising from the Indemnifiable Claims of the other as
follows:
(i) Any inaccuracy in or breach of any of
the representations, warranties or agreements made in
this Agreement by Armitage or Mulvaney, respectively,
or the non-performance of any covenant or obligation
to be performed by Armitage and Mulvaney,
respectively;
(ii) Any liability imposed upon Buyer as
transferee of the Business or the Property, or
otherwise relating to the conduct of the Business in
respect of any period ending on or prior to the
Closing, except to the extent such liability has been
expressly assumed by Buyer pursuant to Section 2.1
hereof;
(iii) Any liability imposed upon Buyer and
arising out of or relating to any of Seller's or
-36-
<PAGE>
Armitage's or Mulvaney's respective other assets,
operations, businesses or activities that are not a
part of the Business;
(iv) Any misrepresentation in or any
omission from any Additional Documents furnished or
to be furnished by or on behalf of Armitage or
Mulvaney under this Agreement; PROVIDED, HOWEVER,
that in the case of a Schedule to this Agreement,
Armitage's and Mulvaney's obligation to indemnify
Buyer hereunder shall only be in respect of a
Schedule related to the representations and
warranties set forth in Section 4.3 hereof, but shall
extend to those representations and warranties
concerning Seller set forth in such Section 4.3; and
(v) Seller's misapplication of the proceeds
of the purchase price of the Property in fraud of its
creditors.
(b) For purposes of this Article IX, all Damages shall be
computed net of any insurance coverage (from the amount of which
coverage there shall be deducted all costs and expenses, including
attorneys' fees, of the Indemnified Party not reimbursed by such
coverage) with respect thereto which reduces the Damages that would
otherwise be sustained; PROVIDED, HOWEVER, that in all cases, the
timing of the receipt or realization of insurance proceeds shall be
taken into account in determining the amount of reduction of Damages.
(c) Without duplication of Damages, Buyer shall be deemed to
have suffered Damages arising out of or resulting from the matters
referred to in subsections (a) above if the same shall be suffered by
any parent, subsidiary or affiliate of Buyer that is a transferee of
the Property or is a third party beneficiary under this Agreement or
any of the documents and instruments delivered pursuant hereto.
SECTION 9.3. LIMITATIONS ON INDEMNIFICATION. Rights to
indemnification hereunder are subject to the following limitations:
(a) Buyer shall not be entitled to indemnification hereunder
with respect to an Indemnifiable Claim (or, if more than one
Indemnifiable Claim is asserted, with respect to all Indemnifiable
Claims) unless the aggregate amount of Damages with respect to such
Indemnifiable Claim or Claims on behalf of Buyer, exceeds $25,000 in
which event the indemnity provided for in Section 9.2 hereof shall be
effective with respect to only so much of such Damages as exceeds
$25,000; PROVIDED, HOWEVER, that if such Damages arise from, are
-37-
<PAGE>
related to or are in connection with obligations of Seller or the
Shareholders that were not expressly assumed by Buyer pursuant to
Section 2.1 hereof, the preceding limitation shall be inapplicable with
respect to Buyer's Damages.
(b) The obligation of indemnity provided herein with respect
to the representations and warranties set forth in Section 4.3(f) of
this Agreement shall terminate on:
(i) the expiration of the periods of limitations and
any extensions thereof applicable to assessment and collection
of federal taxes under the Code with respect to the
representations as to the absence of unpaid or undisclosed
federal taxes (including any interest, penalties or expenses)
of Seller; and
(ii) the expiration of the periods of limitations and
any extensions thereof applicable to assessment and collection
of state, local or foreign taxes, with respect to the
representations as to the absence of unpaid or undisclosed
state, local or foreign taxes (including any interest,
penalties or expenses) of Seller.
(c) The obligation of indemnity provided herein resulting from
the assertion of liability by third parties with respect to the
representations and warranties set forth in Section 4.3 (except Section
4.3(f)) shall terminate 24 months after the Closing.
(d) If, prior to the termination of any obligation to
indemnify as provided for herein, written notice of a claimed breach is
given by Buyer to the Indemnifying Party including in detail the basis
therefor or a suit or action based upon a claimed breach is commenced
against Buyer, Buyer shall not be precluded from pursuing such claimed
breach or suit or action, or from recovering from the Indemnifying
Party (whether through the courts or otherwise) on the claim, suit or
action, by reason of the termination otherwise provided for above.
(e) Anything set forth in this Agreement to the contrary
notwithstanding, the liability of any one of Armitage and Mulvaney to
Buyer pursuant to this Article IX shall not exceed $1,250,000.
SECTION 9.4. PROCEDURE FOR INDEMNIFICATION WITH
RESPECT TO THIRD-PARTY CLAIMS.
Buyer will give the Indemnifying Party an Indemnification
Notice. Notwithstanding the foregoing, Buyer shall not have any obligation to
give any notice of any assertion of liability by a third party unless such
assertion is in writing and the rights of Buyer hereunder in respect of any
third party claim shall not be
-38-
<PAGE>
adversely affected by its failure to give notice pursuant to the foregoing
unless and, if so, only to the extent that, the Indemnifying Party is materially
prejudiced thereby. The Indemnifying Party will have the right to control the
defense or settlement of any such action subject to the provisions set forth
below, but Buyer may, at its election, participate in the defense of any action
or proceeding at its sole cost and expense. Should the Indemnifying Party fail
to defend any such action (except for failure resulting from Buyer's failure to
timely give the Indemnification Notice), then, in addition to any other remedy,
Buyer may settle or defend such action or proceeding through counsel of its own
choosing and may recover from the Indemnifying Party the amount of such
settlement, demand, or any judgment or decree and all of its costs and expenses,
including reasonable fees and disbursements of counsel. Buyer will not
compromise or settle any claim without the prior written consent of the
Indemnifying Party which consent shall not be unreasonably withheld; PROVIDED,
HOWEVER, if such approval is unreasonably withheld, the liability of Buyer will
be limited to the total sum represented in the amount of the proposed compromise
or settlement and the amount of the Buyer's reasonable counsel fees incurred in
defending such claim, as permitted by the preceding sentence, accrued at the
time said approval is unreasonably withheld. Notwithstanding the preceding
sentence, the foregoing limitation on the liability of Buyer shall only be
applicable if (i) a complete release of the Indemnifying Party is contemplated
to be part of the proposed compromise or settlement of such third party claim
and (ii) the Indemnifying Party withholds its consent to such compromise or
settlement.
SECTION 9.5. PROCEDURE FOR INDEMNIFICATION WITH
RESPECT TO NON-THIRD-PARTY CLAIMS.
In the event that Buyer asserts the existence of an
Indemnifiable Claim (but excluding claims resulting from the assertion of
liability by third parties), it shall promptly give the Indemnifying Party a
Non-Third Party Claim Indemnification Notice. If the Indemnifying Party, within
30 days (or such greater time as may be necessary for the Indemnifying Party to
investigate such Indemnifiable Claim not to exceed 60 days), after receiving the
Non-Third Party Claim Indemnification Notice from Buyer, shall not give to Buyer
a Contest Notice, such assertion shall be deemed accepted and the amount of
claim shall be deemed a valid Indemnifiable Claim. During the time period set
forth in the preceding sentence, Buyer shall cooperate fully with the
Indemnifying Party in respect of such Indemnifiable Claim. In the event,
however, that the Indemnifying Party contests the assertion of a claim by giving
a Contest Notice to Buyer within said period, then if the parties hereto, acting
in good faith, cannot reach agreement with respect to such claim within ten days
after such notice the contested assertion of a claim shall be referred to
arbitration in accordance with Section 11.11 hereof.
-39-
<PAGE>
ARTICLE X. TERMINATION
SECTION 10.1. TERMINATION BY ANY PARTY HERETO. This Agreement
may be terminated and cancelled at any time prior to the Closing by Buyer on the
one hand or Seller and the Shareholders on the other hand upon written notice to
the proper party if: (i) any of the representations or warranties of Buyer,
Seller or any of the Shareholders, as the case may be, contained herein or in
any Schedule attached hereto shall prove to be inaccurate or untrue in any
material respect; or (ii) any obligation, term or condition to be performed,
kept or observed by Buyer, Seller or any of the Shareholders, as the case may
be, hereunder has not been performed, kept or observed in any material respect
at or prior to the time specified in this Agreement.
SECTION 10.2. TERMINATION BY BUYER. This Agreement may be
terminated and cancelled by Buyer without penalty, damages, payments or
liabilities whatsoever to either party: (i) with or without cause at any time
prior to the close of business on May 31, 1996; or (ii) at any time prior to the
Closing in the event of a material adverse loss or damage to the Property in
excess of $100,000, it being understood by the parties that none of the risk of
any such loss or damage prior to the Closing shall be borne by Buyer. In the
event of a loss or damage to the Property prior to the Closing and the Closing
shall have occurred, Buyer shall be entitled to receive any insurance proceeds
received by Seller or any of the Shareholders in respect of such loss or
damages.
ARTICLE XI. MISCELLANEOUS PROVISIONS
SECTION 11.1. NOTICES. All notices and other communications
required or permitted under this Agreement shall be deemed to have been duly
given and made if in writing and if served either by personal delivery to the
party for whom intended (which shall include delivery by Federal Express or
similar nationally recognized service) or three (3) business days after being
deposited, postage prepaid, certified or registered mail, return receipt
requested, in the United States mail bearing the address shown in this Agreement
for, or such other address as may be designated in writing hereafter by, such
party:
IF TO SELLER OR STALEY: 15303 Dallas Parkway
Suite 1060
Dallas, Texas 75248
Attention: Douglas Staley
with a copy to: Clements & Allen, P.C.
15303 Dallas Parkway
Suite 750
Dallas, Texas 75248
Attention: Robert M. Allen, Esq.
-40-
<PAGE>
IF TO ARMITAGE: Mr. Joseph Armitage
5564 Prestonhaven Drive
Dallas, Texas 75230
with a copy to: Jenkens & Gilchrist
1445 Ross Avenue
Suite 3200
Dallas, Texas 75202-2799
Attention: Gregory J. Schmitt, Esq.
IF TO MULVANEY: Mr. David Mulvaney
4 Peppercorn Court
New Castle, NEI 3HD
England
with a copy to: Baker & McKenzie
One Prudential Plaza
130 East Randolph Drive
Chicago, Illinois 60601
Attention: Nam H. Paik, Esq.
IF TO BUYER: Uniforce Information Services of
Texas, Inc.
415 Crossways Park Drive
Woodbury, New York 11797
Attention: Diane J. Geller, Esq.
with a copy to: Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: David J. Adler, Esq.
SECTION 11.2. ENTIRE AGREEMENT. This Agreement, the Additional
Documents, and the documents referred to herein embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous agreements and understandings, oral
or written, relative to said subject matter.
SECTION 11.3. BINDING EFFECT; ASSIGNMENT. This Agreement and
the various rights and obligations arising hereunder shall inure to the benefit
of and be binding upon Buyer, Seller and each of the Shareholders and their
respective successors and permitted assigns. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be transferred or assigned
(by operation of law or otherwise) by any of the parties hereto without the
prior written consent of the other parties except that Buyer shall have the
right to assign its rights but not its obligations hereunder to any affiliate of
Buyer. Any transfer or assignment of any of the rights, interests or obligations
hereunder
-41-
<PAGE>
in violation of the terms hereof shall be void and of no force or effect.
SECTION 11.4. CAPTIONS. The Article and Section headings of
this Agreement are inserted for convenience only and shall not constitute a part
of this Agreement in construing or interpreting any provision hereof.
SECTION 11.5. EXPENSES OF TRANSACTION. Seller and each of the
Shareholders shall pay all costs and expenses incurred by them in connection
with this Agreement and the transactions contemplated hereby, and will make all
necessary arrangements so that the Property will not be charged with or
diminished by any such cost or expense. Buyer shall pay all costs and expenses
incurred by it in connection with this Agreement and the transactions
contemplated hereby. The liability for sales, real estate transfer and/or
documentary taxes, if any, (but not income or similar type taxes) in connection
with the sale and delivery of the Property shall be the responsibility of Seller
and Buyer equally.
SECTION 11.6. WAIVER; CONSENT. This Agreement may not be
changed, amended, terminated, augmented, rescinded or discharged (other than by
performance), in whole or in part, except by a writing executed by each of the
parties hereto, and no waiver of any of the provisions or conditions of this
Agreement or any of the rights of a party hereto shall be effective or binding
unless such waiver shall be in writing and signed by the party claimed to have
given or consented thereto. Except to the extent that a party hereto may have
otherwise agreed to in writing, no waiver by that party of any condition of this
Agreement or breach by any other party of any of its obligations,
representations or warranties hereunder shall be deemed to be a waiver of any
other condition or subsequent or prior breach of the same or any other
obligation or representation or warranty by such other party, nor shall any
forbearance by the first party to seek a remedy for any noncompliance or breach
by such other party be deemed to be a waiver by the first party of its rights
and remedies with respect to such noncompliance or breach.
SECTION 11.7. NO THIRD PARTY BENEFICIARIES. Subject to Section
11.3 hereof, nothing herein, expressed or implied, is intended or shall be
construed to confer upon or give to any person, firm, corporation or legal
entity, other than the parties hereto, any rights, remedies or other benefits
under or by reason of this Agreement.
SECTION 11.8. COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
SECTION 11.9. GENDER. Whenever the context requires, words
used in the singular shall be construed to mean or include the plural and vice
versa, and pronouns of any gender shall be
-42-
<PAGE>
deemed to include and designate the masculine, feminine or neuter gender.
SECTION 11.10. REMEDIES OF BUYER. The Property is unique and
not readily available. Accordingly, Seller and each of the Shareholders
acknowledge that, in addition to all other remedies to which Buyer is entitled,
Buyer shall have the right to enforce the terms of this Agreement by a decree of
specific performance, provided Buyer is not in material default hereunder.
SECTION 11.11. ARBITRATION.
(a) Each of the parties hereto hereby irrevocably consents to
arbitration of any dispute, controversy or claim arising out of or
relating to this Agreement. Each of the parties hereto hereby
irrevocably waives, to the fullest extent legally possible, any
objection to the use of arbitration to resolve any such dispute,
controversy or claim. If the parties in good faith cannot resolve any
controversy or claim arising out of or related to this Agreement or in
connection with a breach thereof within 20 days after the claimant
gives written notice of such controversy or claim to the other parties,
any party may demand and commence arbitration of the controversy or
claim. In the event of a demand for arbitration, Seller and the
Shareholders involved in such arbitration shall jointly select one
arbitrator and Buyer shall select one arbitrator, within 30 days after
such demand shall have been given (the "Demand Date") and the two
arbitrators, within 45 days thereafter shall select a third arbitrator.
If the third arbitrator shall not be selected within 45 days after the
Demand Date, either Seller and the Shareholders, on the one hand, or
Buyer, on the other hand, may apply to the American Arbitration
Association (or any successor thereto) for the appointment of an
arbitrator in Chicago, Illinois and the parties shall be bound by the
appointments made by such Association. The arbitration shall be held in
Chicago, Illinois as promptly as practicable thereafter under the rules
of the American Arbitration Association in effect at the time such
controversy, claim or breach is submitted to arbitration. The award or
decision made in accordance with such rules shall be delivered in
writing to the parties hereto and shall be final, binding and
conclusive upon them in the absence of fraud and judgment upon such
award or decision may be entered in any court having jurisdiction
thereof. Seller and the Shareholders, on the one hand, and Buyer, on
the other hand, shall bear equally the cost of such arbitration.
(b) Notwithstanding the provisions of Section 11.11(a), the
parties hereto shall have the right to seek and obtain from a court of
competent jurisdiction a temporary restraining order, injunction,
specific performance or other equitable relief to enforce the
provisions of this Agreement.
-43-
<PAGE>
SECTION 11.12. GOVERNING LAW. This Agreement shall in all
respects be construed in accordance with and governed by the laws of the State
of New York, without regard to the principles of conflicts of laws thereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the day and year first above written.
WITNESSES: BUYER:
UNIFORCE INFORMATION SERVICES OF
TEXAS, INC.
By: /s/ Rosemary Maniscalco
-----------------------------
Name: Rosemary Maniscalco
Title: President
SELLER:
MONTARE INTERNATIONAL, INC.
By: /s/ Douglas Staley
-----------------------------
Name: Douglas Staley
Title: Vice-President
/s/ JOSEPH ARMITAGE
--------------------------------
JOSEPH ARMITAGE
/s/ DAVID MULVANEY
--------------------------------
DAVID MULVANEY
/s/ DOUGLAS STALEY
--------------------------------
DOUGLAS STALEY
-44-
RECEIVABLES PURCHASE AGREEMENT
AGREEMENT dated the 17th day of May, 1996 by and among UNIFORCE
INFORMATION SERVICES OF TEXAS, INC., a New York corporation ("Uniforce"),
MONTARE INTERNATIONAL, INC., a Texas corporation ("Montare"), JOSEPH ARMITAGE
("Armitage"), DAVID MULVANEY ("Mulvaney") and DOUGLAS STALEY ("Staley" and,
together with Armitage and Mulvaney, the "Shareholders").
W I T N E S S E T H:
WHEREAS, simultaneously herewith Uniforce, Montare and the Shareholders
are entering into (i) an Asset Purchase Agreement (the "AP Agreement") whereby
Uniforce is purchasing substantially all of the assets of Montare's personnel
service business and (ii) certain other agreements ancillary thereto (the
"Related Agreements") of which this agreement is one; and
WHEREAS, Montare wishes to sell, convey and assign, and Uniforce wishes
to purchase, all of Montare's right, title and interest in and to the
Receivables (as hereinafter defined) upon the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, the execution, delivery and performance of the AP Agreement
and each of the Related Agreements by Montare and the Shareholders, as the case
may be, is the inducement for Uniforce's execution, delivery and performance of
this Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the respective
agreements of the parties hereinafter set forth, Uniforce, Montare and the
Shareholders hereby agree as follows:
1. DEFINITIONS.
(a) "Aged Receivables" shall mean Receivables that are represented by
invoices dated from 61 to and including 120 days prior to the Closing Date.
(b) "Clients" shall mean customers for services rendered by Montare.
(c) "Closing Date" shall mean the date upon which the transactions
contemplated by the AP Agreement are consummated.
(d) "Conveyed Receivables" shall mean the Receivables purchased by
Uniforce on the Closing Date, consisting of the Current Receivables, the Aged
Receivables and the Defaulted Receivables.
(e) "Current Receivables" shall mean Receivables represented by
invoices that are dated not more than 60 days prior to the Closing Date.
(f) "Defaulted Receivables" shall mean Receivables represented by
invoices that are dated more than 120 days prior to the Closing Date.
(g) "Face Amount" shall mean the lesser of (i) the dollar amount of any
of the Conveyed Receivables reflected in Montare's invoices to Clients as of the
Closing Date or (ii) the dollar amount of such invoices as of the Closing Date,
reduced by (x) any payments received by Montare with respect to such invoices
prior to
-2-
<PAGE>
the Closing Date or (y) adjustments with respect to such invoices agreed to by
Montare prior to the Closing Date.
(h) "Receivables" shall mean all obligations of Clients to make
payments to Montare for services rendered, provided that such charges have been
billed to Clients on or before the Closing Date.
(i) "Reconveyed Receivables" shall mean any of the Conveyed Receivables
reconveyed to Montare by Uniforce upon the terms and subject to the conditions
set forth in Section 4 of this Agreement.
(j) "Settlement Date" shall mean the date 90 days after the Closing
Date.
2. SALE AND PURCHASE OF THE CONVEYED RECEIVABLES.
(a) Montare hereby sells, conveys and assigns to Uniforce, and Uniforce
hereby purchases from Montare, upon the terms and subject to the conditions set
forth in this Agreement, all of Montare's right, title and interest in and to
(i) the Current Receivables listed on Column A of Schedule 2.1 annexed hereto,
(ii) the Aged Receivables listed on Column B of Schedule 2.1 annexed hereto, and
(iii) the Defaulted Receivables listed on Column C of Schedule 2.1 annexed
hereto (together with the Current Receivables and the Aged Receivables, the
"Conveyed Receivables"). Schedule 2.1 also lists the Face Amount of each of the
Conveyed Receivables. Uniforce shall have the right to bill, collect and deposit
to its own account any payments received on account of the Conveyed Receivables,
subject, in all events, to the terms and conditions of this Agreement.
-3-
<PAGE>
(b) In consideration of the sale and conveyance of the Conveyed
Receivables and in full payment therefor, on the Closing Date, Uniforce shall
(i) pay to Montare in cash by wire transfer of immediately available funds in
accordance with Montare's written instructions, an amount equal to the total of
the Face Amounts of the Current Receivables less the sum of $250,000 and (ii)
deliver to Montare a non-interest bearing promissory note of Uniforce and
Uniforce Staffing Services, Inc. in the principal amount of $250,000, due and
payable on the Settlement Date, in the form of Exhibit A annexed hereto (the
"Note").
3. CONVEYED RECEIVABLES.
(a) Following the Closing Date, Uniforce shall use reasonable
commercial efforts to collect the Conveyed Receivables in accordance with their
respective terms and conditions; provided, however, nothing herein shall require
Uniforce to (i) commence litigation to collect any of the Conveyed Receivables
(unless Montare is in default hereof or, prior to Uniforce commencing any
action, Montare shall have (x) given its prior written consent to such action
and (y) agreed to be responsible for all of the costs of the litigation
including, without limitation, reasonable attorneys' fees); or (ii) accept less
than the Face Amount in satisfaction of any Conveyed Receivable, unless Montare
shall have agreed to reimburse Uniforce for the difference between the amount
proposed to be accepted in satisfaction of such Conveyed Receivable and the Face
Amount. Uniforce shall not discount or agree with any Client to accept less than
the Face Amount in satisfaction of any
-4-
<PAGE>
Conveyed Receivable without the prior written consent of Montare. Uniforce shall
deliver a written report to Montare approximately weekly as to any payments
received in the prior week in respect of the Conveyed Receivables, including the
name of each Client and the amounts paid by it.
(b) If prior to the Settlement Date, a Client obligated to pay one or
more of the Current Receivables notifies Uniforce or Montare that it has become
the subject of a proceeding or case commenced under any federal or state
bankruptcy or insolvency law (such related Receivables are hereinafter referred
to as the "Bankruptcy Receivables"), such Bankruptcy Receivables shall be
treated in accordance with Section 4 hereof. Montare shall promptly notify
Uniforce in writing if any Client contacts Montare regarding a Conveyed
Receivable and the nature and substance of such contact.
4. RECONVEYANCE
(a) If as of the Settlement Date, Uniforce has collected in full all of
the Current Receivables, Uniforce shall pay the Note without any set off.
(b) If and to the extent that on the Settlement Date any of the Current
Receivables have not been collected in full (the "Uncollected Current
Receivables") by Uniforce, Uniforce shall set off the amount of such Uncollected
Current Receivables (to a maximum of $250,000) against the amount of the Note
and, provided the amount of the Uncollected Current Receivables does not exceed
$250,000, pay to Montare in cash by wire transfer of immediately
-5-
<PAGE>
available funds in accordance with Montare's written instructions an amount
equal to the remaining balance of the Note in full and final payment of the
Current Receivables.
(c) If on the Settlement Date the amount of Uncollected Current
Receivables exceeds $250,000, the Note thereupon shall be cancelled and returned
to Uniforce.
(d) Anything set forth in this Agreement to the contrary
notwithstanding, (i) if, for any reason, Uniforce is unable to set off any
Uncollected Current Receivables against the Note and has paid to Montare the
principal amount or any portion thereof or (ii) if, for any reason, Uniforce is
unable to set off any Bankruptcy Receivable against the Note, each of the
Shareholders shall, within five days following the Settlement Date, pay to
Uniforce the amount of such Uncollected Current Receivables and/or Bankruptcy
Receivables, as the case may be, (to a maximum of $250,000) in equal
proportions.
(e) Within 10 days after the later of (i) the Settlement Date or (ii)
the date upon which Uniforce receives payment from each of the Shareholders as
contemplated by Section 4(d) hereof, Uniforce shall transfer and assign to
Montare all of its right, title and interest in and to the Uncollected Current
Receivables and Bankruptcy Receivables and the remaining uncollected Aged
Receivables and the Defaulted Receivables (hereinafter, collectively, the
"Reconveyed Receivables"); provided, however, that if upon such date the amount
of Uncollected Current Receivables and/or Bankruptcy Receivables exceeds
$250,000, the
-6-
<PAGE>
transfer by Uniforce to Montare of the Reconveyed Receivables shall be postponed
until such time as such amount is no greater than $250,000. Notwithstanding the
foregoing, Clients shall be directed to continue to make all payments on account
of the Reconveyed Receivables to the account maintained by Uniforce. At least
once a week, Uniforce shall remit to Montare all payments received by Uniforce
with respect to the Reconveyed Receivables.
(f) Prior to the Settlement Date, or the date upon which the transfer
described in Section 4(e) hereof is effected, Uniforce shall remit to Montare,
on a weekly basis, any amounts theretofore received by it with respect to the
Defaulted Receivables and/or the Aged Receivables and not previously distributed
to Montare.
(g) In any case in which a collection from a Client cannot be
specifically identified to a Receivable, it shall, for purposes of this
Agreement, be deemed to be specifically identified to such Client's Receivables
on a first in, first out basis.
(h) After a Receivable has been reconveyed to Montare by Uniforce
pursuant to this Agreement, or at any time in the case of a Defaulted
Receivable, Montare shall, upon notice to Uniforce, have the right to take all
lawful steps to collect such Receivables from the applicable Clients, provided
all such collection efforts shall be coordinated with Uniforce and Uniforce
shall have the option but not the obligation to pursue the applicable Clients
for collection of the Receivables.
5. AUTHORIZATION.
-7-
<PAGE>
(a) On the Closing Date, and from time to time thereafter, as requested
by Uniforce, Montare shall provide Uniforce with such number of copies as
Uniforce may request of a letter in the form of Exhibit B annexed hereto, signed
by Staley and addressed to Montare's Clients giving instructions consistent with
the terms of this Agreement for payment of all Receivables, including the
Defaulted Receivables.
(b) Montare hereby constitutes Uniforce (and any designee or assignee
of Uniforce) with full power to carry out in Montare's name and stead the terms
and conditions of this Agreement with respect to the collection of the Conveyed
Receivables including, without limitation, the following powers which shall be
deemed irrevocable: (i) to receive, take, endorse, assign, deliver, accept and
deposit, in Montare's or Uniforce's name, any and all checks, remittances and
other instruments and documents in payment of the Conveyed Receivables; (ii) to
receive, open and dispose of all mail addressed to Montare at the Depository (as
hereinafter defined) (iii) to transmit to Clients notice of Uniforce's interest
in the Conveyed Receivables and to request from the Clients at any time in
Montare's or Uniforce's name information concerning the Conveyed Receivables and
the amounts due thereon; (iv) to notify Clients to make payments directly to
Uniforce; and (v) to take or commence in Montare's or Uniforce's name all steps,
actions, suits or proceedings that Uniforce deems necessary or desirable to
effect collection of the Conveyed Receivables.
-8-
<PAGE>
(c) Except as provided in Section 3(a) hereof, nothing in the powers
set forth in Section 5(b) shall obligate Uniforce to accept less than the Face
Value for the Conveyed Receivables. Except as provided in Section 3(a) hereof,
Uniforce shall not be obligated to commence suit to collect any amounts due in
respect of the Conveyed Receivables.
(d) Upon request, Montare and its officers shall execute and deliver
any document or instrument reasonably necessary or desirable to confirm the
foregoing powers.
(e) From and after the Closing Date, all payments and correspondence in
respect of the Receivables shall be directed to an address or post office box
from time to time specified in writing by Uniforce (the "Depository").
(f) Montare agrees that (i) it will instruct the Clients to send all
payments on account of the Conveyed Receivables to the Depository and (ii) if
payment for any of the Conveyed Receivables is made to or received by Montare
(or any agent or representative thereof), Montare shall be deemed to have
received such payment in trust for Uniforce and shall promptly remit such
payment to Uniforce; PROVIDED, HOWEVER, that upon the transfer of the Reconveyed
Receivables to Montare pursuant to Section 4 hereof, Montare shall be entitled
to all subsequent payments with respect to the Reconveyed Receivables.
6. MISCELLANEOUS PROVISIONS
(a) NOTICES. All notices and other communications required or permitted
under this Agreement shall be deemed to have been duly
-9-
<PAGE>
given and made if in writing and if served either by personal delivery to the
party for whom intended (which shall include delivery by Federal Express or
similar nationally recognized service) or three (3) business days after being
deposited, postage prepaid, certified or registered mail, return receipt
requested, in the United States mail bearing the address shown in this Agreement
for, or such other address as may be designated in writing hereafter by, such
party:
If to Montare or the Shareholders:
Montare International, Inc.
15303 Dallas Parkway, Suite 1060
Dallas, Texas 75248
Attention: Mr. Glenn Perkins
with a copy to: Clements & Allen
15303 Dallas Parkway
Suite 750
Dallas, Texas 75248
Attention: Robert Allen, Esq.
If to Uniforce: Uniforce Information Services
of Texas, Inc.
415 Crossways Park Drive
Woodbury, New York 11797
Attention: Diane J. Geller, Esq.
with a copy to: Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: David J. Adler, Esq.
(b) ENTIRE AGREEMENT. This Agreement (and the exhibits and schedules
annexed hereto) embody the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, oral or written, relative to said
subject matter.
-10-
<PAGE>
(c) BINDING EFFECT; ASSIGNMENT. This Agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon Uniforce, Montare and each of the Shareholders and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be transferred or assigned (by
operation of law or otherwise) by any of the parties hereto without the prior
written consent of the other parties except that Uniforce shall have the right
to assign its rights but not its obligations hereunder to any affiliate thereof.
Any transfer or assignment of any of the rights, interests or obligations
hereunder in violation of the terms hereof shall be void and of no force or
effect.
(d) CAPTIONS. The Section headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement in construing
or interpreting any provision hereof.
(e) WAIVER; CONSENT. This Agreement may not be changed, amended,
terminated, augmented, rescinded or discharged (other than by performance), in
whole or in part, except by a writing executed by each of the parties hereto,
and no waiver of any of the provisions or conditions of this Agreement or any of
the rights of a party hereto shall be effective or binding unless such waiver
shall be in writing and signed by the party claimed to have given or consented
thereto. Except to the extent that a party hereto may have otherwise agreed to
in writing, no waiver by that party of any condition of this Agreement or breach
by any other party of any of its obligations, representations or warranties
hereunder shall be deemed to be a waiver of any other condition or subsequent or
prior
-11-
<PAGE>
breach of the same or any other obligation or representation or warranty by such
other party, nor shall any forbearance by the first party to seek a remedy for
any noncompliance or breach by such other party be deemed to be a waiver by the
first party of its rights and remedies with respect to such noncompliance or
breach.
(f) NO THIRD PARTY BENEFICIARIES. Subject to Section 6(c) hereof,
nothing herein, expressed or implied, is intended or shall be construed to
confer upon or give to any person, firm, corporation or legal entity, other than
the parties hereto, any rights, remedies or other benefits under or by reason of
this Agreement.
(g) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
(h) GENDER. Whenever the context requires, words used in the singular
shall be construed to mean or include the plural and vice versa, and pronouns of
any gender shall be deemed to include and designate the masculine, feminine or
neuter gender.
(i) GOVERNING LAW; ARBITRATION.
(A) This Agreement shall in all respects be construed in
accordance with and governed by the laws of the State of New York,
without regard to the principles of conflicts of laws thereof.
(B) Each of the parties hereto hereby irrevocably consents to
arbitration of any dispute, controversy or claim arising out of or
relating to this Agreement. Each of the parties hereto hereby
irrevocably waives, to the fullest
-12-
<PAGE>
extent legally possible, any objection to the use of arbitration to
resolve any such dispute, controversy or claim. If the parties in good
faith cannot resolve any controversy or claim arising out of or related
to this Agreement or in connection with a breach thereof within 20 days
after the claimant gives written notice of such controversy or claim to
the other parties, any party may demand and commence arbitration of the
controversy or claim. In the event of a demand for arbitration, Montare
and the Shareholders involved in such arbitration shall jointly select
one arbitrator and Uniforce shall select one arbitrator, within 30 days
after such demand shall have been given (the "Demand Date") and the two
arbitrators, within 45 days thereafter shall select a third arbitrator.
If the third arbitrator shall not be selected within 45 days after the
Demand Date, either Montare and the Shareholders, on the one hand, or
Uniforce, on the other hand, may apply to the American Arbitration
Association (or any successor thereto) for the appointment of an
arbitrator in Chicago, Illinois and the parties shall be bound by the
appointments made by such Association. The arbitration shall be held in
Chicago, Illinois as promptly as practicable thereafter under the rules
of the American Arbitration Association in effect at the time such
controversy, claim or breach is submitted to arbitration. The award or
decision made in accordance with such rules shall be delivered in
writing to the parties hereto and shall be final, binding and
conclusive upon them in the absence of fraud and judgment upon
-13-
<PAGE>
such award or decision may be entered in any court having jurisdiction
thereof. Montare and the Shareholders, on the one hand, and Uniforce,
on the other hand, shall bear equally the cost of such arbitration.
(C) Notwithstanding the provisions of Section 6(i)(B) hereof,
the parties hereto shall have the right to seek and obtain from a court
of competent jurisdiction a temporary restraining order, injunction,
specific performance or other equitable relief to enforce the
provisions of this Agreement.
(j) INSPECTION OF RECORDS. At any reasonable times authorized
representatives of Montare, or their designated agents, shall have the right to
inspect the records of Uniforce relative to the Conveyed Receivables, at
Montare's cost and expense.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WITNESSES:
UNIFORCE INFORMATION SERVICES
OF TEXAS, INC.
By: /s/ Rosemary Maniscalco
---------------------------
Name: Rosemary Maniscalco
Title: President
MONTARE INTERNATIONAL, INC.
By: /s/ Doug Staley
---------------------------
Name: Doug Staley
Title: Sr. Vice President
/s/ JOSEPH ARMITAGE
------------------------------
JOSEPH ARMITAGE
-14-
<PAGE>
/s/ DAVID MULVANEY
------------------------------
DAVID MULVANEY
/s/ DOUGLAS STALEY
------------------------------
DOUGLAS STALEY
-15-
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND OTHER LOAN DOCUMENTS
This FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT AND OTHER LOAN
DOCUMENTS (this "Amendment") is dated as of March 27, 1996 by and among
BRENTWOOD SERVICE GROUP, INC., a New York corporation, COMPUTER CONSULTANTS
FUNDING & SUPPORT, INC., a New York corporation, LABFORCE OF AMERICA, INC., a
New York corporation, PRO UNLIMITED, INC., a New York corporation, TEMPORARY
HELP INDUSTRY SERVICING COMPANY, INC., a New York corporation, UNIFORCE MIS
SERVICES OF GEORGIA, INC., a Georgia corporation, and UNIFORCE STAFFING
SERVICES, INC., a New York corporation (collectively, "Original Borrowers" and
individually, each an "Original Borrower"), PROFESSIONAL STAFFING FUNDING &
SUPPORT, INC., a New York corporation ("PSF&S") (PSF&S and Original Borrowers
referred to herein collectively, as "Borrowers" and individually, each as a
"Borrower"), UNIFORCE SERVICES, INC., a New York corporation ("Holdings"),
HELLER FINANCIAL, INC., a Delaware corporation (in its individual capacity,
"Heller"), for itself, as Lender, and as Agent for Lenders ("Agent"), and UNITED
JERSEY BANK, a New Jersey banking corporation, as a Lender ("UJB").
RECITALS
WHEREAS, Original Borrowers, Holdings, Heller and Agent are
parties to that certain Loan and Security Agreement dated as of December 8, 1995
(as from time to time amended, restated, supplemented or otherwise modified, the
"Loan Agreement"; capitalized terms used but not otherwise defined herein having
the definitions provided therefor in the Loan Agreement) and various other Loan
Documents;
WHEREAS, UJB and Heller have entered into that certain Lender
Addition Agreement of even date herewith, pursuant to which UJB will become a
Lender under the Loan Agreement concurrently with the effectiveness hereof; and
WHEREAS, the parties hereto desire to amend the Loan Agreement
and the Loan Documents to include PSF&S as a Borrower thereunder and as
otherwise herein set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:
1. LIMITED CONSENT.
(a) Notwithstanding the provisions of SUBSECTIONS 7.1 and 7.2 of
the Loan Agreement, the Agent hereby consents to the incurrence by Holdings of
its obligations under (1) the Lease Guaranty dated as of October 25, 1995 by
Holdings in favor of PeopleSoft Credit Corporation and (2) the Guaranty dated as
of February 28, 1996 by Holdings in favor of Siemens Credit
<PAGE>
Corporation, as each such document is in effect on such date without giving
effect to any amendment or other modification thereto; and
(b) Notwithstanding the provisions of SUBSECTION 7.5 of the Loan
Agreement, the Agent hereby consents to the purchase, on or prior to April 30,
1996, by Holdings from Vince Brannon and Steven Tully of 13,794 shares in the
aggregate for an amount not to exceed $165,000 in the aggregate, together with
all costs, fees and expenses relating thereto.
2. AMENDMENT TO THE LOAN AGREEMENT AND OTHER LOAN DOCUMENTS. Subject to
the terms and conditions set forth in SECTION 5 of this Amendment, the Loan
Agreement and the other Loan Documents identified below are hereby amended as
follows:
(a) The definition of "Borrowers" contained in the preamble to the
Loan Agreement is hereby amended to include PSF&S therein. In addition, each
reference to "Borrowers" contained in any Loan Document are hereby deemed to
include PSF&S therein.
(b) The definition of "Inactive Subsidiary" contained in
SUBSECTION 1.1 of the Loan Agreement is hereby amended to exclude the reference
to PSF&S.
(c) The following text is inserted as the final text of the first
sentence of SUBSECTION 6.4 of the Loan Agreement:
"other than Fiscal Year 1996 and will not exceed $1,900,000
for Fiscal Year 1996"
(d) The Form of Borrowing Base Certificate contained in EXHIBIT
1.1(A) of the Loan Agreement is hereby amended such that each Borrowing Base
Certificate delivered to Agent from and after the date of this Amendment shall
include a reference to PSF&S as a Borrower where applicable therein.
(e) The Form of Compliance Certificate in EXHIBIT 1.1(B) of the
Loan Agreement is hereby amended to include a reference to PSF&S as a Borrower
where applicable therein.
(f) Upon the effectiveness of this Amendment each reference to
PSF&S as a "Guarantor" in the Loan Documents is hereby deleted.
(g) Upon the effectiveness of this Amendment each reference to
PSF&S as a "Grantor" in the Loan Documents is hereby deleted.
(h) PSF&S shall be deemed to have acted in its capacity as a
Borrower, rather than as a "Grantor", in appointing Olshan Grundman Frome &
Rosenzweig LLP ("OGF&R") as its agent to receive service of process in New York
pursuant to the letter dated the Closing Date between PSF&S and OGF&R.
-2-
<PAGE>
3. NO WAIVER OF PAST DEFAULTS. Nothing contained herein shall be deemed to
constitute a waiver of any Default or Event of Default that may heretofore or
hereafter occur or have occurred and be continuing or, except as expressly
provided herein, to modify any provision of the Loan Agreement.
4. REPRESENTATIONS AND WARRANTIES. Holdings and Borrowers jointly and
severally represent and warrant to Agent and Lenders that the execution,
delivery and performance by Holdings and each Borrower of this Amendment and the
related Loan Documents are within each such Person's corporate powers, have been
duly authorized by all necessary corporate action (including, without
limitation, all necessary shareholder approval) of each such Person, have
received all necessary governmental approvals, and do not and will not
contravene or conflict with any provision of law applicable to any such Person,
the certificate or articles of incorporation or bylaws of any such Person, or
any order, judgment or decree of any court or other agency of government or any
contractual obligation binding upon any such Person; and this Amendment, the
Loan Agreement and each Loan Document, each as amended hereby, is the legal,
valid and binding obligation of Holdings and each Borrower, as applicable,
enforceable against each such Person in accordance with its terms.
5. CONDITIONS. The effectiveness of the amendments stated in this
Amendment is subject to the following conditions precedent or concurrent:
(a) AMENDMENT. This Amendment shall have been duly executed by all
parties hereto and delivered to Agent.
(b) LENDER ADDITION AGREEMENT. The Lender Addition Agreement of
even date herewith between Heller and UJB shall have been duly executed and
delivered to Agent.
(c) FIRST AMENDED TERM NOTES. The First Amended Term Notes of even
date herewith shall have been duly executed and delivered by Borrowers to Agent.
Upon Agent's receipt of such Notes, the Term Note made as of December 8, 1995 in
favor of Heller shall be returned to Borrower Representative with reasonable
promptness.
(d) FIRST AMENDED REVOLVING NOTES. The First Amended Revolving
Notes of even date herewith shall have been duly executed and delivered by
Borrowers to Agent. Upon Agent's receipt of such Notes, the Revolving Notes made
as of December 8, 1995 in favor of Heller shall be returned to Borrower
Representative with reasonable promptness.
(e) NO DEFAULT. No Default or Event of Default under the Loan
Agreement, as amended hereby, shall have occurred and be continuing.
(f) WARRANTIES AND REPRESENTATIONS. The warranties and
representations of Holdings and each Borrower contained in this Amendment, the
Loan Agreement, as amended hereby, and the other Loan Documents shall be true
and correct as of the effective date hereof, with the same effect as though made
on such date, except to the extent that such warranties and representations
-3-
<PAGE>
expressly relate to an earlier date, in which case such warranties and
representations shall have been true and correct as of such earlier date.
(g) LEGAL OPINION. A legal opinion of counsel for PSF&S, in
substantially the form delivered by counsel for the original Borrowers on the
Closing Date, shall have been duly executed and delivered to Agent.
(h) SECRETARY'S CERTIFICATE. A Secretary's Certificate of PSF&S
shall have been duly executed and delivered to Agent certifying that (i) there
have been no amendments or other modifications to the certificate of
incorporation or bylaws of PSF&S since the Closing Date, (ii) PFS&S is in good
standing in its state of incorporation, the state in which the principal place
of business of PSF&S is located and all states in which its activities require
it to be qualified and/or licensed to do business, (iii) attached are
resolutions of the PSF&S Board of Directors authorizing and approving the
execution, delivery and performance of the Loan Documents by PSF&S as a Borrower
and (iv) the persons named on such certificate are the duly elected and
qualified officers of PSF&S holding the offices set forth opposite their
respective names, and that the signatures set forth opposite their respective
names are their genuine signatures.
6. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Amendment are for
convenience only, and shall not affect the construction of this Amendment.
(b) GOVERNING LAW. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES. Whenever possible each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Amendment shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Amendment.
(c) COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
(d) SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon,
and shall inure to the sole benefit of, Borrowers, Holdings, Agent and Lenders,
and their respective successors and assigns.
(e) REFERENCES. Any reference to the Loan Agreement contained in
any notice, request, certificate, or other document executed concurrently with
or after the execution and delivery of this Amendment shall be deemed to include
this Amendment unless the context shall otherwise require.
-4-
<PAGE>
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything contained
herein, the terms of this Amendment are not intended to and do not serve to
effect a novation as to the Loan Agreement; instead, it is the express intention
of the parties hereto to reaffirm the Indebtedness created under the Loan
Agreement which is evidenced by the Notes and secured by the Collateral. The
Loan Agreement, as amended hereby, and each of the other Loan Documents shall
remain in full force and effect.
(g) COSTS, EXPENSES AND INDEMNITY. Borrowers affirm and
acknowledge that SECTION 10.1 and SECTION 10.2 of the Loan Agreement apply to
this Amendment and the transactions and agreements and documents contemplated
hereunder.
[signature page follows]
-5-
<PAGE>
IN WITNESS WHEREOF, this First Amendment to Loan and Security Agreement
has been duly executed and delivered as of the day and year first above written.
COMPUTER CONSULTANTS
FUNDING & SUPPORT, INC.
LABFORCE OF AMERICA, INC.
PRO UNLIMITED, INC.
PROFESSIONAL STAFFING
FUNDING & SUPPORT, INC.
TEMPORARY HELP INDUSTRY
SERVICING COMPANY, INC.
UNIFORCE MIS SERVICES OF GEORGIA,
INC.
UNIFORCE STAFFING SERVICES, INC.
For each of the foregoing:
By: /s/ HARRY MACCARRONE
----------------------------
Title: Vice President - Finance
BRENTWOOD SERVICE GROUP, INC.
By: /s/ HARRY MACCARRONE
----------------------------
Title: President
HELLER FINANCIAL, INC.,
as Agent and a Lender
By: /s/ SHYAM AMLADI
----------------------------
Title: Senior Vice President
UNITED JERSEY BANK,
as a Lender
By: /s/ ROBERT MUNNS
----------------------------
Title: Vice President
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND CONSENT
This SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT AND CONSENT (this
"Amendment") is dated as of May 17, 1996 by and among BRENTWOOD SERVICE GROUP,
INC., a New York corporation ("BSGI"), COMPUTER CONSULTANTS FUNDING & SUPPORT,
INC., a New York corporation ("CCFS"), LABFORCE OF AMERICA, INC., a New York
corporation ("LOFI"), PRO UNLIMITED, INC., a New York corporation ("PUI"),
TEMPORARY HELP INDUSTRY SERVICING COMPANY, INC., a New York corporation
("THISCO"), UNIFORCE MIS SERVICES OF GEORGIA, INC., a Georgia corporation
("UMIS-GA"), UNIFORCE STAFFING SERVICES, INC., a New York corporation ("USS")
and PROFESSIONAL STAFFING FUNDING & SUPPORT, INC., a New York Corporation
("PSFS") (with BSGI, CCFS, LOFI, PUI, THISCO, UMIS-GA, USS and PSFS are
sometimes referred to herein collectively, as "Original Borrowers" and
individually, each as an "Original Borrower"), UNIFORCE INFORMATION SERVICES OF
TEXAS, INC. a New York Corporation ("UIS-TX") (UIS-TX and Original Borrowers are
sometimes referred to herein collectively, as "Borrowers" and individually, each
as a "Borrower"), UNIFORCE SERVICES, INC., a New York corporation ("Holdings"),
HELLER FINANCIAL, INC., a Delaware corporation (in its individual capacity,
"Heller"), for itself, as Lender, and as Agent for Lenders ("Agent"), UNITED
JERSEY BANK, a New Jersey banking corporation, as a Lender ("UJB"), BRANNON &
TULLY, INC., a Georgia corporation ("B&T"), E.O. OPERATIONS CORP., a New York
corporation ("EOOC"), E.O. SERVICING CO., INC., a New York corporation ("EOSC"),
STAFFING INDUSTRY FUNDING & SUPPORT, INC. a New York corporation ("SIFS"),
TEMPFUNDS INTERNATIONAL, INC., a New York corporation ("TII"), THISCO OF CANADA,
INC., a New York corporation ("THISCO-CAN"), UNIFORCE INFORMATION SERVICES,
INC., a New York corporation ("UISI"), UNIFORCE MEDICAL OFFICE SUPPORT, INC., a
New York corporation ("UMOSI"), UNIFORCE PAYROLLING SERVICES, INC., a New York
corporation ("UPSI"), USI INC. OF CALIFORNIA, a California corporation
("USI-CA"), UTS OF DELAWARE, INC., a Delaware corporation ("UTS-DE"), and UTS
CORP. OF MINNESOTA, a Minnesota corporation ("UTS-MN") (each of B&T, EOOC, EOSC,
SIFS, TII, THISCO-CAN, UISI, UMOSI, UPSI, USI-CA, UTS-DE, UTS-MN are sometimes
referred to herein collectively, as "Guarantors" and individually, each as a
"Guarantor").
RECITALS
WHEREAS, Original Borrowers, Holdings, Heller and Agent are
parties to that certain Loan and Security Agreement dated as of December 8, 1995
(as it has been or may from time to time be amended, restated, supplemented or
otherwise modified, the "Loan Agreement"; capitalized terms used but not
otherwise defined herein having the definitions provided therefor in the Loan
Agreement) and various other Loan Documents; and
WHEREAS, each of the Guarantors has executed that certain
Guaranty dated December 8, 1995 (the "Guaranty") guarantying the Obligations of
the Borrowers under the Loan Agreement; and
<PAGE>
WHEREAS, each of Holdings, USS and THISCO (each of the
foregoing sometimes referred to herein individually as a "Pledgor" and together
as "Pledgors") has executed that certain Pledge Agreement dated December 8, 1995
(the "Pledge Agreement"), pursuant to which each Pledgor pledged to Agent a
securing interest in all of the capital stock of each Subsidiary owned by such
Pledgor; and
WHEREAS, USS desires to establish UIS-TX as a wholly-owned
subsidiary; and
WHEREAS, the establishment of UIS-TX by USS would create a
breach of the covenant contained in subsection 7.12 of the Loan Agreement; and
WHEREAS, UIS-TX and Original Borrowers deem it in their best
interest for UIS-TX to become a Borrower under the Loan Agreement for the
purpose, among other things, of obtaining Loans and other financial
accommodations under the Loan Agreement to be used for, among other things,
acquiring certain of the assets of MONTARE INTERNATIONAL, INC., a Texas
corporation ("MONTARE") pursuant to the terms set forth in (i) that certain
Asset Purchase Agreement dated May 10, 1996 among UIS-TX, MONTARE, Joseph
Armitage, David Mulvaney and Douglas Staley and (ii) that certain Receivables
Purchase Agreement (the "Receivables Agreement") dated May 17, 1996 among
UIS-TX, MONTARE, Joseph Armitage, David Mulvaney and Douglas Staley (the
"Acquisition"); and
WHEREAS, pursuant to the Receivables Agreement UIS-TX and USS
have agreed to execute that certain Non-Negotiable Promissory Note in the form
of Exhibit A to the Receivables Agreement (the "Note"); and
WHEREAS, the incurrence of the Indebtedness evidenced by the
Note by UIS-TX and USS would create a breach of the covenants contained in
subsections 7.1 and 7.6(B)(7) of the Loan Agreement; and
WHEREAS, Borrowers have requested that Agent and Requisite
Lenders consent to (i) the establishment of UIS-TX as a subsidiary of USS and
(ii) the incurrence of the Indebtedness evidenced by the Note, and Agent and
Requisite Lenders have agreed to do so, subject to the terms and conditions set
forth herein; and
WHEREAS, Original Borrowers have requested that Agent and
Requisite Lenders amend the Loan Agreement and the Loan Documents to, among
other things, include UIS-TX as a Borrower thereunder and Agent and Requisite
Lenders have agreed to do so, subject to the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, and for other good and valuable
consideration, the parties hereto agree as follows:
1. LIMITED CONSENT. Subject to the terms and conditions set forth in
Section 7 of this Amendment and notwithstanding the provisions of subsections
7.1, 7.6(B)(7) and
2
<PAGE>
7.12 of the Loan Agreement, Agent and Requisite Lenders hereby consent to (i)
the establishment of UIS-TX as a wholly-owned subsidiary of USS and (ii) the
incurrence by USS and UIS-TX of the Indebtedness evidenced by the Note.
2. AMENDMENT TO GUARANTY. Subject to the terms and conditions set forth
in Section 7 of this Amendment, the Guaranty is hereby amended as follows:
UIS-TX and PSFS are each deemed to be a Borrower under the Guaranty and by its
execution and delivery of this Amendment, each Guarantor (i) acknowledges
receipt of this Amendment, (ii) confirms that any Obligations of each of UIS-TX
and PSFS are guaranteed by Guarantors under the Guaranty, and (iii) confirms
that the terms and conditions of the Guaranty, all of its obligations under the
Guaranty and any documents it has executed in securing such Guaranty shall
remain valid and in full force and effect.
3. AMENDMENT TO PLEDGE AGREEMENT. Subject to the terms and conditions
set forth in Section 7 of this Amendment, the Guaranty is hereby amended as
follows:
(a) Wherever it may occur, the term "Pledged Shares" in the Pledge
Agreement shall be deemed to include the capital stock of UIS-TX and
each of the Pledgors under the Pledge Agreement, by its execution and
delivery of this Amendment, confirms that such capital stock shall be
subject to all the terms and conditions of the Pledge Agreement.
(b) UIS-TX shall be deemed to be a "Subsidiary" under the Pledge
Agreement.
(c) Schedule I to the Pledge Agreement is hereby supplemented by adding
thereto, the information contained on Schedule I to the Pledge
Agreement attached hereto.
4. AMENDMENT TO THE LOAN AGREEMENT AND OTHER LOAN DOCUMENTS. Subject to
the terms and conditions set forth in Section 7 of this Amendment, the Loan
Agreement and the other Loan Documents are hereby amended as follows:
(a) The definition of "Borrowers" contained in the preamble to the Loan
Agreement is hereby amended to include UIS-TX therein. In addition,
each reference to "Borrowers" contained in any Loan Document are hereby
deemed to include UIS-TX therein.
(b) The Form of Borrowing Base Certificate contained in EXHIBIT 1.1(A)
of the Loan Agreement is hereby amended such that each Borrowing Base
Certificate delivered to Agent from and after the date of this
Amendment shall include a reference to UIS-TX as a Borrower where
applicable therein.
(c) The Form of Compliance Certificate in EXHIBIT 1.1(B) of the Loan
Agreement is hereby amended to include a reference to UIS-TX as a
Borrower where applicable therein.
3
<PAGE>
(d) By its execution of this Amendment, UIS-TX agrees, from and after
the date hereof, to be a Borrower under the Loan Agreement, to assume
all of the obligations of a Borrower thereunder, including, without
limitation, the provisions of subsection 11.1 therein, and to make and
be bound by all of the representations and warranties, covenants, terms
and conditions thereof as if it were a direct signatory thereto, all of
which representations, and warranties, covenants, terms and conditions
are acknowledged and are incorporated herein by this reference. Each of
the Original Borrowers hereby reaffirms the validity of its obligations
under the Loan Agreement, including, without limitation, the provisions
of subsection 11.1 therein. Each of the Original Borrowers acknowledges
and agrees that UIS-TX shall hereafter be a Borrower and shall be bound
by the terms and conditions of the Loan Agreement, including, without
limitation, the provisions of subsection 11.1 therein, as if it were a
direct signatory thereto.
(e) Each of the Schedules to the Loan Agreement is hereby supplemented
by adding thereto, the information from the corresponding schedules
attached hereto.
5. NO WAIVER OF PAST DEFAULTS. Nothing contained herein shall be deemed
to constitute a waiver of any Default or Event of Default that may heretofore or
hereafter occur or have occurred and be continuing or, except as expressly
provided herein, to modify any provision of the Loan Agreement.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. Holdings, Borrowers and
Guarantors jointly and severally represent, warrant and covenant to Agent and
Lenders that:
(a) The execution, delivery and performance of this Amendment and the
related Loan Documents by Holdings, each Borrower and each Guarantor
(except for B&T) are within each such Person's corporate powers, have
been duly authorized by all necessary corporate action (including,
without limitation, all necessary shareholder approval) of each such
Person, have received all necessary governmental approvals, and do not
and will not contravene or conflict with any provision of law
applicable to any such Person, the certificate or articles of
incorporation or bylaws of any such Person, or any order, judgment or
decree of any court or other agency of government or any contractual
obligation binding upon any such Person; and this Amendment, the Loan
Agreement and each Loan Document, each as amended hereby, is the legal,
valid and binding obligation of Holdings, each Borrower and each
Guarantor (except for B&T), as applicable, enforceable against each
such Person in accordance with its terms.
(b) Upon the granting of Agent and Requisite Lenders of the limited
consent contained in Section 1 of this Amendment, the Acquisition is a
Permitted Acquisition and that all of the conditions precedent set
forth in subsection 7.6(B) of the Loan Agreement have been satisfied;
provided, that certain information that is designated in subsection
7.6(B) of the Loan Agreement as being included on the Acquisition Pro
Forma and the Acquisition Projections has been provided to Agent
4
<PAGE>
in a number of additional documents as previously delivered to Agent,
and together with such additional documents the Acquisition Pro Forma
and the Acquisition Projections satisfy the informational requirements
of said subsection.
(c) B&T is an Inactive Subsidiary and, as such, B&T does not currently
nor shall it in the future, without Agent's and Requisite Lenders'
prior written consent, (i) hold any assets, (ii) incur any liabilities
(other than corporate franchise taxes and other similar charges
incidental to the maintenance of its corporate existence and
intercompany loans incurred in accordance with subsection 7.1(b)(ii) of
the Loan Agreement solely for the purpose of paying such taxes and
charges) or (iii) engage in any business activity.
7. CONDITIONS. The effectiveness of the amendments stated in this
Amendment is subject to the following conditions precedent or concurrent:
(a) This Amendment shall have been duly executed by all parties hereto
and delivered to Agent.
(b) The effectiveness of this Agreement is conditioned on (i) the
Acquisition being completed, (ii) Borrowers having satisfied all the
conditions precedent set forth in subsection 7.6(B) of the Loan
Agreement; provided, that certain information that is designated in
said subsection as being included on the Acquisition Pro Forma and the
Acquisition Projections has been provided to Agent in a number of
additional documents as previously delivered to Agent, and together
with such additional documents the Acquisition Pro Forma and the
Acquisition Projections satisfy the informational requirements of
subsection 7.6(B) of the Loan Agreement and (iii) each of the Loan
Parties having executed and delivered or having caused to be executed
and delivered to Agent on or before the date hereof this Amendment and
each of the documents, instruments and agreements set forth on the
Index of Closing Documents attached hereto as Exhibit A (the "Closing
Index"), in form and substance reasonably satisfactory to Agent;
provided, that with respect to (A) the Waiver and Consent (item B.4. of
the Closing Index), Borrowers shall use their best efforts to obtain
and to deliver such document to Agent (in form and substance reasonably
satisfactory to Agent) either on or after the date hereof and (B) the
insurance requirements (item B.8 of the Closing Checklist), Borrowers
shall obtain and deliver such documents to Agent (in form and substance
reasonably satisfactory to Agent) on or before thirty (30) days from
the date hereof.
(c) No Default or Event of Default under the Loan Agreement, as amended
hereby, shall have occurred and be continuing.
(d) The warranties and representations of Holdings, each Borrower and
each Guarantor contained in this Amendment, the Loan Agreement, as
amended hereby, and the other Loan Documents shall be true and correct
as of the effective date hereof, with the same effect as though made on
such date, except to the extent that
5
<PAGE>
such warranties and representations expressly relate to an earlier
date, in which case such warranties and representations shall have been
true and correct as of such earlier date.
8. MISCELLANEOUS.
(a) CAPTIONS. Section captions used in this Amendment are for
convenience only, and shall not affect the construction of this
Amendment.
(b) GOVERNING LAW. THIS AMENDMENT SHALL BE A CONTRACT MADE UNDER AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES. Whenever possible each provision of this
Amendment shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Amendment
shall be prohibited by or invalid under such law, such provision shall
be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining
provisions of this Amendment.
(c) COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
(d) SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon, and
shall inure to the sole benefit of, Borrowers, Holdings, Guarantors,
Agent and Lenders, and their respective successors and assigns.
(e) REFERENCES. Any reference to the Loan Agreement or any Loan
Document contained in any notice, request, certificate, or other
document executed concurrently with or after the execution and delivery
of this Amendment shall be deemed to include this Amendment unless the
context shall otherwise require.
(f) CONTINUED EFFECTIVENESS. Notwithstanding anything contained herein,
the terms of this Amendment are not intended to and do not serve to
effect a novation as to the Loan Agreement; instead, it is the express
intention of the parties hereto to reaffirm the Indebtedness created
under the Loan Agreement which is evidenced by the Notes and secured by
the Collateral. The Loan Agreement, as amended hereby, and each of the
other Loan Documents, as amended hereby, shall remain in full force and
effect.
(g) COSTS, EXPENSES AND INDEMNITY. Each of the Loan Parties affirms and
acknowledges that SECTION 10.1 and SECTION 10.2 of the Loan Agreement
apply to this Amendment and the transactions and agreements and
documents contemplated hereunder.
[signature page follows]
6
<PAGE>
IN WITNESS WHEREOF, this Second Amendment to Loan and Security
Agreement and Consent has been duly executed and delivered as of the day and
year first above written.
COMPUTER CONSULTANTS
FUNDING & SUPPORT, INC.
LABFORCE OF AMERICA, INC.
PRO UNLIMITED, INC.
PROFESSIONAL STAFFING
FUNDING & SUPPORT, INC.
TEMPORARY HELP INDUSTRY
SERVICING COMPANY, INC.
UNIFORCE MIS SERVICES OF GEORGIA,
INC.
UNIFORCE STAFFING SERVICES, INC.
UNIFORCE INFORMATION SERVICES OF
TEXAS, INC.
For each of the foregoing:
By: /s/ HARRY MACCARRONE
--------------------------------
Title: Vice President
BRENTWOOD SERVICE GROUP, INC.
By: /s/ HARRY MACCARRONE
--------------------------------
Title: President
HELLER FINANCIAL, INC.,
as Agent and a Lender
By: /s/ JOEL RICHARDS
--------------------------------
Title: Vice President
UNITED JERSEY BANK,
as a Lender
By: /s/ ROBERT MUNNS
--------------------------------
Title: Vice President
7
<PAGE>
UNIFORCE SERVICES, INC.
By: /s/ HARRY MACCARRONE
--------------------------------
Title: Vice President
BRANNON & TULLY, INC.
E.O. OPERATIONS CORP
E.O. SERVICING CO., INC.
STAFFING INDUSTRY FUNDING &
SUPPORT, INC.
TEMPFUNDS INTERNATIONAL, INC.
THISCO OF CANADA, INC.
UNIFORCE INFORMATION SERVICES, INC.
UNIFORCE MEDICAL OFFICE SUPPORT,
INC.
UNIFORCE PAYROLLING SERVICES, INC.
USI INC. OF CALIFORNIA
UTS OF DELAWARE, INC.
UTS CORP, OF MINNESOTA
For each of the foregoing:
By: /s/ HARRY MACCARRONE
--------------------------------
Title: Vice President
8
<PAGE>
SCHEDULE I
USS
SUBSIDIARY
Name Jurisdiction of Incorporation
---- -----------------------------
Uniforce Information Services New York
of Texas, Inc.
DESCRIPTION OF PLEDGED SHARES
-----------------------------
Certificate No. Date of Issuance No. of Shares
--------------- ---------------- -------------
1 April 17, 1996 100
DESCRIPTION OF STOCK OF THE SUBSIDIARIES
----------------------------------------
No. of Shares No. of Shares Issued No. of Shares in
------------- -------------------- ----------------
Authorized and Outstanding Treasury
---------- --------------- --------
200 100 0
<PAGE>
SCHEDULE 4.1(B)
---------------
CAPITALIZATION OF LOAN PARTIES
------------------------------
ISSUED
AUTHORIZED AND
LOAN PARTY CAPITAL STOCK OUTSTANDING HOLDER
- ---------- ------------- ----------- ------
Holdings 10,000,000 shares of 3,001,538*
common stock, $.01 par
value
Uniforce 200 shares of common 100 USS
Information stock, no par value
Services of
Texas, Inc.
- ----------
*As of May 1, 1996.
<PAGE>
SCHEDULE 4.7
LOCATION OF PRINCIPAL PLACE OF BUSINESS, BOOKS AND RECORDS AND
COLLATERAL
The principal place of business and the locations of the books, records and
Collateral for Uniforce Information Services of Texas, Inc.:
ROLM Tower
15303 Dallas Parkway
Suite 1060
Dallas, Texas 75248
Montare International, Inc.'s federal employer identification
number is 11-3118933.
<PAGE>
SCHEDULE 4.10
PENDING AUDITS
COMPANY TAX AUTHORITY YEAR(S) STATUS
------- ------------- ------- ------
Deleted entry set forth below:
THISCO New York State 1992-95 Potential Audit.
Sales Tax
<PAGE>
SCHEDULE 4.20
BANK ACCOUNTS
G/L Account # Name of Bank Name of Acct #
- ------------- ------------ ------- ------
Acct.
-----
Accounts Receivable Depository:
- -------------------------------
Chemical UISTX 209043350
Payroll accounts:
- -----------------
Comerica UISTX 7611-02111-9
Accounts payable:
- -----------------
Chase UISTX 500-2-401502
Co-Owned Advance
- ----------------
Accounts:
- ---------
Comerica UISTX 7611-02110-1
<PAGE>
SCHEDULE 4.22
1. Employment Agreement dated May 17, 1996 by and between
Uniforce Staffing Services, Inc. and Douglas Staley.
<PAGE>
EXHIBIT A
INDEX OF CLOSING DOCUMENTS
See Attached.
11
<PAGE>
INDEX OF CLOSING DOCUMENTS
Second Amendment to
$35,000,000 Loan and Security Agreement
by and among
UNIFORCE SERVICES, INC.,
as guarantor,
and
THE SUBSIDIARIES OF UNIFORCE SERVICES, INC., NAMED
THEREIN,
as Borrowers and cross-guarantors,
and
HELLER FINANCIAL INC.,
for itself as a Lender
and as Agent for all the Lenders from
time to time signatory thereto
and
UNITED JERSEY BANK, as Lender
CLOSING DATE: May 17, 1996
<PAGE>
Set forth below is an Index of Closing Documents which lists the documents
delivered in connection with the closing of the transactions contemplated by the
Second Amendment to the Loan and Security Agreement and Consent (the
"Amendment") contained herein under Tab No. 1. Each capitalized term used but
not defined herein shall have the meaning ascribed to such term the Amendment.
All documents are dated as of the Closing Date unless otherwise indicated. THIS
IS NOT A LOAN DOCUMENT.
PARTIES
Uniforce Services, Inc. ("Holdings")
Brentwood Service Group, Inc., (individually, each a
Computer Consultants Funding & Support, Inc. "Borrower" and collectively,
Labforce of America, Inc. "Borrowers")
PrO Unlimited, Inc.
Professional Staffing & Support, Inc.
Temporary Help Industry Servicing
Company, Inc. ("THISCO"),
Uniforce Information Services of Texas, Inc. ("UIS-TX")
Uniforce MIS Services of Georgia, Inc. and
Uniforce Staffing Services, Inc. ("USS")
Brannon & Tully, Inc. (individually, each a "Subsidiary
E.O. Operations Corp., Guarantor" and collectively,
E.O. Servicing Co. Inc., "Subsidiary Guarantors")
Staffing Industry Funding & Support, Inc.
Tempfiinds International, Inc.,
THISCO of Canada, Inc.,
Uniforce Information Services, Inc.,
Uniforce Medical Office Support, Inc.,
Uniforce Payrolling Services, Inc.,
USI Inc. of California,
UTS of Delaware, Inc. and
UTS Corp. of Minnesota
Holdings, each Borrower and each (individually, each a "Loan
Subsidiary Guarantor Party" and collectively,
"Loan Parties")
2
<PAGE>
Heller Financial, Inc., as Agent ("Agent")
Heller Financial, Inc, as Lender ("Heller~')
United Jersey Bank, as Lender ("UJB")
Montare International, Inc. ("Montare")
DESCRIPTION OF DOCUMENT
A. DOCUMENTS PERTAINING TO ASSET PURCHASE
1. Asset purchase Agreement by and among UIS-TX, Montare, Joseph Armitage,
David Mulvaney and Douglas Staley.
2. Receivable Purchase Agreement by and among UIS-TX, Montare, Joseph
Armitage, David Mulvaney and Douglas Staley.
3. Employment Agreement between UIS-TX and Douglas Staley.
4. Special Conveyance, Assignment and Bill of Sale executed by Montare.
5. Assumption Agreement by and among UIS-TX, Montare, Joseph Armitage, David
Mulvaney and Douglas Staley.
6. Confidentiality and Non-Competition Agreements (3), by and between UIS-TX
and each of Montare, Joseph Armitage and David Mulvaney, respectively.
7. Estoppel Certificate, executed by the Landlord of the real property to be
leased by UIS-TX located in Dallas, Texas
B. PRINCIPAL AMENDMENT DOCUMENTS
1. Second Amendment to Loan and Security Agreement and Consent by and among
Borrowers, Holdings, Subsidiary Guarantors, all Lenders named therein and
Agent
2. Revolving Notes by UIS-TX in favor of Heller and UJB [original notes to be
held by Agent]
3. Second Amended Term Notes by Borrowers in favor of Heller and UJB [original
notes to be held by Agent]
3
<PAGE>
4. Waiver and consent from landlord at Dallas, Texas location - MEPC Quorum
Properties II Inc. (leased to UIS-TX)
5. Stock Certificates (UIS-TX), required to be delivered pursuant to the
Pledge Agreement, accompanied by undated stock powers duly endorsed in
blank [originals to be held by Agent]
UCC RELATED DOCUMENTS
6. UCC, tax and judgment lien search reports listing Montare as Debtor at the
S/S of Texas and Dallas County, Texas
7. UCC-1 filings evidencing Agent's security interest in the Collateral filed
against USS as Debtor at the S/S of Texas and UIS-TX as Debtor at the S/S
of Texas, S/S of New York and Nassau County, New York
INSURANCE DOCUMENTS
8. Certificates of insurance with respect to property and liability insurance
for UIS-TX, together with a loss payable endorsement in favor of Agent and
listing Heller and UJB as additional insureds.
COUNSEL OPINIONS
9. Legal opinion of Olshan Grundman Frome & Rosenzweig L.L.P., counsel for the
Loan Parties.
CORPORATE CERTIFICATES AND DOCUMENTATION
10. Certificates from each Loan Party's secretary (other than UIS-TX's) as to
signature and incumbency of officers of such Loan Party and certifying to
(a) articles of incorporation, (b) by-laws and (c) the attached required
resolutions of board of directors
11. Certificate from UIS-TX's secretary as to signature and incumbency of
officers of UIS-TX and certifying to (a) articles of incorporation, (b)
by-laws and (c) the attached required resolutions of board of directors.
12. A copy of UIS-TX Articles of Incorporation certified by the Department of
State of New York.
4
<PAGE>
13. Required certificates of status/good-standing for UIS-TX, certified by the
appropriate jurisdictional authorities.
FINANCIAL AND ACCOUNTING DOCUMENTS
14. Financial condition certificate by the chief financial officer of UIS-TX,
USS and Holdings pursuant to subsection 7.6(B)(9)(iii) of the Loan and
Security Agreement
MISCELLANEOUS
15. Letter appointing Olshan Grundman Frome & Rosenzweig L.L.P. as UIS-TX's
agent for service of process
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNIFORCE'S FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,044,775
<SECURITIES> 0
<RECEIVABLES> 39,686,618
<ALLOWANCES> 819,984
<INVENTORY> 0
<CURRENT-ASSETS> 42,048,311
<PP&E> 6,198,931
<DEPRECIATION> 2,755,819
<TOTAL-ASSETS> 53,942,646
<CURRENT-LIABILITIES> 13,636,238
<BONDS> 0
0
0
<COMMON> 51,008
<OTHER-SE> 12,259,583
<TOTAL-LIABILITY-AND-EQUITY> 53,942,646
<SALES> 0
<TOTAL-REVENUES> 66,525,728
<CGS> 0
<TOTAL-COSTS> 62,909,838
<OTHER-EXPENSES> (17,696)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 972,216
<INCOME-PRETAX> 2,661,370
<INCOME-TAX> 1,011,000
<INCOME-CONTINUING> 1,650,370
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,650,370
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
