SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of event reported): July 28, 1997.
HEADWAY CORPORATE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Commission File Number: 0-23170
DELAWARE 75-2134871
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 Third Avenue, 11th Floor
New York, NY 10022
(Address of principal executive (Zip Code)
offices)
Registrant's Telephone Number: (212) 508-3560
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 28, 1997, Headway Corporate Resources, Inc.
("Company"), acquired (through a wholly owned subsidiary
formed for that purpose) substantially all the assets of
Administrative Sales Associates Temporaries, Inc., and
Administrative Sales Associates, Inc. (collectively "ASA"),
both New York corporations engaged in the business of
offering permanent and temporary staffing services to the
financial services industry. The principal offices of ASA
are located in New York City. The purchase price for ASA
was paid, in part, at closing on July 28, 1997, and the
balance is payable subsequent to closing as follows:
$4,000,000 was paid in cash at closing; $361,146 is payable
in six equal semi-annual installments commencing January 28,
1998, pursuant to a promissory note bearing interest at 6%
per annum; $90,287 is payable in six equal semi-annual
installments commencing January 28, 1998, pursuant to a
promissory note bearing interest at 6% per annum; 121,066
shares of the Company's restricted common stock, par value
$0.0001, valued at $500,000 based on the average of the
closing average bid and asked prices during the 20-day
period prior to the closing; and an additional amount
payable partly in cash and partly in common stock over a
three-year period commencing on the date of closing based on
the net operating income, as defined in the purchase
agreement, in each year derived from the ASA business
acquired before taking into account certain expenditures
specified in the purchase agreement. Preliminarily, the
Company estimates the additional purchase price payments
will be approximately $3,500,000. The purchase price was
determined through arms length negotiations between the
Company and ASA on the basis of the tangible assets of ASA
and the goodwill associated with the business. The former
shareholders of ASA (which includes the former executive
officers) are Richard Brody and Arnold Katz, none of whom
(including ASA) was affiliated or associated with the
Company or its affiliates prior to the acquisition. Funding
for the acquisition was provided by debt financing obtained
from ING (U.S.) Capital Corporation ("ING"), under the
acquisition loan facility previously established between the
Company and ING.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. Included with this report are
the historical combined audited financial statements of ASA
for the calendar years ended December 31, 1996 and 1995,
consisting of the following:
Report of Independent Auditors
Combined Balance Sheets
Combined Statements of Income and Retained Earnings
Combined Statements of Cash Flows
Notes to Combined Financial Statements
It is impracticable for the Company to provide the required
unaudited combined financial statements of ASA for the
period ended June 30, 1997, at the time this report on Form
8-K is filed. The Company proposes to file the required
financial statements as soon as they are available. The
Company expects that it will file the required financial
statements no later than 60 days after the date on which
this report on Form 8-K is required to be filed.
(b) Pro Forma Financial Information
It is impracticable for the Company to provide the required
pro forma financial information at the time this report on
Form 8-K is filed. The Company proposes to file the
required pro forma financial information as soon as it is
available. The Company expects that it will file the
required financial information no later than 60 days after
the date on which this report on Form 8-K is required to be
filed.
(c) Exhibits. Included in this report are the following
exhibits.
Exhibit SEC Ref. Title of Document Page
No. No.
1 (10) Asset Purchase Agreement
dated July 28, 1997 E-1
2 (23) Consent of Ernst & Young LLP E-33
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
HEADWAY CORPORATE RESOURCES,
INC.
DATED: August 6, 1997 By: Barry Roseman (Signature)
President
<PAGE>
Combined Financial Statements
Administrative Sales Associates Temporaries, Inc.
and
Administrative Sales Associates, Inc.
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
<PAGE>
Administrative Sales Associates Temporaries, Inc.
and
Administrative Sales Associates, Inc.
Combined Financial Statements
Years ended December 31, 1996 and 1995
<PAGE>
Contents
Report of Independent Auditors F-2
Combined Balance Sheets F-3
Combined Statements of Income and Retained Earnings F-4
Combined Statement of Cash Flows F-5
Notes to Combined Financial Statements F-6
<PAGE>
Report of Independent Auditors
The Shareholders of
Administrative Sales Associates Temporaries, Inc.
and Administrative Sales Associates, Inc.
We have audited the accompanying combined balance sheets of
Administrative Sales Associates Temporaries, Inc. and
Administrative Sales Associates, Inc. (collectively, the
"Company") as of December 31, 1996 and 1995, and the related
statements of income and retained earnings and cash flows
for the years then ended. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Administrative Sales Associates Temporaries,
Inc. and Administrative Sales Associates, Inc. at December
31, 1996 and 1995, and the results of their operations and
their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
June 30, 1997
<PAGE>
Administrative Sales Associates Temporaries, Inc.
and
Administrative Sales Associates, Inc.
Combined Balance Sheets
December 31
1996 1995
Assets
Current assets:
Cash $ 224,638 $ 131,212
Accounts receivable 3,647,433 2,670,499
Prepaid expenses and other current assets 113,678 70,151
Total current assets 3,985,749 2,871,862
Property and equipment-net 23,214 16,250
Deposits 12,105 12,105
Total assets $4,021,068 $2,900,217
Liabilities and shareholders' equity
Current liabilities:
Line of credit $ 500,000 $ 350,000
Notes payable-bank 33,333 133,333
Loans from shareholders 254,546 366,652
Accounts payable and accrued expenses 113,126 353,143
Accrued payroll taxes 196,823 157,293
Commission payable 364,934 320,323
Accrued pension 95,289 83,732
Income taxes payable 70,382 10,732
Deferred income taxes 311,000 222,000
Total current liabilities 1,939,433 1,997,208
Shareholders' equity:
Capital stock (Note 5) 7,000 7,000
Retained earnings 2,074,635 896,009
Total shareholders' equity 2,081,635 903,009
Total liabilities and
shareholders' equity $4,021,068 $2,900,217
See accompanying notes.
<PAGE>
Administrative Sales Associates Temporaries, Inc.
and
Administrative Sales Associates, Inc.
Combined Statements of Income and Retained Earnings
Year ended December 31
1996 1995
Revenue from human resource management $17,938,563 $13,202,677
Direct cost of human resource management 13,580,235 10,573,482
Selling, general and administrative expenses 2,993,611 2,451,923
Interest expense 41,091 27,365
16,614,937 13,052,770
Income before provision for income taxes 1,323,626 149,907
Provision for income taxes:
Current 56,000 13,000
Deferred 89,000 12,000
145,000 25,000
Net income 1,178,626 124,907
Retained earnings, beginning of year 896,009 771,102
Retained earnings, end of year $ 2,074,635 $ 896,009
See accompanying notes.
<PAGE>
Administrative Sales Associates Temporaries, Inc.
and
Administrative Sales Associates, Inc.
Combined Statements of Cash Flows
Year ended December 31
1996 1995
Operating activities
Net income $ 1,178,626 $ 124,907
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 8,779 12,106
Deferred income taxes 89,000 12,000
Changes in assets and liabilities:
Accounts receivable (976,934) (146,250)
Prepaid expenses and other current assets (43,527) (45,441)
Accounts payable and accrued expenses (240,017) 132,241
Accrued payroll taxes 39,530 (29,971)
Commission payable 44,611 125,238
Accrued pension 11,557 31,927
Income taxes payable 59,650 9,947
Net cash provided by operating activities 171,275 226,704
Investing activities
Purchase of property and equipment (15,743) (5,259)
Net cash used in investing activities (15,743) (5,259)
Financing activities
Proceeds from line of credit 150,000 150,000
Repayments of notes payable-bank (100,000) (116,667)
Proceeds from loans from shareholders 165,000 -
Repayments of loans from shareholders (277,106) (141,905)
Net cash used in financing activities (62,106) (108,572)
Net increase in cash 93,426 112,873
Cash, beginning of year 131,212 18,339
Cash, end of year $ 224,638 $ 131,212
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 41,091 $ 27,365
Income taxes $ - $ 3,053
See accompanying notes.
<PAGE>
Administrative Sales Associates Temporaries, Inc.
and
Administrative Sales Associates, Inc.
Notes to Combined Financial Statements
December 31, 1996
1. Organization and Summary of Significant Accounting
Policies
Basis of Presentation and Description of Business
The accompanying combined financial statements include the
accounts of Administrative Sales Associates Temporaries,
Inc. ("ASA-TEMP"), and Administrative Sales Associates, Inc.
("ASA-PERM") (collectively the "Company"). ASA-TEMP and ASA-
PERM are both under common control.
ASA-TEMP is engaged in the placement of temporary personnel
throughout New York City. ASA-PERM is engaged in the
placement of permanent personnel in the New York
metropolitan area.
Recognition of Income
Temporary staffing revenue is recognized when the temporary
personnel perform the related services and revenue from
permanent placement services is recognized when the
placement is employed.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Principles of Combination
All significant intercompany transactions and balances have
been eliminated in combination.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
<PAGE>
1. Organization and Summary of Significant Accounting
Policies (continued)
Property and Equipment
Property and equipment are carried at cost. Depreciation is
computed using the straight-line method over the estimated
useful lives of the assets which range from 5 to 10 years.
Leasehold improvements are amortized using the straight-line
method over the leasehold's useful life or the term of the
lease, whichever is shorter.
Advertising Expense
The cost of advertising is expensed when incurred. The
Company incurred advertising expense of approximately
$319,000 and $230,000 in 1996 and 1995, respectively.
Concentration of Credit Risk
Financial instruments that potentially subject the Company
to concentrations of credit risk consist of cash and
accounts receivable. The Company maintains its cash balances
in two financial institutions in New York City.
The Company believes that its concentration of credit risk
with respect to accounts receivable is limited due to the
large number of entities comprising the Company's customer
base. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral. The
Company periodically reviews the status of its accounts
receivable and, accordingly, establishes reserves for
uncollectible accounts.
<PAGE>
2. Property and Equipment
Property and equipment consist of the following:
December 31
1996 1995
Leasehold improvements $ 92,946 $ 92,946
Furniture and fixtures 59,072 59,072
Office equipment 140,056 124,313
292,074 276,331
Less accumulated depreciation and amortization 268,860 260,081
Property and equipment-net $ 23,214 $ 16,250
3. Line of Credit and Notes Payable
The Company has a line of credit with a bank (the "Bank") to
borrow up to $500,000 ($350,000 at December 31, 1995).
Borrowings under the line of credit have been guaranteed by
the two shareholders of the Company and bear interest at
1.25% above the Bank's prime rate (9.5% and 9.75% at
December 31, 1996 and 1995, respectively). Borrowings under
this line of credit were repaid in full in 1997.
In 1994, the Company borrowed $200,000 from the Bank. The
loan is payable in thirty-five monthly principal payments
commencing July 1994 of approximately $5,550, plus interest
at 1.50% over the bank's reference rate (9.75% and 10% at
December 31, 1996 and 1995, respectively). Borrowings under
this note amounted to $33,333 and $100,000 at December 31,
1996 and 1995, respectively, and were repaid in full in
1997.
In August 1993, the Company borrowed $150,000 from the Bank,
payable in thirty-five monthly principal payments of
approximately $4,167, plus interest at 1.50% over the bank's
reference rate (10% at December 31, 1995). Borrowings under
this note amounted to $33,333 at December 31, 1995 and were
repaid in full in 1996.
<PAGE>
4. Loans from Shareholders
Loans from shareholders represent amounts borrowed from the
two shareholders, are interest-free and have no fixed
repayment terms.
5. Common Stock
ASA-TEMP
Common stock, no par value, authorized-200 shares, $5,000
issued and outstanding-100 shares
ASA-PERM
Common stock, no par value, authorized,
issued and outstanding-100 shares 2,000
$7,000
6. Income Taxes
The Company accounts for income taxes using the liability
method in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". ASA-Temp
and ASA-Perm file separate income tax returns, are cash
basis taxpayers and have elected to be treated as S
Corporations under Subchapter S of the Internal Revenue Code
for Federal and New York State income tax purposes.
Accordingly, ASA-Temp and ASA-Perm are not subject to
federal income taxes because the shareholders include the
Company's income in their own personal income tax returns.
For New York State purposes, S Corporations were subject to
a minimum income tax. The Company is also subject to New
York City income taxes. The provision for income taxes
includes New York City income tax and New York State minimum
income tax.
7. Defined Contribution Plan
The Company sponsors a defined contribution plan for
eligible employees and makes annual contributions of 5% of
each employee's eligible wages, as defined. Pension expense
for 1996 and 1995 was $95,289 and $83,732, respectively.
<PAGE>
8. Leases
The Company leases office space under a noncancelable
operating lease that expires in August 1997. Rent expense
amounted to approximately $123,000 for each of the two years
in the period ended December 31, 1996.
9. Major Customers
One customer accounted for approximately 14% of revenue for
the year ended December 31, 1996. Two customers accounted
for approximately 15% and 10%, respectively, of revenue for
the year ended December 31, 1995.
1
Exhibit No. 1
Headway Corporate Resources, Inc.
Form 8-K dated July 28, 1997
File No. 0-23170
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of July 28, 1997, among HEADWAY
CORPORATE RESOURCES, INC., a Delaware corporation ("Headway"),
ASA PERSONNEL SERVICES, INC., a Delaware corporation ("Buyer"),
ADMINISTRATIVE SALES ASSOCIATES TEMPORARIES, INC., a New York
corporation ("ASA Temporaries"), ADMINISTRATIVE SALES ASSOCIATES,
INC., a New York corporation ("ASA Associates"; ASA Temporaries
and ASA Associates sometimes being collectively referred to as
"Seller"), RICHARD BRODY ("Brody") and ARNOLD KATZ ("Katz"; Brody
and Katz being sometimes collectively referred to as the
"Stockholders" and each, individually, as a "Stockholder").
W I T N E S S E T H:
WHEREAS, Buyer wishes to purchase, and Seller wishes to
sell, the assets and business of Seller specified in this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Purchase and Sale of the Acquired Assets.
1.1 Acquired Assets. Subject to the terms and
conditions of this Agreement, and in reliance on the
representations, warranties and agreements set forth herein, at
the Closing (as defined in Section 2), Seller shall sell, convey,
transfer, assign and deliver to Buyer, and Buyer shall purchase
from Seller, all of Seller's right, title and interest in and to
all of the assets of Seller of every kind, tangible and
intangible, wherever located, excepting only those assets
specifically excluded in Section 1.2, and including, without
limitation:
(a) the office furniture and equipment, computers,
leasehold improvements and vehicles listed in Schedule 1.1.A;
(b) all computer software owned by Seller and
Seller's interest in any computer software licensed by it from
others;
(c) all office supplies;
(d) the client agreements and arrangements set
forth in Schedule 1.1.B.;
(e) the office leases, equipment leases and other
agreements, contracts and instruments listed in Schedule 1.1.C;
(f) all prepayments and deposits, including without
limitation, security deposits under leases;
(g) the corporate names "ASA", "Administrative
Sales Associates Temporaries, Inc.", "ASA Temporaries, Inc.",
"ASA Temporaries", "Administrative Sales Associates, Inc.", "ASA
Personnel, Inc.", "ASA Personnel", and "ASA Personnel Temporary
Services," all assumed names, logos, trademarks, service marks,
domain names, trade names and copyrights and registrations and
applications for registration of any of them, and any other
intellectual property rights of Seller, all of which are listed
in Schedule 1.1.D;
(h) originals or true copies of all books and
records of Seller pertaining to the assets referred to in
subparagraphs (a) through (g) above, including customer lists and
credit files, and all those pertaining to Seller's employees who
are hired by Buyer pursuant to Section 10.3;
(i) all permits, licenses, approvals and other
governmental authorizations relating to Seller's business which
are transferable to Buyer, all of which are listed in Schedule
1.1.E;
(j) any other assets not referred to in Section 1.2
which are used by Seller in connection with its businesses of the
placement or provision of temporary, permanent or "payrolled" (as
that term is defined in Section 1.3(e)) personnel (together,
"Seller's Business"), including, without limitation, all
telephone and facsimile numbers and e-mail addresses used by
Seller in connection with such business; and
(k) the good will pertaining to Seller's Business;
all as the same exist on the date hereof and shall exist on
the Closing Date (as defined in Section 2), subject only to
changes occurring in the ordinary course of business of Seller.
All such assets to be acquired are referred to together as the
"Acquired Assets".
1.2 Excluded Assets. The following assets of
Seller are excluded from the Acquired Assets: (a) the
consideration payable to Seller by Buyer, (b) any cash and cash
equivalents owned by Seller, (c) Seller's accounts receivable and
any amounts accrued by Seller for services rendered to Seller's
clients prior to the Closing Date, including, without limitation,
the placement of permanent personnel by Seller prior to the
Closing Date, but which have not been billed as of the Closing
Date (the "Accruals"), (d) any refunds of Taxes (as defined in
Section 6.14) paid by Seller with respect to the business of
Seller conducted prior to the Closing Date, (e) refundable
portions of paid insurance premiums and prepaid federal or state
income taxes, (f) Seller's interest in any term life insurance
policies maintained by Seller on the life of Brody or Katz or any
other employee, (g) any treasury stock held by Seller, (h) the
corporate stock certificate books, ledger books, minute books and
similar corporate records of Seller and (i) all records and
correspondence relating to the foregoing excluded assets.
1.3 Purchase Price.
(a) As consideration for the sale, conveyance,
transfer, assignment and delivery to Buyer of the Acquired
Assets, Buyer shall pay to Seller a purchase price of
approximately $7,800,000 (the "Purchase Price"), subject to
adjustment as provided in Section 1.3(b)), as follows
(i) on the Closing Date, a promissory note, payable in
six consecutive equal semi-annual installments of $66,666.67,
commencing six months from the Closing Date, from Buyer payable
to Seller in the original principal amount of $361,146, in a form
satisfactory to Buyer and Seller (the "First Note");
(ii) on the Closing Date, a promissory
note, payable in six consecutive equal semi-annual installments
of $16,666.67, commencing six months from the Closing Date, from
Buyer payable to Seller in the original principal amount of
$90,287, in a form satisfactory to Buyer and Seller (the "Second
Note"; the First Note and the Second Note being collectively
referred to as the "Notes");
(iii) $4,000,000 payable in cash on the
Closing Date;
(iv) on the Closing Date, that number of
shares (the "Closing Shares") of the Common Stock, par value
$.0001 per share, of Headway (the "Common Stock") as are
determined by dividing $500,000 by the "Closing Average Price"
(defined as the average of the closing bid and closing asked
prices of the Common Stock on The NASDAQ SmallCap Market (the
"NASDAQ") for each of the 20 trading days immediately prior to
the Closing Date); and
(v) the Earnout on the Earnout Payment
Dates (as such terms are defined in Section 1.3(b)); and
(vi) on the last Earnout Payment Date,
$1.00 for each $1.00 by which Buyer's cumulative EBITA over all
of the Earnout Periods (as defined in Section 1.3(b)) is greater
than $4,300,000, up to $500,000.
All amounts payable by Buyer pursuant to Sections 1.3(a) or
1.3(b) shall be paid by wire transfer to accounts designated to
Buyer by Seller, Brody or Katz not later than two business days
prior to the scheduled date of such payment.
(b) Each of the three consecutive twelve-month
periods commencing on the Closing Date is referred to as an
"Earnout Period". During each Earnout Period, Buyer's operations
shall consist solely of the operation of Seller's Business. If,
for any Earnout Period, Buyer's "EBITA" (as defined below) equals
$1,600,000 (the "Base Amount"), Buyer shall pay to Seller an
amount for such Earnout Period (each, an "Earnout") equal to
$766,666, $433,333 of which shall be payable in cash and $333,333
of which shall be payable in such number of shares of Common
Stock as is determined by dividing $333,333 by the Closing
Average Price ("Earnout Shares"). If the EBITA for an Earnout
Period exceeds the Base Amount, the cash portion of the Earnout
for such Earnout Period shall be increased by $1.50 for each
$1.00 of such excess. If the EBITA for an Earnout Period is less
than the Base Amount, the Earnout for such Earnout Period shall
be reduced by $1.50 for each $1.00 of such deficiency. Such
reduction shall be applied first against the Earnout Share
portion of the Earnout (by deducting such number of Earnout
Shares as is determined by dividing 150% of the deficiency by the
Closing Average Price) and second against the cash portion.
After the Earnout for an Earnout Period is determined in
accordance with the foregoing, the Earnout shall be reduced, on a
dollar for dollar basis (first against the Earnout Share portion
of the Earnout and second against the cash portion), by an amount
equal to one-third of the expenses reasonably and necessarily
incurred by Headway, Buyer or any other subsidiary of Headway
during such Earnout Period in connection with the transition of
the operation of Seller's Business to Buyer as part of the
Headway group of companies up to a maximum aggregate reduction of
the Earnouts for all of the Earnout Periods of $50,000, including
(i) expenses for licensing from a third party the accounting and
operating system software used by Headway companies for Buyer's
operations and installing, implementing and operating such
software, (ii) development and programming services necessary to
make Seller's software compatible with the software systems used
by the Headway companies and (iii) acquiring related computer
hardware.
The calculation of the Earnout for each Earnout
Period shall be independent of the calculations for the other
Earnout Periods, and there shall be no cumulation of EBITA from
one Earnout Period to another, except that, if the Earnout for
the first or second Earnout Period is negative (that is, less
than zero), the Base Amount for the following Earnout Period
shall be increased by the amount of the negative Earnout. (For
example, if EBITA during an Earnout Period is equal to
$1,700,000, the resulting Earnout would be $916,666, $583,333 of
which would be payable in cash and $333,333 of which would be
payable in Earnout Shares. If EBITA during an Earnout Period is
equal to $1,500,000, the resulting Earnout would be $616,666,
$433,333 of which would be payable in cash and $183,333 of which
would be payable in Earnout Shares. If EBITA during the first
Earnout Period is -$100,000, the Base Amount for the second
Earnout Period would be $1,700,000.)
(c) For the purposes of this Agreement,
"EBITA" means, for an Earnout Period, "Net Income" (as defined
below) without taking into account (i) interest expense, (ii)
provisions for income taxes, (iii) depreciation in connection
with the transition of the operation of Seller's Business to
Buyer as part of the Headway group of companies, including,
without limitation, depreciation resulting from the installation
and implementation at Buyer of the third party accounting and
operating software used by Headway, development and programming
services necessary to make Seller's software compatible with the
software systems used by the Headway group of companies and
acquisition of related computer hardware and (iv) amortization
of goodwill resulting from Buyer's purchase of Seller's Business.
Net Income shall exclude revenues and expenses attributable to
acquisitions by Buyer of at least a majority of the stock, or
substantially all of the assets of, other entities after the
Closing Date.
"Net Income" means the net income (or loss) of the
Buyer for an Earnout Period attributable to Buyers's operation of
Seller's Business, as reasonably determined by Headway in
accordance with generally accepted accounting principles. The
calculation of Net Income shall take into account the following
expenses to the extent incurred in the ordinary course of
business: (i) wage, salary and commission expense of all
temporary, payrolled and full-time employees of Buyer, excluding
salary (but not commissions) paid to Brody and Katz; provided
that, with respect to Katz only, only those amounts of salary and
incentive compensation paid to him in accordance with the terms
of the Katz Employment Agreement (as defined in Section 3.5) in
excess of $150,000 per Earnout Period shall be excluded in
determining Net Income; (ii) reasonable travel and entertainment
expenses incurred by Buyer's employees, excluding any automobile
and/or travel and entertainment allowances paid to Brody or Katz;
(iii) bonuses paid to Buyer's employees by Buyer in accordance
with past practices of Seller; (iv) all amounts attributable to
FICA and any other federal, state and local taxes paid by Buyer
on behalf of its employees; (v) all unemployment insurance
premiums, medical and disability coverage and any other benefits
provided by Buyer to its employees; (vi) Buyer's general and
administrative expenses; (vii) any general and administrative
expenses of Headway or any subsidiary of Headway directly
attributable to the operations of Buyer in connection with
general accounting services, technical support of Buyer's
computer and telephone systems and operations and human resources
support, up to a maximum amount of $50,000 per Earnout Period;
and (viii) any fall-offs, rebates, discounts, offsets or
concessions granted by Buyer to its clients to the extent
consistent with past practices of Seller (it being recognized
that special situations will nevertheless require concessions not
previously granted) and any reserves or write-offs for fall-offs
or bad debts.
(d) Each Earnout shall be paid 90 days
following the close of the related Earnout Period (each, an
"Earnout Payment Date"). If, as of the close of business on the
day prior to an Earnout Payment Date, any account receivable
included as income in the calculation of Net Income has not been
fully collected, the uncollected amount of such account
receivable shall be deducted from Net Income and EBITA and the
Earnout shall be reduced accordingly. If such account receivable
is thereafter collected after the Earnout Payment Date, Buyer
shall pay Seller the amount by which the Earnout had been reduced
in respect of such account receivable, net of any collection
costs and net of an interest charge for any account receivable
paid more than 120 days after the date of invoice, with the
interest rate determined by reference to the interest rate then
in effect for Eurodollar Loans under the Credit Agreement (as
defined in Section 3.11).
(e) For the purposes of this Agreement,
"payrolled" personnel means (i) those employees of Headway, Buyer
or Seller, as the case may be, who are hired by Headway, Buyer or
Seller on behalf of a client and are considered as full-time
"permanent" employees of such client, but whose compensation is
paid by Headway, Buyer or Seller or (ii) those employees of
Headway or Buyer who are considered to be payrolled employees
under industry practice or understanding prevailing at the time.
(f) Headway guarantees to Seller and the
Stockholders the full and timely performance of all of Buyer's
obligations under this Agreement.
1.4 Assumption of Liabilities. As additional
consideration for the purchase of the Acquired Assets, Buyer
shall assume and agree to pay, perform and discharge in full the
following debts, contracts, obligations and liabilities of Seller
(the "Assumed Liabilities"), and no others, as and when due, and
to indemnify and hold Seller and the Stockholders harmless
therefrom:
(a) all obligations and liabilities of Seller
arising on or after the Closing Date under its office lease for
the premises located at 317 Madison Avenue, New York, New York;
and
(b) all obligations or liabilities arising on
or after the Closing Date under the client agreements and
arrangements set forth in Schedule 1.1.B and the equipment leases
and other agreements, contracts and instruments set forth in
Schedule 1.1.C.
1.5 Liabilities Not Assumed. Other than the
liabilities referred to in Section 1.4, Buyer shall not assume or
be deemed to have assumed any of the liabilities or obligations
of Seller of any kind (together, the "Unassumed Liabilities"),
including, without limitation:
(a) any public or other liability claims with
respect to the business and affairs of Seller and the acts and
omissions of its officers, directors, employees and agents,
either before or after the Closing Date;
(b) any obligation or liability of Seller to any of
the Stockholders or any other officer or director of Seller;
(c) any obligation or liability for federal, state,
local or foreign income or other taxes;
(d) any obligation or liability arising out of the
operation of Seller's business prior to the Closing Date,
including any rebates, discounts, offsets or concessions
attributable to amounts invoiced to Seller's clients prior to the
Closing Date;
(e) any obligation or liability to Seller's
employees for salary, wages or other compensation or benefits,
including any with respect to retirement plans and accrued
vacation, sick and holiday time and pay, incurred prior to the
Closing Date, including any liabilities of Seller contemplated by
Section 10.3;
(f) any liabilities of Seller with respect to any
pension, retirement, savings, profit-sharing or other benefit
plans;
(g) any obligation or liability which is
inconsistent with any representation or warranty of Seller or the
Stockholders;
(h) any liability arising out of, and any expenses
relating to, any claim, action, dispute or litigation involving
Seller;
(i) any liability of Seller for fines, penalties,
damages or other amounts payable to any government or
governmental agency or instrumentality; and
(j) any obligation or liability of Seller or the
Stockholders for any expenses incurred in preparing or
negotiating this Agreement and consummating the transactions
contemplated hereunder; provided, however, that, on the Closing
Date, Buyer agrees to reimburse Seller and the Stockholders for
$20,000 in legal and accounting expenses incurred by them in
connection with the transaction contemplated by the August 28,
1996 letter between Seller and Headway.
Seller and each Stockholder, jointly and severally, agree to
discharge and indemnify, defend and hold harmless Buyer and
Headway and their respective officers, directors, employees,
agents and stockholders from all Unassumed Liabilities, whether
or not now known, liquidated or contingent.
1.6 Allocation of Purchase Price. Buyer and Seller
agree to report this transaction for United States federal income
tax purposes in accordance with a written allocation of Purchase
Price to be prepared, initialed and mutually agreed to by Buyer
and Seller at the Closing.
1.7 Restrictions on Transfer of Shares.
(a) Subject to Section 1.8, Seller understands
that Headway has no obligation to register the Closing Shares and
the Earnout Shares (together, the "Shares") under the Securities
Act of 1933, as amended (the "Act"), and, accordingly, the Shares
shall be subject to restrictions under the Act, the rules and
regulations promulgated thereunder and applicable state
securities laws. At the Closing and on each Earnout Payment
Date, Headway shall deliver to Seller one or more certificates in
proper form in the name of Seller evidencing the Shares being
issued on such date. Each certificate shall bear an appropriate
legend as to the lack of registration of the Shares and the
resulting restrictions on transfer.
(b) Subject to Section 1.8, no Shares shall be
transferable except in compliance with the provisions of this
Section 1.7(b). Seller agrees that, prior to any proposed
transfer of any Shares, it shall give Headway notice of its
intention to effect such transfer. Such notice shall describe
briefly the manner and circumstances of the proposed transfer in
sufficient detail, and shall include such information as is
reasonably necessary, to enable counsel for Headway to render the
opinion contemplated by this paragraph. If, in the opinion of
such counsel, the proposed transfer of such Shares may be
effected without registration or qualification thereof under the
Act or applicable state securities laws, Headway, as promptly as
is practicable, shall notify Seller of such opinion, whereupon
Seller shall be entitled to transfer such Shares in accordance
with the terms of its notice. Unless in the opinion of such
counsel subsequent disposition of such Shares by the transferee
may require such registration or qualification, Headway shall
promptly on such transfer deliver certificates for such Shares
not bearing the restrictive legend contemplated above. If, in
the opinion of such counsel, subsequent disposition by the
transferee of such Shares may require such registration or
qualification, Seller shall not transfer such Shares unless and
until its transferee confirms to Headway in writing its agreement
to be bound by the provisions of this Section 1.7. If Headway
fails to notify Seller of the opinion of its counsel within 15
days after Seller's notice of proposed transfer, Seller may
proceed as if Headway had notified it that such transfer may be
effected without registration or qualification. If, in the
opinion of Headway's counsel, the proposed transfer may not be
effected without registration or qualification thereof, Seller
shall not transfer the same until such registration or
qualification is effected. Based upon the terms of this
Agreement, the Brody Employment Agreement and the Katz Employment
Agreement, Headway and Buyer believe that, as of the date hereof,
Brody and Katz would not be deemed to be "affiliates" of Headway
for the purposes of Rule 144 under the General Rules and
Regulations of the Act, as that rule is in effect on the date
hereof.
1.8 Piggy-Back Registration Right.
(a) Following the Closing Date, if Headway
proposes to register any securities under the Act on Forms S-1, S-
2 or S-3 or any successor forms (but excluding registrations on
Forms S-4 or S-8 or any successor forms), in connection with any
offering of its securities for its own account or otherwise,
Headway shall promptly notify Seller thereof and its intended
method of distribution. If Seller requests Headway, within 15
days following the date of such notice, to include any of the
Closing Shares in such offering, Headway shall use its best
efforts to include the Closing Shares in such registration, at
Headway's expense (other than underwriting compensation with
respect to the Closing Shares, which shall be the responsibility
of Seller).
(b) If the offering covered by such
registration is underwritten and the managing underwriter informs
Headway in writing of its belief that the number of Closing
Shares requested to be included in such registration would
substantially interfere with such offering, Headway shall include
in such offering, to the extent of the overall number of
securities that the managing underwriter has advised may be
included in the offering without such substantial interference,
first, all securities offered by Headway for its own account,
second, any securities requested to be included in such
registration by the holders of Headway's Series A 8% Convertible
Preferred Stock pursuant to registration rights granted to them
by Headway prior to the date of this Agreement (which by their
terms are prior in right to subsequently granted registration
rights), and third, the Closing Shares requested to be included
in such registration by Seller and any other securities requested
to be included in such registration.
1.9 Closing Date Adjustments. On or before
the Closing, Buyer and Seller shall determine and agree on, as of
the Closing Date, (i) any amounts that Seller may have prepaid
for rent on office and equipment leases included in the Acquired
Assets in respect of periods beginning on or after the Closing
Date, (ii) any amounts that Seller may have prepaid for sales,
use or similar taxes, license fees (exclusive of corporate
franchise fees), utilities, insurance, services or other expenses
relating to the Acquired Assets in respect of periods beginning
on or after the Closing Date and (iii) any amounts of the type
described in clauses (i) and (ii) in respect of periods prior to
the Closing Date which are expected to be billed after the
Closing Date. All amounts relating to periods ending prior to
the Closing Date shall be for the account of Seller, and all
amounts relating to periods beginning on or after the Closing
Date shall be for the account of Buyer. The respective amounts
shall be netted against each other at the Closing. If the result
is an amount owing to Seller, Buyer shall pay such amount to
Seller at the Closing. If the result is an amount owing to
Buyer, Seller shall pay such amount to Buyer. In additional to
the foregoing, on the Closing Date, Buyer agrees to reimburse
Seller for all security deposits under leases acquired as part of
the Acquired Assets.
1.10 Collection of Accounts Receivable and
Accrued Payments.
(a) On or before the Closing, Buyer and Seller
shall determine and agree on, as of the close of business on the
business day immediately preceding the Closing Date, the amount
of the Accruals. Seller shall prepare and deliver to Buyer on the
Closing Date a schedule setting forth the Accruals, which
schedule shall, with respect to that portion of the Accruals
relating to the placement of permanent personnel by Seller prior
to the Closing Date, set forth, by client, the personnel placed,
the starting date of such personnel and the fee accrued.
Promptly after the Closing, but in accordance with Seller's
customary billing practices, Buyer shall render invoices to
Seller's clients for the Accruals. Buyer shall remit to Seller
all payments received by it on account of the Accruals and any of
Seller's accounts receivables within 15 days after the end of
each month in which such payments are received. While Buyer
shall use reasonable efforts to collect the Accruals and any
other accounts receivable of Seller outstanding on the Closing
Date commensurate with the efforts it would use to collect its
own accounts receivable, Buyer shall not be required to institute
litigation or other collection proceedings in order to do so and,
in any event, Buyer shall have no liability to Seller for any
Accruals or accounts receivable that are not collected. Seller
shall have the right to institute collection proceedings with
respect to any Accruals or accounts receivable that are aged more
than 120 days after the date of the related invoice, but shall
notify Buyer of any such action not less than five days before it
is instituted.
(b) Seller shall pay to Buyer any amounts
which shall be received by it after the Closing Date in respect
of any of the Acquired Assets or with respect to any accounts
receivable generated by Buyer with respect to periods on or after
the Closing Date. Similarly, if Buyer receives after the Closing
any payments with respect to any assets of Seller not included in
the Acquired Assets other than the Accruals and Seller's accounts
receivable, Buyer shall pay such amounts to Seller. All payments
required to be made by one party to the other hereunder shall be
made on a monthly basis on the 15th day of each month following
the month of receipt. Any amounts received pursuant to this
Section 1.10(b) shall be applied to the receivables specifically
identified by the client. If no such identification is provided,
Buyer or Seller, as the case may be, shall inquire of client for
written identification and apply the amount received accordingly.
1.11 Nonassignable Contracts. Nothing in this
Agreement shall be construed as an attempt to assign any contract
which is by law nonassignable without the consent of any other
party thereto unless and until such consent is given.
2. Closing. The consummation of the purchase
and sale of the Acquired Assets (the "Closing") shall take place
at 9:30 a.m. on July 28, 1997, at the offices of Christy &
Viener, 620 Fifth Avenue, New York, New York 10020, or at such
other time, date and place as the parties may agree (the "Closing
Date").
3. Conditions to the Obligations of Buyer.
The obligations of Buyer under Section 1 are subject to the
satisfaction, on or before the Closing Date, of the following
conditions:
3.2 Due Performance. Seller and the
Stockholders shall have in all material respects fully performed
and complied with all agreements and conditions required under
this Agreement to be performed or complied with by it or them on
or prior to the Closing Date.
3.2 Accuracy of Representations and
Warranties. All representations and warranties of Seller and the
Stockholders set forth in Section 6 of this Agreement shall be
true and correct in all material respects on and as of the
Closing Date as if made on and as of such date.
3.3 Certificate. Buyer shall have received a
certificate from each of Seller and the Stockholders to the
effect set forth in Sections 3.1 and 3.2.
3.4 Brody Employment Agreement. Buyer,
Headway and Brody shall have entered into an Employment Agreement
in a form satisfactory to all such parties (the "Brody Employment
Agreement").
3.5 Katz Employment Agreement. Buyer, Headway
and Katz shall have entered into a Employment Agreement in a form
satisfactory to all such parties (the "Katz Employment
Agreement").
3.6 Related Instruments. Seller shall have
executed and delivered to Buyer a General Bill of Sale in
customary form with respect to the Acquired Assets, as well as
such other instruments of assignment with respect to specific
Acquired Assets as Buyer shall reasonably request.
3.7 Financial Statements. Prior to the
Closing Date, Seller shall, at the expense of Headway, prepare
and deliver to Buyer and Headway, in accordance with generally
accepted accounting principles, (i) audited financial statements
for each of ASA Temporaries and ASA Personnel for the fiscal
years ended December 31, 1995 and 1996 (the "Audited Financial
Statements"), prepared by Ernst & Young LLP, Headway's
independent certified public accountants, and (ii) unaudited
balance sheets, income statements, and statements of cash flow
for each of ASA Temporaries and ASA Personnel as of and for (a)
the six months ended June 30, 1996, (b) the nine months ended
September 30, 1996 and (c) the three months ended March 31, 1997
(the "Unaudited Financial Statements"; the Audited Financial
Statements and the Unaudited Financial Statements being
collectively referred to as the "Financial Statements").
3.8 Legal Opinion. Buyer shall have received
an opinion of Messrs. Todtman Young, Nachamie, Hendler & Spizz,
P.C., counsel for Seller and the Stockholders, dated the Closing
Date, reasonably satisfactory in form and substance to counsel
for Buyer and covering the matters set forth in Sections 6.1
(exclusive of the last sentence thereof), 6.2, 6.3, 6.4(a) and
6.8.
3.9 Corporate Action. Buyer shall have
received copies, certified by the Secretaries of ASA Temporaries
and ASA Associates, of resolutions of their respective Boards of
Directors and Stockholders approving the execution of this
Agreement and the consummation of the transactions contemplated
hereby.
3.10 No Adverse Change. There shall have been
no material adverse change in the business, results of operations
or financial condition of Seller since December 31, 1996.
3.11 Consents and Governmental Approvals.
Headway and Buyer shall have received any material consents of
third parties, and any authorizations, orders, grants, consents,
permits and approvals of all relevant governmental authorities,
required in connection with the consummation of the transactions
contemplated under this Agreement, without the imposition of any
materially burdensome conditions or restrictions, which shall
continue to be in full force and effect on the Closing Date,
including the consent or waiver of International Nederlanden
(U.S.) Capital Corporation ("ING") under the Credit Agreement,
dated as of May 31, 1996, as amended (the "Credit Agreement"), by
and among Headway, as Borrower, the various lenders parties
thereto, and ING, as Agent.
3.12 No Claims. No claim, action, suit,
investigation or proceeding shall be pending or threatened
against any of the parties which, if adversely determined, might
(i) prevent or hinder consummation of the transactions
contemplated by this Agreement, (ii) result in the payment of
substantial damages by Buyer or Headway as a result of the
transactions contemplated hereby or (iii) materially and
adversely affect the business or assets of Seller, Buyer or
Headway.
3.13 Due Diligence. Buyer shall have
completed to its reasonable satisfaction a diligence review of
the business, affairs, results of operations and financial
condition of each Seller.
4. Conditions to the Obligations of Seller and
the Stockholders. The obligations of Seller and the Stockholders
under Section 1 are subject to the satisfaction, on or before the
Closing Date, of the following conditions:
4.1 Due Performance. Headway and Buyer shall
have in all material respects fully performed and complied with
all agreements and conditions required under this Agreement to be
performed or complied with by them on or prior to the Closing
Date.
4.2 Accuracy of Representations and
Warranties. All representations and warranties of Headway and
Buyer set forth in Section 7 of this Agreement shall be true and
correct in all material respects on and as of the Closing Date as
if made on and as of such date.
4.3 Certificate. Seller shall have received a
certificate from each of Buyer and Headway to the effect set
forth in Sections 4.1 and 4.2.
4.4 Related Instruments. Buyer shall have
executed and delivered to Seller a General Instrument of
Assumption in customary form with respect to the Assumed
Liabilities, as well as such other instruments of assumption with
respect to specific Assumed Liabilities as Seller shall
reasonably request.
4.5 Brody Employment Agreement. Headway,
Buyer and Brody shall have entered into the Brody Employment
Agreement.
4.6 Katz Employment Agreement. Headway, Buyer
and Katz shall have entered into the Katz Employment Agreement.
4.7 Legal Opinion. Seller and the
Stockholders shall have received an opinion of Messrs. Christy &
Viener, counsel for Buyer and Headway, dated the Closing Date,
reasonably satisfactory in form and substance to counsel for
Seller and the Stockholders and covering the matters set forth in
Sections 7.1 (exclusive of the last sentence thereof), 7.2, 7.3,
7.4 (a) and 7.6.
4.8 Corporate Action. Seller shall have
received copies, certified by the Secretaries of Buyer and
Headway, of resolutions of Buyer's and Headway's respective
Boards of Directors approving the execution of this Agreement,
the Brody Employment Agreement and the Katz Employment Agreement
and the consummation of the transactions contemplated hereby and
thereby.
4.9 Consents and Governmental Approvals.
Seller and the Stockholders shall have received any material
consents of third parties, and any authorizations, orders,
grants, consents, permits and approvals of all relevant
governmental authorities, required in connection with the
consummation of the transactions contemplated under this
Agreement, without the imposition of any materially burdensome
conditions or restrictions, which shall continue to be in full
force and effect on the Closing Date.
4.10 No Claims. No claim, action, suit,
investigation or proceeding shall be pending or threatened
against any of the parties which, if adversely determined, might
(i) prevent or hinder consummation of the transactions
contemplated by this Agreement, (ii) result in the payment of
substantial damages by Seller or the Stockholders as a result of
the transactions contemplated hereby or (iii) materially and
adversely affect the business or assets of Seller, Buyer or
Headway.
5. Waiver of Conditions. Each of the parties
shall have the right to waive, in whole or in part, any of the
conditions to its performance set forth in this Agreement and, on
such waiver, the waiving party may proceed with the consummation
of the transactions contemplated herein, it being understood
that such waiver shall not constitute a waiver of any right which
such party may have by reason of the breach by the other party of
any representation, warranty or agreement contained herein, or by
reason of any misrepresentation made by such other party herein.
6. Representations and Warranties of Seller
and the Stockholders. Each of ASA Temporaries, ASA Personnel and
the Stockholders, jointly and severally, represent and warrant to
Buyer and Headway as follows:
6.1 Due Incorporation and Qualification. Each
of Seller is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New York,
with full corporate power and authority to own, lease and operate
its properties and to carry on its business in the places and in
the manner currently conducted or proposed to be conducted. Each
of Seller is qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of
the activities conducted by it or the character of the properties
owned or leased by it makes such qualification necessary and the
failure to so qualify would have a material adverse effect on
Seller's Business or the Acquired Assets.
6.2 Authority; Due Authorization. Each of
Seller has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. Each of Seller has taken all corporate
action necessary for the execution and delivery by it of this
Agreement and for the consummation of the transactions
contemplated hereby. Each of Brody and Katz has the requisite
power and authority to execute and deliver, and has taken all
action necessary for the execution and delivery of, this
Agreement and the Brody Employment Agreement or the Katz
Employment Agreement, as the case may be, and for the
consummation of the transactions contemplated hereby and thereby.
6.3 Valid Obligation. This Agreement, when
executed and delivered by each of Seller and the Stockholders,
shall constitute the valid and binding obligation of each of
Seller and the Stockholders, the Brody Employment Agreement, when
executed and delivered by Brody, shall constitute his valid and
binding obligation, and the Katz Employment Agreement, when
executed and delivered by Katz, shall constitute his valid and
binding obligation, in each case enforceable in accordance with
its terms, except as may be limited by principles of equity or by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally.
6.4 No Conflicts or Defaults. The execution
and delivery of this Agreement by each of Seller and each of the
Stockholders, the Brody Employment Agreement by Brody, and the
Katz Employment Agreement by Katz, and the consummation of the
transactions contemplated hereby and thereby, do not and shall
not (a) contravene the Certificate of Incorporation or By-Laws of
either Seller or (b) with or without the giving of notice or the
passage of time, (i) materially violate or conflict with, or
result in a material breach of, or a material default or loss of
rights under, any agreement, lease, mortgage, instrument, permit
or license to which Seller is a party and which is included in
the Acquired Assets or to which any of the Acquired Assets are
subject, or any judgment, order, decree, law, rule or regulation
to which any of the Acquired Assets are subject, (ii) result in
the creation of, or give any party the right to create, any lien,
charge, encumbrance or any other right or adverse interest on or
with respect to any of the Acquired Assets or (iii) terminate or
give any party the right to terminate, abandon or refuse to
perform any agreement, arrangement or commitment to which Seller
is a party and which is included in the Acquired Assets or to
which any of the Acquired Assets are subject.
6.5 Copies of Charter Documents. Copies of
the Certificate of Incorporation and By-Laws of each of Seller,
in each case as amended to the date hereof, have been delivered
to Buyer or its representatives and are true and complete copies
of such documents as in effect on the date of this Agreement.
6.6 Seller's Capitalization. The Stockholders
own all of the issued and outstanding capital stock of each of
Seller. There are no outstanding options, warrants, rights,
conversion rights, preemptive rights, calls, commitments or
demands of any character obligating either of Seller to issue or
sell any shares of its capital stock or any other security giving
a right to acquire shares of its capital stock, or obligating any
of the Stockholders to sell or otherwise dispose of any of its
shares of capital stock of either of Seller.
6.7 Subsidiaries and Related Parties.
Seller's business is conducted entirely by and through Seller.
Seller has no direct or indirect subsidiaries, nor are there any
other entities which Seller otherwise directly or indirectly
controls or in which it has any ownership or other interest.
Except as set forth in Schedule 6.7, none of the Stockholders or
any director, officer or key employee of Seller or any of their
respective affiliates or relatives has any direct or indirect
interest (other than an ownership interest of up to 5% of the
voting securities of any corporation, the securities of which are
publicly-traded) in any assets used in Seller's business or in
any corporation, partnership or other entity which (a) competes
with Seller, (b) sells or purchases products or services to or
from Seller, (c) leases real or personal property to or from
Seller or (d) otherwise does business with Seller.
6.8 Authorizations. Except as set forth in
Schedule 6.8, no authorization, approval, order, license, permit
or consent of, or filing or registration with, any court or
governmental authority, and no consent of any other party, is
required in connection with the execution, delivery and
performance of this Agreement by Seller and the Stockholders, the
Brody Employment Agreement by Brody or the Katz Employment
Agreement by Katz.
6.9 The Acquired Assets.
(a) Seller has, and on the Closing Date shall
have and shall transfer to Buyer good and marketable title to
all of the Acquired Assets, free and clear of all claims, liens,
security interests, charges, restrictions and other encumbrances
except: (i) any created pursuant to this Agreement, (ii) any
arising under leases of real or personal property to which Seller
is a party and which have been specifically disclosed to Buyer or
(iii) mechanics' or other liens arising or incurred in the
ordinary course of business and which do not interfere materially
with the possession, ownership or use of any real or personal
property used by Seller.
(b) Set forth in Schedule 6.9. is a list of
all real property leased by Seller, with a brief description of
the premises. Seller owns no real property.
(c) The office equipment and furniture,
vehicles, computers and computer software, office supplies and
leasehold improvements included in the Acquired Assets are, in
all material respects, in good operating condition and repair,
reasonable wear and tear excepted, and are satisfactory for the
requirements of Seller's business.
6.10 Client Agreements
(a) Schedule 1.1.B sets forth a true and
complete list of all material client agreements and arrangements
to which Seller is party (the "Client Agreements"). Seller has
furnished Buyer with a true copy of each Client Agreement or a
written description of any Client Agreement that has not been
reduced to writing. The Client Agreements constitute all of the
contracts, agreements, understandings and arrangements pursuant
to which Seller provides any temporary, permanent, leased or
payrolled employment services for or with respect to the clients
party to such agreements. Except as set forth in Schedule
6.10.A, (i) each Client Agreement was entered into in the
ordinary course of Seller's business, (ii) is in full force and
effect on the date of this Agreement and is valid, binding and
enforceable in accordance with its terms, (iii) Seller is not in
material breach or default under any of the Client Agreements and
has not received any notice or claim of any such breach or
default from any party, (iv) the relationship of Seller with the
clients that are parties to the Client Agreements is good and
there has been no expression of any intention to terminate or
materially modify any of such relationships, (v) neither Seller
nor any of the Stockholders has any knowledge of any material
breach or default under any of the Client Agreements by any
other party thereto, (vi) no event or action has occurred, is
pending or is threatened, which, after the giving of notice,
passage of time or otherwise, could constitute or result in any
such material breach or default by Seller or any other party
under any of the Client Agreements and (vii) no material amount
claimed to be payable to Seller under any of the Client
Agreements is being disputed by any client.
(b) Except as set forth in Schedule 6.10.A,
(i) for its services under each Client Agreement, Seller
receives the compensation provided under such Client Agreement,
without discount, offset or concessions of any kind, and Seller
has not proposed or agreed to offer or accept any discount,
offset or concession and (ii) the payment history of the clients
under the Client Agreements is good as judged by industry
standards. Set forth in Schedule 6.10.B is an aging schedule of
Seller's accounts receivable and accounts payable as of June 30,
1997, which list is accurate in all material respects.
(c) All of the accounts receivable reflected
on the books and records of Seller and on Schedule 6.10.B are the
result of bona fide transactions in the ordinary course of
business of Seller and are fully collectible by Seller, subject,
to the best knowledge of Seller, to no defenses, counterclaims,
set-offs or recoupments, except to the extent appropriately
reserved for on the books and records of Seller and except as
disclosed in Schedule 6.10.A.
..........6.11 Financial Statements.
(a) The Financial Statements have been
prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout all periods
presented. Such statements are correct and complete in all
material respects, are reconcilable to the books and records of
Seller, and present fairly the financial position of Seller as of
the dates, and the results of operations, cash flows and changes
in financial position of Seller for the periods, indicated,
except in the case of interim financial statements, for the
omission of footnotes and for year-end review adjustments that
are not expected to be material. The Financial Statements are
presented for each of Seller as well as on a combined basis.
(b) Except as set forth in Schedule 6.11, as
of December 31, 1996, Seller had no material liabilities or
obligations, whether secured or unsecured, accrued, determined,
absolute or contingent, asserted or unasserted or otherwise,
which are required to be reflected or reserved in a balance sheet
or the notes thereto under generally accepted accounting
principles, but which are not reflected in the Financial
Statements.
6.12 Other Agreements in the Acquired Assets.
(a) Schedule 1.1.C sets forth a true and
complete list of the office leases, equipment leases and other
agreements, contracts and instruments included in the Acquired
Assets other than the Client Agreements (the "Other Agreements").
Together with the Client Agreements, the Other Agreements
constitute all of the contracts, agreements, understandings and
arrangements required for the operation of Seller's business, as
currently conducted by Seller, or which have a material effect
thereon.
(b) Except as set forth in Schedule 6.12, (i)
each Other Agreement was entered into in the ordinary course of
Seller's business, is in full force and effect on the date of
this Agreement and is valid, binding and enforceable in
accordance with its terms, (ii) Seller is not in material breach
or default under any of the Other Agreements and has not received
any notice or claim of any such breach or default from any party,
(iii) Seller and each of the Stockholders have no knowledge of
any material breach or default under any of the Other Agreements
by any other party thereto and (iv) no event or action has
occurred, is pending or is threatened, which, after the giving of
notice, passage of time or otherwise, could constitute or result
in any such material breach or default by Seller or any other
party under any of the Other Agreements.
6.13 Intellectual Property. Schedule 1.1.D
sets forth a true and complete list of all trademarks, service
marks, domain name, trade names and copyrights, and United States
or foreign registrations and applications for registration of any
of them, and any other intellectual property rights, used by
Seller in its business, all of which intellectual property is
included in the Acquired Assets. Seller owns or has legal right
to use, pursuant to one or more of the Other Agreements, all such
intellectual property without infringing on the rights or
intellectual property of any third party. No royalties or fees
are payable by Seller to any party by reason of the use by Seller
of any of such intellectual property. Seller has not received
any claims that it or its products or services have infringed the
rights of others, and Seller and the Stockholders are not aware
of any infringement by others of Seller's intellectual property.
6.14 Taxes. Except as set forth in Schedule
6.14, Seller has filed all federal, state, local and foreign
returns and reports which were required to be filed prior to the
date hereof in respect of all income, withholding, franchise,
payroll, excise, property, value-added, sales, use or other
taxes, imposts, duties or assessments (together with any related
penalties, fines or interest, "Taxes"). Each such return and
report is complete and accurate in all material respects, and
Seller has paid, or established adequate reserves for payment of,
all Taxes (and any related penalties, fines and interest) shown
to be due on such returns or reports and any assessments received
with respect thereto. Except as set forth in Schedule 6.14,
Seller has received no notice of any claims pending or threatened
for taxes against it for periods prior to the date hereof, in
excess of such reserves.
6.15 Permits; Compliance with Law. Seller
holds all permits, certificates, licenses, approvals and other
authorizations of governmental authorities as are materially
necessary to the conduct of its business. Seller is in material
compliance with the terms of each thereof and has not received
any notice or claim pertaining to the failure to obtain, or the
breach or violation of the terms of, any such authorization.
Neither Seller nor any Stockholder has received any notice of any
proceeding or investigation likely to result in the suspension or
revocation of any such authorization. Seller is conducting its
business and affairs in material compliance with all applicable
federal, state and local laws, ordinances, rules, regulations and
court or administrative orders and decrees.
6.16 Litigation. Except as set forth in
Schedule 6.16, there are no claims, actions, suits, proceedings,
investigations or criminal proceedings, at law or in equity,
before any court, tribunal, governmental authority or other forum
(collectively, "Proceedings") pending or threatened, against
Seller which, if adversely determined, would, singly or in the
aggregate, have a material adverse effect on Seller's business or
the Acquired Assets or the ability of Seller or any of the
Stockholders to perform their obligations under this Agreement or
which would challenge the validity or propriety of the
transactions contemplated in this Agreement. Schedule 6.16
contains a list of all Proceedings to which Seller is a party or
to which it or any of the Acquired Assets are subject. There is
no material outstanding and unsatisfied judgment, order, writ,
ruling, injunction, stipulation or decree of any court,
arbitrator or governmental authority against or materially
affecting Seller or any material portion of the Acquired Assets.
6.17 Ordinary Course; No Material Adverse
Effect. Except as set forth in Schedule 6.17 and for the
transactions contemplated in this Agreement, since December 31,
1996, Seller has conducted its business and maintained its assets
substantially in the same manner as previously conducted or
maintained and solely in the ordinary course and, since such
date, there has not been any event that has or would, with or
without the giving of notice or the passage of time, result in a
material adverse effect on Seller or its business.
6.18 Employee Benefits and Relations.
(a) Except as set forth in Schedule 6.18,
Seller does not maintain or sponsor, or contribute or have any
obligation or liability to, any "employee pension benefit plan",
"employee welfare benefit plan" or "multi-employer plan" (as such
terms are defined in Sections 3(2), 3(1) and 4001(a)(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")). Set forth in Schedule 6.18 is a list of all bonus,
pension, profit-sharing, deferred compensation, stock ownership,
stock bonus, stock option, phantom stock, retirement, vacation,
disability, death benefit, unemployment, hospitalization,
medical, dental, severance, or other plan, agreement, arrangement
or understanding providing benefits to any current or former
employee, officer or director of Seller or to which Seller has
any liability or obligation (all such plans, agreements,
arrangements and understandings are referred to as "Benefit
Plans"). Seller and the Stockholders have delivered to Buyer and
Headway true, complete and correct copies of (i) each Benefit
Plan and all amendments thereto (or, in the case of any unwritten
Benefit Plans, descriptions thereof), (ii) annual reports on Form
5500 for the past three years (together with accompanying
financial statements) filed with the Internal Revenue Service or
Department of Labor, as applicable, with respect to each Benefit
Plan (if any such report was required), (iii) all summary plan
descriptions for each Benefit Plan for which such summary plan
description is required or otherwise available and (iv) each
trust agreement and group annuity contract relating to any
Benefit Plan. No Benefit Plan provides for post-retirement
medical or life insurance benefits unless the event giving rise
to the benefit entitlement occurs prior to the employee's
retirement (except as required by Title I, Part 6 of ERISA).
(b) Any accrued obligations of Seller under
all Benefit Plans that are required to be reflected on the
balance sheet of Seller in accordance with generally accepted
accounting principles are reflected thereon as of the dates
indicated thereon and on the books and records of Seller for all
periods thereafter. Seller has provided Buyer with copies of all
such balance sheets, books and records.
(c) Except as set forth in Schedule 6.18, each
Benefit Plan and any related trust complies currently, both as
to form and operation, in all material respects with the terms of
such Benefit Plan and with the applicable provisions of ERISA,
the Code and other applicable laws. All necessary government
approvals for each Benefit Plan have been obtained on a timely
basis.
(d) Except as set forth in Schedule 6.18,
Seller has no liability (contingent or otherwise) with respect to
any terminated Benefit Plan. Seller is not a member of, and has
no liability with respect to, a controlled group of corporations
or a trade or business (whether or not incorporated) under common
control which, together with Seller, is or was at any time
treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA.
(e) Seller is not a party to any union or
collective bargaining contract with respect to any of its
employees and there has not been, nor has Seller or any
Stockholder received written notice threatening, any
representational or organizational activity, strike, slowdown,
picketing or work stoppage by any union or other group of
employees against Seller.
(f) Schedule 6.18 sets forth (i) the name of
each director, officer, employee and sales representative of
Seller (other than temporary or payrolled personnel), together
with the annual compensation rate for each such person and (ii)
each oral or written contract, commitment or understanding
between Seller and any current or former director, officer, sales
person, employee, agent or stockholder of Seller or any associate
or relative of such persons (other than temporary or payrolled
personnel).
6.19 Insurance. All of the insurable Acquired
Assets are, in the judgment of Seller, adequately insured for the
benefit of Seller against loss or damage by theft, fire and all
other hazards and risks of a character usually insured against by
persons operating similar properties in the localities where such
properties are located, under valid and enforceable policies
issued by insurance carriers of substantial assets. A list of
all of insurance policies of Seller, indicating carriers,
coverage and applicable limits of liability, is set forth in
Schedule 6.19. All such policies of insurance are in full force
and effect on the date hereof, and shall remain in full force and
effect through the Closing Date in accordance with their terms.
Neither Seller nor any Stockholder has received notice of
termination of any such policies.
6.20 Investment Intent. The Shares are being
acquired solely for the account of Seller for investment and not
with a view to, or for resale in connection with, any
distribution.
6.21 Miscellaneous. All representations and
warranties of Seller and each of the Stockholders set forth in
this Agreement and all information set forth in the Schedules,
were, as of the date on which they were made or given, true and
complete in all material respects and no such representation,
warranty or information contains or contained any untrue
statement of a material fact or, to the knowledge of Seller and
each of the Stockholders, omits to state any material fact
necessary in order to make such representation or warranty, in
light of the circumstances under which it is or was made, not
false or misleading. Any disclosure made pursuant to any of the
representations and warranties in this Section 6 shall be deemed
to have been made for purposes of any other such representations
and warranties.
7. Representations and Warranties of Buyer and
Headway. Buyer and Headway, jointly and severally, represent
and warrant to Seller and each of the Stockholders as follows:
7.1 Due Organization and Qualification. Each
of Buyer and Headway is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware. Each of Buyer and Headway has all requisite power and
authority to own, lease and operate its properties and to carry
on its business in the places and in the manner currently
conducted or proposed to be conducted. Each of Buyer and Headway
is qualified to do business and is in good standing as a foreign
corporation in which the nature of the activities conducted by it
or the character of the properties owned or leased by it makes
such qualification necessary and the failure to so qualify would
have a material adverse effect on its business.
7.2 Authority; Due Authorization. Buyer has
all requisite power and authority to execute and deliver this
Agreement, the Notes, the Brody Employment Agreement and the Katz
Employment Agreement and to consummate the transactions
contemplated hereby and thereby. Buyer has taken all corporate
action necessary for the execution and delivery by it of this
Agreement, the Notes, the Brody Employment Agreement and the Katz
Employment Agreement and for the consummation of the transactions
contemplated hereby and thereby. Headway has all requisite power
and authority to execute and deliver this Agreement, the Brody
Employment Agreement and the Katz Employment Agreement and to
consummate the transactions contemplated hereby and thereby,
including, without limitation, the guarantee of Headway set forth
in Section 1.3(f) of this Agreement. Headway has taken all
corporate action necessary for the execution and delivery by it
of this Agreement, the Brody Employment Agreement and the Katz
Employment Agreement and for the consummation of the transactions
contemplated hereby and thereby, including, without limitation,
the guarantee of Headway set forth in Section 1.3(f) of this
Agreement.
7.3 Valid Obligation. This Agreement, the
Brody Employment Agreement and the Katz Employment Agreement,
when executed and delivered by each of Buyer and Headway, shall
constitute the valid and binding obligations of each of Buyer and
Headway, and the Notes, when executed and delivered by Buyer,
shall constitute the valid and binding obligation of Buyer, in
each case enforceable in accordance with its terms, except as may
be limited by principles of equity or by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally.
7.4 No Conflicts or Defaults. The execution
and delivery of this Agreement, the Brody Employment Agreement
and the Katz Employment Agreement by each of Buyer and Headway,
and the Notes by Buyer, and the consummation of the transactions
contemplated hereby and thereby, do not and shall not (a)
contravene the Certificate of Incorporation or By-Laws of Buyer
or Headway or (b) with or without the giving of notice or the
passage of time, materially violate or conflict with, or result
in a material breach of, or a material default or loss of rights
under, any agreement, lease, mortgage, instrument, permit or
license to which Buyer or Headway is a party or by which Buyer or
Headway are bound, other than the Credit Agreement, or any
judgment, order, decree, law, rule or regulation to which Buyer
or Headway are subject.
7.5 Copies of Charter Documents. Copies of
the Certificate of Incorporation and By-Laws of each of Buyer and
Headway, in each case as amended to the date hereof, have been
delivered to Seller and are true and complete copies of such
documents as in effect on the date of this Agreement.
7.6 Authorizations. No authorization,
approval, order, license, permit or consent of, or filing or
registration with, any court or governmental authority, and no
consent of any other party, is required in connection with the
execution, delivery and performance of this Agreement, the Notes,
the Brody Employment Agreement or the Katz Employment Agreement
by Buyer, and the execution, delivery and performance of this
Agreement, the Brody Employment Agreement or the Katz Employment
Agreement by Headway, except for the consent or waiver of ING
under the Credit Agreement.
7.8 The Shares. The Shares, when and as
issued pursuant to the terms of this Agreement, shall be duly
authorized, validly issued and nonassessable, free and clear of
any encumbrances, and shall not be issued in violation of any
preemptive rights.
7.9 Litigation. There are no claims, actions,
suits, proceedings, investigations or criminal proceedings, at
law or in equity, before any court, tribunal, governmental
authority or other forum (collectively, "Proceedings") pending or
threatened, against Buyer or Headway which, if adversely
determined, would, singly or in the aggregate, have a material
adverse effect on the ability of Buyer or Headway to perform its
obligations under this Agreement or which would challenge the
validity or propriety of the transactions contemplated in this
Agreement. There is no material outstanding and unsatisfied
judgment, order, writ, ruling, injunction, stipulation or decree
of any court, arbitrator or governmental authority against or
materially affecting Buyer or Headway or any material portion of
their respective assets.
7.9 Miscellaneous. All representations and
warranties of Buyer and Headway set forth in this Agreement were,
as of the date on which they were made or given, true and
complete in all material respects and no such representation,
warranty or information contains or contained any untrue
statement of a material fact or, to the knowledge of Buyer and
Headway, omits or omitted to state any material fact necessary in
order to make such representation or warranty, in light of the
circumstances under which it is or was made, not false or
misleading. Any disclosure made pursuant to any of the
representations in this Section 7 shall be deemed to have been
made for purposes of any other such representations.
8. Survival of Representations and Warranties.
All representations and warranties made by any party in this
Agreement or in any document or certificate delivered pursuant to
this Agreement shall survive the Closing for a period of three
years (except that the representations and warranties set forth
in Sections 6.14 and 6.18 relating to Taxes and Benefit Plans
shall survive for a period equal to the statute of limitations
applicable to any claims and liabilities which may result from a
breach thereof) and shall be unaffected by any investigation made
by or on behalf of any party or by any notice of breach of, or
failure to perform under, this Agreement which is not effectively
waived pursuant to Section 5, subject, however, to the
limitations on indemnification set forth in Section 13.5.
9. Conduct of Seller's Business Prior to
Closing Date.
9.1 Preservation of Representations and
Warranties. Between the date of this Agreement and the Closing
Date, Seller and each of the Stockholders shall refrain from
taking, without the prior written consent of Buyer or Headway,
any action which would render any of the representations or
warranties set forth in Section 6 inaccurate as of the Closing
Date. Seller shall notify Buyer and Headway promptly of the
occurrence of any matter, event or change in circumstances after
the date hereof that would render any of such representations and
warranties inaccurate or which would have been required to be
disclosed hereunder if it had occurred on or prior to the date
hereof.
9.2 Preserve Business. Between the date of
this Agreement and the Closing Date, Seller shall, to the best of
its ability, preserve substantially intact its business
organization, keep available the services of its present officers
and key employees and preserve its present relationships with
persons having significant business relations with Seller and
conduct its business solely in the ordinary course. In this
regard and without limitation of the foregoing, Seller shall not,
without the prior consent of Buyer, (A) make or grant any wage or
salary increases or bonuses other than pursuant to pre-existing
commitments, (B) terminate, amend or waive any substantial rights
under any Client Agreement or Other Agreement, (C) sell,
encumber or otherwise dispose of any of the Acquired Assets, (D)
enter into any material agreement, lease, commitment or
understanding involving a time period of more than 90 days, an
amount of more than $10,000 or otherwise not in the ordinary
course of business.
9.3 Further Investigation. Between the date
of this Agreement and the Closing Date, Seller shall provide
Buyer, Headway and their respective representatives with full
access during normal business hours, on reasonable prior notice,
to Seller's premises, personnel and files, books and records
concerning Seller's business and the Acquired Assets, and Seller
shall cause its officers, employees and representatives to
furnish such financial and operating data and other information
with respect to Seller's business and the Acquired Assets as
Buyer or Headway shall reasonably request; provided, however,
that any such investigation shall be conducted in such manner as
not to interfere unreasonably with the operation of Seller's
business. During such investigation, Buyer, Headway and their
respective representatives shall have the right to make copies
of, or excerpts from, such files, books and records as they may
deem advisable.
If the purchase and sale contemplated in this
Agreement are not consummated, each of the parties shall (i)
return all written information and copies and summaries thereof
to the party from which such information originated and (ii)
maintain in confidence and not disclose to third parties any
information obtained from the other party which the other party
designated as confidential or with respect to which the
circumstances of its disclosure reasonably indicated that the
other party treated it as confidential. The foregoing shall not
apply to any information that is or becomes part of public or
industry knowledge for reasons other than the acts or omissions
of the party to whom such information is disclosed in connection
with the transactions contemplated herein. In addition, if the
purchase and sale contemplated in this Agreement are not
consummated, Headway and Buyer shall not, directly or indirectly,
for one year from the date of the signing of this Agreement,
solicit for employment any person employed as of the date of this
Agreement by Seller in any executive, managerial or sales
position, unless and until Seller terminates the employment of
any such person. The provisions of this Section 9.3 shall
survive the termination of this Agreement for any reason.
9.4 Releases, Consents, Waivers and Filings.
The parties shall use their respective best efforts and cooperate
with each other to do all things reasonably necessary or
desirable to consummate in an expeditious manner the transactions
contemplated by this Agreement. In this regard, the parties
shall cooperate to obtain from all relevant third parties and
governmental authorities all consents, waivers, permits,
authorizations and licenses to or for, such transactions that may
be required under any agreement, lease, financing arrangement,
license, permit or other instrument or under any applicable law,
rule or regulation, and to obtain and file appropriate
registrations and transfers of Seller's intellectual property.
9.5 No Solicitation. Neither Seller nor any
Stockholder shall, directly or through any other party,
negotiate or conclude an agreement with any other party for a
merger or sale of the securities of Seller or for the sale or
other disposition of the business or assets of Seller, or enter
into any discussions with any other party for such purposes or
knowingly take any other action that might materially prejudice
the consummation of the transactions contemplated herein, unless
this Agreement is terminated in accordance with Section 15.1.
10. Post-Closing Matters.
10.1 Cessation of Use of Name. As promptly as
practicable after the Closing Date, and in any event not later
than ten days thereafter, each of Seller (a) shall cease the use
of its name or any other name that contains "ASA",
"Administrative Sales Associates Temporaries, Inc.", "ASA
Temporaries, Inc.", "ASA Temporaries", "Administrative Sales
Associates Personnel, Inc.", "ASA Personnel, Inc.", "ASA
Personnel", "ASA Personnel Temporary Services", "Temporaries",
"Personnel", "Administrative" or any words including or formed
from such words and (b) shall file amendments to their respective
certificates of incorporation and state qualifications to do
business to effect a change of their respective corporate names
to names consistent with the intent of this Section 10.1.
10.2 Operation of Buyer During Earnout
Periods. For each Earnout Period, Buyer shall prepare and submit
to the Board of Directors of Headway Corporate Staffing Services,
Inc. ("HCSS") annual operating and capital expenditure budgets,
as well as interim budget reports, at such times as the Board of
Directors reasonably establishes, which budgets shall be approved
in the reasonable discretion of the Board of Directors. After a
budget is approved by the Board of Directors, Buyer's management
shall be authorized to act and to operate the business of Buyer
in accordance with such budget. Headway and HCSS shall at all
times have access to the books and records of Buyer and with such
other information pertaining to its business as they request from
time to time and shall have the right at any time to audit the
books of Buyer. Brody and Katz, who shall be employed by Buyer
to manage Buyer, agree to implement the accounting and operating
systems and procedures of the Headway group of companies at
Buyer. To the extent that Buyer is not meeting the annual
operating or capital expenditure budgets then in effect or
collecting accounts receivable due Buyer on a timely basis, the
Board of Directors of Buyer shall have the right to require Buyer
to make such changes in its operations and personnel as the Board
of Directors deems reasonably necessary.
10.3 Sellers Employees. Buyer shall, after
conferring with the Stockholders in such regard, inform Seller in
writing reasonably prior to the Closing Date (which shall in no
case be less than one week prior to the Closing Date) as to
whether it wishes to employ any of Seller's employees, and if it
wishes to do so, the names of such employees and the positions
and compensation Buyer proposes to offer them. Seller shall
permit Buyer to offer employment to such employees on the terms
proposed by Buyer prior to the Closing Date. Immediately prior
to the Closing Date, Seller shall inform any of its employees to
whom Buyer does not offer employment, or who do not accept
Buyer's offer of employment if made, that they shall be relieved
of their duties with respect to the business of Seller being
acquired by Buyer hereunder, effective on the Closing Date. All
liabilities and obligations associated with the termination of
employment by Seller of any of Seller's employees to whom Buyer
does not offer employment or who do not accept Buyer's offer of
employment under contract or applicable law or otherwise, shall
be the sole responsibility of Seller, and Seller and each of the
Stockholders, jointly and severally, shall discharge and
indemnify, defend and hold harmless Buyer and Headway and their
respective officers, directors, employees, agents and
shareholders from all such obligations and liabilities.
10.4 June 30 Financial Statements. On or
prior to the date thirty days from the Closing Date, Seller shall
deliver to Buyer the unaudited balance sheets, income statements
and statements of cash flow for each of Seller (and on a combined
basis) as of and for the six-month period ended June 30, 1997,
prepared in accordance with generally accepted accounting
principles.
10.5 Insurance Matters. The parties shall
cooperate to preserve the existing insurance coverage of Seller
with respect to the Acquired Assets through and following the
Closing and to effect an appropriate transition to Buyer's
insurance, if requested, at the time of Closing.
10.6 Further Assurances. Whenever reasonably
requested to do so by Buyer, on or after the Closing Date, Seller
and the Stockholders shall do, execute, acknowledge and deliver
all such acts, bills of sale, assignments, confirmations,
consents and any and all such further instruments and documents,
in form reasonably satisfactory to Buyer, as shall be reasonably
necessary or advisable to carry out the intent of this Agreement
and to vest in Buyer all of the right, title and interest of
Seller in and to the Acquired Assets.
10.7 Authorization to Buyer. Without limiting
in any respect the right, title and interest in and to the
Acquired Assets to be acquired by Buyer hereunder, Seller
irrevocably authorizes, effective upon the Closing, Buyer, its
successors and assigns, to demand and receive, from time to time,
any and all of the Acquired Assets, to give receipts and releases
for or in respect of the same, to collect, assert or enforce any
claim, right or title of any kind therein or thereto and, for
such purpose, from time to time, to institute and prosecute in
the name of Seller (but only if Seller consents to such use of
its name), or otherwise, any and all proceedings at law, in
equity or otherwise, which Buyer shall deem expedient or
desirable.
10.8 Correspondence. Seller authorizes Buyer,
on and after the Closing Date, to receive and open mail addressed
to Seller and to deal with the contents thereof in a responsible
manner, provided that such mail relates to the Acquired Assets or
to the business of Seller to be carried on by Buyer. Buyer shall
deliver to Seller all other mail addressed to Seller which is
received by Buyer. Seller shall have the right, on its request
and its expense, to inspect any such mail addressed to it and
retained by Buyer and to make copies thereof
11. Non-Competition.
11.1 General. Each of Seller and the
Stockholders agrees, for a period of four years (three and one-
half years in the case of Katz only) after the Closing Date (the
"Term"), that it shall not, in the New York Metropolitan area or
in any other area in which Headway or Buyer conducts the business
of the placement or provision of temporary, permanent, leased or
payrolled personnel during the Term (or for such lesser area or
such lesser period as may be determined by a court of competent
jurisdiction to be a reasonable limitation on the competitive
activity of each of Seller and the Stockholders), directly or
indirectly:
(a) engage, for or on behalf of itself or any
person or entity other than Buyer or Headway, in the business of
the placement or provision of temporary, permanent, leased or
payrolled personnel;
(b) solicit or attempt to solicit business for
services offered by Seller, Buyer or Headway from any parties who
(i) are clients of Seller on the Closing Date or at any time
during the 12 months prior to the Closing Date or to whom Seller
has made or makes proposals for services during the 12 months
preceding the Closing Date or (ii) are clients of Buyer or
Headway during the Term or to whom Buyer or Headway makes
proposals for services during the Term;
(c) otherwise divert or attempt to divert from
Buyer or Headway any business involving the placement or
provision of temporary, permanent, leased or payrolled personnel
of the type now or during the Term conducted by Seller, Buyer or
Headway;
(d) solicit or attempt to solicit for any
business endeavor any employee of Buyer or Headway, including any
employee of Seller who is employed by Buyer after the Closing
Date; or
(e) render any services as a joint venturer,
partner, consultant or otherwise to, or have any interest as a
stockholder, partner, lender or otherwise in, any person or
entity which is engaged in activities which, if performed by
Seller, would violate this Section 11.1.
The foregoing shall not prevent Seller from purchasing or
owning (i) up to 5% of the voting securities of any corporation,
the securities of which are publicly-traded, or (ii) any interest
in any entity which is not also engaged in the business of the
placement or provision of temporary, permanent, leased or
payrolled personnel. Seller and the Stockholders shall, during
the Term, direct any business opportunities in the temporary,
permanent, leased or payrolled personnel placement business that
may come to their attention to Buyer and Headway. References to
Headway and Buyer in this Section 11 shall also be deemed to
refer to their respective subsidiaries. To the extent that
Headway or Buyer materially default in their obligations to
Seller and the Stockholders under this Agreement, the provisions
of this Section 11 shall no longer be effective.
11.2 Injunctive Relief. Because Buyer and
Headway would not have an adequate remedy at law to protect their
businesses from any breach of the provisions of Section 11.1,
Buyer and Headway shall be entitled, in the event of such a
breach or threatened breach thereof by Seller, to injunctive
relief, in addition to such other remedies and relief that would
be available to Buyer. In the event of such a breach, in
addition to any other remedies, Buyer and Headway shall be
entitled to receive from Seller and the Stockholders, jointly and
severally, payment of, or reimbursement for, their reasonable
attorneys' fees and disbursements incurred in successfully
enforcing any such provision. The provisions of this Section 11
shall survive the Closing Date.
12. Bulk Sales. Buyer waives compliance by
Seller with the provisions of any applicable bulk sales law.
Seller shall promptly pay or otherwise discharge all valid claims
of its creditors (as defined by the applicable bulk sales law),
as and when they become due and payable (in accordance with
Seller's customary and commercially reasonable practices), and
Seller and each Stockholder, jointly and severally, shall
indemnify and hold harmless Buyer and Headway from any and all
liabilities, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by Buyer
and arising from the failure of Seller to satisfy the claims of
such creditors.
13. Indemnification
13.1 Obligations of Seller and the
Stockholders. Seller and each Stockholder, jointly and
severally, shall indemnify, defend and hold harmless Buyer and
Headway and their respective officers, directors, employees,
agents and shareholders from and against any Damages (as defined
in Section 13.3) in connection with:
(a) any breach of any representation, warranty
or agreement of either Seller or the Stockholders contained in
this Agreement or in any certificate, instrument or other
agreement delivered by either of them in connection with this
Agreement;
(b) all Unassumed Liabilities and the
operation of Seller's business at any time prior to the Closing
Date;
(c) the termination of the employment of any
of Seller's employees, as contemplated in Section 10.3; and
(d) any claim, action, suit or proceeding
asserted or instituted on the basis of any matter described in
clauses (a), (b) or (c) of this Section 13.1;
provided, however, that, except in connection with
liabilities under clauses (b) and (c) above, the breach of the
representations and warranties set forth in Sections 6.14 and
6.18 relating to Taxes and Benefit Plans or the breach of the
provisions set forth in Section 11 relating to non-competition
(as to which the limitations of these provisos shall not apply),
no payment hereunder shall be required to be made by Seller or
the Stockholders unless and until the aggregate amount of any
such losses, damages, liabilities, costs and expenses exceeds
$25,000 and Seller and the Stockholders shall not be required to
make payments hereunder in excess of the Purchase Price.
13.2 Obligations of Buyer and Headway. Buyer
and Headway, jointly and severally, shall indemnify, defend and
hold harmless Seller and each of the Stockholders and their
respective heirs, executors, officers, directors, employees,
agents, and shareholders, as applicable, from and against any
Damages in connection with:
(a) any breach of any representation, warranty
or covenant of either Buyer or Headway contained in this
Agreement or in any certificate, instrument or other agreement
delivered by either of them in connection with this Agreement;
(b) all Assumed Liabilities and the operation
by Buyer of the business of Seller being acquired by Buyer
hereunder at any time on or after the Closing Date; and
(c) any claim, action, suit or proceeding
asserted or instituted on the basis of any matter described in
clauses (a) or (b) of this Section 13.2;
provided, however, that, except in connection with clause
(b) above, no payment hereunder shall be required to be made by
Buyer or Headway unless and until the aggregate amount of any
such losses, damages, liabilities, costs and expenses exceeds
$25,000 and Buyer and Headway shall not be required to make
payments hereunder in excess of the Purchase Price.
13.3 Damages. For purposes of this Section
13, "Damages" means any loss, liability, damage or expense
suffered or incurred by a party in connection with the matters
described in Sections 13.1 or 13.2, as the case may be,
including, without limitation, assessments, fines, penalties,
judgments, settlements, costs, reasonable attorneys' fees and
disbursements and other expenses of the party incident to any
matter as to which the party is entitled to indemnification under
such Sections, or incident to any allegations or claims which, if
true, would give rise to Damages subject to indemnification
hereunder, or incident to the enforcement by the party of its
rights and remedies under this Section 13.
13.4 Proceedings. Any party seeking
indemnification pursuant to this Section 13 (the "Indemnified
Party") shall give the party from which indemnification is sought
(the "Indemnifying Party") prompt notice of any claim,
allegation, action, suit or proceeding which it believes might
give rise to indemnification under this Section 13. Any failure
to give such notice shall not affect the indemnification provided
hereunder except to the extent that the Indemnifying Party is
actually prejudiced as a result of such failure. The
Indemnifying Party shall have the right to participate in, and,
with the consent of the Indemnified Party, which consent shall
not be unreasonably withheld, to control, the defense of any such
claim, allegation, action, suit or proceeding, at the
Indemnifying Party's expense, and with counsel of its own
choosing reasonably acceptable to the Indemnified Party;
provided, however, that if Buyer and Headway are the Indemnified
Parties, they shall have the right to withhold such consent and
to retain control of such defense in the case of any claim,
action, suit or proceeding with respect to which an adverse
outcome could have a material adverse effect on Buyer or Headway,
with the expense of any counsel retained by Buyer and Headway in
any such instance to be their expense. No settlement or
compromise of any such claim, action, suit or proceeding shall be
made without the prior consent of the Indemnified Party and the
Indemnifying Party, which consent shall not be unreasonably
withheld by either of them.
13.5 Limitations on Indemnification. No right
to indemnification may be asserted under this Section 13 after
the third anniversary of the Closing Date, except any such rights
to indemnification arising in connection with (a) any matter
referred to in Sections 6.14 or 6.18, none of which shall be
subject to any time limitation other than any statutes of
limitation applicable to such matters, (b) any matter covered by
Section 11 or (c) any claim as to which the notice required by
Section 13.4 has been given on or prior to the third anniversary
of the Closing Date.
13.6 Offset. It is agreed that, without
limiting any other rights of Buyer and Headway, they shall have
the right to set off against and deduct from any amounts payable
pursuant to the provisions of Section 1.3, including amounts
payable under the Notes, the amount of any Damages for which they
are entitled to indemnification under this Section 13; provided
that any such set off shall first be against any Earnout then due
and payable.
14. Arbitration.
14.1 General. Any controversy or claim
arising out of or relating to this Agreement shall be finally
resolved by arbitration pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. Any such
arbitration shall take place in New York, New York, before three
arbitrators, one of which shall be appointed by Buyer or Headway,
one by Seller or the Stockholders and the third by the
arbitrators so appointed; provided, however, that the parties may
by mutual agreement designate a single arbitrator. The parties
further agree that (i) the arbitrators shall be empowered to
include arbitration costs and attorney fees in the award to the
prevailing party in such proceedings and (ii) the award in such
proceedings shall be final and binding on the parties. The
arbitrators shall apply the law of the State of New York,
exclusive of conflict of laws principles, to any dispute.
Judgment on the arbitrators' award may be entered in any court
having the requisite jurisdiction. Nothing in this Agreement
shall require the arbitration of disputes between the parties
that arise from actions, suits or proceedings instituted by third
parties.
14.2 Consent to Jurisdiction; Service of
Process. Each party irrevocably submits to the jurisdiction and
venue of the arbitration described in Section 14.1 and to the
jurisdiction and venue of the federal and state courts sitting in
New York County, New York, for the enforcement of any judgment on
the arbitrators' award, and waives any objection it may have with
respect to the jurisdiction of such arbitrations or courts or the
inconvenience of such forums or venues. Buyer and Headway
appoint Messrs. Christy & Viener, 620 Fifth Avenue, New York, New
York 10020, Attention: Laurence S. Markowitz, Esq., and Seller
and the Stockholders appoint Messrs. Todtman Young, Nachamie,
Hendler & Spizz, P.C., 425 Park Avenue, New York, New York 10022,
Attention: Alex Spizz, Esq., as their respective attorneys-in-
fact and authorized agents solely to receive on their behalf,
service of any demands for, or any notice with respect to,
arbitration hereunder or any service of process. Service on
either of such attorneys-in-fact may be made by registered or
certified mail or by personal delivery, in any case return
receipt requested, and shall be effective as service on Buyer and
Headway or Seller and the Stockholders, as the case may be.
Nothing herein shall be deemed to affect any right to serve any
such demand, notice or process in any other manner permitted
under applicable law.
15. Miscellaneous.
15.1 Termination. This Agreement may be
terminated at any time prior to the Closing Date by the mutual
written consent of all of the parties.
15.2 Entire Agreement; Amendments; No Waivers.
This Agreement, together with the Schedules, sets forth the
entire understanding of the parties with respect to its subject
matter and merges and supersedes all prior and contemporaneous
understandings of the parties with respect to its subject matter.
No provision of this Agreement may be waived or modified, in
whole or in part, except by a writing signed by each of the
parties. Failure of any party to enforce any provision of this
Agreement shall not be construed as a waiver of its rights under
such or any other provision. No waiver of any provision of this
Agreement in any instance shall be deemed to be a waiver of the
same or any other provision in any other instance.
15.3 Communications. All notices, consents
and other communications given under this Agreement shall be in
writing and shall be deemed to have been duly given (a) when
delivered by hand or by Federal Express or a similar overnight
courier to, (b) five days after being deposited in any United
States post office enclosed in a postage prepaid registered or
certified mail envelope addressed to, or (c) when successfully
transmitted by facsimile (with a confirming copy of such
communication to be sent as provided in (a) or (b) above) to, the
party for whom intended, at the address or facsimile number for
such party set forth below, or to such other address or facsimile
number as may be furnished by such party by notice in the manner
provided herein; provided, however, that any notice of change of
address or facsimile number shall be effective only upon receipt.
If to Buyer or Headway:
Headway Corporate Resources, Inc.
850 Third Avenue
New York, New York 10022
Attention: Barry S. Roseman, President
Telecopier Number: (212) 508-3540
with a copy to:
Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attention: Laurence S. Markowitz, Esq.
Telecopier No.: (212) 632-5555
If to Seller or the Stockholders
Richard Brody
70 Grace Avenue
Merrick, New York 11566
Arnold Katz
30 Christy Drive
Muttontown, New York, 11753
with a copy to:
Todtman, Young, Nachamie
Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Alex Spizz, Esq.
Telecopier No.: (212) 754-6262
15.4 Successors and Assigns. This Agreement
shall be binding on, enforceable against and inure to the benefit
of, the parties and their respective heirs, successors and
permitted assigns, and nothing herein is intended to confer any
right, remedy or benefit upon any other person. No party may
assign its rights or delegate its obligations under this
Agreement without the express written consent of all of the other
parties; provided, however, that Buyer may assign its rights or
delegate its obligations hereunder, either before or after the
Closing, to any other wholly-owned subsidiary of Headway.
15.5 Expenses. Each of the parties shall
bear and pay, without any right of reimbursement from any other
party, all costs, expenses and fees incurred by it or on its or
his behalf incident to the preparation, execution and delivery of
this Agreement and the performance of such party's obligations
hereunder, whether or not the transactions contemplated in this
Agreement are consummated, including, without limitation, the
fees and disbursements of attorneys, accountants and consultants
employed by such party, and shall indemnify and hold harmless the
other parties from and against all such fees, costs and expenses.
15.6 Brokers and Finders. Each party
represents to the others that no agent, broker, investment
banker, financial advisor or other person or entity is or shall
be entitled to any broker's or finder's fee or other commission
or similar fee in connection with the transactions contemplated
by this Agreement, except for a broker retained by Headway, the
fees and expenses of which shall be borne entirely by Headway.
Each party shall indemnify and hold harmless the others from and
against any claim, liability or obligation with respect to any
fees, commissions or expenses asserted by any person or entity on
the basis of any act or statement alleged to have been committed
or made by such indemnifying party or any of its affiliates.
15.7 Public Announcements. No oral or written
public announcement or disclosure with respect to this Agreement
and the transactions contemplated herein prior to the Closing
Date shall be made by or on behalf of any party without the prior
approval of the other parties, except to the extent required by
applicable securities laws or the rules and regulations of any
stock exchange, by court order or as otherwise required by law.
15.8 Governing Law. This Agreement shall in
all respects be governed by and construed in accordance with the
laws of the State of New York applicable to agreements made and
fully to be performed in such state, without giving effect to
conflicts of law principles.
15.9 Severability and Savings Clause. If any
provision of this Agreement is held to be invalid or
unenforceable by any court or tribunal of competent jurisdiction,
the remainder of this Agreement shall not be affected thereby,
and such provision shall be carried out as nearly as possible
according to its original terms and intent to eliminate such
invalidity or unenforceability. In this regard, the parties
agree that the provisions of Section 11, including, without
limitation, the scope of the territorial and time restrictions,
are reasonable and necessary to protect and preserve Buyer's
legitimate interests. If the provisions of Section 11 are held
by a court of competent jurisdiction to be in any respect
unreasonable, then such court may reduce the territory or time to
which it pertains or otherwise modify such provisions to the
extent necessary to render such provisions reasonable and
enforceable.
15.10 Counterparts. This Agreement may be
executed in multiple counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and
the same instrument.
15.11 Construction. Headings used in this
Agreement are for convenience only and shall not be used in the
interpretation of this Agreement. References to Sections and
Schedules are to the sections and schedules of this Agreement.
As used herein, the singular includes the plural and the
masculine, feminine and neuter gender each includes the others
where the context so indicates.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
HEADWAY CORPORATE RESOURCES, INC. ASA PERSONNEL SERVICES, INC.
By (Signature) By (Signature)
Name: Gary S. Goldstein Name: Philicia G. Levinson
Title: Chairman & CEO Title: Secretary
ADMINISTRATIVE SALES ASSOCIATES ADMINISTRATIVE SALES
TEMPORARIES, INC. ASSOCIATES, INC.
By Signature By (Signature)
Name: Arnold Katz Name: Richard Brody
Title: President Title: President
(Signature) (Signature)
Arnold Katz Richard Brody
Exhibit No. 2
Headway Corporate Resources, Inc.
Form 8-K dated July 28, 1997
File No. 0-23170
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 333-08615) and related Prospectus of
Headway Corporate Resources, Inc., of our report dated June 30,
1997, with respect to the combined financial statements of
Administrative Sales Associates Temporaries, Inc. and
Administrative Sales Associates Inc., included in Headway Corporate
Resources, Inc.'s, Form 8-K dated July 28, 1997, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
August 6, 1997
