SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-23534
CAREER HORIZONS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 22-3038096
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
177 CROSSWAYS PARK DRIVE, WOODBURY, NY 11797
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 682-1400
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date:
Class Outstanding at May 1, 1996
----- --------------------------
Common Stock, $.01 par value 17,635,422
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets -
March 31, 1996 and Dec. 31, 1995 3
Unaudited Condensed Consolidated Statements
of Income - Three months ended March 31,
1996 and 1995 5
Unaudited Condensed Consolidated Statements
of Cash Flows - Three months ended
March 31, 1996 and 1995 6
Notes to Unaudited Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 16
Index to Exhibits 17
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
ASSETS
March 31, Dec. 31,
1996 1995
--------- --------
CURRENT ASSETS:
Cash and cash equivalents $ 69,835 $ 11,712
Reverse repurchase agreements 41,908 48,449
Accounts receivable, net of allowance for
doubtful accounts of $2,480 and $1,848 78,362 62,346
Due from Associated Offices, net of
allowance for doubtful accounts
of $1,373 and $1,254 34,723 35,832
Other receivables, net 1,487 1,060
Prepaid expenses 1,235 988
Deferred income taxes 3,345 2,771
-------- --------
Total current assets 230,895 163,158
INTANGIBLE ASSETS, net 94,560 29,719
FURNITURE, FIXTURES AND EQUIPMENT, net 5,838 5,003
OTHER RECEIVABLES, net 287 310
OTHER ASSETS, net 3,379 3,368
-------- --------
$334,959 $201,558
======== ========
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, Dec. 31,
1996 1995
--------- --------
CURRENT LIABILITIES:
Bank overdrafts $ 10,649 $ 10,511
Accounts payable and accrued liabilities 17,682 11,898
Accrued compensation and related taxes 30,907 23,007
Notes payable 1,539 6,966
Current income taxes payable 1,192 1,677
-------- --------
Total current liabilities 61,969 54,059
DEFERRED INCOME TAXES 231 280
OTHER LIABILITIES 53 66
7% CONVERTIBLE SENIOR NOTES DUE 2002 86,250 86,250
-------- --------
Total liabilities 148,503 140,655
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
authorized, 1,000,000 shares;
issued and outstanding - none --- ---
Common stock, $.01 par value; authorized,
25,000,000 shares; issued and
outstanding - 17,618,500 and 5,622,038 176 56
Nonvoting common stock, $.01 par value;
shares authorized, issued and outstanding
- none and 392,638 --- 4
Additional paid-in capital 169,474 46,585
Retained earnings 16,861 14,329
-------- --------
186,511 60,974
Less: treasury stock, at cost, 6,318
and 4,068 shares (55) (71)
-------- --------
Total stockholders' equity 186,456 60,903
-------- --------
$334,959 $201,558
======== ========
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
March 31,
-------------------
1996 1995
---- ----
REVENUES $127,192 $89,583
EXPENSES:
Cost of services 97,409 69,024
Selling, general and administrative
expenses 19,649 12,762
Remittance to franchisees 4,652 4,630
Other expense, net 187 1,052
-------- -------
Total expenses 121,897 87,468
Income from operations 5,295 2,115
Interest expense, net (1,178) (517)
------- ------
Income before income taxes 4,117 1,598
Provision for income taxes (1,585) (674)
------- -------
NET INCOME $ 2,532 $ 924
======= =======
INCOME PER COMMON SHARE $.18 $.08
==== ====
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 14,440 12,305
======= =======
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES $(2,463) $8,400
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in reverse repurchase
agreements, net 6,541 ---
Acquisition of furniture, fixtures
and equipment (392) (173)
Acquisition of businesses, net of
cash acquired (67,333) (6,553)
-------- -------
Net cash used by investing activities (61,184) (6,726)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in senior credit facility --- (820)
Increase (decrease) in bank overdrafts 137 (266)
Repayment of debt assumed in acquisitions --- (674)
Payments under capital lease obligation (11) (14)
Exercise of stock options 1,221 92
Proceeds from public offering of
common stock, net 120,423 ---
------- -------
Net cash provided (used) by financing
activities 121,770 (1,682)
------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 58,123 (8)
CASH AND CASH EQUIVALENTS, AT BEGINNING
OF YEAR 11,712 741
------- -------
CASH AND CASH EQUIVALENTS, AT END OF
PERIOD $69,835 $ 733
======= =======
The accompanying notes are an integral part of the unaudited
condensed consolidated financial statements.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the
instructions to Form 10-Q and, accordingly, do not include all
of the information and disclosures required by generally
accepted accounting principles. The accompanying condensed
consolidated financial statements have not been audited by
independent accountants in accordance with generally accepted
auditing standards, but, in the opinion of the Company, such
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly its
financial position as of March 31, 1996, and the results of
operations and changes in cash flows for the three month periods
ended March 31, 1996 and 1995, and are not necessarily
indicative of the results to be expected for the full year.
In reading the interim condensed consolidated financial
statements, reference should be made to the summary of
accounting policies and notes to the financial statements
included in the Company's Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission on February 28,
1996.
2. ACQUISITION OF SUBSIDIARIES
In January 1996, the Company acquired all of the outstanding
common stock of Programming Enterprises, Inc. d.b.a. Mini-
Systems Associates ("Mini-Systems") and substantially all of the
assets of Zeitech Inc. ("Zeitech"). In addition, in March 1996,
the Company acquired substantially all of the assets relating to
the temporary staffing business of Management Search, Inc. and
its affiliate Temps & Co. Services, Inc. (collectively "MSI").
The aggregate purchase price of these acquisitions, including
fees and expenses, was $63.8 million. In addition, the purchase
agreements provide for contingent consideration in the case of
Mini-Systems (up to a maximum of $10 million) and Zeitech, based
upon operating results of the acquired businesses over a three-
year period. The acquisition of MSI was partially financed by
the issuance of a note payable in the amount of $1,539,000 due
in 1997.
These acquisitions have been accounted for as purchase
transactions and, accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on their
estimated fair values as of the dates of acquisition. Goodwill
resulting from these transactions, which represents the excess
of the consideration paid over the estimated fair value of net
assets acquired, amounted to $65.4 million, and will be
amortized over 32 years.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Contd.)
Pro forma data for the three months ended March 31, 1996 and
1995, as if the acquisitions of Mini-Systems, Zeitech and MSI as
well as the issuance of the 7% Convertible Senior Notes Due 2002
(the "Convertible Notes") and the public offering of 5,377,500
shares of common stock (the "Stock Offering") all had occurred
as of January 1, 1995 is as follows (in thousands, except per
share amounts):
Three months ended
March 31,
------------------
1996 1995
-------- --------
Revenues $131,369 $116,711
Net income 2,584 698
Income per common share $0.14 $0.04
Note: Assuming the Company had invested the net proceeds of
the Convertible Notes and Stock Offering into
interest-bearing cash equivalents at an interest rate
of 5%, pro forma earnings per share would have been
$0.20 and $0.10 for the three months ended March 31,
1996 and 1995, respectively.
3. COMMON STOCK
On January 17, 1996, the Board of Directors declared a two-for-one
stock split of the Common Stock in the form of a 100% stock
dividend distributed on February 22, 1996 to shareholders of
record at the close of business on February 8, 1996. Accordingly,
$56,000 has been transferred from additional paid-in capital to
Common Stock.
In March 1996, the Company completed a public offering of
6,727,500 shares of its $.01 par value Common Stock (1,350,000
shares were sold by certain selling shareholders and 5,377,500
shares were sold by the Company). The Company received, net of
expenses associated with the offering, $120.4 million.
4. SUBSEQUENT EVENTS
In April 1996, the Company acquired substantially all of the
assets of American Computing Professionals, Inc. ("ACP") and The
Richard Michael Group, Inc. and its affiliate Richard Michael
Temps, Inc. (collectively "Richard Michael"), as well as all of
the outstanding Common Stock of Century Temporary Services, Inc.
and its affiliate Le-Gals, Inc. (collectively "Cencor"). The
aggregate purchase price of these acquisitions was approximately
$25 million plus amounts contingent (in the case of Richard
Michael, up to $12 million) upon the operating results of the
acquired businesses over periods ranging from one to five years.
These acquisitions will be accounted for as purchase transactions,
and, accordingly, the purchase price will be allocated to the
assets acquired and liabilities assumed based on their estimated
fair values as of the dates of acquisition. Goodwill resulting
from these transactions, which represents the excess of the
consideration paid over the estimated fair value of net assets
acquired, will be amortized over 32 years.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1995
Revenues. Revenues for the three months ended March 31, 1996 were
$127.2 million, an increase of $37.6 million, or 42.0%, from revenues
of $89.6 million for the three months ended March 31, 1995. Of the
increase, $31.7 million was attributable to the inclusion of the
operations of Computer Consulting Group, Professionals for Computing,
Mini-Systems, Zeitech and MSI (the "Acquired Businesses"), which the
Company has purchased since March 31, 1995. The remaining increase
was primarily attributable to increased volume by the company-owned
HR Services locations. Revenues across all lines of the Company's
businesses were influenced by severe winter weather, which caused
office closures and reduced work hours in many markets.
Gross profit. Gross profit increased by $9.2 million to $29.8
million, or 23.4% of revenues, for the three months ended March 31,
1996, compared to $20.6 million, or 23.0% of revenues, for the three
months ended March 31, 1995. The increase in gross profit as a
percentage of revenues is primarily the result of higher margins
generated by the Company's recent acquisitions.
Selling, general and administrative expenses. Selling, general and
administrative expenses ("SG&A") increased by $6.9 million to $19.6
million, or 15.4% of revenues, for the three months ended March 31,
1996, compared to $12.8 million, or 14.2% of revenues, for the three
months ended March 31, 1995. The increase of 1.2% as a percentage of
revenues was primarily attributable to the Acquired Businesses which
generate higher gross margins, but require higher operating expense
levels. In addition, new offices opened and franchises acquired
since March 1995 accounted for $656,000 of the increase in SG&A.
Remittance to franchisees. Remittance to franchisees was $4.7
million, or 3.7% of revenues, for the three months ended March 31,
1996, compared to $4.6 million, or 5.2% of revenues, for the three
months ended March 31, 1995. The decrease of 1.5% was attributable
to the decrease in revenues from the Company's franchised HR Services
and health care operations, which results in decreased remittances to
the franchisees.
Other expense, net. Other expense, net for the three months ended
March 31, 1995 includes a one-time charge of $965,000 ($550,000 after
tax) for expenses relating to the resignation of the former Chief
Executive Officer.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Contd.)
Interest expense, net. Net interest expense increased by $661,000
to $1,178,000 for the three months ended March 31, 1996, compared to
$517,000 for the three months ended March 31, 1995. The increase in
net interest expense reflects the issuance of the 7% Convertible
Senior Notes Due 2002 in October 1995, partially offset by the
investment of proceeds from the public offering of common stock in
March 1996.
Income taxes. The Company's effective income tax rate was 38.5%
for the three months ended March 31, 1996, compared to 42.2% for the
three months ended March 31, 1995. The decrease in the effective
income tax rate was primarily attributable to Company programs to
reduce state income tax expense.
Net income. Net income was $2,532,000 for the three months ended
March 31, 1996, compared to $924,000 for the three months ended March
31, 1995. The increase in profitability is a result of the above-
mentioned items.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Contd.)
LIQUIDITY AND CAPITAL RESOURCES
On March 6, 1996, the Company received, net of fees and expenses,
approximately $120.4 million from the issuance of 5,377,500 shares of
common stock. Such proceeds were used to fund the acquisition of MSI
and the remainder was invested in cash equivalents and reverse
repurchase agreements. The proceeds will be used for general
corporate purposes, primarily acquisitions.
As of March 31, 1996, the Company had no borrowings under the Senior
Credit Facility and had outstanding letters of credit, totaling
approximately $11.0 million, primarily to guarantee the payment of
its workers' compensation expenses. In addition, the Company could
borrow an additional $49.0 million under the Senior Credit Facility.
While the amounts available under the Senior Credit Facility are
determined by the terms of that Facility, management believes that,
based on the Company's current financial position, borrowings of up
to $100 million could readily be attained. Management believes that
this borrowing capacity and cash flow from operations, together with
amounts invested in cash equivalents and reverse repurchase agreement
will be sufficient to fund the Company's current operations and
anticipated capital expenditure requirements, as well as provide at
least a portion of the funds for future acquisitions. However,
depending on the size and extent of any such acquisitions, additional
acquisition or working capital financing might be required.
As collateral for its obligations under the Facility, the Company has
granted its lender a security interest in substantially all of the
Company's assets. Since the Company's borrowings under the Senior
Credit Facility are primarily subject to variable interest rates, a
significant increase in interest rates at a time when the Company has
substantial outstanding borrowings would have a negative effect on
the Company's results of operations.
The 7% Convertible Senior Notes Due 2002 are guaranteed by all of the
direct and indirect subsidiaries of the Company ("the guarantor
subsidiaries"). All of the guarantor subsidiaries are wholly-owned,
and the guarantee of the guarantor subsidiaries is full and
unconditional, and joint and several. There are no restrictions on
the ability of any of the guarantor subsidiaries to distribute funds
to the Company.
Capital expenditures, generally for computer equipment and
peripherals and office furniture and fixtures, were $392,000 for the
three months ended March 31, 1996. The Company is in the process of
implementing an enhanced billing system, the remaining payment on
which (approximately $350,000) will be made by June 30, 1996. The
Company is presently considering various enhancements to its health
care management information system, which, if implemented, may
require, depending on the final configuration and system
requirements, an investment of not less than $1.0 million. Other
than the purchase of the enhanced billing system and the possible
enhancement of its health care management information system, the
Company anticipates that recurring capital expenditures, primarily
for computer equipment and peripherals, will be approximately $1.5
million per year.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Contd.)
INFLATION
The effects of inflation on the Company's operations were not
significant during the periods presented in the financial statements.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
---------------------------------
a) Exhibit No. Description
----------- -----------
Exhibit 2.1 Asset Purchase Agreement by and among
Career Horizons, Inc., Temps & Co.
Services, Inc., Management Search, Inc.
and Eric J. Lindberg
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
b) Since January 1, 1996, the Company has filed the following
Reports on Form 8-K with the Securities and Exchange
Commission:
Date of Report Explanation
-------------- -----------
December 20, 1995 Financial Statements of Programming
(Form 8-K/A) Enterprises, Inc. d.b.a.
(filed January 18, 1996) Mini-Systems Associates as of
September 22, 1995 and September
23, 1994 and for the thirty-nine
week periods then ended (Unaudited).
Financial Statements of Mini-Systems
Associates as of December 23, 1994
and December 24, 1993 and for the
fifty-two week periods then ended
(Audited).
Financial Statements of Zeitech, Inc.
as of September 30, 1995 and 1994 and
for the nine months then ended
(Unaudited).
Financial Statements of Zeitech, Inc.
as of December 31, 1994 and 1993 and
for the years then ended (Audited).
Unaudited Pro Forma Financial
Information as follows:
Pro forma Combined Balance Sheet as
of September 30, 1995.
Pro forma Combined Statements of
Income for the year ended June 30,
1995 and three months ended
September 30, 1995.
January 11, 1996 Signing of Asset Purchase Agreement
to acquire the business of Zeitech,
Inc.
January 17, 1996 Filing of Consolidated Financial
Statements of Career Horizons, Inc.
as of June 30, 1995 and 1994 and for
the three years then ended (addition
of Note 23 to the Consolidated
Financial Statements).
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K (Contd.)
-----------------------------------------
January 18, 1996 Listing of Common Stock on New York
Stock Exchange and notification of
two-for-one stock split payable to
stockholders of record on February 8,
1996 which was effective on February
22, 1996.
February 8, 1996 Notice of filing a Registration
Statement on Form S-3 in connection
with a public offering of Common
Stock.
February 20, 1996 Press release reporting results of
operations for the three and six
months ended December 31, 1995.
March 1, 1996 Press release reporting commencement
of public offering.
March 4, 1996 Press release reporting the
acquisition of MSI.
April 1, 1996 Press release reporting the
acquisition of American Computer
Professionals, Inc.
April 24, 1996 Press release reporting results of
operations for the three months ended
March 31, 1996.
April 30, 1996 Press release reporting the
acquisitions of CenCor and Richard
Michael.
May 1, 1996 Financial statements of Management
Search, Inc. and Subsidiary and
Affiliate as of December 31, 1995 and
1994 and for the nine months then
ended (Unaudited).
Financial Statements of Management
Search, Inc. and Subsidiary and
Affiliate as of March 31, 1995 and
1994 and for the years then ended
(Audited).
Combined Financial Statements of
Century Temporary Services, Inc.
(d.b.a. CenCor Temporary Services)
and Grant Management Company (d.b.a.
Le-Gals) as of December 31, 1995 and
1994 and for the years then ended
(Audited).
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K (Contd.)
----------------------------------------
Unaudited Pro Forma Financial
Information as follows:
Pro forma Combined Balance Sheet as
of December 31, 1995.
Pro forma Combined Statements of
Income for the year ended June 30,
1995 and the six months ended
December 31, 1995.
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CAREER HORIZONS, INC.
---------------------
Registrant
Date: May 6, 1996 /s/ Michael T. Druckman
----------- -------------------------
Michael T. Druckman
Senior Vice President,
Treasurer and Asst. Secretary
(Principal Financial and
Accounting Officer)
<PAGE>
CAREER HORIZONS, INC. and SUBSIDIARIES
EXHIBIT NO. DESCRIPTION
----------- -----------
Exhibit 2.1 Asset Purchase Agreement by and among Career
Horizons, Inc., Temps & Co. Services, Inc.,
Management Search, Inc. and Eric J. Lindberg
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
Exhibit 2.1
ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of this 4th day of
March, 1996, by and among TEMPS & CO. SERVICES, INC., a Delaware
corporation and a wholly-owned subsidiary of CAREER HORIZONS,
INC. ("Parent"), as purchaser ("Purchaser"), and TEMPS & CO.
SERVICES, INC., a Georgia corporation ("Temps & Co."), and
MANAGEMENT SEARCH, INC., a Georgia corporation ("MSI") as sellers
(together, the "Sellers" or either of them individually, a
"Seller") and ERIC J. LINDBERG, an individual residing in
Atlanta, Georgia ("Lindberg").
WITNESSETH:
WHEREAS, Sellers own and operate a staffing services
division providing temporary personnel services, both directly
through offices that are Seller-owned and through franchised
offices, commonly referred to by it as its Temporary Help
Division (the "Business");
WHEREAS, Sellers desire to sell and transfer to Purchaser,
and Purchaser desires to purchase and acquire from Sellers, all
of Sellers' right, title and interest in and to all of the
tangible and intangible assets of Sellers relating to the
Business, or used in or held for use in connection with the
Business, except current assets, all as set forth more fully
below;
WHEREAS, Lindberg is the owner of all of the issued and
outstanding capital stock of Sellers and is entering into this
Agreement to further induce Purchaser to acquire the Business;
WHEREAS, MSI is the owner of the service mark "MSI Services"
and will license it to Purchaser pursuant to a license agreement
in form reasonably satisfactory to the parties hereto (the
"Service Mark License Agreement").
WHEREAS, in connection with the transfer of the Purchased
Assets to Purchaser, Purchaser desires to employ Harlan Medford
("Medford") as divisional president of the Business and Medford
desires to serve as divisional president of the Business, all in
accordance with the terms and conditions set forth in an
employment agreement with Medford dated January 1, 1992, which is
being assigned to Purchaser, as amended by an Employment
Agreement Amendment in form reasonably satisfactory to Purchaser
(the "Employment Agreement Amendment"), which is being entered
into between Purchaser and Medford;
WHEREAS, in connection with the transfer of the Purchased
Assets to Purchaser, Purchaser desires that Sellers, Lindberg,
Medford, and F. Ronald Allen ("Allen") not compete with Purchaser
and its affiliates with respect to the Business pursuant to the
terms and conditions set forth in noncompetition agreements (the
"Noncompetition Agreements") in form reasonably satisfactory to
Purchaser, which Noncompetition Agreements are being entered into
among Purchaser and Sellers, Lindberg, Medford and Allen,
respectively.
NOW, THEREFORE, in consideration of the covenants and
agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchase and Sale of Assets. Subject to the terms and
---------------------------
conditions hereof, Sellers agree to and hereby assign, transfer,
sell, convey and deliver to Purchaser, and Purchaser agrees to
and hereby acquires from Sellers, free and clear of all Liens (as
defined in Section 2.1(e) hereof) all of Sellers' right, title
and interest in and to the properties, assets and rights
comprising or relating to the Business or used therein
(collectively, the "Purchased Assets"), including, without
limitation:
(a) Furniture and Fixtures. All tangible personal
----------------------
property, furniture, equipment (including Sellers' telephone
system and numbers used in the Business), fixtures,
leasehold improvements, equipment under capital leases and
other fixed assets related to the Business or used therein,
including, without limitation, the assets listed and
described on Schedule 1.1(a) hereto.
(b) Supplies. All inventories and office and other
--------
supplies relating to or used in the Business, wherever
located, as described on Schedule 1.1(b) hereto.
(c) Records. All books, records and files or other
-------
documentation relating to the Purchased Assets or the
Business, including without limitation, (i) inventory,
maintenance and asset history records, (ii) sales promotion
materials, (iii) all client lists and telephone numbers with
respect to past, present or prospective clients and
customers of Sellers and all related sales and credit
records, and (iv) all employee lists and telephone numbers
used in the Business and all other documentation relating to
the Purchased Assets.
(d) Intangible Property. All trademarks, trade names,
-------------------
service marks and names, copyrights (including any
registrations of or pending applications for any of the
foregoing), methods of operation and manuals, trade secrets,
customer lists, methods of operation and manuals, trade
secrets, and all other intellectual property of Sellers, and
all applications for the same, owned or used in connection
with the Business and all other intangible assets,
properties and rights used by Sellers in the conduct of the
Business or any part of the Purchased Assets (collectively,
the "Intellectual Property"), including that listed on
Schedule 1.1(d) hereto; it being understood, however, that
Sellers are retaining the names "MSI Services," "MSI
International" and "Management Search, Inc." and that the
name "MSI Services" will be licensed to Purchaser pursuant
(e) Computers. All technology, computer programs,
---------
computer software, master disk of source codes, licenses,
permits and other proprietary information of Sellers
relating to or utilized in the Business, to the extent
assignment thereof to Purchaser is permitted by applicable
law and licensing arrangements, as itemized and described on
Schedule 1.1(e) hereto, but excluding the Tempserve software
used by Sellers.
(f) Assigned Contracts. All leases for real and
------------------
personal property, employee contracts, customer contracts,
franchise agreements, receivables from franchisees (the
"Franchisee Notes"), technology, license and know-how
agreements, the Purchase Agreement between CHR Enterprises,
Inc. and MSI dated October 23, 1995 (the "Cleveland
Agreement"), but not including the payment obligations
required to be evidenced by a promissory note pursuant to
the Cleveland Agreement (the "Cleveland Purchase Note"), and
to the extent permitted by applicable law, all rights under
any written or oral contract, agreement, lease, plan,
instrument, registration, license, certificate of occupancy,
other permit or approval of any nature, or other document,
commitment, arrangement, practice or authorization relating
to the Business listed on Schedule 1.1(f) hereto (all of
which contracts, orders, agreements, permits and leases are
hereinafter collectively referred to as the "Assigned
Contracts").
(g) Names. The name "TEMPS & CO." and all goodwill
-----
associated therewith, to the extent of Sellers' rights
therein.
1.2 Excluded Assets. Notwithstanding any other provision
---------------
herein to the contrary, the Purchased Assets shall exclude, and
Sellers are retaining all right, title and interest in and to all
of, and are not transferring to Purchaser, the following (the
"Excluded Assets"):
(a) Cash. All investments and cash on hand or in
----
transit and in the bank account(s) of Sellers.
(b) Corporate Documents. Any interest in and to the
-------------------
capital stock of Sellers and all minute books, stock
books, income tax records, and similar corporate records of
Sellers.
(c) Employee Plans. Sellers' right, title and
--------------
interest (if any) in and to the assets held with respect to
any "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA (as defined in Section 2.1(m) hereof))
or any other plans, programs or arrangements of any kind
relating to employee benefits sponsored or maintained by
Sellers listed on Schedule 2.1(m) hereto.
(d) Taxes. Sellers' right to any refund of any
-----
federal, state or local tax, charge, fee, duty, levy or
other assessment, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales (retail occupation), use,
franchise, excise, value added, stamp, leasing, lease, user,
equalization, windfall profits, severance, employee's income
withholding, unemployment and Social Security taxes and
other withholding taxes, including any interest, penalties
or additions to tax attributable thereto (collectively,
"Taxes"), for amounts paid by Sellers through the date
hereof, that are imposed by any Governmental Authority (as
defined in Section 2.1(b) hereof), except to the extent any
portion thereof was paid or is attributable to amounts paid
by Purchaser.
(e) Accounts Receivable. All billed and unbilled
-------------------
costs and accounts, notes, fees, commissions, and all other
receivables payable to Sellers, other than the Franchisee
Notes, accruing prior to the date hereof and all billed and
unbilled costs and accounts, notes, fees, commissions and
all other receivables payable to Sellers (including
receivables owing by officers, directors and employees of
Sellers) prior to the date hereof, a list of which accounts
receivable will be provided by Sellers on Schedule 1.2(e)
hereto within fifteen (15) days after Closing (the "Closing
Accounts Receivable"), together with all other rights to
receive and collect monies due Sellers that have accrued, or
arise with respect to matters in existence prior to the date
hereof, including any right as plaintiff or claimant in any
action or proceeding arising out of facts in existence on or
prior to the date hereof.
(f) Insurance Policies. All insurance policies and
------------------
refunds due Sellers upon cancellation of such policies
subsequent to the date hereof.
(g) Related Enterprises. Any properties, assets and
-------------------
rights comprising or used in MSI Search Division, the SCI
Search Division or the PDQS Division.
(h) Headquarter Office. Assets and properties located
------------------
in Sellers' headquarter offices, including Sellers' pay/bill
computer system and peripheral equipment.
(i) This Agreement. All rights of Sellers or Lindberg
--------------
under this Agreement or any Related Agreements (as defined
in Section 2.1(a) hereof) to which Sellers, Lindberg or any
of them is a party.
(j) Current Assets. All current assets of Sellers,
--------------
including prepaid expenses.
1.3 Assumption of Liabilities. Purchaser does not and
-------------------------
shall not assume or agree to pay, perform or discharge any
liability or obligation of Sellers except as expressly provided
herein. Upon and subject to the terms, conditions,
representations and warranties contained herein, Purchaser
assumes and agrees to pay, perform and discharge when due the
liabilities and obligations of Sellers under the Assigned
Contracts set forth on Schedule 1.1(f) hereto and the obligation
to pay unpaid vacation pay of employees of the Business that has
accrued prior to the date hereof, and no other liabilities or
obligations of Seller.
1.4 Excluded Liabilities. Except with respect to the
--------------------
Assigned Contracts and vacation pay, and regardless of whether
any of the following may be disclosed to Purchaser pursuant to
Section 2.1 hereof or otherwise, or whether Purchaser may have
knowledge of the same, Purchaser does and shall not assume, and
has and shall have no liability or responsibility for, any debts,
liabilities, obligations, claims, expenses, Taxes, contracts,
accounts payable or commitments of Sellers of any kind, character
or description, whether accrued, absolute, contingent or
otherwise, arising out of any act or omission occurring or state
of facts existing prior to or on the date hereof (the "Excluded
Liabilities"), including, without limitation, any liability of
Sellers relating to or arising from (i) the breach by a Seller of
its obligations under the Assigned Contracts, other than a breach
of an anti-assignment clause disclosed hereunder or other breach
arising by reason of the assignment of an Assigned Contract
disclosed hereunder, (ii) any infringement by a Seller of the
rights of others with respect to the Business, (iii) any
liability of Sellers for Taxes, including specifically, without
limitation, any social security taxes or other Taxes relating to
employees of Sellers, any employment or withholding Taxes upon
employees of Sellers, any income, capital gains, franchise,
capital, sales, use or transfer Taxes that may be due in
connection with the consummation of the transactions contemplated
hereby; (iv) any accrued and unpaid payroll, severance, bonus,
obligations to employees of Sellers existing at the date hereof;
(v) any liability or obligations under, or directly or indirectly
relating to, any "employee benefit plan" (as defined in ERISA) or
any other plans, programs or arrangements of any kind relating to
employee benefits sponsored or maintained by Sellers, whether or
not identified on Schedule 2.1(m) hereto; and (vi) any liability
or obligation of Sellers for current or long-term indebtedness or
payables or amounts owing to any of Sellers' respective officers,
directors, shareholders or any of its or their affiliates or any
other third party, including the Cleveland Purchase Note.
1.5 Purchase Price.
--------------
(a) Purchase Price. In consideration of the Purchased
--------------
Assets, Purchaser is paying Sellers an aggregate purchase
price (the "Purchase Price") equal to the product of Five
(5) times the Final Adjusted Profits (as defined in Section
1.5(e) hereof) plus $223,144 for the Franchise Notes minus
$204,000 for certain advertising funds.
(b) Payment. Subject to Section 1.5(c) hereof, the
-------
Purchase Price is being paid as follows: (i) Thirteen
Million, Eight Hundred Sixty-Eight Thousand, Three Hundred
Forty-Four Dollars ($13,868,344.00) by wire transfer of
immediately available funds to such accounts as Sellers have
designated (the "Closing Payment"); and (ii) a Promissory
Note in form reasonably satisfactory to Sellers in the
principal amount of One Million, Five Hundred Thirty-Eight
Thousand Eight Hundred Dollars ($1,538,800.00) (together
with the replacement Note contemplated by Section 1.5(c)
hereof, if any, the "Note"). The Note principal and all
accumulated interest are payable on the eighteen (18) month
anniversary hereof. The Note bears interest at the floating
rate (the "Interest Rate") equal to One and One-Quarter
percent over the rate of interest at which thirty (30) day
dollar deposits are offered by prime lenders in the London
inter-bank market (LIBOR + 1 1/4) compounded monthly. The
Note is subject to a right of offset as provided in Section
5.5 hereof.
(c) Compensating Payment. If the product of Five (5)
--------------------
times the Final Adjusted Profits is greater than or less
than Fifteen Million, Three Hundred Eighty-Eight Thousand
Dollars ($15,388,000), a compensating payment (the
"Compensating Payment") equal to such difference shall be
made within five (5) days after the Determination (as
defined in Section 1.5(e) hereof) of the Final Adjusted
Profits. The Compensating Payment shall be paid by
Purchaser if the Final Adjusted Profits are greater than
Fifteen Million, Three Hundred Eighty-Eight Thousand Dollars
($15,388,000) or by Sellers if the Final Adjusted Profits
are less than Fifteen Million, Three Hundred Eighty-Eight
Thousand Dollars ($15,388,000), in either case by wire
transfer of immediately available funds to such accounts as
the payee thereof designates in writing within two (2) days
after such Determination. The Compensating Payment shall
bear interest at the Interest Rate, payable with the
principal sum thereof. Notwithstanding the foregoing, if
the Compensating Payment would otherwise equal or exceed
Five Hundred Thousand Dollars ($500,000), then ten percent
(10%) thereof shall not be paid as provided above, but shall
be added to or subtracted from the principal amount of the
Note, in which case Purchaser shall simultaneously issue a
replacement Note reflecting the increased or decreased
principal amount upon delivery and cancellation of the
existing Note held by Seller.
(d) Final Adjusted Profits. For purposes of this
----------------------
Agreement, (i) "Sellers' Portion of Final Adjusted Profits"
shall mean the combined Temporary Help Division Profits of
Sellers (as more fully described in Schedule 1.5(d)(i)
hereto) for the period April 1, 1995, until the date hereof
(A) increased by fifty percent (50%) of the worker's
compensation expense, all franchise sales expense, all cash
settlements for incentive awards, and all deferred
compensation payments made to Medford otherwise reflected in
the calculation of such Temporary Help Division Profits, and
(B) decreased by any initial franchise fees otherwise
included in such Temporary Help Division Profits; (ii)
"Purchaser's Portion of Final Adjusted Profits" shall mean
the profits of the Business from the date hereof through
March 31, 1996; provided, however, that the "Selling,
-------- -------
General, and Administrative Expenses" (as more fully
described in Schedule 1.5(d)(ii) hereto) included in
determining Purchaser's Portion of Final Adjusted Profit
will be limited to a maximum amount equal to the average
monthly Selling, General, and Administrative Expenses
included in Seller's Portion of Final Adjusted Profits for
the five-month period from October 1, 1995, through February
29, 1996; and (iii) the "Final Adjusted Profits" shall mean
the sum of Seller's Portion of Final Adjusted Profits and
Purchaser's Portion of Adjusted Profits, reduced by Five
Hundred Thousand Dollars ($500,000) for the entire twelve
month period from April 1, 1995, to March 31, 1996, as a pro
forma charge for corporate expenses.
(e) Accounting Determinations. The following
-------------------------
provisions apply to the calculation of Final Adjusted
Profits:
(i) For purposes of determining the Final
Adjusted Profits, Sellers shall deliver to Purchaser
upon receipt their audited financial statements,
prepared in accordance with generally accepted
accounting principles consistently applied ("GAAP"),
for their fiscal year ended March 31, 1996 (the "1996
Financial Statements"), and for the three (3) fiscal
year period then ended, together with their calculation
of Sellers' Portion of Final Adjusted Profits, based on
the 1996 Financial Statements (the "Sellers' Statement
of Adjusted Profits"). The determinations set forth in
the Sellers' Statement of Adjusted Profits shall be a
final and binding determination (a "Determination") on
the parties hereto unless timely disputed by Purchaser
pursuant to paragraph (iii) below.
(ii) For purposes of determining the Final
Adjusted Profits, Purchaser shall deliver to Sellers
upon preparation its internally prepared, unaudited
financial statements, prepared in accordance with GAAP,
for the period from the date hereof until March 31,
1996, together with its calculation of Purchaser's
Portion of Final Adjusted Profits (the "Purchaser's
Statement of Adjusted Profits"). The determinations
set forth in the Purchaser's Statement of Adjusted
Profits shall be a final and binding determination (a
"Determination") on the parties hereto unless timely
disputed by Sellers pursuant to paragraph (iii) below.
(iii) If a party (the "Disputing Party") disputes
the determinations made by the other party (the
"Determining Party") in a Statement prepared pursuant
to clause (i) or clause (ii) above, as the case may be,
the Disputing Party shall deliver written notice of
such dispute within ten (10) days of receipt of the
Statement at issue, setting forth the nature of the
dispute and the Disputing Party's determination of the
proper calculation (a "Notice of Dispute"). The
Determining Party shall, within ten (10) days of
receipt of a Notice of Dispute, notify the Disputing
Party in writing that it challenges the calculation in
the Notice of Dispute, or it will be conclusively
deemed to have accepted such calculations, which shall
be the Determination thereof. If the Determining Party
so notifies the Disputing Party, the dispute shall be
submitted within ten (10) days of such notification to
Ernst & Young (the "Arbiter") for its determination of
the dispute, which shall be the Determination thereof.
The costs and expenses incurred in connection with a
determination by the Arbiter shall be allocated by the
Arbiter, in its discretion, in proportion to the
relative success of the parties as to the dispute.
1.6 Allocation of Purchase Price. Purchaser and Sellers
----------------------------
agree that the fair market value of the Purchased Assets that
constitute Class I, II and III Assets (as such terms are defined
in Treasury Regulation Section 1.1060-IT(d) of the Internal
Revenue Code of 1986, as amended (the "Code")) shall be as set
forth on Schedule 1.6 hereto. Purchaser and Sellers further
agree that (i) the Purchase Price shall be allocated among the
Purchased Assets in the manner required by Treasury Regulation
Section 1.1060-IT based on the fair market values set forth on
such Schedule; (ii) such allocation shall be binding on Purchaser
and Sellers for all federal, state and local tax purposes; (iii)
Purchaser and Sellers shall file with their respective federal
income tax returns consistent IRS Forms 8594: Asset Acquisition
Statement Under Section 1060, including any required amendments
or supplements thereto ("Form 8594"), which shall reflect such
allocation; and (iv) Purchaser shall prepare such Forms 8594 and
shall deliver Sellers' copy to Sellers so that Sellers may file
such Form or any amendments or supplements thereto with their
respective federal income tax returns. Sellers also agree to
assist Purchaser and provide Purchaser with any information
necessary for the completion of such Forms 8594.
1.7 Closing. The closing (the "Closing") of the
-------
transactions provided for herein are taking place simultaneously
with the execution and delivery hereof, to be effective as of
12:01 A.M. local time.
1.8 Apportionment. All income and expenses not otherwise
-------------
specifically provided for herein pertaining to Sellers' Business,
including without limitation all prepaid sums and fees, service
charges, advertising and rental charges, prepaid rentals and
advertising, utility charges, payments under the Assigned
Contracts, accrued and prepaid expenses, staff salaries, payroll
taxes, vacation pay and benefits shall be prorated between
Purchaser and Sellers as of the date hereof based on the number
of business days so that Sellers shall receive all revenues and
shall be responsible for all expenses and liabilities allocable
to the period prior to the date hereof and Purchaser shall
receive all revenues and shall be responsible for all expenses
and liabilities allocable to the period beginning on and
continuing after the date hereof, with Purchaser and Sellers to
cooperate with one another in calculating all such prorated
items, and to make a payment one to the other, as appropriate,
within sixty (60) days of the date hereof for the net amount of
such prorated items to reflect the foregoing. Further, within
sixty (60) days of the date hereof, Sellers may submit to
Purchaser invoices or other evidence of expenditures for
advertising provided by Sellers on behalf of its franchisees and
Purchaser shall promptly reimburse Sellers for such expenditures.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Sellers and Lindberg.
------------------------------------------------------
To induce Purchaser to enter into this Agreement, Sellers and
Lindberg, jointly and severally, represent and warrant to
Purchaser as follows:
(a) Due Incorporation; Authority.
----------------------------
(i) Lindberg has full legal capacity to execute,
deliver and perform this Agreement and all of the other
agreements and documents to be executed by him in
connection with and pursuant to this Agreement,
including, without limitation, a Noncompetition
Agreement (collectively, the "Lindberg Agreements").
(ii) Each Seller is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Georgia. Each Seller has all requisite
power and authority to own, lease and operate its
properties and to conduct its business as currently
conducted, and to execute, deliver and perform this
Agreement and all of the other agreements to be
executed by it in connection with and pursuant to this
Agreement, including, without limitation, the
Noncompetition Agreement and the Bills of Sale (as
defined in Section 4.1 hereof) (collectively, the
"Seller Agreements" and, together with the Lindberg
Agreements, the "Related Agreements"). Except as set
forth on Schedule 2.1(a), each Seller is qualified to
do business and is in good standing in Georgia and is
duly qualified in all jurisdictions in which the
character and location of assets owned or leased by it,
or the nature of the business transacted by it, or
both, require such qualification, except where the
failure to be so qualified would not have a material
adverse effect on Sellers or the Business, each of
which jurisdictions is identified in Schedule 2.1(a)
hereto. Neither Seller is required to be qualified as
a foreign corporation in any other jurisdictions.
(iii) Lindberg owns, beneficially and of record,
all of the issued and outstanding capital stock of each
Seller. Lindberg has consented to the consummation of
the transactions contemplated by this Agreement as the
sole shareholder of each Seller.
(iv) Each of Seller's and Lindberg's execution,
delivery, and performance of this Agreement and the
Related Agreements have been duly and validly
authorized by all necessary corporate or other action
on the part of the given Seller and of Lindberg. This
Agreement and the Related Agreements have been duly
executed and delivered by each Seller and by Lindberg
and this Agreement and the Related Agreements
constitute the legal, valid and binding obligations of
each Seller and enforceable in accordance with their
respective terms against each Seller and Lindberg,
jointly and severally, except to the extent that such
validity, binding effect or enforceability may be
limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect
and by general equitable principles.
(b) No Restrictions Against Performance. Except as
------------------------------------
set forth on Schedule 2.l(b) hereto, neither the execution
and delivery, nor the performance of this Agreement or the
Related Agreements by either Seller or by Lindberg, nor the
consummation of the transactions contemplated in this
Agreement or in the Related Agreements will violate any
provision of or conflict with either Seller's Articles of
Incorporation or By-Laws or will, with or without the giving
of notice or the passage of time, or both, violate any
provisions of, conflict with, result in a breach of,
constitute a default under, or result in the creation or
imposition of any Lien or condition under, (i) any federal,
state or local law, statute, ordinance, regulation or rule,
that is or may be applicable to Sellers, Lindberg, the
Business or any of the Purchased Assets; (ii) any contract,
indenture, instrument, agreement, mortgage, lease, right or
other obligation or restriction to which either of Sellers
or Lindberg is a party or by which either of Sellers,
Lindberg, the Business or any of the Purchased Assets is or
may be bound; or (iii) any order, judgment, writ,
injunction, decree, license, franchise, permit or other
authorization of any federal, state or local court,
arbitration tribunal or governmental agency (collectively, a
"Governmental Authority") by which either of Sellers,
Lindberg, the Business or any of the Purchased Assets is or
may be bound. The execution and delivery of this Agreement
and the Related Agreements by each Seller and Lindberg and
the performance by each Seller and Lindberg of the
transactions contemplated herein and therein will not
constitute an act of bulk sale, bankruptcy, preference,
insolvency or fraudulent conveyance under any bankruptcy act
or other law for the protection of debtors or creditors.
(c) Third-Party and Governmental Consents. Except as
-------------------------------------
set forth on Schedule 2.1(c) hereto, no approval, consent,
waiver, order or authorization of, or registration,
qualification, declaration, or filing with, or notice to,
any Governmental Authority or other third party is required
on the part of either of Sellers or in connection with the
execution of this Agreement or the Related Agreements, or
the consummation of the transactions contemplated hereby or
thereby.
(d) Assigned Contracts. Except as set forth on
------------------
Schedule 2.1(d) hereto, each of the Assigned Contracts is
valid and in full force and effect and constitutes the
legal, valid and binding obligation of Seller and, to the
best of Sellers' and Lindberg's knowledge, the other parties
thereto, enforceable against the given Seller and, to the
best of Sellers' and Lindberg's knowledge, the other parties
thereto in accordance with its terms, and there are no
existing violations or defaults by Seller or, to the best of
Sellers' and Lindberg's knowledge, by any other party
thereto and no event, act or omission has occurred which
(with or without notice, lapse of time and/or the happening
or occurrence of any other event) would result in a
violation or default thereunder. No other party to any such
Assigned Contract has in writing or otherwise asserted the
right, and, to the best of Sellers' and Lindberg's
knowledge, no basis exists for the assertion of any
enforceable right, to renegotiate, or cancel or terminate
prior to the full term thereof, any of the terms or
conditions of any such Assigned Contract, nor does either
Seller or Lindberg have any knowledge that any party to any
such Assigned Contract intends not to renew any such
Assigned Contract upon termination of its current term.
Except as set forth on Schedule 2.1(d) hereto, all of
Sellers' rights to and under each of the Assigned Contracts
are fully and freely assignable by Sellers to Purchaser, and
no consent of any party to any of the Assigned Contracts is
required for the execution, delivery or performance of this
Agreement or the consummation of the transactions
contemplated hereby. Sellers have heretofore delivered to
Purchaser true, correct and complete copies of each of the
Assigned Contracts.
(e) Title. Except as otherwise identified on Schedule
-----
2.1(e) hereto, Sellers have, and pursuant to this Agreement
will convey, sell, transfer, assign and deliver to
Purchaser, good, valid, marketable, legal and beneficial
title to all of the Purchased Assets, free and clear of all
liens, liabilities, claims, security interests, mortgages,
pledges, agreements, obligations, restrictions, or other
encumbrances of any nature whatsoever, whether absolute,
legal, equitable, accrued, contingent or otherwise,
including, without limitation, any rights of first refusal
as to any of the Purchased Assets (collectively, "Liens").
There are no outstanding options, warrants, commitments,
agreements or any other rights of any character, entitling
any person or entity other than Purchaser to acquire any
interest in all, or any part of, the Purchased Assets. All
of Sellers' leasehold or other executory interests in and to
the Purchased Assets are fully and freely assignable, except
as set forth in Schedule 2.1(e) hereto.
(f) Trademark Rights; Proprietary Information.
-----------------------------------------
Schedule 2.l(f) hereto is a true, correct and complete list
of the Intellectual Property. Except as disclosed on
Schedule 2.1(f) hereto:
(i) all of the Intellectual Property is owned by
Sellers or one of them free and clear of any Liens, and
is not subject to any license, royalty or other
agreement;
(ii) none of the Intellectual Property has been
or is the subject of any pending or threatened
litigation or claim of infringement;
(iii) no license or royalty agreement to which
either Seller is a party is in breach or default by any
party thereto or the subject of any notice of
termination given or threatened;
(iv) the Purchased Assets do not infringe any
trademark, trade name, service mark or name, copyright,
trade secret, or confidential or proprietary rights of
another, and neither of Sellers nor Lindberg has
received any notice contesting Sellers' right to use
any Intellectual Property, except as previously
disclosed to Purchaser;
(v) Neither Seller has granted any license or
agreed to pay or receive any royalty in respect of any
Intellectual Property, except as provided in the
Franchise Agreements (as defined in Section 2.1(v)
hereof); and
(vi) Sellers own or possess, and pursuant to this
Agreement are conveying, selling, transferring,
assigning and delivering to Purchaser, adequate rights
in perpetuity in and to all Intellectual Property
necessary to conduct the Business relating to the
Purchased Assets, except as otherwise provided in the
Service Mark License Agreement (as defined in Section
3.7 hereof).
(g) Solvency and Payment of Liabilities. Each Seller
-----------------------------------
is not, either as a result of the transactions contemplated
by this Agreement or otherwise, insolvent, as such term is
defined in Title 11-Bankruptcy of the United States Code or
any state statute relating to insolvency; the sum of each
Seller's debts is not greater than all of its property as a
result of the transactions contemplated herein or otherwise;
and each Seller is able to pay its debts as they mature.
(h) Litigation. Except as set forth on Schedule
----------
2.1(h), there is no judicial or administrative action, suit
or proceeding pending or, to the best of Sellers' and
Lindberg's knowledge, threatened against or relating to
either Seller, Lindberg, the Purchased Assets or the
transactions contemplated hereby, before any federal, state
or local court, arbitration tribunal or Governmental
Authority, and neither Seller nor Lindberg is aware of any
facts or circumstances that may give rise to any of the
foregoing. There are no claims, actions, suits, proceedings
or investigations pending or, to the best of Sellers' and
Lindberg's knowledge, threatened by or against either Seller
or Lindberg with respect to this Agreement or the Related
Agreements, or in connection with the transactions
contemplated hereby or thereby, and neither Seller nor
Lindberg has reason to believe there is a valid basis for
any such claim, action, suit, proceeding or investigation.
Neither Seller nor Lindberg is the subject of any order,
judgment, decree, injunction or stipulation of any court or
other Governmental Authority.
(i) Compliance with Laws; Permits. Seller has
-----------------------------
complied in all material respects, during the last three
years, with all applicable federal and state domestic and
foreign laws, rules, regulations, judgments, orders and
other legal requirements (including, but not limited to,
those relating to environmental, safety and labor matters)
affecting its Business. Schedule 2.l(i) hereto sets forth a
true, correct and complete list of all permits, licenses,
franchises, orders, certificates and approvals
(collectively, the "Permits") of any Governmental Authority
relating to either Seller, the Purchased Assets or the
Business. The Permits constitute all material permits,
licenses, franchises, orders, certificates and approvals
which are required for the lawful operation of the Business
and the operation of the Purchased Assets. Each Seller is
in compliance in all material respects with all such Permits
and each Seller owns or has owned or had valid Permits to
use all properties, tangible or intangible, necessary for
the conduct of the Business and the operation of the
Purchased Assets in the manner in which they are presently
conducted and operated.
(j) Insurance.
---------
(i) Schedule 2.1(j)(i) contains a true, correct
and complete list of all policies of fire, liability,
workers' compensation, title and other forms of
insurance owned or held by either Seller applicable to
the Business. All such policies are in full force and
effect, all premiums with respect thereto covering all
periods up to the date hereof have been paid, and no
notice of cancellation or termination has been received
with respect to any such policy. Such policies are
sufficient for compliance with all requirements of law
and all contracts to which either Seller is a party,
and are valid, outstanding and enforceable policies
applicable to the Business. Such insurance policies
provide types and amounts of insurance customarily
obtained by businesses similar to the Business. To the
extent insurable, the Purchased Assets are insured by
Sellers, under such policies of fire, casualty,
liability or other forms of insurance in such amounts
and against such risks and losses as are reasonably
adequate for the Purchased Assets.
(ii) Set forth on Schedule 2.1(j)(ii) is a list
of all claims that have been made against either Seller
in the last three (3) years for workers' compensation,
general liability or property damage, whether insured
under insurance policies or otherwise, applicable to
the Business or any of the Purchased Assets. Except as
set forth on said list, there are no pending or
threatened claims under any such insurance policy or
otherwise applicable to the Business or the Purchased
Assets. Such claim information includes the following
information with respect to each accident, loss or
other event: (a) the identity of the claimant; (b) the
date of the occurrence; (c) the status as of the report
date; and (d) the amounts paid or expected to be paid
or recovered.
(k) Taxes.
-----
(i) All Taxes of Sellers have been duly paid or
are adequately provided for and adequately reserved
(excluding for this purpose the liability for deferred
taxes). In addition, all tax reports required (A) to
be timely filed by either Seller on or prior to the
date hereof have been filed by such Seller on or prior
to the date hereof, or (B) to be timely filed by either
Seller after the date hereof, relating to taxes that
accrue on or before the date hereof, will be filed by
such Seller.
(ii) There are no agreements, waivers or other
arrangements providing for extension of time with
respect to the assessment or collection of unpaid tax
of either Seller nor are there any actions, suits,
proceedings, investigations or claims now pending
against either Seller with respect to any such unpaid
taxes, or any matters under discussion with any
Governmental Authority relating to any amount of any
such unpaid taxes. Except as otherwise set forth on
Schedule 2.1(k), no tax reports of Sellers have been
audited or are in the process of being audited by the
applicable taxing authorities, and there is no tax
deficiency outstanding, proposed or assessed against
either Seller.
(iii) There are no Taxes that are or could
constitute a Lien on the Purchased Assets or that could
have an adverse effect on the Purchased Assets, the
Business or Purchaser.
(l) Condition and Sufficiency of Assets. Except as
-----------------------------------
disclosed on Schedule 2.l(l), all of the tangible assets and
properties of Sellers, whether owned or leased, relating to
the Business or constituting a portion of the Purchased
Assets have been well-maintained and are in good operating
condition and repair (with the exception of normal wear and
tear), and are free from defects other than such minor
defects as do not interfere with the intended use thereof in
the conduct of normal operations or adversely affect the
resale value thereof. The Purchased Assets constitute all
of the tangible and intangible assets which are required for
the operation of the Business as it is presently conducted,
except for cash and working capital on hand or in transit
and in the bank account(s) of Sellers.
(m) Employee Benefit Plans.
----------------------
(i) Except as set forth on Schedule 2.1(m)
hereto, none of Sellers nor any other member of the
Controlled Group (A) has at any time maintained,
contributed to or participated in, (B) has or had at
any time any obligation to maintain, contribute to or
participate in, or (C) has any liability or contingent
liability, direct or indirect, with respect to: any
employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), oral or written retirement
or deferred compensation plan, incentive compensation
plan, stock plan, consulting agreement, unemployment
compensation plan, vacation pay plan, severance plan,
bonus plan, stock compensation plan or any other type
or form of employee-related (or independent contractor-
related) arrangement, program, policy, plan or
agreement. For purposes of this Agreement, the term
"Controlled Group" shall refer to Sellers and each
other corporation or other entity under common control
with Sellers (pursuant to the provisions of Sections
414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986, as amended (the "Code)) at any time during the
sixty (60) month period ending on the date hereof.
(ii) With respect to each plan, program,
arrangement, agreement or policy included, or required
to be included, in Schedule 2.1(m) hereto (the "Benefit
Plans"): (A) there has been no violation of any
applicable provision of ERISA; (B) each Benefit Plan
intended to quality under Section 401(a) of the Code or
for any other tax-exempt or tax-favored status under
the code so qualifies; (C) none of Sellers nor any
other member of the Controlled Group is subject to any
outstanding or potential liability or obligation,
direct or indirect, relating to any such Benefit Plan;
and (D) there are no actual or potential claims or
actions (other than claims for benefits in the normal
course) relating to any such Benefit Plan.
(iii) With respect to the Benefit Plans covering
any current or former employee of Sellers, Sellers have
delivered to Purchaser correct and complete copies of:
(A) each of such Benefit Plans; (B) all trust
agreements, insurance contracts or other funding
vehicles related to one or more of such Benefit Plans;
and (C) the most recent Forms 5500 relating to such
Benefit Plans.
(n) Accounts Receivable.
-------------------
(i) Schedule 2.1(n)(i) hereto contains a
description of the Accounts Receivable of Sellers
arising from the Business as close to the date hereof
as possible and a true and accurate aging Schedule
thereof.
(ii) Except as set forth on Schedule 2.1(n)(ii),
to the best of Sellers' and Lindberg's knowledge, no
Account Receivable is subject to any claim for
reduction, set-off, counterclaim, recoupment or other
claim for credit, allowances or adjustments by the
obligor thereof in excess of Ten Thousand Dollars
($10,000).
(iii) Schedule 2.1(iii) sets forth the balances
as of the date hereof of the outstanding obligations
under the Franchisee Notes.
(o) Real Property. Sellers own no real property
-------------
relating to the Business.
(p) Personal Property. Schedule 2.1(p) sets forth a
-----------------
true and complete list of all of the tangible personal
property used by Sellers in the Business having an original
acquisition cost of Five Thousand Dollars ($5,000) or more.
Schedule 2.1(p) also sets forth all leases of personal
property binding upon either Seller or any of their assets
or properties, and all items of personal property covered
thereby. All of such tangible personal property is
presently utilized in the ordinary course of the Business.
Sellers have delivered to Purchaser true and complete copies
of all such personal property leases.
(q) Contracts. Schedule 2.1(q) lists all material
---------
contracts and arrangements of the following types, whether
oral or written, relating to the Business to which either
Seller is a party or by which either is bound, or to which
any of the Purchased Assets is subject:
(i) any collective bargaining agreement;
(ii) any contract or arrangement of any kind with
any employee, officer or director of either Seller or
any of their affiliates;
(iii) any contract or arrangement with a sales
representative, dealer, broker, marketing, sales
agency, advertising agency or other person engaged in
sales, distributing, marketing or promotional
activities, or any contract to act as one of the
foregoing on behalf of any person;
(iv) any contract or arrangement of any nature
which involves the payment or receipt of cash or other
property, an unperformed commitment, or goods or
services, having a value in excess of Five Thousand
Dollars ($5,000);
(v) any contract or arrangement pursuant to which
either Seller has made or will make loans or advances,
or has or will have incurred debts or become a
guarantor or surety or pledged its credit on or
otherwise become responsible with respect to any
undertaking of another (except for the negotiation or
collection of negotiable instruments in transactions in
the ordinary course of business);
(vi) any indenture, credit agreement, loan
agreement, note, mortgage, security agreement, lease of
real property or personal property or agreement for
financing;
(vii) any contract or arrangement involving a
partnership, joint venture or other cooperative
undertaking;
(viii) any contract or arrangement involving any
restrictions with respect to the geographical area of
operations or scope or type of business of either
Seller;
(ix) any power of attorney or agency agreement or
arrangement with any person pursuant to which such
person is granted the authority to act for or on behalf
of either Seller, or either Seller is granted the
authority to act for or on behalf of any person;
(x) any contract for which the full performance
thereof may extend beyond sixty (60) days from the date
of this Agreement;
(xi) any contract not made in the ordinary course
of business which is to be performed at or after the
date of this Agreement;
(xii) any contract relating to any acquisition or
disposition of either Seller or any material amount of
Purchased Assets or any acquisition or disposition of
any subsidiary or division of either Seller during the
six (6) years prior to the date of this Agreement; and
(xiii) any contract not specified above that is
material to either Seller.
Except for various leases of equipment identified on
Schedule 1.1(a), Sellers have delivered to Purchaser or have
given Purchaser access to true and complete copies of each
document listed on Schedule 2.1(q), and a written
description of each oral arrangement so listed. Sellers
have delivered to Purchaser accurate copies of each form
which has been used in the Business and is in effect with
respect to any third party on the date hereof.
(r) Labor Matters. Sellers have and currently are
-------------
conducting the Business in full material compliance with all
laws relating to employment and employment practices, terms
and conditions of employment, wages and hours, and
nondiscrimination in employment. Except as disclosed on
Schedule 2.1(r), the relationships of Sellers with its
employees are, as a general matter and to the best of
Sellers' and Lindberg's knowledge, good and there is, and
during the past five (5) years there has been, no labor
strike, dispute, slowdown, work stoppage or other labor
difficulty actually pending or threatened against or
involving Sellers. None of the employees of Sellers is
covered by any collective bargaining agreement, no
collective bargaining agreement is currently being
negotiated and no attempt is currently being made or during
the past three (3) years has been made to organize any
employees of Sellers to form or enter a labor union or
similar organization.
(s) Customers.
---------
(i) Schedule 2.1(s)(i) sets forth a list of the
Twenty (20) largest customers of the Business, in terms
of revenue, during each of the 1994 and 1995 fiscal
years, and through February 23 of fiscal year 1996
(collectively, the "Major Customers"), showing the
approximate total revenue received in each such period
from each such customer.
(ii) Except as set forth on Schedule 2.1(s)(ii),
no customer represented in excess of Five percent (5%)
of the total revenue of the Business during the 1995
fiscal year and through February 23 of fiscal year
1996.
(iii) Except to the extent set forth in Schedule
2.1(s)(iii), since December 31, 1995, there has not
been any adverse change in the business relationship,
and there has been no material dispute, between Sellers
and any Major Customer, and Sellers and Lindberg have
no knowledge of any indications that any Major Customer
intends to reduce its purchases from Sellers.
(t) Historical Financial Information. The unaudited
--------------------------------
financial statements of Sellers for the nine (9) months
ended December 31, 1995, and the audited financial
statements for each of the fiscal years ended in 1994 and
1995, copies of which are annexed hereto as Schedule 2.1(t)
(collectively the "Financial Statements") have been, and the
1996 Financial Statements will be, prepared in a manner
consistent with that used in prior years' reporting. The
Financial Statements present, and the 1996 Financial
Statements will present, fairly the financial position,
assets and liabilities of Sellers as of the dates thereof
and the revenues, expenses, results of operations and cash
flows of Sellers for the periods covered thereby, all in
accordance with prior reporting methods and have been or
will be prepared in accordance with GAAP. The Financial
Statements are, and the 1996 Financial Statements will be,
in accordance with the books and records of Sellers, do and
will not reflect any material transactions which are not
bona fide transactions made in the ordinary course of
business, and do and will not contain any untrue statement
of a material fact or omit to state any material fact
necessary to make the statements contained therein, in light
of the circumstances in which they were made, not
misleading. The Financial Statements make, and the 1996
Financial Statements will make, full and adequate disclosure
of, and provision for, all material obligations and
liabilities of Sellers as of the dates thereof. The books
and records of Sellers have been maintained in accordance
with applicable laws, rules and regulations, and in the
ordinary course of business.
(u) No Adverse Effects or Changes. Except as listed
-----------------------------
on Schedule 2.1(u), since December 31, 1995, Sellers have
not:
(i) incurred any obligation or entered into any
contract relating to the Business which either (A)
requires a payment by any party in excess of, or a
series of payments which in the aggregate exceed,
Twenty-Five Thousand Dollars ($25,000) or provides for
the delivery of goods or performance of services, or
any combination thereof, having a value in excess of
Twenty-Five Thousand Dollars ($25,000), or (B) has a
term of, or requires the performance of any obligations
by Sellers over a period in excess of, six (6) months;
(ii) taken any action, or entered into or
authorized any contract or transaction other than in
the ordinary course of business and consistent with
past practice;
(iii) sold, transferred, conveyed, assigned or
otherwise disposed of any of Sellers' assets other than
in the ordinary course of business;
(iv) waived, released or cancelled any claims
against third parties or debts owing to it, or any
rights that have any value;
(v) made any changes in its accounting systems,
policies, principles or practices;
(vi) authorized for issuance, issued, sold,
delivered or agreed or committed to issue, sell or
deliver (whether through the issuance or granting of
options, warrants, convertible or exchangeable
securities, commitments, subscriptions, rights to
purchase or otherwise) any shares of its capital stock
or any other securities, or amend any of the terms of
any such securities;
(vii) made any borrowings, incurred any debt
(other than trade payables in the ordinary course of
business), or assumed, guaranteed, endorsed or
otherwise become liable (whether directly, contingently
or otherwise) for the obligations of any other person,
except for endorsements of negotiable instruments in
the ordinary course and except for ordinary course
borrowings under Sellers' revolving loan with Textron
Financial Corporation;
(viii) made any loans, advances or capital
contributions to, or investments in, any other person;
(ix) entered into, adopted, amended or terminated
any bonus, profit-sharing, compensation, termination,
stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement,
employment, severance or other employee benefit
agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer or
employee, or increased in any manner the compensation
or fringe benefits of any director, officer or
employee, or paid any benefit not required by any
existing plan and arrangement or entered into any
contract, agreement, commitment or arrangement to do
any of the foregoing;
(x) except for capital expenditures contemplated
by (xi) below, acquired, leased or encumbered any
assets outside the ordinary course of business or any
assets which are material to the Business;
(xi) authorized or made any capital expenditures
relating to the Business which individually or in the
aggregate are in excess of Ten Thousand Dollars
($10,000);
(xii) made any Tax election or settled or
compromised any federal, state, local or foreign income
Tax liability, or waived or extended the statute of
limitations in respect of any such Taxes;
(xiii) paid or agreed to pay any amount in
settlement or compromise of any suits or claims of
liability against Sellers or their directors, officers,
employees or agents;
(xiv) terminated, modified, amended or otherwise
altered or changed any of the terms or provisions of
any material contract or arrangement, or breached the
terms of any material contract or arrangement, or paid
any amount not required by law or by any contract; or
(xv) taken any other action that would have a
material adverse effect on the Business or the
Purchased Assets, including, without limitation, the
value or condition thereof.
(v) Franchise Matters.
-----------------
(i) Attached hereto as Schedule 2.1(v) is a
complete and accurate list of (i) all locations for
which Sellers have entered into a franchise agreement
(as franchisor) with respect to the Business; (ii) all
development agreements for franchises to which Sellers
have entered into (as franchisor) with respect to the
Business; and (iii) all option agreements for
franchises with certain optionees which Sellers have
entered into as franchisor with respect to the Business
(collectively, the "Franchise Agreements"). Sellers
have previously delivered to Purchaser true and correct
copies of all Franchise Agreements and amendments
thereto. Except as set forth on Schedule 2.1(v)
hereto, the Franchise Agreements are valid and binding
obligations of Sellers, as the case may be, and are
enforceable in accordance with their respective terms,
subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws
of general applicability relating to or affecting
creditors' rights generally and to general equity
principles. Sellers are not in material default with
respect to any of the Franchise Agreements, have
performed all material obligations required to be
performed by them thereunder and have not performed any
material act that is prohibited under any of the
Franchise Agreements. Except as set forth in Schedule
2.1(v), neither Sellers nor Lindberg has knowledge of
any facts indicating that any of the other parties to
the Franchise Agreements (the "Franchisees") intends to
terminate a Franchise Agreement or the relationship
created thereby.
(ii) Sellers have previously delivered to
Purchaser a true and correct copy of the disclosure
statements of Sellers used at any time in the past or
currently in the offer and sale by Sellers or either of
them of franchise area development rights and
franchises required to be delivered to prospective
franchisees pursuant to the rules and regulations of
the Federal Trade Commission or state law. Such
disclosure statement complies in all material respects
with the requirements of the rules and regulations of
the Federal Trade Commission. Sellers have previously
delivered to Purchaser true and correct copies of all
applications containing Uniform Franchise Offering
Circulars required to be filed with the appropriate
state authorities in jurisdictions where such filings
are or were required. Such applications have been
declared effective in all jurisdictions where Sellers
are required to file such applications; and there are
no stop orders or other proceedings in effect or
threatened which would prohibit or impede the ability
of Purchaser to solicit or sell franchises in such
jurisdictions, except that supplemental filings may be
required to reflect the transactions contemplated by
this Agreement. Except as set forth on Schedule
2.1(v), the disclosure statement and the Uniform
Franchise Offering Circulars do not contain any untrue
statements of a material fact, or omit to state a
material fact necessary to make the statement therein,
in light of the circumstances under which they were
made, not misleading. Sellers have sold or solicited
for the sale of franchises only in compliance with all
applicable laws governing such activity. Except as set
forth on Schedule 2.1(v), there are no actions or
proceedings pending or threatened, alleging failure to
comply with the laws of any jurisdiction relating to
the solicitation or sale of franchises.
(iii) The aggregate amount contributed or
required to be contributed to the National Advertising
Fund, as provided in the Franchise Agreements, is Two
Hundred Four Thousand Dollars ($204,000).
(w) Broker's Fees. Other than John Hamachek &
-------------
Company, no agent, broker or other person acting pursuant to
the express or implied authority of either Seller or
Lindberg is or may be entitled to a commission or finder's
fee in connection with the transactions contemplated by this
Agreement, or is or may be entitled to make any claim
against a Seller, Lindberg or Purchaser as a result of any
actions by a Seller or Lindberg for a commission or finder's
fee. The commission or finder's fee payable to John
Hamachek & Company shall be paid by Sellers or Lindberg and
each of Sellers and Lindberg agrees to indemnify Purchaser
against any claim for any commission or finder's fee made by
any agent, broker or other person acting pursuant to the
express or implied authority of a Seller or Lindberg.
(x) No Misstatements or Omissions. No representation
-----------------------------
or warranty made in this Agreement or on any Schedule hereto
by a Seller or Lindberg is false or misleading as to any
material fact, or omits to state a material fact required to
make any of the statements made herein or therein not
misleading in any material respect. All of the Schedules
hereto applicable to Sellers or Lindberg will constitute
representations and warranties by Sellers and Lindberg
herein. All representations, covenants and warranties made
by or on behalf of Sellers or Lindberg in this Agreement
will be deemed to have been relied upon by Purchaser (not
withstanding any investigation by Purchaser), unless
Purchaser has obtained, prior to Closing, actual knowledge
that such representation or warranty is untrue. Any
Schedule referenced in a given paragraph or section hereof
(and the matters contained therein) shall be deemed to
modify all sentences of such paragraph or section.
2.2 Representations and Warranties of Purchaser. In order
-------------------------------------------
to induce Sellers and Lindberg to enter into this Agreement,
Purchaser represents and warrants to Sellers as follows:
(a) Due Incorporation; Authority.
----------------------------
(i) Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Delaware. Purchaser has all requisite
power and authority to own its properties and to
conduct its business as currently conducted, and to
execute, deliver and perform this Agreement and the
Related Agreements, including, without limitation, the
Noncompetition Agreements. Purchaser's execution,
delivery, and performance of this Agreement and the
Related Agreements have been duly and validly
authorized by all necessary corporate action on the
part of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and this Agreement
and each of the Related Agreements constitute the
legal, valid and binding obligation of Purchaser
enforceable in accordance with its respective terms
against Purchaser, except to the extent that such
validity, binding effect and enforceability may be
limited by applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting
creditors' rights generally from time to time in effect
and by general equitable principles.
(ii) Purchaser is a wholly-owned subsidiary of
Parent.
(b) No Restrictions Against Performance. Neither the
-----------------------------------
execution and delivery, nor the performance of this
Agreement, nor the consummation of the transactions
contemplated hereby will violate any provision of or
conflict with Purchaser's Certificate of Incorporation or
By-Laws or will, with or without the giving of notice or the
passage of time, or both, violate any provisions of,
conflict with, result in a breach of, constitute a default
under, or result in the creation or imposition of any Lien
or condition under, (i) any federal, state or local law,
statute, ordinance, regulation or rule, which is applicable
to Purchaser; (ii) any contract, indenture, instrument,
agreement, mortgage, lease, right or other obligation or
restriction to which Purchaser is a party or by which
Purchaser is bound; or (iii) any order, judgment, writ,
injunction, decree, license, franchise, permit or other
authorization of any federal, state or local court,
arbitration tribunal or governmental agency by which
Purchaser is bound, any of which, when taken as a whole,
would have a material adverse affect on Purchaser.
(c) Third-Party and Governmental Consents. No
-------------------------------------
approval, consent, waiver, order or authorization of, or
registration, qualification, declaration, or filing with, or
notice to, any Governmental Authority or other third party
is required on the part of Purchaser in connection with the
execution of this Agreement or the Related Agreements, or
the consummation of the transactions contemplated hereby or
thereby.
(d) Broker's Fees. No agent, broker or other person
-------------
acting pursuant to the express or implied authority of
Parent or Purchaser is or may be entitled to a commission or
finder's fee in connection with the transactions
contemplated by this Agreement, or is or may be entitled to
make any claim against Sellers, Lindberg, Parent or
Purchaser as a result of any actions by Purchaser, for a
commission or finder's fee. Parent and Purchaser agree to
indemnify Sellers and Lindberg against any claim for any
such commission or finder's fee made by any agent, broker or
other person acting pursuant to the express or implied
authority of Parent or Purchaser.
(e) Insurance. Schedule 2.2(e) contains a true,
---------
correct and complete list of all policies of fire,
liability, workers' compensation, title and other forms of
insurance owned or held by Parent that will provide coverage
with respect to the Business effective as of the Closing,
except as otherwise required by applicable laws.
(f) No Misstatements or Omissions. No representation
-----------------------------
or warranty made in this Agreement or on any Schedule hereto
by Purchaser is false or misleading as to any material fact,
or omits to state a material fact required to make any of
the statements made herein or therein not misleading in any
material respect. All of the Schedules hereto applicable to
Purchaser will constitute representations and warranties by
Purchaser herein. All representations, covenants and
warranties made by or on behalf of Purchaser in this
Agreement will be deemed to have been relied upon by Sellers
and (notwithstanding any investigation by Sellers or
Lindberg).
ARTICLE 3
COVENANTS SUBSEQUENT TO CLOSING
3.1 1996 Financial Statements. Sellers shall prepare and
-------------------------
deliver the 1996 Financial Statements required pursuant to
Section 1.5(e) hereof within ninety (90) days after the date
hereof.
3.2 Further Assurances. Sellers and Lindberg jointly and
------------------
severally agree, without further consideration, to execute and
deliver following the Closing such other instruments of transfer
and take such other action as Purchaser may reasonably request in
order to put Purchaser in possession of, and to vest in
Purchaser, good and valid title to the Purchased Assets free and
clear of any Liens in accordance with this Agreement and to
consummate the transactions contemplated by this Agreement.
3.3 Change of Name. From and after the date hereof, and
--------------
other than in connection with the preparation and filing of tax
returns and amendments, Sellers and Lindberg shall discontinue
all further use, directly or indirectly, of the name "Temps &
Co." or any variation thereof, and of any trademark, trade name,
service mark or name, or logo used by Sellers or any word or logo
that is similar in sound or appearance. Immediately following
the Closing, Sellers will take all actions necessary to change
the name of Temps & Co. to a name unrelated and not confusing
with "Temps & Co." and shall provide thereafter to Purchaser
copies of duly executed documents effecting the change in such
name.
3.4 Post-Closing Services. For a period not to exceed One
---------------------
Hundred Eighty (180) days from and after the date hereof, Sellers
shall provide computer processing and related services with
respect to the Business in accordance with Sellers' current
customary practices and procedures pursuant to a Services
Agreement in form reasonably satisfactory to Purchaser and
Sellers.
3.5 Tax Records. Purchaser shall allow Sellers access for
-----------
six (6) years from the date hereof to existing records of the
Business for income tax purposes that are in Purchaser's
possession, and Purchaser shall use its good faith efforts to
maintain such records for six (6) years unless specifically
authorized by Sellers to the contrary.
3.6 Satisfaction of Liabilities. Sellers and Lindberg
---------------------------
covenant and agree that all outstanding obligations, liabilities,
costs and expenses of relating to the Business will be paid,
performed or otherwise discharged or provided for by Sellers,
including, without limitation, the Excluded Liabilities,
liabilities and obligations incurred by Sellers in connection
with this Agreement and the transactions provided for herein or
contemplated hereby, fees and expenses of Sellers' counsel,
accountants and other experts, and all other expenses incurred by
Sellers incident to the negotiation, preparation and execution of
this Agreement or any of the transactions contemplated hereby,
including Taxes, if any, payable by Sellers with respect to and
resulting from the transactions contemplated by this Agreement.
3.7 Service Mark License Agreement. Sellers shall license
------------------------------
to Purchaser for no additional consideration the intellectual
property utilized in the Business that are not included in the
Purchased Assets (the "Licensed Marks") as identified more fully
in and in accordance with a license agreement in form reasonably
satisfactory to Purchaser and Sellers (the "Service Mark License
Agreement"), pursuant to which Purchaser shall be granted a
license of the Licensed Marks for a three (3) year period, except
in the case of use by the Franchisees, as to whom the grant shall
be into perpetuity.
3.8 Employee Benefits.
-----------------
(a) Continuation of Plans. On and after the date
---------------------
hereof, Sellers (or any insurer at Sellers' cost) shall
continue to process and, as required by law or to the extent
provided in the given employee benefit plan or policy, pay
(or cause to be processed and paid) in an expeditious manner
and with respect to all current and former employees of
Sellers performing, or having performed, services related to
the Business (the "Employees") (and, to the extent
applicable, their spouses, dependents and beneficiaries):
(i) all claims under such "employee benefit
plans" (as defined under Section 3(3) of ERISA)
maintained by Sellers that provide health and medical,
or other welfare benefits submitted for covered
expenses with respect to occurrences commencing on or
prior to the date hereof, including, but not limited
to, (A) covered hospital benefits for any confinements
that commenced on or before the date hereof, including
any covered charges of health care professionals
relating to such confinements, and (B) any other
covered medical or health expenses incurred on or
before the date hereof;
(ii) short-term and long-term disability
benefits, if any, for disabilities that commenced on or
before the date hereof for the period that each of such
affected individuals remain disabled;
(iii) life and survivor income benefits, if any,
for deaths which occur on or prior to the date hereof;
(iv) workers' compensation benefits for
disabilities resulting from work-related accidents
which occurred on or prior to the date hereof;
(v) all benefits that are being, or that may be,
paid to, or with respect to, any Employees who are on
short or long-term disability, or medical, personal or
other leaves of absence as of the date hereof (or who
go on short- or long-term disability, or medical,
personal or other leave of absence after the date
hereof as a result of any injury, illness or other
factor occurring on or prior to the date hereof)
pursuant to the terms of such employee benefit plans as
in effect immediately prior to the date hereof
(including any subsequent benefit increases);
(vi) benefits under any "spending account," or
similar arrangement, under any "cafeteria plan" (as
defined under Section 125 of the Code), regardless of
whether such benefits accrue before, on or after the
date hereof; and
(vii) benefits under all other such employee
benefit plans which accrue on or before the date
hereof.
(b) Continuation of Coverage. Sellers (or any plan
------------------------
maintained by Sellers, at Sellers' cost) will provide
continued health and medical coverage as required under
Section 4980B of the Code, Part 6 of Title I of ERISA or any
other applicable federal, state or local law or ordinance to
all employees (and independent contractors) of Sellers (and
their spouses, dependents and beneficiaries) with respect to
whom a "qualifying event" (as such term is defined under
Sections 4980B(f)(3) of the Code or 603 of ERISA) or other
triggering event described under the applicable federal,
state or local laws or ordinances occurred on or before the
date hereof.
(c) Incentive Awards. Sellers shall make cash
----------------
settlements with any employees of the Business otherwise
entitled to incentive awards as of the date hereof.
3.9 Sublease Agreement. Sellers shall lease to Purchaser
------------------
an aggregate of approximately One Thousand (1,000) square feet of
office space as identified in and on the terms and conditions set
forth in a letter agreement in form reasonably satisfactory to
the parties hereto (the "Letter Agreement"). Purchaser and
Sellers acknowledge that consent of the Sellers' landlord may be
required for the Letter Agreement and hereby waive the
requirement of such consent, provided that the failure to obtain
such consent shall not affect the obligation of the parties to
perform under the Letter Agreement.
3.10 Insurance. During the Indemnity Period, Purchaser
---------
shall maintain the insurance coverage for the Business as set
forth in Schedule 2.2(e), except as otherwise required by
applicable laws or as determined by Purchaser in the exercise of
reasonable business prudence, and Sellers shall be additional
insureds under such policies with respect to losses arising out
of the Business after the Closing and during the Indemnification
Period, it being understood and agreed that Purchaser is not
obligated to provide any insurance coverage relating to any
claim, whether made before or after the date of this Agreement,
or any litigation, proceeding or governmental investigation,
whether commenced before or after the date of this Agreement,
arising out of the Business prior to the Closing, or otherwise
arising out of any act or occurrence prior to, or any state or
facts existing as of, the Closing (regardless of whether or not
referred to on a Schedule to this Agreement or otherwise
disclosed or known to Purchaser as of the Closing).
3.11 Employees.
---------
(a) Employment. Purchaser anticipates hiring on an
----------
at-will basis substantially all of the employees of Sellers
employed in the Business on substantially the same
compensation terms as are currently applicable to them. As
of the date hereof, Purchaser shall offer employment on an
at-will basis to such employees, except to the extent
specified by Purchaser prior to the date hereof.
(b) Benefits. Immediately following the Closing,
--------
Purchaser will use its good faith efforts to establish a
group medical plan and dental plan for employees of Sellers
that are hired by Purchaser ( Seller Employees ). Such
plans, to the extent available, will provide that (i) to the
extent each Seller Employee and his or her dependents were
covered under a Seller s group medical plan and dental plan
immediately prior to the Closing, the Seller Employee and
his or her dependents shall immediately participate in
Purchaser s group medical and dental plan immediately
following the Closing; (ii) all pre-existing conditions
requirements in Purchaser s group medical and dental plans
shall be waived for all former Employees described in clause
(i) above and their dependents; and (iii) Purchaser s group
medical and dental plan in existence immediately after
Closing shall consider all claims paid under Sellers' group
medical and dental plan for purposes of annual deductibles
and annual out-of-pocket expenses.
(c) No Contract Rights. Nothing in this Agreement
------------------
shall be construed as a contract of employment for any
person, whether identified herein or otherwise, and nothing
in this Agreement shall give any rights or interests as a
third-party beneficiary to any person.
ARTICLE 4
DELIVERIES
4.1 Sellers' and Lindberg's Deliveries. In connection with
----------------------------------
the Closing, Sellers and Lindberg are delivering or causing to be
delivered to Purchaser the following:
(a) Bills of Sale. One or more bills of sale ("Bills
-------------
of Sale"), in form reasonably satisfactory to Purchaser,
conveying to Purchaser all of the Purchased Assets to be
acquired hereunder, free and clear of any and all Liens and
assigning to Purchaser all of the Assigned Contracts;
(b) Corporate and Stockholder Authorization.
---------------------------------------
Certificates, dated the date hereof, executed by a secretary
or assistant secretary of each of Sellers, certifying
resolutions of the Board of Directors and of the
shareholders of the given Seller approving and authorizing
the execution, delivery and performance by such Seller of
this Agreement and of each of the Related Agreements to
which such Seller is a party and the consummation of the
transactions contemplated hereby and thereby (together with
an incumbency and signature certificate regarding the
officer(s) signing any document or instrument on behalf of
such Seller).
(c) Corporate Certificate. A Certificate of Good
---------------------
Standing for each Seller from the State of Georgia as of a
date within Thirty (30) days before the date hereof.
(d) Corporate Records. A copy of the Certificate of
-----------------
Incorporation of each Seller, certified by the Secretary of
State of the State of Georgia and a copy of the By-laws of
each Seller, certified by the secretary or assistant
secretary of such Seller.
(e) Legal Opinion. The legal opinion of Alston &
-------------
Bird, Sellers' counsel, containing opinions reasonably
satisfactory to Purchaser.
(f) Consents and Approvals. Copies of all consents,
----------------------
approvals, registrations, qualifications, declarations,
filings and notices required of Sellers in connection with
the execution and performance of this Agreement.
(g) Noncompetition Agreement. Noncompetition
------------------------
Agreements as executed by each Seller, by Lindberg and by F.
Ronald Allen.
(h) Employment Agreement. An assignment and amendment
--------------------
of the employment agreement with Medford.
(i) Service Agreement. The Service Agreement as
-----------------
executed by Sellers.
(j) Service Mark License Agreement. The Service Mark
------------------------------
License Agreement as executed by Sellers.
(k) Sublease. The Sublease Agreement as executed by
--------
Sellers.
(l) Lien Release. Evidence reasonably satisfactory to
------------
Purchaser that any Liens have been removed or released or
will be released.
(m) Change of Name. The documents contemplated by
--------------
Section 3.3 hereof, in form and substance sufficient to
change Temps & Co.'s name as therein required and in the
appropriate form for filing with the Governmental Authority
with whom such documents must be filed to become effective.
(n) Business Documents. Constructive possession of
------------------
all manuals, including employee manuals, customer lists,
books and other records and files, computer programs,
computer software and master disk of source codes relating
to, or associated with, the Business or the Purchased
Assets, by leaving all of the foregoing at their current
physical locations.
(m) Franchise Letter. An opinion from Kilpatrick &
----------------
Cody, franchise counsel to Sellers, in form reasonably
satisfactory to Purchaser.
(n) Assignment of Trademark. An assignment of the
-----------------------
trademarks that are part of the Purchased Assets in form
reasonably satisfactory to Purchaser.
4.2 Purchaser's Deliveries. In connection with the
----------------------
Closing, Purchaser is delivering to Sellers or Lindberg the
following:
(a) Purchase Price. The Closing Payment and the Note
--------------
as provided in Section 1.5(a) hereof.
(b) Corporate Authorization. A certificate for each
-----------------------
of Parent and Purchaser, dated the date hereof, executed by
the secretary or assistant secretary of Parent and
Purchaser, respectively, certifying resolutions of the Board
of Directors of Parent and Purchaser, respectively,
approving and authorizing the execution, delivery and
performance by Parent and Purchaser, respectively, of this
Agreement and each of the Related Agreements to which Parent
or Purchaser, as the case may be, is a party and the
consummation of the transactions contemplated hereby and
thereby (together with an incumbency and signature
certificate regarding the officer(s) signing any document or
instrument on behalf of Parent or Purchaser, as the case may
be).
(c) Corporate Certificate. A Certificate of Good
---------------------
Standing for each of Parent and Purchaser from the State of
Delaware.
(d) Corporate Records. A copy of the Certificate of
-----------------
Incorporation of each of Parent and Purchaser, certified by
the Secretary of State for the State of Delaware, and a copy
of the By-laws of Parent and Purchaser, certified by the
secretary or assistant secretary of Parent and Purchaser,
respectively.
(e) Legal Opinion. The legal opinion of Leslie A.
-------------
Adler, Purchaser's Associate General Counsel, containing
opinions reasonably satisfactory to Sellers.
(f) Consents and Approvals. All necessary consents
----------------------
and approvals required of Parent or Purchaser in connection
with the execution and performance of this Agreement.
(g) Service Agreement. The Service Agreement as
-----------------
executed by Purchaser.
(h) Service Mark License Agreement. The Service Mark
------------------------------
License Agreement as executed by Purchaser.
(i) Sublease. The Sublease Agreement as executed by
--------
Purchaser.
(j) Insurance. Certificates of insurance evidencing
---------
the insurance required to be maintained pursuant to Section
3.10 hereof.
(k) Miscellaneous. Such other documents, assignments,
-------------
instruments of conveyance, and certificates of officers as
reasonably may be required by Sellers to consummate this
Agreement and the transactions contemplated hereby.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by Sellers and Lindberg. Each Seller
---------------------------------------
and Lindberg, jointly and severally, agree to defend, indemnify
and hold Purchaser, any subsidiary or affiliate thereof, and its
respective successors, assigns, officers, directors, shareholders
and controlling persons (the "Indemnified Purchaser Group")
harmless from and against any and all losses, liabilities,
damages, costs or expenses (including reasonable attorneys' fees,
penalties and interest) payable to or for the benefit of, or
asserted by, any party, resulting from, arising out of, or
incurred as a result of (a) the material breach of any
representation, warranty or covenant made by a Seller or Lindberg
herein or in accordance herewith including, but not limited to,
any misrepresentation as to required contributions to the
National Advertising Fund as set forth in Section 2.1(v)(iii);
(b) any claim, whether made before or after the date of this
Agreement, or any litigation, proceeding or governmental
investigation, whether commenced before or after the date of this
Agreement, arising out of the Business prior to the Closing, or
otherwise arising out of any act or occurrence prior to, or any
state or facts existing as of, the Closing (regardless of whether
or not referred to on a Schedule to this Agreement or otherwise
disclosed or known to Purchaser as of the Closing) other than (i)
the existence of a breach of an Assigned Contract by reason of
its assignment to Purchaser pursuant hereto or (ii) any claim,
suit, cause of action, proceeding or governmental investigation
arising out of or related to any obligation or alleged obligation
on the part of either Seller under any Franchise Agreement to
establish and make contributions to a National Advertising Fund
or to make expenditures out of such funds for advertising
purposes; (c) failure to pay any Tax as a result of the
acquisition of the Purchased Assets pursuant to this Agreement
and failure to pay any Tax owed by Seller pursuant to and
contemplated by Section 1.4 hereof; (d) failure of either Seller
or Lindberg to pay, perform or dischage any of the Excluded
Liabilities or any other obligation, liability, agreement or
commitment not assumed by Purchaser pursuant to this Agreement
(collectively, "Claims"). Notwithstanding the foregoing
provisions of this Section 5.1, the amount to which Purchaser
would otherwise be entitled pursuant to this Section 5.1 shall be
reduced by the amount of any insurance recovery by Purchaser with
respect to the Claim giving rise to such entitlement.
5.2 Indemnification by Purchaser. Purchaser agrees to
----------------------------
defend, indemnify and hold Sellers and Lindberg and any affiliate
thereof, and their respective heirs, successors, officers,
directors and controlling persons (the "Indemnified Seller
Group") harmless from and against any and all losses,
liabilities, damages, costs, or expenses (including reasonable
attorneys' fees, penalties and interest) (collectively, "Claims")
payable to or for the benefit of, or asserted by, any party,
resulting from, arising out of, or incurred as a result of (a)
the breach of any representation, warranty or covenant made by
Purchaser herein or in accordance herewith; (b) any claim made or
any litigation, proceeding or governmental investigation
commenced after the Closing (i) arising out of the operations of
the Business following the date hereof or (ii) arising out of the
assignment to Purchaser by Sellers pursuant hereto of any
Assigned Contract or (iii) arising out of or related to any
obligation or alleged obligation on the part of either Seller
under any Franchise Agreement to establish and make contributions
to a National Advertising Fund or to make expenditures out of
such funds for advertising purposes; or (c) the failure of
Purchaser to pay, perform or discharge any of Purchaser's
obligations, liabilities, agreements or commitments assumed by
Purchaser pursuant to this Agreement. Notwithstanding the
foregoing provisions of this Section 5.2, the amount to which
Seller would otherwise be entitled pursuant to this Section 5.2
shall be reduced by the amount of any insurance recovery by
Seller with respect to the Claim giving rise to such entitlement.
5.3 Survival of Covenants and Warranties. Notwithstanding
------------------------------------
anything to the contrary set forth herein and except for the Note
and the guaranty thereof executed by Parent or as otherwise
provided in any other document or instrument delivered in
connection with the Closing, the representations, warranties,
covenants and agreements made by Sellers and Lindberg on the one
hand, and Purchaser, on the other hand, in this Agreement shall
survive the Closing for a period of eighteen (18) months (the
"Indemnity Period") or, in the case of Taxes or claims under
ERISA, the expiration of the statute of limitations with respect
thereto, and no claim for indemnification may be made after the
expiration of the Indemnity Period (or the statute of limitations
period in the case of Taxes or claims under ERISA).
5.4 Notice of Claims. Each of Purchaser, Sellers and
----------------
Lindberg agree to give prompt written notice to the other of any
claim against the party giving notice which might give rise to a
claim by him, it or them against the other party hereto based
upon the indemnity provisions contained herein, stating the
nature and basis of the claim and the actual or estimated amount
thereof; provided, however, that failure to give such notice will
-------- -------
not affect the obligation of the indemnifying party to provide
indemnification in accordance with the provisions of this Article
7 unless, and only to the extent that, such indemnifying party is
actually prejudiced thereby. In the event that any action, suit
or proceeding is brought against any member of the Indemnified
Seller Group or the Indemnified Purchaser Group with respect to
which any party hereto may have liability under the
indemnification provisions contained herein, the indemnifying
party shall have the right, at his or its sole cost and expense,
to defend such action in the name or on behalf of the indemnified
party and, in connection with any such action, suit or
proceeding, the parties hereto agree to render to each other such
assistance as may reasonably be required in order to ensure the
proper and adequate defense of any such action, suit or
proceeding; provided, however, that an indemnified party shall
-------- -------
have the right to retain its own counsel, with the fees and
expenses to be paid by the indemnifying party, if representation
of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate because of actual or
potential differing interests between such indemnified party and
any other party represented by such counsel. Neither party
hereto shall make any settlement of any claim which might give
rise to liability of the other party under the indemnification
provisions contained herein without the written consent of such
other party, which consent shall not be unreasonably withheld,
delayed or conditioned.
5.5 Limitation on Indemnities. Notwithstanding anything to
-------------------------
the contrary contained in Section 5.1 hereof, no claim may be
made against Sellers or Lindberg for indemnification pursuant to
Section 5.1 hereof, unless the aggregate of all liabilities and
damages of the Indemnified Purchaser Group with respect to
Section 5.1 hereof exceeds Fifty Thousand Dollars ($50,000), and
Sellers and Lindberg shall not be required to pay or be liable
for the first Fifty Thousand Dollars ($50,000) in aggregate
amount of any such liabilities and damages. Without limiting any
other rights and notwithstanding anything to the contrary set
forth herein, any amounts due to the Indemnified Purchaser Group
by Sellers or Lindberg pursuant to this Article 5 shall be offset
by Purchaser against amounts owing under the Note and the maximum
aggregate amount by which the Indemnified Purchaser Group is
entitled to indemnification pursuant to Section 5.1 hereof or
otherwise shall not exceed the amounts owing under the Note. The
right of offset shall be the exclusive remedy of Purchaser for
indemnification. Any amount offset against the Note pursuant to
the foregoing sentences shall reduce the principal amount thereof
as of the date of offset for purposes of calculating interest on
the Note. For purposes of the foregoing sentence, an offset
shall be deemed to occur (i) as of the date hereof with respect
to any indemnification for items that reduce Final Adjusted
Profits if accrued in accordance with Section 2.1 hereof, or (ii)
as of the date of payment or other satisfaction of any other
item. None of the foregoing provisions of this Section 5.5 shall
apply to any indemnification relating to Taxes or claims made
under ERISA.
ARTICLE 6
GENERAL PROVISIONS
6.1 Expenses. Except as otherwise expressly provided
--------
herein, each party to this Agreement shall pay its or his own
expenses (including, without limitation, the fees and expenses of
its or his agents, representatives, counsel, and accountants)
incidental to the negotiation, drafting, and performance of this
Agreement.
6.2 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of Sellers, Lindberg, Purchaser and
their respective heirs, successors, representatives and assigns.
Neither this Agreement nor any of the Related Agreements may be
assigned without the written consent of the other party(ies)
hereto or thereto.
6.3 Waiver. No provision of this Agreement shall be deemed
------
waived by course of conduct, including the act of closing, unless
such waiver is made in a writing signed by all parties hereto
stating that it is intended specifically to modify this
Agreement, nor shall any course of conduct operate or be
construed as a waiver of any subsequent breach of this Agreement,
whether of a similar or dissimilar nature.
6.4 Entire Agreement. This Agreement (together with the
----------------
Schedules and Exhibits hereto) supersedes any other agreement,
whether written or oral, that may have been made or entered into
by Purchaser, Sellers and Lindberg (or by any director, officer,
agent, or other representative of such parties) relating to the
matters contemplated hereby. This Agreement (together with the
Schedules hereto) constitutes the entire agreement by and among
the parties and there are no agreements or commitments except as
expressly set forth herein.
6.5 Further Assurances. Each of the parties hereto agrees
------------------
to execute all further documents and instruments and to take or
to cause to be taken all reasonable actions which are necessary
or appropriate to complete the transactions contemplated by this
Agreement.
6.6 Notices. All notices, demands, requests, and other
-------
communications hereunder shall be in writing and shall be deemed
to have been duly given and shall be effective upon receipt if
delivered by hand, or sent by certified or registered United
States mail, postage prepaid and return receipt requested, or by
prepaid overnight express service. Notices shall be sent to the
parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice; provided that
such notice shall be effective only upon receipt thereof):
(a) (i) If to a Seller:
Management Search, Inc.
2500 Marquis One Tower
245 Peachtree Center Ave.
Atlanta, GA 30303
FAX: 404-659-7139
(ii) If to Lindberg:
c/o Management Search, Inc.
2500 Marquis One Tower
245 Peachtree Center Ave.
Atlanta, GA 30303
FAX: 404-659-7139
in each case, with a copy (which shall not constitute
notice) to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, GA 30309-3424
Attn: Richard W. Grice
FAX: 404-881-7777
(b) If to Purchaser:
Temps & Co. Services, Inc.
c/o Career Horizons, Inc.
177 Crossways Park Drive
Woodbury, NY 1197
Attn: Chief Executive Officer
FAX: 516-496-1007
6.7 Specific Performance. In addition to the remedies
--------------------
specified in Article 5 hereof, the parties agree that, due to the
unique subject matter of this transaction, monetary damages will
be insufficient to compensate the non-breaching party in the
event of a breach by any party of a covenant in this Agreement or
with respect to the obligation of the Sellers' to deliver the
Purchased Assets (or to execute documents evidencing the transfer
of the Purchased Assets); therefore, the parties agree that in
the event of such material breach of this Agreement by any party,
the non-breaching party shall be entitled to specific performance
of the breaching party's obligations hereunder, without any
showing of actual damage or inadequacy of legal remedy.
6.8 Amendments, Supplements. This Agreement may be amended
-----------------------
or modified only by a written instrument executed by all parties
hereto which states specifically that it is intended to amend or
modify this Agreement.
6.9 Severability. In the event that any provision
------------
contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof and this Agreement shall be construed as
if such invalid, illegal or unenforceable provisions had never
been contained herein and, in lieu of each such illegal, invalid
or unenforceable provision, there shall be added automatically as
a part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible
but still be legal, valid and enforceable.
6.10 Applicable Law. This Agreement and the legal
--------------
relations between the parties hereto shall be governed by and
construed in accordance with the substantive laws of the State of
New York, without giving effect to the principles of conflicts of
law thereof.
6.11 Titles and Headings. Titles and headings to sections
-------------------
hereof are inserted for convenience of reference only and are not
intended to be a part of, or to affect the meaning or
interpretation of, this Agreement.
6.12 Execution in Counterparts. This Agreement may be
-------------------------
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument.
6.13 Publicity. Except as required by applicable law, no
---------
party to this Agreement shall issue any press release or other
public statement regarding the transactions contemplated by this
Agreement without the consent of the other, which consent shall
not be unreasonably withheld. Such release or statement shall be
in form and substance reasonably satisfactory to both parties or
as required by law.
6.14 Materiality. Any reference herein to "material" or
-----------
"materiality" to the Business or the Purchased Assets shall be to
the Business and/or the Purchased Assets, taken as a whole.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
TEMPS & CO. SERVICES, INC., as a
Seller
By: /s/ Eric J. Lindberg
----------------------------
Eric J. Lindberg, President
Attest: /s/ F. Ronald Allen
------------------------
F. Ronald Allen, Secretary
MANAGEMENT SEARCH, INC., as a
Seller
By: /s/ Eric J. Lindberg
----------------------------
Eric J. Lindberg, President
Attest: /s/ F. Ronald Allen
------------------------
F. Ronald Allen, Secretary
/s/ Eric J. Lindberg
-------------------------------
Eric J. Lindberg
TEMPS & CO. SERVICES, INC., a
Delaware corporation, as Purchaser
By: /s/ Mike G. Reinecke
----------------------------
Mike G. Reinecke, Vice President
Attest: /s/ Leslie A. Adler
------------------------
Leslie A. Adler, Asst. Secy.
<PAGE>
GUARANTY
CAREER HORIZONS, INC. ("Guarantor"), as an inducement to
Sellers and Lindberg to enter into and perform the foregoing
Asset Purchase Agreement (terms used herein and not defined
herein have their respective defined meanings as set forth in the
Asset Purchase Agreement), does hereby guarantee, unconditionally
and absolutely, to Sellers and Lindberg the full and faithful
keeping, performance and observance of all the covenants,
agreements, terms, provisions and conditions of the Asset
Purchase Agreement and the other documents and instruments
executed by Purchaser in connection therewith to be kept,
performed and observed by Purchaser thereunder, including the
Note. Guarantor hereby waives any requirement of notice or
presentment other than those provided in the Asset Purchase
Agreement to Purchaser.
This Guaranty shall be a guaranty of payment and not of
collection and Sellers and Lindberg may proceed directly and
immediately against the undersigned for any claims hereunder
without any duty or obligation to proceed initially against the
Purchaser.
In the event Purchaser fails to pay to Sellers or Lindberg
any amount under the Asset Purchase Agreement or the Note, or the
other documents and instruments executed and delivered by
Purchaser in connection therewith when due, the undersigned shall
pay the same not late than three (3) business days after written
demand therefor to the undersigned at the address of Purchaser as
provided in the Asset Purchase Agreement.
In order to induce Sellers and Lindberg to enter into the
Asset Purchase Agreement, Guarantor represents and warrants to
Sellers and Lindberg as follows:
(a) Due Incorporation; Authority. Guarantor is a
----------------------------
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Guarantor
has all requisite power and authority to own its properties
and to conduct its business as currently conducted, and to
execute, deliver and perform this Guaranty. Guarantor's
execution, delivery, and performance of this Guaranty have
been duly and validly authorized by all necessary corporate
action on the part of Guarantor. This Guaranty has been
duly executed and delivered by Guarantor and this Guaranty
constitutes the legal, valid and binding obligation of
Guarantor enforceable in accordance with its terms against
Guarantor, except to the extent that such validity, binding
effect and enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium and other
laws affecting creditors' rights generally from time to time
in effect and by general equitable principles.
(b) No Restrictions Against Performance. Neither the
-----------------------------------
execution and delivery, nor the performance of this
Guaranty, will violate any provision of or conflict with
Guarantor's Certificate of Incorporation or By-Laws or will,
with or without the giving of notice or the passage of time,
or both, violate any provisions of, conflict with, result in
a breach of, constitute a default under, or result in the
creation or imposition of any Lien or condition under, (i)
any federal, state or local law, statute, ordinance,
regulation or rule, which is applicable to Guarantor; (ii)
any contract, indenture, instrument, agreement, mortgage,
lease, right or other obligation or restriction to which
Guarantor is a party or by which Guarantor is bound; or
(iii) any order, judgment, writ, injunction, decree,
license, franchise, permit or other authorization of any
federal, state or local court, arbitration tribunal or
governmental agency by which Guarantor is bound, any of
which, when taken as a whole, would have a material adverse
affect on Guarantor.
(c) Third-Party and Governmental Consents. No
-------------------------------------
approval, consent, waiver, order or authorization of, or
registration, qualification, declaration, or filing with, or
notice to, any Governmental Authority is required on the
part of Guarantor in connection with the execution of this
Guaranty.
Guarantor hereby irrevocably waives any legal defenses
available to it as a result of its status as guarantor or surety.
This Guaranty shall be governed by, and construed in
accordance with, the laws of the State of New York.
CAREER HORIZONS, INC.
By: /s/ Mike G. Reinecke
--------------------------------
Mike G. Reinecke, Vice President
Attest: /s/ Leslie A. Adler
----------------------------
Leslie A. Adler, Asst. Secy.
CAREER HORIZONS, INC. and SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
Three Months
Ended March 31,
-------------------------
1996 1995
---------- ---------
Net income $2,532,000 $924,000
Add: Interest expense on 7%
Convertible Senior Notes Due
2002, net of taxes (2) --- ---
---------- --------
Net income - "if converted" $2,532,000 $924,000
========== ========
Shares outstanding (1):
Weighted average number of
common shares outstanding 13,583,211 11,802,560
Additional shares assuming
exercise of Employee stock
options 742,328 487,048
---------- ----------
Weighted average number of
common shares outstanding -
primary earnings per share 14,325,539 12,289,608
Incremental shares deemed
outstanding based upon period
ending fair market value:
Employee stock options 114,217 15,018
Add: Deemed conversion of 7%
Convertible Senior Notes
Due 2002 (2) --- ---
--------- ----------
Weighted average number of
common shares outstanding -
fully diluted earnings per share 14,439,756 12,304,626
========== ==========
Income per common share (3):
Income before extraordinary item $ .18 $ .08
Extraordinary item --- ---
------ ------
Net income applicable to
common stockholders $ .18 $ .08
====== ======
(1) Restated for the Company's two-for-one stock split effective
February 22, 1996.
(2) Use of the "if-converted" method is anti-dilutive for the
three months ended March 31, 1996. Accordingly, fully
diluted earnings per share excludes the deemed conversion of
the 7% Convertible Senior Notes Due 2002.
(3) Represents fully diluted earnings per share. For each of
the periods presented, primary earnings per share did not
differ materially from fully diluted earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF
CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 111,743
<SECURITIES> 0
<RECEIVABLES> 113,085
<ALLOWANCES> 3,853
<INVENTORY> 0
<CURRENT-ASSETS> 230,895
<PP&E> 5,838
<DEPRECIATION> 0
<TOTAL-ASSETS> 334,959
<CURRENT-LIABILITIES> 61,969
<BONDS> 86,250
0
0
<COMMON> 176
<OTHER-SE> 186,335
<TOTAL-LIABILITY-AND-EQUITY> 334,959
<SALES> 127,192
<TOTAL-REVENUES> 127,192
<CGS> 97,409
<TOTAL-COSTS> 97,409
<OTHER-EXPENSES> 24,488
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,178
<INCOME-PRETAX> 4,117
<INCOME-TAX> 1,585
<INCOME-CONTINUING> 2,532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,532
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
