AGREEMENT AND PLAN
dated as of the 11th day of September, 1997
by and among
NATIONWIDE STAFFING, INC.
TPLUS ACQUISITION CORP.
TECHNOLOGY PLUS, INC.
and
the STOCKHOLDERS
Page
INTRODUCTION AND RECITALS.....................................................1
1. THE MERGER................................................................5
1.1 Delivery and Filing of Articles of Merger......................5
1.2 Effective Time of the Merger...................................5
1.3 Certificate of Incorporation, By-laws and Board of
Directors of the Surviving Corporation.........................5
1.4 Certain Information With Respect to the Capital Stock
of the COMPANY, PARENT and ACQUISITION CORP....................6
1.5 Effect of Merger...............................................6
2. CONVERSION OF STOCK.......................................................7
2.1 Manner of Conversion...........................................7
3. DELIVERY OF MERGER CONSIDERATION..........................................8
4. CLOSING...................................................................8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND STOCKHOLDERS......................................................9
5.1 Due Organization..............................................10
5.2 Authorization.................................................10
5.3 Capital Stock of the COMPANY..................................10
5.4 Transactions in Capital Stock; Organization Accounting........11
5.5 No Bonus Shares...............................................11
5.6 Subsidiaries..................................................11
5.7 Predecessor Status; Etc.......................................11
5.8 Spin-off by the COMPANY.......................................11
5.9 Financial Statements, Etc.....................................11
5.10 Liabilities and Obligations...................................12
5.11 Accounts and Notes Receivable.................................13
5.12 Permits and Intangibles.......................................13
5.13 Environmental Matters.........................................14
5.14 Personal Property.............................................14
5.15 Significant Customers; Material Contracts and Commitments.....15
5.16 Real Property.................................................16
5.17 Insurance.....................................................17
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5.18 Compensation; Employment Agreements; Organized Labor Matters..17
5.19 Employee Plans................................................18
5.20 Compliance with ERISA.........................................18
5.21 Conformity with Law; Litigation...............................19
5.22 Taxes.........................................................20
5.23 No Violations.................................................20
5.24 Government Contracts..........................................21
5.25 Absence of Changes............................................21
5.26 Deposit Accounts; Powers of Attorney..........................23
5.27 Validity of Obligations.......................................23
5.28 Relations with Governments....................................23
5.29 Disclosure....................................................23
5.30 Prohibited Activities.........................................24
5.31 Authority; Ownership..........................................25
5.32 Preemptive Rights.............................................25
5.33 No Intention to Dispose of Parent Stock.......................25
6. REPRESENTATIONS OF PARENT and ACQUISITION CORP...........................25
6.1 Due Organization..............................................25
6.2 Authorization.................................................26
6.3 Capital Stock of PARENT and ACQUISITION CORP..................26
6.4 Transactions in Capital Stock, Organization Accounting........26
6.5 Subsidiaries..................................................26
6.6 Financial Statements..........................................26
6.7 Liabilities and Obligations...................................27
6.8 Conformity with Law; Litigation...............................27
6.9 No Violations.................................................27
6.10 Validity of Obligations.......................................28
6.11 Parent Stock..................................................28
6.12 No Side Agreements............................................28
6.13 Business; Real Property; Material Agreements..................28
6.14 Taxes.........................................................28
6.15 Absence of Changes. .........................................29
6.16 Disclosure. .................................................30
7. COVENANTS PRIOR TO CLOSING...............................................30
7.1 Access and Cooperation; Due Diligence.........................30
7.2 Conduct of Business Pending Closing...........................31
7.3 Prohibited Activities.........................................32
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7.4 No Shop.......................................................33
7.5 Notice to Bargaining Agents...................................33
7.6 Agreements....................................................33
7.7 Notification of Certain Matters...............................34
7.8 Amendment of Schedules........................................34
7.9 Cooperation in Preparation of Registration Statement..........35
7.10 Final Financial Statements....................................36
7.11 Further Assurances............................................36
7.12 Authorized Capital............................................36
7.13 Compliance with Hart-Scott....................................36
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
AND COMPANY..........................................................36
8.1 Representations and Warranties; Performance of Obligations....37
8.2 Satisfaction..................................................37
8.3 No Litigation.................................................37
8.4 Opinion of Counsel............................................37
8.5 Registration Statement........................................37
8.6 Consents and Approvals........................................38
8.7 Good Standing Certificates....................................38
8.8 No Material Adverse Effect....................................38
8.9 Closing of IPO................................................38
8.10 Secretary's Certificate.......................................38
8.11 Employment Agreements.........................................38
8.12 Tax Matters. ................................................38
8.13 Parallel Transfer Restrictions................................39
8.14 Other Mergers.................................................39
8.15 Listing.......................................................39
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND
ACQUISITION CORP.....................................................39
9.1 Representations and Warranties; Performance of Obligations....39
9.2 No Litigation.................................................40
9.3 Secretary's Certificate.......................................40
9.4 No Material Adverse Effect....................................40
9.5 STOCKHOLDERS' Release.........................................40
9.6 Satisfaction..................................................40
9.7 Termination of Related Party Agreements.......................40
9.8 Opinion of Counsel............................................40
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9.9 Consents and Approvals........................................41
9.10 Good Standing Certificates....................................41
9.11 Registration Statement........................................41
9.12 Employment Agreements.........................................41
9.13 Closing of IPO................................................41
9.14 FIRPTA Certificate............................................41
10. COVENANTS OF PARENT AND THE STOCKHOLDERS AFTER CLOSING...............41
10.1 Repayment of Certain Obligations..............................41
10.2 Preservation of Tax Treatment.................................42
10.3 Preparation and Filing of Tax Returns.........................42
10.4 Directors.....................................................43
10.5 Preservation of Employee Benefit Plans........................43
10.6 Dividends.....................................................43
11. INDEMNIFICATION......................................................43
11.1 Indemnification by the STOCKHOLDERS...........................43
11.2 Indemnification by PARENT.....................................44
11.3 Third Person Claims...........................................44
11.4 Exclusive Remedy..............................................46
11.5 Limitations on Indemnification................................46
12. TERMINATION OF AGREEMENT.............................................46
12.1 Termination...................................................47
12.2 Liabilities in Event of Termination...........................47
13. NONCOMPETITION.......................................................47
13.1 Prohibited Activities.........................................47
13.2 Damages.......................................................48
13.3 Reasonable Restraint..........................................49
13.4 Severability; Reformation.....................................49
13.5 Independent Covenant..........................................49
13.6 Materiality...................................................49
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................49
14.1 STOCKHOLDERS..................................................49
14.2 PARENT and ACQUISITION CORP...................................50
14.3 Damages.......................................................51
14.4 Survival......................................................51
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15. TRANSFER RESTRICTIONS................................................51
15.1 Transfer Restrictions.........................................51
16. FEDERAL SECURITIES ACT REPRESENTATIONS...............................51
16.1 Compliance with Law...........................................51
16.2 Economic Risk; Sophistication.................................52
17. REGISTRATION RIGHTS..................................................52
17.1 Piggyback Registration Rights.................................52
17.2 Registration Procedures.......................................53
17.3 Underwriting Agreement........................................53
17.4 Availability of Rule 144......................................53
18. GENERAL..............................................................54
18.1 Cooperation...................................................54
18.2 Successors and Assigns........................................54
18.3 Entire Agreement..............................................54
18.4 Counterparts..................................................54
18.5 Brokers and Agents............................................54
18.6 Expenses......................................................54
18.7 Notices.......................................................55
18.8 Governing Law.................................................56
18.9 Survival of Representations and Warranties....................56
18.10 Exercise of Rights and Remedies...............................56
18.11 Time..........................................................56
18.12 Reformation and Severability..................................57
18.13 Remedies Cumulative...........................................57
18.14 Captions......................................................57
18.15 Amendments and Waivers........................................57
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ANNEXES
ANNEX I
FORM OF CERTIFICATE OF INCORPORATION AND BY-LAWS OF PARENT AND
ACQUISITION CORP.
ANNEX II
CONSIDERATION TO BE PAID TO STOCKHOLDERS
ANNEX III
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY
ANNEX IV
STOCKHOLDERS AND STOCK OWNERSHIP OF PARENT
ANNEX V
FORM OF OPINION OF COUNSEL TO PARENT
ANNEX VI
FORM OF OPINION OF COUNSEL TO COMPANY
AND STOCKHOLDERS
ANNEX VII
FORM OF EMPLOYMENT AGREEMENT
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SCHEDULES
COMPANY SCHEDULES: PARENT SCHEDULES:
SCHEDULE 5.1 SCHEDULE 6.4
SCHEDULE 5.3 SCHEDULE 6.6
SCHEDULE 5.4 SCHEDULE 6.7
SCHEDULE 5.5 SCHEDULE 6.8
SCHEDULE 5.5 SCHEDULE 6.9
SCHEDULE 5.6 SCHEDULE 6.13
SCHEDULE 5.7 SCHEDULE 6.14
SCHEDULE 5.8
SCHEDULE 5.9
SCHEDULE 5.10 JOINT SCHEDULES:
SCHEDULE 5.11
SCHEDULE 5.12 SCHEDULE 9.12
SCHEDULE 5.13
SCHEDULE 5.14
SCHEDULE 5.15
SCHEDULE 5.16
SCHEDULE 5.17
SCHEDULE 5.18
SCHEDULE 5.19
SCHEDULE 5.21
SCHEDULE 5.22
SCHEDULE 5.23
SCHEDULE 5.24
SCHEDULE 5.25
SCHEDULE 5.26
SCHEDULE 5.29
SCHEDULE 5.30
SCHEDULE 5.31
SCHEDULE 7.2
SCHEDULE 7.3
SCHEDULE 7.6/9.7
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AGREEMENT AND PLAN
THIS AGREEMENT AND PLAN (the "Agreement") is made as of the 11th day of
September, 1997, by and among NATIONWIDE STAFFING, INC., a Delaware corporation
("PARENT"), TPLUS ACQUISITION CORP., a Delaware corporation and a direct,
wholly-owned subsidiary of PARENT ("ACQUISITION CORP."), TECHNOLOGY PLUS, INC.,
a Kansas corporation (the "COMPANY"), and all of the COMPANY's stockholders
specified on the attached Stockholder Signature Page (the "STOCKHOLDERS"), who
agree as follows:
WHEREAS, the STOCKHOLDERS are all of the stockholders of the
COMPANY; and
WHEREAS, ACQUISITION CORP. is a corporation duly organized and
existing under the laws of the State of Delaware and was organized by
PARENT in September 1997 solely for the purpose of completing the
transactions set forth herein; and
WHEREAS, the respective Boards of Directors of ACQUISITION CORP.
and the COMPANY (which together are hereinafter collectively referred to
as "Constituent Corporations") deem it advisable and in the best
interests of the COMPANY and ACQUISITION CORP. and their respective
stockholders that ACQUISITION CORP. merge with and into the COMPANY
pursuant to this Agreement and the applicable provisions of the laws of
the State of Kansas and the State of Delaware; and
WHEREAS, PARENT is entering into other separate agreements
substantially similar to this Agreement (the "Other Agreements"), each
of which is entitled "Agreement and Plan," with each of the other
Founding Companies (as defined herein) and their respective stockholders
in order to acquire additional temporary staffing, "PEO" or staff
leasing, permanent placement, and human resource consulting service
companies; and
WHEREAS, this Agreement, the Other Agreements and the IPO
constitute the "Consolidation Plan;" and
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of PARENT, each of the Other Founding Companies and each of
the subsidiaries of PARENT that are parties to the Other Agreements have
approved and adopted the Consolidation Plan as an integrated plan
pursuant to which the Company and each of the other Founding Companies
will be acquired by the PARENT in separate mergers or share
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exchanges that are intended to qualify as tax-free transfers of property
under Section 351 of the Internal Revenue Code of 1986, as amended
("Code"); and
WHEREAS, in consideration of the agreements of the Other Founding
Companies pursuant to the Other Agreements, the Board of Directors of
the COMPANY has approved this Agreement as part of the Consolidation
Plan in order for the PARENT to acquire the COMPANY; and
WHEREAS, unless the context otherwise requires, capitalized terms
used in this Agreement or in any Schedule attached hereto and not
otherwise defined elsewhere herein shall have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any subsidiary of the COMPANY and
any member of a Relevant Group.
"Articles of Merger" shall mean the Articles or Certificate of Merger
with respect to the Merger in such form as may be required by applicable state
laws in order to implement the Merger in accordance with this Agreement.
"ACQUISITION CORP." has the meaning set forth in the first paragraph of
this Agreement.
"Acquisition Corp. Stock" means the common stock, par value $.01 per
share, of ACQUISITION CORP.
"Balance Sheet Date" means June 30, 1997.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement, and, unless the context expressly requires otherwise, shall include
all subsidiaries of the COMPANY.
"Company Stock" means the common capital stock of the COMPANY.
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"Constituent Corporations" has the meaning set forth in the third
recital of this Agreement.
"Corporation Statute" has the meaning set forth in Section 1.5.
"Effective Time of the Merger" shall mean the time as of which the
Merger becomes effective, which shall occur on the Funding and Consummation
Date.
"Environmental Laws" has the meaning set forth in Section 5.13.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" means:
Alternative Solutions, Inc., a Massachusetts corporation and
Newbury Employment, Inc., a Massachusetts corporation
A.S.A.P. Services, Inc., an Arkansas corporation
Cardinal Services, Inc., an Oregon corporation
Employment Enterprises, Inc., a Virginia corporation
Evins Personnel Group which consists of the following
Texas corporations:
Evins Personnel Consultants, Inc., Evins Personnel
Consultants, Inc. # One, Evins Personnel Consultants,
Inc. # Two, Exceptional Resource Services, Inc.,
Excelsior Personnel Consultants, Inc., Excellent
Personnel Consultants, Inc., Evins Personnel
Consultants of Abilene, Inc. and Elite Personnel
Consultants, Inc.
Global Technical Services, Inc., a Texas corporation
HP Services, Inc., a Texas corporation
Technology Plus, Inc., a Kansas corporation
"Funding and Consummation Date" has the meaning set forth in Section 4.
"IPO" means the initial public offering of Parent Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
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"Merger" means the merger of ACQUISITION CORP. with and into the
COMPANY, as contemplated in this Agreement.
"Other Agreements" has the meaning set forth in the fourth recital of
this Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the COMPANY.
"PARENT" has the meaning set forth in the first paragraph of this
Agreement.
"Parent Charter Documents" has the meaning set forth in Section 6.1.
"Parent Stock" means the common stock, par value $.01 per share, of
PARENT.
"Pricing" means the date of determination by PARENT and the Underwriters
of the public offering price of the shares of Parent Stock in the IPO; the
parties to this Agreement contemplate that the Pricing shall take place on the
Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on
Form S-1 to be filed with the SEC covering the shares of Parent Stock to be
issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Surviving Corporation" means the COMPANY as the surviving party in the
Merger.
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"Tax" or "Taxes" means all federal, state, local or foreign net or gross
income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Underwriters" means the prospective underwriters identified in the
Registration Statement.
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The COMPANY and
ACQUISITION CORP. will cause the Articles of Merger to be signed, verified and
filed with the Secretary of State of the State of Delaware and the appropriate
authorities of the State of Kansas and stamped receipt copies of each such
filing to be delivered to PARENT on or before the Funding and Consummation Date.
1.2 EFFECTIVE TIME OF THE MERGER. At the Effective Time of the Merger,
ACQUISITION CORP. shall be merged with and into the COMPANY, the separate
existence of ACQUISITION CORP. shall cease, and the COMPANY shall be the
surviving party in the Merger and is sometimes hereinafter referred to as the
"Surviving Corporation."
1.3 CERTIFICATE OF INCORPORATION, BY-LAWS AND BOARD OF DIRECTORS OF THE
SURVIVING CORPORATION. At the Effective Time of the Merger:
(i) the Articles or Certificate of Incorporation of the COMPANY
then in effect shall be the Articles or Certificate of Incorporation of
the Surviving Corporation until changed as provided by law;
(ii) the By-laws of ACQUISITION CORP. then in effect shall become
the By-laws of the Surviving Corporation, with such changes, if any, as
may be consistent with the laws of the State of Kansas; and subsequent
to the Effective Time of the Merger, such By-laws shall be the By-laws
of such Surviving Corporation until they shall thereafter be duly
amended (and such By-Laws shall be amended, if necessary, to comply with
this Agreement and applicable state law);
(iii) the Board of Directors of the Surviving Corporation shall
consist of the persons who are on the Board of Directors of the COMPANY
immediately prior to the Effective Time of the Merger, provided that (x)
Larry E. Darst shall be elected as an
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additional director of the Surviving Corporation as of the Effective
Time and (y) the number of directors shall be reduced to take into
account any directors who choose to resign as of the Effective Time; the
members of the Board of Directors of the Surviving Corporation shall be
entitled to hold office until the next annual meeting of the SURVIVING
CORP.'s stockholders, subject to the provisions of the laws of the State
of Kansas and of the Articles or Certificate of Incorporation and
By-laws of the Surviving Corporation; and
(iv) the officers of the COMPANY immediately prior to the
Effective Time of the Merger shall continue as the officers of the
Surviving Corporation in the same capacity or capacities, and effective
upon the Effective Time of the Merger Larry E. Darst shall be appointed
as a Vice President of the Surviving Corporation and Gary J. Petry shall
be appointed as an Assistant Secretary of the Surviving Corporation,
each of such officers to serve, subject to the provisions of the
Articles or Certificate of Incorporation and By-laws of the Surviving
Corporation, until their respective successors are duly elected and
qualified.
1.4 CERTAIN INFORMATION WITH RESPECT TO THE CAPITAL STOCK OF THE
COMPANY, PARENT AND ACQUISITION CORP. The respective designations and numbers of
outstanding shares of each class of outstanding capital stock of the COMPANY,
PARENT and ACQUISITION CORP. as of the date of this Agreement are as follows:
(i) as of the date of this Agreement, the authorized and
outstanding capital stock of the COMPANY is as set forth on Schedule 5.3
hereto;
(ii) immediately prior to the Funding and Consummation Date, the
authorized capital stock of PARENT will consist of 60,000,000 shares of
capital stock, of which 55,000,000 shares are common stock, the number
of issued and outstanding shares of which will be set forth in the
Registration Statement, and 5,000,000 shares of preferred stock, $.01
par value, of which no shares will be issued and outstanding; and
(iii) as of the date of this Agreement, the authorized capital
stock of ACQUISITION CORP. consists of 1,000 shares of common stock, par
value $.01 per share, of which one hundred (100) shares are issued and
outstanding and owned by PARENT.
1.5 EFFECT OF MERGER. At the Effective Time of the Merger, the effect of
the Merger shall be as provided in the applicable provisions of the corporation
law of the State of Kansas (the "Corporation Statute") and the law of the State
of Delaware. Except as herein specifically set forth, the identity, existence,
purposes, powers, objects, franchises, privileges, rights and immunities of the
COMPANY shall continue unaffected and unimpaired by the Merger and the corporate
franchises, existence and rights of ACQUISITION CORP. shall be merged with and
into the
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COMPANY, and the COMPANY, as the Surviving Corporation, shall be fully vested
therewith. At the Effective Time of the Merger, the separate existence of
ACQUISITION CORP. shall cease and, in accordance with the terms of this
Agreement, the Surviving Corporation shall possess all the rights, privileges,
immunities and franchises, of a public, as well as of a private, nature, and all
property, real, personal and mixed, and all debts due on whatever account,
including subscriptions to shares, and all taxes, including those due and owing
and those accrued, and all other choses in action, and all and every other
interest of or belonging to or due to the COMPANY and ACQUISITION CORP. shall be
taken and deemed to be transferred to, and vested in, the Surviving Corporation
without further act or deed; and all property, rights and privileges, powers and
franchises and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the COMPANY and
ACQUISITION CORP.; and the title to any real estate, or interest therein,
whether by deed or otherwise, under the laws of the state of incorporation
vested in the COMPANY and ACQUISITION CORP., shall not revert or be in any way
impaired by reason of the Merger. Except as otherwise provided herein, the
Surviving Corporation shall thenceforth be responsible and liable for all the
liabilities and obligations of the COMPANY and ACQUISITION CORP. and any claim
existing, or action or proceeding pending, by or against the COMPANY or
ACQUISITION CORP. may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in their place. Neither the rights of
creditors nor any liens upon the property of the COMPANY or ACQUISITION CORP.
shall be impaired by the Merger, and all debts, liabilities and duties of the
COMPANY and ACQUISITION CORP. shall attach to the Surviving Corporation, and may
be enforced against the Surviving Corporation to the same extent as if said
debts, liabilities and duties had been incurred or contracted by the Surviving
Corporation.
2. CONVERSION OF STOCK
2.1 MANNER OF CONVERSION. The manner of converting the shares of (i)
outstanding Company Stock and (ii) Acquisition Corp. Stock issued and
outstanding immediately prior to the Effective Time of the Merger into shares of
(x) Parent Stock and (y) common stock of the Surviving Corporation,
respectively, shall be as follows:
As of the Effective Time of the Merger:
(i) all of the shares of Company Stock issued and outstanding
immediately prior to the Effective Time of the Merger shall, by virtue
of the Merger and without any action on the part of the holder thereof,
automatically be deemed to represent (1) the right to receive the number
of shares of Parent Stock set forth on Annex II with respect to such
holder and (2) the right to receive the amount of cash set forth on
Annex II with respect to such holder;
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(ii) all shares of Company Stock that are held by the COMPANY as
treasury stock shall be canceled and retired and no shares of Parent
Stock or other consideration shall be delivered or paid in exchange
therefor; and
(iii) each share of Acquisition Corp. Stock issued and
outstanding immediately prior to the Effective Time of the Merger,
shall, by virtue of the Merger and without any action on the part of
PARENT, automatically be converted into one (1) fully paid and
non-assessable share of common stock of the Surviving Corporation which
shall constitute all of the issued and outstanding shares of common
stock of such Surviving Corporation immediately after the Effective Time
of the Merger.
All Parent Stock received by the STOCKHOLDERS pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all the other shares of outstanding
Parent Stock by reason of the provisions of the Certificate of Incorporation of
PARENT or as otherwise provided by the Delaware General Corporation Law. All
voting rights of such Parent Stock received by the STOCKHOLDERS shall be fully
exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor
restricted in exercising those rights. At the Effective Time of the Merger,
PARENT shall have no class of capital stock issued and outstanding other than
Parent Stock.
3. DELIVERY OF MERGER CONSIDERATION
3.1 At the Effective Time of the Merger and on the Funding and
Consummation Date the STOCKHOLDERS, who are all the holders of all outstanding
certificates representing shares of Company Stock, shall, upon surrender of such
certificates, receive the number of shares of Parent Stock and the amount of
cash determined in accordance with Annex II, said cash to be payable by
certified check or wire transfer, at the option of the STOCKHOLDERS.
3.2 The STOCKHOLDERS shall deliver to PARENT at the Closing the
certificates representing Company Stock, duly endorsed in blank by the
STOCKHOLDERS, or accompanied by blank stock powers, with signatures guaranteed
by a national or state chartered bank or other financial institution, and with
all necessary transfer tax and other revenue stamps, acquired at the
STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to
cure any deficiencies with respect to the endorsement of the stock certificates
or other documents of conveyance with respect to such Company Stock or with
respect to the stock powers accompanying any Company Stock.
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4. CLOSING
At or prior to the Pricing, the parties shall take all actions necessary
to prepare to (i) effect the Merger (including, if permitted by applicable state
law, the filing with the appropriate state authorities of the Articles of Merger
which shall become effective at the Effective Time of the Merger) and (ii)
effect the conversion and delivery of shares referred to in Sections 2 and 3
hereof; provided, that such actions shall not include the actual completion of
the Merger or the conversion and delivery of the shares and certified check(s)
or the initiation of wire transfers referred to in Section 3 hereof, each of
which actions shall only be taken upon the Funding and Consummation Date. In the
event that there is no Funding and Consummation Date and this Agreement
terminates, PARENT covenants and agrees to do all things required by Delaware
law and all things which counsel for the COMPANY advise PARENT are required by
applicable laws of the State of Kansas in order to rescind the merger
contemplated by the filing of the Articles of Merger as described in this
Section. The taking of the actions described in clauses (i) and (ii) above (the
"Closing") shall take place on the closing date (the "Closing Date") at the
offices of Bracewell & Patterson, L.L.P., South Tower Pennzoil Place, 711
Louisiana, Suite 2900, Houston, Texas 77002. On the Funding and Consummation
Date, (x) the Articles of Merger shall be or shall have been filed with the
appropriate state authorities so that they shall be effective as early as
practicable on the Funding and Consummation Date and the Merger shall thereby be
effected, (y) all transactions contemplated by this Agreement, including the
conversion and delivery of shares, the delivery of a certified check or checks
or the initiation of a wire transfer or transfers in an amount equal to the cash
portion of the consideration which the STOCKHOLDERS shall be entitled to receive
pursuant to the Merger and (z) the closing with respect to the IPO shall occur
and be deemed to be completed. The date on which the actions described in the
preceding clauses (x), (y) and (z) occurs shall be referred to as the "Funding
and Consummation Date." Except as otherwise provided in Section 12, during the
period from the Closing Date to the Funding and Consummation Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the IPO is terminated pursuant to the terms of such agreement. This
Agreement shall in any event terminate if the Funding and Consummation Date has
not occurred within 15 business days of the Closing Date. Time is of the
essence.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND STOCKHOLDERS
(A) REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND STOCKHOLDERS.
The COMPANY and the STOCKHOLDERS jointly and severally represent and
warrant that all of the following representations and warranties in this Section
5(A) are true at the date of this Agreement and, subject to Section 7.8 hereof,
shall be true on the Closing Date and on the Funding
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and Consummation Date, and that such representations and warranties shall
survive the Funding and Consummation Date for a period of 12 months (the last
day of such period being the "Expiration Date"), except that (i) the warranties
and representations set forth in Section 5.22 hereof shall survive until such
time as the limitations period has run for all Tax periods ended on or prior to
the Funding and Consummation Date, which shall be deemed to be the Expiration
Date for Section 5.22 and (ii) solely for purposes of determining whether a
claim for indemnification under Section 11.1(iii) hereof has been made on a
timely basis, and solely to the extent that in connection with the IPO, PARENT
actually incurs liability under the 1933 Act, the 1934 Act, or any other federal
or state securities laws, the representations and warranties set forth herein
shall survive until the expiration of any applicable limitations period, which
shall be deemed to be the Expiration Date for such purposes. For purposes of
this Section 5, the term COMPANY includes any and all of its subsidiaries unless
the context expressly requires otherwise.
5.1 DUE ORGANIZATION. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has the corporate power and authority to carry on its
business as it is now being conducted. The COMPANY is duly qualified to do
business and is in good standing in the jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of the COMPANY and its subsidiaries taken as a whole
(as used herein with respect to the COMPANY, or with respect to any other
person, a "Material Adverse Effect"). Schedule 5.1 sets forth each jurisdiction
in which the COMPANY is incorporated and contains a list of all jurisdictions in
which the COMPANY is authorized or qualified to do business. True, complete and
correct copies of the Certificate or Articles of Incorporation and By-laws, as
amended, of the COMPANY (the "Charter Documents") are all attached hereto as
Schedule 5.1. The stock records of the COMPANY, as heretofore made available to
PARENT, are correct and complete in all material respects. There are no minutes
in the possession of the COMPANY or the STOCKHOLDERS which have not been made
available to PARENT, and all of such minutes are correct and complete in all
respects. The most recent minutes of the COMPANY, which are dated no earlier
than ten business days prior to the date hereof, affirm and ratify all prior
acts of the COMPANY, and of its officers and directors on behalf of the COMPANY.
5.2 AUTHORIZATION. The representatives of the COMPANY executing this
Agreement have the authority to enter into and bind the COMPANY to the terms of
this Agreement. The COMPANY has the corporate power and authority to enter into
this Agreement and the Merger. All requisite approval of the shareholders of the
COMPANY has been given and is confirmed by the signatures on the Stockholder
Signature Page.
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5.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 5.3. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex III (or are owned by the Company in the case of any
subsidiary) and further, except as set forth on Schedule 5.3, are owned free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of the capital stock of the COMPANY have been duly authorized
and validly issued, are fully paid and nonassessable, are owned of record and
beneficially by the STOCKHOLDERS, and such shares were offered, issued, sold and
delivered in compliance with all applicable state and Federal laws concerning
the issuance and distribution of securities. Further, none of such shares were
issued in violation of any preemptive rights of any past or present stockholder.
5.4 TRANSACTIONS IN CAPITAL STOCK; ORGANIZATION ACCOUNTING. Except as
set forth on Schedule 5.4, the COMPANY has not acquired any Company Stock.
Except as set forth on Schedule 5.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates the COMPANY to issue any
of its capital stock, and (ii) the COMPANY has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. Schedule 5.4 also includes complete and accurate copies of all
stock option or stock purchase plans, including a list of all outstanding
options, warrants or other rights to acquire shares of the COMPANY's capital
stock.
5.5 NO BONUS SHARES. Except as set forth on Schedule 5.5, none of the
shares of Company Stock was issued pursuant to awards, grants or bonuses.
5.6 SUBSIDIARIES. Except as set forth on Schedule 5.6, the COMPANY has
no subsidiaries. Except as set forth in Schedule 5.6, the COMPANY does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, limited liability company, association or business
entity nor is the COMPANY, directly or indirectly, a participant in any joint
venture, partnership or other non-corporate entity.
5.7 PREDECESSOR STATUS; ETC. Set forth in Schedule 5.7 is a listing of
all names of all predecessor companies and names of the COMPANY, including the
names of any entities or businesses acquired by the COMPANY (by stock purchase,
asset purchase, merger or otherwise) or owned by the COMPANY or from whom the
COMPANY previously acquired material assets. Except as disclosed on Schedule
5.7, the COMPANY has not been a subsidiary or division of another corporation or
a part of an acquisition which was later rescinded.
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5.8 SPIN-OFF BY THE COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY.
5.9 FINANCIAL STATEMENTS, ETC.
(a) FINANCIAL STATEMENTS. Attached hereto as Schedule 5.9 are copies of
the following financial statements of the COMPANY (the "Company Financial
Statements"): the COMPANY's audited and unaudited Balance Sheets as of December
31, 1996 and June 30, 1997, and Statements of Income, Shareholders' Equity and
Cash Flows for the periods therein ended. The date of June 30, 1997 is
hereinafter referred to as the "Balance Sheet Date." Such Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein or on Schedule 5.9). Except as set forth on Schedule 5.9, such Balance
Sheets as of December 31, 1996 and June 30, 1997 present fairly the financial
position of the COMPANY as of the dates indicated thereon, and such Statements
of Income, Shareholders' Equity and Cash Flows present fairly the results of
operations and cash flows for the periods indicated thereon.
(b) RESERVES FOR WORKERS' COMPENSATION AND HEALTH CARE. Except as set
forth on Schedule 5.9, the COMPANY's reserves for workers' compensation and
health care costs reflected on the Balance Sheet as of the Balance Sheet Date
are adequate and appropriate and have been accrued in accordance with generally
accepted accounting principles. The COMPANY has not received any report
(including, without limitation, a report from any actuary, insurance company or
accountant) which suggests that any of the reserves reflected on any of the
Balance Sheets may be inadequate.
5.10 LIABILITIES AND OBLIGATIONS. The COMPANY has delivered to PARENT an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected on the balance
sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in the
Company Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of the COMPANY (including all liabilities in excess of $10,000 which
are not reflected in the balance sheet as of the Balance Sheet Date) and (iii)
all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens,
pledges or other security agreements. Except as set forth on Schedule 5.10,
since the Balance Sheet Date the COMPANY has not incurred any material
liabilities of any kind, character and description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, other than nonmaterial
liabilities incurred in the ordinary course of business. The COMPANY has also
delivered to PARENT on Schedule 5.10, in the case of those contingent
liabilities related to pending or, to the COMPANY's knowledge, threatened
litigation,
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or other liabilities which are not fixed or otherwise accrued or reserved, a
good faith and reasonable estimate of the maximum amount which may be payable.
For any such contingent liability or liability for which the amount is not fixed
or is contested, the COMPANY has provided to PARENT the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating
thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the
claim, suit or proceeding; and
(ii) the name of the court or agency before which such claim,
suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted; and
(iv) either (x) a good faith and reasonable estimate of the
maximum amount, if any, which is likely to become payable with respect
to the such liability, or (y) a specific description of any related
reserve that may have been reflected in the Balance Sheet as of the
Balance Sheet Date, with respect to such liability. If no estimate is
provided or no specific reserve is reflected in the Balance Sheet as of
the Balance Sheet Date, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 ACCOUNTS AND NOTES RECEIVABLE. The COMPANY has delivered to PARENT
an accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of July 31, 1997, including any such amounts which
are not reflected in the balance sheet as of the Balance Sheet Date, and
including receivables from and advances to employees and the STOCKHOLDERS. The
COMPANY shall also provide PARENT (x) an accurate list of all receivables
obtained subsequent to August 31, 1997 and (y) an aging of all accounts and
notes receivable showing amounts due in 30 day aging categories, and such list
and such aging report (the "A/R Aging Reports") shall be current as of August
31, 1997. Except to the extent reflected on Schedule 5.11 or as disclosed by the
COMPANY to PARENT in a writing accompanying the A/R Aging Reports, such
accounts, notes and other receivables are collectible in the amounts shown on
Schedule 5.11, and shall be collectible in the amounts shown on the A/R Aging
Reports, net of reserves reflected in the Balance Sheet as of the Balance Sheet
Date and as of the date of the A/R Aging Reports, respectively.
5.12 PERMITS AND INTANGIBLES. The COMPANY and its employees (for the
benefit of the COMPANY) hold all licenses, registrations, franchises, permits
and other governmental
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authorizations the absence of any of which could have a Material Adverse Effect
on the COMPANY. The COMPANY and its employees (for the benefit of the COMPANY)
are licensed or registered as professional employer organizations and/or as
control persons thereof, as appropriate, in each jurisdiction in which their
activities require such licensing or registration, except where failure to be so
licensed or registered could not have a Material Adverse Effect on the COMPANY.
The COMPANY has delivered to PARENT an accurate list and summary description
(which is set forth on Schedule 5.12) of all such licenses, registrations,
franchises, permits and other governmental authorizations, including permits,
titles (including motor vehicle titles and current registrations), fuel permits,
licenses, registrations, franchises, certificates, trademarks, trade names,
patents, patent applications and copyrights owned or held by the COMPANY or any
of its employees (including interests in software or other technology systems,
programs and intellectual property) (it being understood and agreed that a list
of all environmental permits and other environmental approvals is set forth on
Schedule 5.13). To the knowledge of the COMPANY, the licenses, registrations,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 are valid, and the COMPANY has not received any notice that any
governmental authority intends to cancel, terminate or not renew any such
license, franchise, permit or other governmental authorization. The COMPANY has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the licenses, registrations,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 and is not in violation of any of the foregoing except where such
non-compliance or violation would not have a Material Adverse Effect on the
COMPANY. Except as specifically provided in Schedule 5.12, the transactions
contemplated by this Agreement will not result in a material default under or a
material breach or violation of, or materially adversely affect the rights and
benefits afforded to the COMPANY by, any such licenses, registrations,
franchises, permits or government authorizations.
5.13 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied with and is in compliance with all Federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of their properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are defined in any applicable
Environmental Law) including petroleum and petroleum products; (ii) the COMPANY
has obtained and adhered to all necessary permits and other approvals necessary
to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and
Hazardous Substances, a list of all of which permits and approvals is set forth
on Schedule 5.13, and have reported to the appropriate authorities, to the
extent required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
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releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to
which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any Federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the COMPANY, PARENT or ACQUISITION CORP. for any clean-up cost, remedial
work, damage to natural resources, property damage or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended; and (v) the
COMPANY has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.14 PERSONAL PROPERTY.
(a) The COMPANY has delivered to PARENT an accurate list (which is set
forth on Schedule 5.14) of (x) all personal property included (or that will be
included) in "property and equipment, net" on the balance sheet of the COMPANY,
(y) all other personal property owned by the COMPANY with a value in excess of
$10,000 (i) as of the Balance Sheet Date or (ii) acquired since the Balance
Sheet Date and (z) all leases and agreements in respect of personal property,
including, in the case of the of (x), (y) and (z), (1) true, complete and
correct copies of all such leases and (2) an indication as to which assets are
currently owned, or were formerly owned, by STOCKHOLDERS, relatives of
STOCKHOLDERS, or affiliates of the COMPANY. Except as set forth on Schedule
5.14, (i) all personal property used by the COMPANY in its business is either
owned by the COMPANY or leased by the COMPANY pursuant to a lease included on
Schedule 5.14, (ii) all of the personal property listed on Schedule 5.14 is in
good working order and condition, ordinary wear and tear excepted and (iii) all
leases and agreements included on Schedule 5.14 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their terms.
(b) The COMPANY owns, licenses or possesses the right to use all
material patents, patents pending, trademarks, servicemarks, trade names,
service names, slogans, registered copyrights, trade secrets, computer software
and other intellectual property rights it currently uses, without any conflict
or, to the knowledge of the COMPANY, alleged conflict with the rights of others
or in violation of any license or other agreement with respect thereto. Each
item of intellectual property owned or used by the COMPANY prior to the Closing
will be owned or available for use by the Surviving Corporation on the same
terms and conditions immediately following the Closing. Except as described in
Schedule 5.14, the COMPANY has taken all such actions as are reasonably
necessary to maintain and protect such of its intellectual property as is
material to the operations and results of the COMPANY's business. Schedule 5.14
lists all of the
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material intellectual property rights used by the COMPANY as well as any
material intellectual property rights owned by third parties and used by the
COMPANY pursuant to licenses, sublicenses, agreements or permissions; all of the
foregoing licenses, sublicenses, agreements and permissions are valid, binding
and in full force and effect and no default has occurred and no notice of
default has been received with respect thereto.
5.15 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS. The
COMPANY has delivered to PARENT an accurate list (which is set forth on Schedule
5.15) of all significant customers, or persons or entities that are sources of a
significant number of customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers (or persons or entities that are sources of
a significant number of customers) have canceled or substantially reduced or, to
the knowledge of the COMPANY, are currently attempting or threatening to cancel
a contract or substantially reduce utilization of the services provided by the
COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than agreements listed on Schedule 5.10, 5.14 or 5.16, (a) in existence as
of the Balance Sheet Date and (b) entered into since the Balance Sheet Date, and
in the case has delivered true, complete and correct copies of such agreements
to PARENT. The COMPANY has complied with all material commitments and
obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 5.15 and no notice of default under any such
contract or agreement has been received. The COMPANY has also indicated on
Schedule 5.15 a summary description of all plans or projects involving the
opening of new operations, expansion of existing operations, the acquisition of
any personal property, business or assets requiring, in any event, the payment
of more than $50,000 by the COMPANY.
5.16 REAL PROPERTY. Schedule 5.16 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, and all other real property, if any, used
by the COMPANY in the conduct of its business. The COMPANY has good and
insurable title to the real property owned by it, including those reflected on
Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
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(i) liens reflected on Schedules 5.10 or 5.15 as securing
specified liabilities (with respect to which no material default
exists);
(ii) liens for current taxes not yet payable and assessments not
in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions
to title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located which do not
materially and adversely affect the current use of the property.
Schedule 5.16 contains, without limitation, true, complete and correct copies of
all title reports and title insurance policies currently in possession of the
COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to the Parent an accurate list of real
property leased by the COMPANY (which list is set forth on Schedule 5.16),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY (which copies are attached
to Schedule 5.16), and an indication as to which such properties, if any, are
currently owned, or were formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.16,
all of such leases included on Schedule 5.16 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their terms.
5.17 INSURANCE. The COMPANY has delivered to PARENT, as set forth on and
attached to Schedule 5.17, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs or workers compensation claims received for the past three
(3) policy years, and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Funding and Consummation Date. Since January 1, 1993, no
insurance carried by the COMPANY has been canceled by an insurer and, to the
knowledge of the COMPANY, the COMPANY has not been denied coverage. No insurance
carried by the Company has ever been underwritten or reinsured with any
insurance company in which the COMPANY, any STOCKHOLDER or any affiliate of the
COMPANY or any STOCKHOLDER has any financial or ownership interest.
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5.18 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS. The
COMPANY has delivered to PARENT an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons as of (i) the
Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to PARENT
true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.18. Except as set forth on Schedule 5.18, since June 30,
1997 there have been no increases in the compensation payable or any special
bonuses to any officer, director, key employee or other employee, except
ordinary salary increases implemented on a basis consistent with past practices.
Except as set forth on Schedule 5.18, (i) the COMPANY is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
COMPANY are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the COMPANY, no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any
group of its employees nor has the COMPANY experienced any labor interruptions
over the past three years. The COMPANY believes its relationship with employees
to be good.
5.19 EMPLOYEE PLANS. The STOCKHOLDERS have delivered to PARENT an
accurate schedule (Schedule 5.19) showing all employee benefit and employee
welfare plans of the COMPANY (including COMPANY's subsidiaries), including all
employment agreements and other agreements or arrangements containing "golden
parachute" or other similar provisions, and deferred compensation agreements,
together with true, complete and correct copies of such plans, agreements and
any trusts related thereto, and classifications of employees covered thereby as
of the Balance Sheet Date. Except for the employee benefit plans, if any,
described on Schedule 5.19, COMPANY (including a COMPANY subsidiary) does not
sponsor, maintain or contribute to any plan program, fund or arrangement that
constitutes an "employee pension benefit plan," nor has COMPANY or any
subsidiary any obligation to contribute to or accrue or pay any benefits under
any deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) or any non-qualified deferred compensation arrangement).
For the purposes of this Agreement, the term "employee pension benefit plan"
shall have the same meaning as is given that term in Section 3(2) of ERISA.
Neither COMPANY nor any subsidiary has sponsored, maintained or contributed to
any employee pension benefit plan other than the plans set forth on Schedule
5.19, nor is COMPANY or any subsidiary required to contribute to any retirement
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plan pursuant to the provisions of any collective bargaining agreement
establishing the terms and conditions or employment of any of COMPANY's or any
subsidiary's employees.
Neither the COMPANY nor any subsidiary is now, or can as a result of its
past activities become, liable to the Pension Benefit Guaranty Corporation
("PBGC") or to any multiemployer employee pension benefit plan under the
provisions of Title IV of ERISA.
All employee benefit plans listed on Schedule 5.19 and the
administration thereof are in substantial compliance with their terms and all
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable federal, state and local statutes, ordinances and
regulations.
All accrued contribution obligations of COMPANY or any subsidiary with
respect to any plan listed on Schedule 5.19 have either been fulfilled in their
entirety or are fully reflected on the balance sheet of the COMPANY as of the
Balance Sheet Date.
5.20 COMPLIANCE WITH ERISA. All such plans listed on Schedule 5.19 that
are intended to qualify (the "Qualified Plans") under Section 401(a) of the Code
are, and have been so qualified and have been determined by the Internal Revenue
Service to be so qualified, and copies of such determination letters are
included as part of Schedule 5.19. Except as disclosed on Schedule 5.20, all
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, actuarial reports, audits or tax returns) have been timely filed or
distributed, and copies thereof are included as part of Schedule 5.19. None of
STOCKHOLDERS, any such plan listed in Schedule 5.19, or COMPANY (including a
COMPANY subsidiary) has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No such Plan
listed in Schedule 5.19 has incurred an accumulated funding deficiency, as
defined in Section 412(a) of the Code and Section 302(1) of ERISA; and COMPANY
(including a COMPANY subsidiary) has not incurred any liability for excise tax
or penalty due to the Internal Revenue Service nor any liability to the PBGC.
In addition,
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and approval
by the Internal Revenue Service;
(ii) no such plan listed in Schedule 5.19 subject to the
provisions of Title IV of ERISA has been terminated;
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(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed
in Schedule 5.19;
(iv) COMPANY (including a COMPANY subsidiary) has not incurred
liability under Section 4062 of ERISA; and
(v) no circumstances exist pursuant to which the COMPANY
(including a COMPANY subsidiary) could have any direct or indirect
liability whatsoever (including, but not limited to, any liability to
any multiemployer plan or the PBGC under Title IV of ERISA or to the
Internal Revenue Service for any excise tax or penalty, or being subject
to any statutory lien to secure payment of any such liability) with
respect to any plan now or heretofore maintained or contributed to by
any entity other than the COMPANY that is, or at any time was, a member
of a "controlled group" (as defined in Section 412(n)(6)(B) of the Code)
that includes the COMPANY.
5.21 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 5.21 or 5.13, neither the COMPANY nor, to the knowledge of the COMPANY,
any client of the COMPANY is in violation of, or has violated, any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them which would have a Material Adverse Effect
on the COMPANY; and except to the extent set forth on Schedule 5.10 or 5.13,
there are no material claims, actions, suits or proceedings, commenced or, to
the knowledge of the COMPANY, threatened, against or affecting the COMPANY, at
law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over any of them and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. The COMPANY has,
and, to the knowledge of the COMPANY, each of its clients has, conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable Federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations, including all such permits, licenses, orders and other
governmental approvals set forth on Schedules 5.12 and 5.13, and is not in
violation of any of the foregoing which might have a Material Adverse Effect on
the COMPANY.
5.22 TAXES. Except as set forth on schedule 5.22, the COMPANY (including
each COMPANY subsidiary) has timely filed all requisite federal, state and other
Tax returns or extension requests for all fiscal periods ended on or before the
Balance Sheet Date; and except as set forth on Schedule 5.22, to the knowledge
of the COMPANY, there are no examinations in progress or claims against any of
them for federal, state and other taxes (including penalties and interest) for
any period or periods prior to and including the Balance Sheet Date and no
notice of any claim for taxes,
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whether pending or threatened, has been received. Except as set forth on
Schedule 5.22, all Taxes, including interest and penalties (whether or not shown
on any Tax return) owed by the COMPANY, any of the COMPANY's subsidiaries, any
member of an affiliated or consolidated group which includes or included the
COMPANY or any of the COMPANY's subsidiaries, or with respect to any payment
made or deemed made by the COMPANY or any of the COMPANY's subsidiaries, have
been paid. The amounts shown as accruals for Taxes on the Company Financial
Statements are sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all fiscal periods. Copies of (i) any Tax
examinations, (ii) extensions of statutory limitations and (iii) the federal and
local income Tax returns and franchise Tax returns of COMPANY (including the
COMPANY subsidiaries) for their last three (3) fiscal years, or such shorter
period of time as any of them shall have existed, are attached hereto as
Schedule 5.22. The COMPANY has a taxable year ended December 31 and has not made
an election to retain a fiscal year other than December 31 under Section 444 of
the Code. The COMPANY's methods of accounting have not changed in the past five
years. The COMPANY is not an investment company as defined in Section 351(e)(1)
of the Code.
5.23 NO VIOLATIONS. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto is in default under any lease, instrument, agreement, license, or
permit set forth on Schedule 5.12, 5.13, 5.14, 5.15 or 5.16, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents") in any manner that could result in a Material Adverse
Effect; and, except as set forth in Schedule 5.23, (a) the rights and benefits
of the COMPANY under the Material Documents will not be materially adversely
affected by the transactions contemplated hereby and (b) the execution of this
Agreement and the performance of the obligations hereunder and the consummation
of the transactions contemplated hereby will not result in any material
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit. Except as set forth on Schedule 5.23, none of the
Material Documents prohibits the use or publication by the COMPANY, the PARENT
or ACQUISITION CORP. of the name of any other party to such Material Document,
and none of the Material Documents prohibits or restricts the COMPANY from
freely providing services to any other customer or potential customer of the
COMPANY, the PARENT, ACQUISITION CORP. or any Other Founding Company.
5.24 GOVERNMENT CONTRACTS. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contracts subject to price
redetermination or renegotiation.
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5.25 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of the
COMPANY; or
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
the COMPANY; or
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
or
(iv) except as contemplated in Section 10.6, any declaration or
payment of any dividend or distribution in respect of the capital stock
or any direct or indirect redemption, purchase or other acquisition of
any of the capital stock of the COMPANY; or
(v) any increase in the compensation, bonus, sales commissions or
fee arrangement payable or to become payable by the COMPANY to any of
its officers, directors, STOCKHOLDERS, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for
employees in accordance with past practice; or
(vi) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of the COMPANY; or
(vii) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of COMPANY to any person,
including, without limitation, the STOCKHOLDERS or any affiliates
thereof; or
(viii) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the COMPANY, including without limitation
any indebtedness or obligation of any STOCKHOLDERS or any affiliate
thereof; or
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets,
property or rights of the COMPANY or requiring consent of any party to
the transfer and assignment of any such assets, property or rights; or
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(x) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets
outside of the ordinary course of the COMPANY's business; or
(xi) any waiver of any material rights or claims of the COMPANY;
or
(xii) any material breach, amendment or termination of any
contract, agreement, license, permit or other right to which the COMPANY
is a party; or
(xiii) any transaction by the COMPANY outside the ordinary course
of its businesses; or
(xiv) any cancellation or termination of a material contract with
a customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY;
or
(xvi) except as contemplated in Section 10.6, any incurrence,
drawing, borrowing or deferral of or under any debt or credit
arrangement so as to result in an aggregate amount of debt outstanding
greater than as set forth in the COMPANY's Balance Sheet on the Balance
Sheet Date.
5.26 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. The COMPANY has delivered to
the PARENT an accurate schedule (which is set forth on Schedule 5.26) as of the
date of this Agreement of:
(i) the name of the financial institution in which the COMPANY
has accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of the person authorized to draw thereon or have
access thereto.
Schedule 5.26 also sets forth the name of the person, corporation, firm or other
entity holding a general or special power of attorney from the COMPANY and a
description of the terms of such power.
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5.27 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors and the
STOCKHOLDERS of the COMPANY and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
obligation of the COMPANY and the STOCKHOLDERS.
5.28 RELATIONS WITH GOVERNMENTS. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office.
5.29 DISCLOSURE. (a) This Agreement, including the schedules hereto,
together with the completed Directors and Officers Questionnaires attached
hereto as Schedule 5.29 and all other documents and information made available
to PARENT and its representatives in writing pursuant hereto or thereto, present
fairly the business and operations of the COMPANY for the time periods with
respect to which such information was requested. The COMPANY's rights under the
documents delivered pursuant hereto would not be materially adversely affected
by, and no statement made herein would be rendered untrue in any material
respect by, any other document to which the COMPANY is a party, or to which its
properties are subject, or by any other fact or circumstance regarding the
COMPANY (which fact or circumstance was, or should reasonably, after due
inquiry, have been known to the COMPANY) that is not disclosed pursuant hereto
or thereto. If, prior to the 25th day after the date of the final prospectus of
PARENT utilized in connection with the IPO, the COMPANY or the STOCKHOLDERS
become aware of any fact or circumstance which would change (or, if after the
Funding and Consummation Date, would have changed) a representation or warranty
of COMPANY or STOCKHOLDERS in this Agreement or would affect any document
delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to
PARENT. However, subject to the provisions of Section 7.8, such notification
shall not relieve either the COMPANY or the STOCKHOLDERS of their obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of PARENT, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Closing Date and on the Funding and
Consummation Date, shall be a precondition to the consummation of this
transaction.
(b) PARENT shall use reasonable commercial efforts to file
the Registration Statement and to have it declared effective; however, the
COMPANY and the STOCKHOLDERS acknowledge and agree (i) that there exists no firm
commitment, binding agreement, or promise or other assurance of any kind,
whether express or implied, oral or written, that a Registration Statement will
become effective or that the IPO pursuant thereto will occur at a particular
price or within a particular range of prices or occur at all; (ii) that neither
PARENT or any
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of its officers, directors, agents or representatives nor any Underwriter shall
have any liability to the COMPANY, the STOCKHOLDERS or any other person
affiliated or associated with the COMPANY for any failure of the Registration
Statement to become effective, the IPO to occur at a particular price or within
a particular range of prices or to occur at all; and (iii) that the decision of
STOCKHOLDERS to enter into this Agreement, or to vote in favor of or consent to
the proposed Merger, has been or will be made independent of, and without
reliance upon, any statements, opinions or other communications, or due
diligence investigations which have been or will be made or performed by any
prospective Underwriter, relative to PARENT or the prospective IPO; provided,
however, that the COMPANY and the STOCKHOLDERS retain their right to insist that
the IPO Stock Price be no lower than the minimum price specified in Annex II.
5.30 PROHIBITED ACTIVITIES. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions (Prohibited Activities) set forth in Section 7.3.
(B) REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8, shall be true on the Closing Date and on
the Funding and Consummation Date, and that the representations and warranties
set forth in Sections 5.31 and 5.32 shall survive until the first anniversary of
the Funding and Consummation Date, which shall be the Expiration Date for
purposes of Sections 5.31 and 5.32.
5.31 AUTHORITY; OWNERSHIP. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the Company Stock identified on
Annex III as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.31, such Company Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
5.32 PREEMPTIVE RIGHTS. Such STOCKHOLDER does not have, or hereby
waives, any preemptive or other right to acquire shares of Company Stock or
Parent Stock that such STOCKHOLDER has or may have had other than rights of any
STOCKHOLDER to acquire Parent Stock pursuant to (i) this Agreement or (ii) any
written option granted by PARENT.
5.33 NO INTENTION TO DISPOSE OF PARENT STOCK. The STOCKHOLDER is not
under any binding commitment or contract to sell, exchange or otherwise dispose
of shares of Parent Stock received as described in Section 3.1.
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6. REPRESENTATIONS OF PARENT AND ACQUISITION CORP.
PARENT and ACQUISITION CORP. jointly and severally represent and
warrant that all of the following representations and warranties in this Section
6 are true at the date of this Agreement and, subject to Section 7.8 hereof,
shall be true on the Closing Date and the Funding and Consummation Date, and
that such representations and warranties shall survive the Funding and
Consummation Date for a period of twelve months (the last day of such period
being the "Expiration Date"), except that (i) the warranties and representations
set forth in Section 6.14 hereof shall survive until such time as the
limitations period has run for all Tax periods ended on or prior to the Funding
and Consummation Date, which shall be deemed to be the Expiration Date for
Section 6.14 and (ii) solely for purposes of determining whether a claim for
indemnification under Section 11.2(iv) hereof has been made on a timely basis,
and solely to the extent that, in connection with the IPO, PARENT actually
incurs liability under the 1933 Act, the 1934 Act, or any other federal or state
securities laws, the representations and warranties set forth herein shall
survive until the expiration of any applicable limitations period, which shall
be deemed to be the Expiration Date for such purposes.
6.1 DUE ORGANIZATION. PARENT and ACQUISITION CORP. are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware and are duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their business in the places and in the manner as now conducted except
where the failure to be so authorized or qualified would not have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and By-laws, each as amended, of PARENT and ACQUISITION CORP. (the
"Parent Charter Documents") are all attached hereto as Annex I.
6.2 AUTHORIZATION. The representatives of PARENT and ACQUISITION CORP.
executing this Agreement have the authority to enter into and bind PARENT and
ACQUISITION CORP. to the terms of this Agreement. PARENT and ACQUISITION CORP.
have the corporate power and authority to enter into this Agreement and the
Merger.
6.3 CAPITAL STOCK OF PARENT AND ACQUISITION CORP. The authorized capital
stock of PARENT and ACQUISITION CORP. is as set forth in Sections 1.4(ii) and
(iii), respectively. All of the issued and outstanding shares of the capital
stock of ACQUISITION CORP. are owned by PARENT and all of the issued and
outstanding shares of the capital stock of PARENT are owned as set forth on
Annex IV. All of the issued and outstanding shares of the capital stock of
PARENT and ACQUISITION CORP. have been duly authorized and validly issued, are
fully paid and nonassessable. Further, none of such shares were issued in
violation of the preemptive rights of any past or present stockholder of PARENT
or ACQUISITION CORP.
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On the Funding and Consummation Date, PARENT shall have outstanding only
one class of common stock (Parent Common Stock) and the shares of Parent Common
Stock owned by the Founding Companies and the purchasers of stock in the IPO
will not possess less than 80% of the total voting power of Parent Common Stock
entitled to vote. For this purpose, the outstanding Parent Common Stock shall
include, without limitation, the shares to be held by the stockholders of all
Founding Companies and by purchasers in the IPO.
6.4 TRANSACTIONS IN CAPITAL STOCK, ORGANIZATION ACCOUNTING. Except for
the Other Agreements and except as set forth on Schedule 6.4, (i) no option,
warrant, call, conversion right or commitment of any kind exists which obligates
PARENT or ACQUISITION CORP. to issue any of their authorized but unissued
capital stock; and (ii) neither PARENT nor ACQUISITION CORP. has any obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of PARENT.
6.5 SUBSIDIARIES. ACQUISITION CORP. has no subsidiaries. PARENT has no
subsidiaries except for ACQUISITION CORP. and the other companies identified as
"ACQUISITION CORP." in the of the Other Agreements. Except as set forth in the
preceding sentence, neither PARENT nor ACQUISITION CORP. presently owns, of
record or beneficially, or controls, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity, and neither PARENT nor ACQUISITION
CORP., directly or indirectly, is a participant in any joint venture,
partnership or other non-corporate entity.
6.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.6 are copies of
the following financial statements (the "Parent Financial Statements") of
PARENT, which reflect the results of its operations from inception in February
1997: PARENT's audited Balance Sheet as of June 30, 1997 and Statements of
Income, Cash Flows and Retained Earnings for the period from inception through
June 30, 1997. Such Parent Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated (except as noted thereon or on Schedule
6.6). Except as set forth on Schedule 6.6, such Balance Sheet as of June 30,
1997 presents fairly the financial position of PARENT as of such date, and such
Statements of Income, Cash Flows and Retained Earnings present fairly the
results of operations and cash from for the period indicated.
6.7 LIABILITIES AND OBLIGATIONS. Except as set forth on Schedule 6.7,
PARENT and ACQUISITION CORP. have no material liabilities, contingent or
otherwise, except as set forth in
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or contemplated by this Agreement and the Other Agreements and except for fees
incurred in connection with the transactions contemplated hereby and thereby.
6.8 CONFORMITY WITH LAW; LITIGATION. Except to the extent set forth on
Schedule 6.8, neither PARENT nor ACQUISITION CORP. is in violation of any law or
regulation or any order of any court or Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over either of them which would have a Material Adverse
Effect; and except to the extent set forth in Schedule 6.8, there are no
material claims, actions, suits or proceedings, pending or, to the knowledge of
PARENT or ACQUISITION CORP., threatened, against or affecting PARENT or
ACQUISITION CORP., at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over either of them and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. PARENT and ACQUISITION CORP. have conducted and are conducting their
businesses in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and are not in violation of any of the foregoing which might have a
Material Adverse Effect.
6.9 NO VIOLATIONS. Neither PARENT nor ACQUISITION CORP. is in violation
of any Parent Charter Document. None of PARENT, ACQUISITION CORP., or, to the
knowledge of PARENT and ACQUISITION CORP., any other party thereto, is in
default under any lease, instrument, agreement, license, or permit to which
PARENT or ACQUISITION CORP. is a party, or by which PARENT or ACQUISITION CORP.,
or any of their properties, are bound (collectively, the "Parent Documents");
and (a) the rights and benefits of PARENT and ACQUISITION CORP. under the Parent
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any material violation or breach or constitute a default under, any of
the terms or provisions of the Parent Documents or the Parent Charter Documents.
Except as set forth on Schedule 6.9, none of the Parent Documents requires
notice to, or the consent or approval of, any governmental agency or other third
party with respect to any of the transactions contemplated hereby in order to
remain in full force and effect and consummation of the transactions
contemplated hereby will not give rise to any right to termination, cancellation
or acceleration or loss of any right or benefit.
6.10 VALIDITY OF OBLIGATIONS. The execution and delivery of this
Agreement by PARENT and ACQUISITION CORP. and the performance of the
transactions contemplated herein have been duly and validly authorized by the
Boards of Directors of PARENT and ACQUISITION CORP.
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and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of PARENT and
ACQUISITION CORP.
6.11 PARENT STOCK. At the time of issuance thereof, the Parent Stock to
be delivered to the STOCKHOLDERS pursuant to this Agreement will constitute
valid and legally issued shares of PARENT, fully paid and nonassessable, and
with the exception of restrictions upon resale set forth in Sections 15 and 16
hereof, will be identical in all substantive respects (which do not include the
form of certificate upon which it is printed or the presence or absence of a
CUSIP number on any such certificate) to the Parent Stock issued and outstanding
as of the date hereof. The shares of Parent Stock to be issued to the
STOCKHOLDERS pursuant to this Agreement will not be registered under the 1933
Act, except as provided in Section 17 hereof.
6.12 NO SIDE AGREEMENTS. Neither PARENT nor ACQUISITION CORP. has
entered or will enter into any agreement with any of the Founding Companies or
any of the stockholders of the Founding Companies other than the Other
Agreements and the agreements contemplated by the Other Agreements, including
the employment agreements referred to therein.
6.13 BUSINESS; REAL PROPERTY; MATERIAL AGREEMENTS. PARENT was organized
in February 1997 and has conducted limited operations since that time. Neither
PARENT nor ACQUISITION CORP. has conducted any material business since the date
of its inception, except in connection with this Agreement, the Other Agreements
and the IPO. Neither PARENT nor ACQUISITION CORP. owns or has at any time owned
any real property or any material personal property or is a party to any other
agreement, except as listed on Schedule 6.13 and except that PARENT is a party
to the Other Agreements and the agreements contemplated thereby and to such
agreements as will be filed as Exhibits to the Registration Statement.
Except (i) as described in Schedule 6.13 and (ii) for the information
included in the Annexes and Schedules this Agreement and the Other Agreements
are in substantially the same form; and copies of the Other Agreements are
available for review by COMPANY and the STOCKHOLDERS. In arriving at the
consideration to be paid to STOCKHOLDERS specified in Annex II, PARENT utilized
with the COMPANY substantially the same methodologies as PARENT utilized with
each of the Other Founding Companies.
6.14 TAXES. PARENT has timely filed all requisite federal, state and
other Tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 6.14, there
are no examinations in progress or claims against PARENT for federal, state and
other Taxes (including penalties and interest) for any period or periods prior
to and including the Balance Sheet Date and no notice of any claim for taxes,
whether pending or threatened, has been received. All Tax, including interest
and penalties (whether or not shown on
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any tax return) owed by PARENT, any member of an affiliated or consolidated
group which includes or included PARENT, or with respect to any payment made or
deemed made by PARENT herein has been paid. The amounts shown as accruals for
taxes on Parent Financial Statements are sufficient for the payment of all Taxes
of the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before that date. PARENT is not an investment company as defined in
Section 351(e)(1) of the Code.
PARENT will not make an election to treat the transaction as a
purchase of assets under Section 338 of the Code.
6.15 ABSENCE OF CHANGES. Since June 30, 1997, except as set forth in the
drafts of the Registration Statement delivered to the STOCKHOLDERS, and except
as contemplated by this Agreement and the Other Agreements, there has not been:
(i) any material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
PARENT;
(ii) any damage destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of
PARENT;
(iii) any change in the authorized capital of PARENT or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution
in respect of the capital stock or any direct or indirect redemption,
purchase or other acquisition of any of the capital stock of PARENT;
(v) any work interruptions, labor grievances or claims filed, or
any event or condition of any character, materially adversely affecting
the business of PARENT;
(vi) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of PARENT to any person;
(vii) any cancellation or agreement to cancel, any indebtedness
or other obligation owing PARENT;
(viii) any plan, agreement or arrangement granting any
preferential rights to purchase or acquire any interest in any of the
assets, property or rights of PARENT or
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requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(ix) any waiver of any material rights or claims of PARENT;
(x) any amendment or termination of any material contract
agreement, license, permit or other right to which PARENT is a party;
(xi) any transaction by PARENT outside the ordinary course of its
business; or
(xii) any other distribution of property or assets by PARENT
other than in the ordinary course of business.
6.16 DISCLOSURE. The most recent draft of the Registration Statement
delivered to the COMPANY and the STOCKHOLDERS, together with this Agreement and
the information furnished to the COMPANY and the STOCKHOLDERS in connection
herewith, does not contain an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing does not apply to statements contained in or omitted from any
of such documents made or omitted in reliance upon information furnished by the
COMPANY or the STOCKHOLDERS.
7. COVENANTS PRIOR TO CLOSING
7.1 ACCESS AND COOPERATION; DUE DILIGENCE. (a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of PARENT access to all of the COMPANY's
sites, properties, books and records and will furnish PARENT with such
additional financial and operating data and other information as to the business
and properties of the COMPANY as PARENT may from time to time reasonably
request. The COMPANY will cooperate with PARENT, its representatives, auditors
and counsel in the preparation of any documents or other material which may be
reasonably required in connection with any documents or materials required by
this Agreement. PARENT, ACQUISITION CORP., the STOCKHOLDERS and the COMPANY will
treat all information obtained in connection with the negotiation and
performance of this Agreement as confidential in accordance with the provisions
of Section 14 hereof. In addition, PARENT will cause each of the Other Founding
Companies to enter into a provision similar to this Section 7.1 requiring each
Other Founding Company, its stockholders, directors, officers, representatives,
employees and agents to keep confidential any information obtained by such Other
Founding Company.
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(b) Between the date of this Agreement and the Funding and Consummation
Date, PARENT will afford to the officers and authorized representatives of the
COMPANY access to all of PARENT's and ACQUISITION CORP.'s sites, properties,
books and records and will furnish the COMPANY with such additional financial
and operating data and other information as to the business and properties of
PARENT and ACQUISITION CORP. as the COMPANY may from time to time reasonably
request. PARENT and ACQUISITION CORP. will cooperate with the COMPANY, its
representatives, auditors and counsel in the preparation of any documents or
other material which may be required in connection with any documents or
materials required by this Agreement. The COMPANY will cause all information
obtained in connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section 14
hereof.
7.2 CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will, except as set
forth on Schedule 7.2:
(i) carry on its businesses in substantially the same manner as
it has heretofore and not introduce any material new method of
management, operation or accounting; and
(ii) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted; and
(iii) perform in all material respects all of its obligations
under agreements relating to or affecting its assets, properties or
rights; and
(iv) keep in full force and effect present insurance policies or
other comparable insurance coverage; and
(v) use its reasonable best efforts to maintain and preserve its
business organization intact, retain its present key employees and
maintain its relationships with suppliers, customers and others having
business relations with the COMPANY; and
(vi) maintain compliance with all material permits, laws, rules
and regulations, consent orders, and all other orders of applicable
courts, regulatory agencies and similar governmental authorities; and
(vii) maintain present debt and lease instruments and not enter
into new or amended debt or lease instruments, except as permitted in
Section 10.6, or as disclosed on Schedule 5.10, or without the prior
knowledge and written consent of PARENT; and
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maintain all debt and lease obligations at levels no greater than the
levels in effect on the Balance Sheet Date; and
(viii) maintain or reduce present salaries and commission levels
for all officers, directors, employees and agents except for ordinary
and customary bonus and salary increases for employees in accordance
with past practices.
7.3 PROHIBITED ACTIVITIES. Except as disclosed on Schedule 7.3, and
except as expressly permitted by Section 10.6, between the date hereof and the
Funding and Consummation Date, the COMPANY will not, without prior written
consent of PARENT:
(i) make any change in its Certificate or Articles of
Incorporation or By-laws; or
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind other than
in connection with the exercise of options or warrants listed in
Schedule 5.4; or
(iii) declare or pay any dividend, or make any distribution in
respect of its stock whether now or hereafter outstanding, or purchase,
redeem or otherwise acquire or retire for value any shares of its stock;
or
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, except if it is in
the normal course of business (consistent with past practice) or
involves an amount not in excess of $50,000; or
(v) create, assume or permit to exist any borrowing, debt,
mortgage, pledge or other lien or encumbrance upon any assets or
properties whether now owned or hereafter acquired, except (1) debt in
an aggregate amount not to exceed the amount of debt outstanding on the
Balance Sheet Date, (2) with respect to purchase money liens incurred in
connection with the acquisition of equipment with an aggregate cost not
in excess of $50,000 necessary or desirable for the conduct of the
businesses of the COMPANY, (3) (A) liens for taxes either not yet due or
being contested in good faith and by appropriate proceedings (and for
which contested taxes adequate reserves have been established and are
being maintained) or (B) materialmen's, mechanics', workers',
repairmen's, employees' or other like liens arising in the ordinary
course of business (the liens set forth in clause (3) being referred to
herein as "Statutory Liens"), or (4) liens set forth on Schedule 5.10
and/or 5.15 hereto; or
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(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business; or
(vii) negotiate for the acquisition of any business or the
start-up of any new business; or
(viii) merge or consolidate or agree to merge or consolidate with
or into any other corporation; or
(ix) waive any material rights or claims of the COMPANY, provided
that the COMPANY may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be
included in Schedule 5.11 unless specifically listed thereon; or
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY; or
(xi) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
7.4 NO SHOP. None of the STOCKHOLDERS, the COMPANY, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers
from any person for, or
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than PARENT or
its authorized agents relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, acquisition, consolidation, share
exchange or business combination of or with the COMPANY.
7.5 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under
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applicable collective bargaining agreements, and shall provide PARENT on
Schedule 7.5 with proof that any required notice has been sent.
7.6 AGREEMENTS. Prior to the Closing Date, the STOCKHOLDERS and the
COMPANY shall terminate (i) any stockholders agreements, voting agreements,
voting trusts, options, warrants, (ii) any employment agreements between the
COMPANY and any employee listed on Schedule 9.12 hereto, and (iii) any existing
agreement between the COMPANY and any STOCKHOLDER other than those expressly
disclosed on Schedule 7.6/9.7 as not being terminated.
7.7 NOTIFICATION OF CERTAIN MATTERS. The STOCKHOLDERS and the COMPANY
shall give prompt notice to PARENT of (i) the occurrence or non-occurrence of
any event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
Date or the Funding and Consummation Date and (ii) any material failure of any
STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. PARENT and
the ACQUISITION CORP. shall give prompt notice to the COMPANY of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty of PARENT or such
ACQUISITION CORP. contained herein to be untrue or inaccurate in any material
respect at or prior to the Closing Date or the Funding and Consummation Date and
(ii) any material failure of PARENT or such ACQUISITION CORP. to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder. The delivery of any notice pursuant to this Section 7.7 shall not
be deemed to (i) modify the representations or warranties hereunder of any
party, which modification may only be made pursuant to Section 7.8, (ii) modify
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to any party receiving such notice.
7.8 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation, until 24 hours prior to the
anticipated effectiveness of the Registration Statement, to supplement or amend
promptly the Schedules hereto with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, provided however,
that supplements and amendments to Schedules 5.10, 5.11, 5.14 and 5.15 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the COMPANY that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless PARENT
and a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided
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further, that no amendment or supplement to a Schedule prepared by PARENT or
ACQUISITION CORP. that constitutes or reflects an event or occurrence that would
have a Material Adverse Effect may be made unless a majority of the Founding
Companies consent to such amendment or supplement. For all purposes of this
Agreement, including without limitation for purposes of determining whether the
conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the Schedules
hereto shall be deemed to be the Schedules as amended or supplemented pursuant
to this Section 7.8. In the event that one of the Other Founding Companies seeks
to amend or supplement a Schedule pursuant to Section 7.8 of one of the Other
Agreements, and such amendment or supplement constitutes or reflects an event or
occurrence that would have a Material Adverse Effect on such Other Founding
Company, PARENT shall give the COMPANY notice promptly after it has knowledge
thereof. If PARENT and a majority of the Founding Companies consent to such
amendment or supplement, which consent shall have been deemed given by PARENT or
any Founding Company if no response is received within 24 hours following
receipt of notice of such amendment or supplement (or sooner if required by the
circumstances under which such consent is requested), but the COMPANY does not
give its consent, the COMPANY may terminate this Agreement pursuant to Section
12.1(iv). In the event that COMPANY seeks to amend or supplement a Schedule
pursuant to this Section 7.8, and PARENT and a majority of the Other Founding
Companies do not consent to such amendment or supplement, this Agreement shall
be deemed terminated by mutual consent as set forth in Section 12.1(i). In the
event that PARENT or any ACQUISITION CORP. seeks to amend or supplement a
Schedule pursuant to this Section 7.8 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i). No party to this
Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8. No amendment of or
supplement to a Schedule shall be made later than 24 hours prior to the
anticipated effectiveness of the Registration Statement.
7.9 COOPERATION IN PREPARATION OF REGISTRATION STATEMENT. The COMPANY
and STOCKHOLDERS shall furnish or cause to be furnished to PARENT and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with PARENT and the Underwriters
in the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree
promptly to advise PARENT if at any time during the period in which a prospectus
relating to the offering is required to be delivered under the 1933 Act, any
information contained in the prospectus concerning the COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. Insofar as the
information relates solely to the COMPANY or the STOCKHOLDERS, the COMPANY
represents and warrants as to such information with respect to itself, and each
Stockholder represents and warrants, as to such
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information with respect to the COMPANY and himself or herself, that the
Registration Statement will not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. PARENT will keep the COMPANY and the Other Founding
Companies advised as to the status of the Registration Statement, including
receipt of SEC comments, PARENT'S response thereto, and the anticipated date and
time of its effectiveness.
7.10 FINAL FINANCIAL STATEMENTS. The COMPANY shall provide prior to the
Funding and Consummation Date, and PARENT shall have had sufficient time to
review, the unaudited consolidated balance sheets of the COMPANY as of the end
of all fiscal quarters following the Balance Sheet Date, and the unaudited
consolidated statement of income, cash flows and retained earnings of the
COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing
no material adverse change in the financial condition of the COMPANY or the
results of its operations or cash flows from the financial statements as of the
Balance Sheet Date. Such financial statements must be prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted therein). Except as noted in
such financial statements, all of such financial statements will present fairly
the results of operations or cash flows of the COMPANY for the periods indicated
therein.
7.11 FURTHER ASSURANCES. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.12 AUTHORIZED CAPITAL. PARENT shall maintain its authorized capital
stock as set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the Parent Stock.
7.13 COMPLIANCE WITH HART-SCOTT. All parties to this Agreement hereby
recognize that one or more filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "Hart-Scott Act") may be required in
connection with the transactions contemplated herein. If it is determined by the
parties to this Agreement that filings under the Hart-Scott Act are required,
then: (i) each of the parties hereto agrees to cooperate and use its best
efforts to comply with the Hart-Scott Act, (ii) such compliance by the
STOCKHOLDERS and the COMPANY shall be deemed a condition precedent in addition
to the conditions precedent set forth in Section 9 of this Agreement, and such
compliance by PARENT and ACQUISITION CORP. shall be deemed a condition precedent
in addition to the conditions precedent set forth in Section 8 of this
Agreement, and (iii) the parties agree to cooperate and use their best efforts
to cause all filings required under the Hart-Scott Act to be made.
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8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions
to be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the STOCKHOLDERS and the COMPANY with respect to the actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 8.1, 8.8, 8.9 and 8.12. As of the Closing Date or, with respect to the
conditions set forth in Sections 8.1, 8.8, 8.9 and 8.12, as of the Funding and
Consummation Date, all conditions not satisfied or objected to shall be deemed
to have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of PARENT and ACQUISITION CORP.
contained in Section 6 hereof:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All
representations and warranties of PARENT and ACQUISITION CORP. contained in
Section 6 shall be true and correct in all material respects as of the Closing
Date and the Funding and Consummation Date as though such representations and
warranties had been made on and as of such dates; all of the terms, covenants
and conditions of this Agreement to be complied with and performed by PARENT and
ACQUISITION CORP. on or before the Closing Date and the Funding and Consummation
Date shall have been duly complied with and performed in all material respects;
and certificates to the foregoing effect dated the Closing Date and the Funding
and Consummation Date, respectively, and signed by the President or any Vice
President of PARENT shall have been delivered to the COMPANY and the
STOCKHOLDERS.
8.2 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out this Agreement or incidental hereto and all other related
legal matters shall be satisfactory to the COMPANY and its counsel. The
STOCKHOLDERS and the COMPANY shall not have determined that the Registration
Statement and the prospectus forming a part thereof, including any amendments
thereof or supplements thereto, contain any untrue statement of a material fact,
or omit to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that the
condition contained in this sentence shall be deemed satisfied if the COMPANY or
STOCKHOLDERS shall have failed to inform PARENT in writing prior to the
effectiveness of the Registration Statement of the existence of an untrue
statement of a material fact or the omission of such a statement of a material
fact.
8.3 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of the
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COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.4 OPINION OF COUNSEL. The COMPANY shall have received an opinion from
counsel for PARENT, dated the Funding and Consummation Date, in the form annexed
hereto as Annex V.
8.5 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC and the Underwriters shall have agreed to acquire
on a firm commitment basis, subject to the conditions set forth in the
underwriting agreement, on terms such that the aggregate value of the cash and
the number of shares of Parent Stock to be received by the STOCKHOLDERS is not
less than the Minimum Value set forth on Annex II.
8.6 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
the Merger and no governmental agency or body shall have taken any other action
or made any request of COMPANY as a result of which COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.7 GOOD STANDING CERTIFICATES. PARENT and ACQUISITION CORP. shall have
delivered to the COMPANY a certificate, dated as of a date no later than ten
days prior to the Closing Date, duly issued by the Secretary of State Delaware
and Texas and in each state in which PARENT or ACQUISITION CORP. is authorized
to do business, showing that each of PARENT and ACQUISITION CORP. is in good
standing and authorized to do business.
8.8 NO MATERIAL ADVERSE EFFECT No event or circumstance shall have
occurred with respect to PARENT or ACQUISITION CORP. which would constitute a
Material Adverse Effect.
8.9 CLOSING OF IPO. The closing of the sale of the Parent Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
8.10 SECRETARY'S CERTIFICATE. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of PARENT and of ACQUISITION CORP., certifying the truth and correctness of
attached copies of the PARENT's and ACQUISITION CORP.'s Certificate or Articles
of Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the Boards of Directors and, if required, the
stockholders of PARENT and ACQUISITION CORP. approving PARENT's and ACQUISITION
CORP.'s entering into this Agreement and the consummation of the transactions
contemplated hereby.
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8.11 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.12
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 TAX MATTERS. The STOCKHOLDERS shall have been advised a tax advisor
reasonably acceptable to the STOCKHOLDERS that the Merger should qualify as a
tax-free transfer of property under Section 351 of the Code; provided that this
shall not constitute a condition precedent under this Section 8 or otherwise
unless the STOCKHOLDERS have complied with every reasonable request designed or
intended to enable the Merger to so qualify.
8.13 PARALLEL TRANSFER RESTRICTIONS. WJG Capital, L.L.C. ("WJG") and the
PARENT's other stockholders and option and warrant holders shall have agreed in
writing to restrict the transfers of their shares of Parent Stock on
substantially the same terms as specified in Section 15.1; provided, that
nothing shall restrict WJG from distributing shares of Parent Stock to the
members of WJG so long as such members are subject to the referenced
restrictions on transfer.
8.14 OTHER MERGERS. PARENT's acquisitions of the Other Founding
Companies shall occur on the Funding and Consummation Date pursuant to the Other
Agreements.
8.15 LISTING. PARENT shall have caused the Parent Stock to be listed on
the New York Stock Exchange or traded or quoted on the NASDAQ National Market
System, subject to official notice of issuance.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND ACQUISITION CORP.
The obligations of PARENT and ACQUISITION CORP. with respect to actions
to be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
PARENT and ACQUISITION CORP. with respect to actions to be taken on the Funding
and Consummation Date are subject to the satisfaction or waiver on or prior to
the Funding and Consummation Date of the conditions set forth in Sections 9.1,
9.4 and 9.13. As of the Closing Date or, with respect to the conditions set
forth in Sections 9.1, 9.4 and 9.13, as of the Funding and Consummation Date,
all conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to affect the survival of the representations and
warranties of the COMPANY and STOCKHOLDERS contained in Section 5 hereof.
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. All the
representations and warranties of the STOCKHOLDERS and the COMPANY contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date and the Funding
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and Consummation Date with the same effect as though such representations and
warranties had been made on and as of such dates; all of the terms, covenants
and conditions of this Agreement to be complied with or performed by the
STOCKHOLDERS and the COMPANY on or before the Closing Date or the Funding and
Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS shall have
delivered to PARENT certificates dated the Closing Date and the Funding and
Consummation Date, respectively, and signed by them to such effect.
9.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or the IPO and no governmental agency or body shall have
taken any other action or made any request of PARENT as a result of which the
management of PARENT deems it inadvisable to proceed with the transactions
hereunder.
9.3 SECRETARY'S CERTIFICATE. PARENT shall have received a certificate,
dated the Closing Date and signed by the secretary of the COMPANY, certifying
the truth and correctness of attached copies of such COMPANY's Certificate or
Articles of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the Board of Directors and the
STOCKHOLDERS approving the COMPANY's entering into this Agreement and the
consummation of the transactions contemplated hereby.
9.4 NO MATERIAL ADVERSE EFFECT. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of such COMPANY
to conduct its business.
9.5 STOCKHOLDERS' RELEASE. The STOCKHOLDERS shall have delivered to
PARENT and the COMPANY an instrument dated the Closing Date releasing the
COMPANY (including all subsidiaries) from (i) any and all claims of the
STOCKHOLDERS against the COMPANY and PARENT and (ii) any and all obligations of
the COMPANY and PARENT to the STOCKHOLDERS, except for (x) items specifically
identified on Schedules 5.10, 5.15 or 7.6/9.7 as being claims of or obligations
to the STOCKHOLDERS which are to survive after Closing, (y) any obligations
arising after the Funding and Consummation Date to a STOCKHOLDER relating to his
or her employment by the COMPANY and (z) obligations arising under this
Agreement or the transactions contemplated hereby.
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9.6 SATISFACTION. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this Agreement or
incidental hereto and all other related legal matters shall have been approved
by counsel to PARENT.
9.7 TERMINATION OF RELATED PARTY AGREEMENTS. Except as otherwise
specifically set forth on Schedule 7.6/9.7, all existing agreements between
COMPANY (including all subsidiaries) and the STOCKHOLDERS and their affiliates
shall have been canceled effective prior to or as of the Funding and
Consummation Date.
9.8 OPINION OF COUNSEL. PARENT shall have received an opinion from
Counsel to the COMPANY and the STOCKHOLDERS, dated the Closing Date,
substantially in the form annexed as Annex VI, and the Underwriters shall have
received a copy of the same opinion addressed to them.
9.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made; all consents
and approvals of third parties listed on Schedule 5.23 shall have been obtained;
and no action or proceeding shall have been instituted or threatened to restrain
or prohibit the Merger and no governmental agency or body shall have taken any
other action or made any request of PARENT as a result of which PARENT deems it
inadvisable to proceed with the transactions hereunder.
9.10 GOOD STANDING CERTIFICATES. The COMPANY shall have delivered to
PARENT a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's (and each subsidiary) state of incorporation and, unless waived by
PARENT, in the state in which the COMPANY (and each subsidiary) is authorized to
do business, showing the COMPANY is in good standing and authorized to do
business and that all state franchise and/or income Tax returns and Taxes for
the COMPANY (and each subsidiary) for all periods prior to the Closing have been
filed and paid.
9.11 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective by the SEC.
9.12 EMPLOYMENT AGREEMENTS. The COMPANY and each of the persons listed
on Schedule 9.12 shall have entered into an employment agreement substantially
in the form of Annex VII hereto.
9.13 CLOSING OF IPO. The closing of the sale of the Parent Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
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9.14 FIRPTA CERTIFICATE. Each of the STOCKHOLDERS shall have delivered
to PARENT a certificate to the effect that he or she is not a foreign person
pursuant to Section 1.1445- 2(b) of the Treasury regulations.
10. COVENANTS OF PARENT AND THE STOCKHOLDERS AFTER CLOSING
10.1 REPAYMENT OF CERTAIN OBLIGATIONS. On the Funding and Consummation
Date, PARENT shall pay off or cause to be paid off all of the COMPANY's funded
indebtedness which either (i) has been disclosed pursuant to Schedule 5.10 of
this Agreement and is issued and outstanding consistent with this Agreement or
(ii) is incurred in accordance with Section 10.6. After the Funding and
Consummation Date, PARENT shall provide the COMPANY with the working capital
required for operations.
10.2 PRESERVATION OF TAX TREATMENT. Except as contemplated by this
Agreement or the Registration Statement, after the Funding and Consummation
Date, PARENT shall not and shall not permit any of its subsidiaries to undertake
any act that would jeopardize the tax status of the Consolidation Plan as
qualifying under Section 351 of the Code.
10.3 PREPARATION AND FILING OF TAX RETURNS.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end
on or before the Funding and Consummation Date. Notwithstanding the
foregoing, the STOCKHOLDERS shall file or cause to be filed all separate
federal income Tax Returns of any Acquired Party for all taxable periods
that end on or before the Funding and Consummation Date. The
STOCKHOLDERS shall pay or cause to be paid all Tax liabilities (in
excess of all amounts already paid with respect thereto or properly
accrued or reserved with respect thereto on the Company Financial
Statements) shown by such Returns to be due.
(ii) PARENT shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries
and affiliates to, provide to the of the other parties hereto such
cooperation and information as any of them reasonably may request in
filing any Return, amended Return or claim for refund, determining a
liability for Taxes or a right to refund of Taxes or in conducting any
audit or other proceeding in respect of Taxes. Such cooperation and
information shall include providing copies of all relevant portions of
relevant Returns, together with relevant accompanying schedules and
relevant work papers, relevant documents relating to rulings
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or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which such party may
possess. Each party shall make its employees reasonably available on a
mutually convenient basis at its cost to provide explanation of any
documents or information so provided. Subject to the preceding sentence,
the party required to file Returns pursuant to this Agreement shall bear
all costs of filing such Returns.
(iv) Each of the COMPANY, ACQUISITION CORP., PARENT and the
STOCKHOLDERS shall comply with the Tax reporting requirements of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a tax-free contribution under Section 351 of the Code.
10.4 DIRECTORS. The persons named in the Registration Statement shall be
appointed as directors and elected as officers of PARENT, as and to the extent
set forth in the Registration Statement, promptly following the Funding and
Consummation Date.
10.5 PRESERVATION OF EMPLOYEE BENEFIT PLANS. Following the Funding and
Consummation Date, PARENT shall not terminate any health insurance, life
insurance or 401(k) plan in effect at the COMPANY until such time as PARENT is
able to replace such plan with a plan that is applicable to PARENT and all of
its then existing subsidiaries, provided that PARENT shall have no obligation to
provide replacement plans that have the same terms and provisions as the
existing plans, provided, further, that any new health insurance plan shall
provide for coverage for preexisting conditions. On the Funding and Consummation
Date, the employees of the COMPANY will be the employees of the Surviving
Corporation (provided that this provision is for purposes of clarifying that the
Merger, in and of itself, will not have any impact on the employment status of
any employee and provided, further, that this provision shall not in any way
limit the management rights of the Surviving Corporation or PARENT to assess
workforce needs and make appropriate adjustments as necessary or desirable
within their discretion subject to applicable laws and collective bargaining
agreements).
10.6 DIVIDENDS. The COMPANY may pay to the STOCKHOLDERS as dividends the
amount of the COMPANY's net income after accruals for federal and state income
taxes for the period after the Balance Sheet Date to the Funding and
Consummation Date. The COMPANY may borrow funds to the extent necessary to make
the payments contemplated by this Section 10.6 and to the extent necessary to
ensure that the COMPANY has cash on hand to adequately fund operations on the
Funding and Consummation Date.
11. INDEMNIFICATION
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The STOCKHOLDERS, PARENT and ACQUISITION CORP. each make the following
covenants that are applicable to them, respectively:
11.1 INDEMNIFICATION BY THE STOCKHOLDERS. The STOCKHOLDERS covenant and
agree that they, jointly and severally, will indemnify, defend, protect and hold
harmless PARENT, ACQUISITION CORP., the COMPANY and the Surviving Corporation at
all times, from and after the date of this Agreement until the applicable
Expiration Date, from and against all claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by PARENT, ACQUISITION CORP., the COMPANY or the
Surviving Corporation as a result of or arising from (i) any breach of the
representations and warranties of the STOCKHOLDERS or the COMPANY set forth
herein or on the Schedules or certificates delivered in connection herewith,
(ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY
under this Agreement, or (iii) any liability under the 1933 Act, the 1934 Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the COMPANY or the STOCKHOLDERS, and provided to
PARENT or its counsel by the COMPANY or the STOCKHOLDERS (but in the case of the
STOCKHOLDERS, only if such statement was provided in writing) contained in the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that such indemnity
shall not inure to the benefit of PARENT, ACQUISITION CORP., the COMPANY or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and the STOCKHOLDERS provided, in writing, corrected
information to PARENT's counsel and to PARENT for inclusion in the final
prospectus, and such information was not so included or properly delivered.
11.2 INDEMNIFICATION BY PARENT. PARENT covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by PARENT or
ACQUISITION CORP. of their representations and warranties set forth herein or on
the Schedules or certificates attached hereto, (ii) any breach of any agreement
on the part of PARENT or ACQUISITION CORP. under this Agreement, or (iii) any
liabilities which the STOCKHOLDERS may incur due to PARENT's or ACQUISITION
CORP.'s failure to be responsible for the liabilities and obligations
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of the COMPANY as provided in Section 1 hereof (except to the extent that PARENT
or ACQUISITION CORP. has claims against the STOCKHOLDERS by reason of such
liabilities); (iv) any liability under the 1933 Act, the 1934 Act or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to PARENT, ACQUISITION CORP. or any of the Other Founding
Companies contained in any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to PARENT or ACQUISITION CORP. or any of
the Other Founding Companies required to be stated therein or necessary to make
the statements therein not misleading.
11.3 THIRD PERSON CLAIMS. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently,
provided that the Indemnifying Party shall not settle any criminal proceeding
without the written consent of the Indemnified Party. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by Indemnifying Party, provided that if counsel to
the Indemnifying Party shall have a conflict of interest that prevents counsel
for the Indemnifying Party from representing an Indemnified Party, then the
Indemnified Party shall have the right to participate in such matter through
counsel of its own choosing and Indemnifying Party will reimburse the
Indemnified Party for the reasonable expenses of its counsel. An Indemnified
Party shall also have the right, at its sole expense, to have counsel of its
choice participate in (but never to control) the defense of any such claim.
After the Indemnifying Party has notified the Indemnified Party of its intention
to undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except (i) as set forth in the preceding sentence and (ii) to the
extent such participation is requested by the
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Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. Upon agreement as to
such settlement between said Third Person and the Indemnifying Party, the
Indemnifying Party shall, in exchange for a complete release from the
Indemnified Party, promptly pay to the Indemnified Party the amount agreed to in
such settlement and the Indemnified Party shall, from that moment on, bear full
responsibility for any additional costs of defense which it subsequently incurs
with respect to such claim and all additional costs of settlement or judgment.
If the Indemnifying Party does not undertake to defend such matter to which the
Indemnified Party is entitled to indemnification hereunder, or fails diligently
to pursue such defense, the Indemnified Party may undertake such defense through
counsel of its choice, at the cost and expense of the Indemnifying Party, and
the Indemnified Party may settle such matter, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
11.4 EXCLUSIVE REMEDY. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided that, nothing herein shall be
construed to limit the right of a party, in a proper case, to seek injunctive
relief for a breach of this Agreement.
11.5 LIMITATIONS ON INDEMNIFICATION. None of PARENT, ACQUISITION CORP.,
the Surviving Corporation nor any other persons or entities indemnified pursuant
to Section 11.1 or 11.2 shall assert any claim for indemnification hereunder
against the STOCKHOLDERS until such time as, and solely to the extent that, the
aggregate of all claims which all such persons may have against all such
STOCKHOLDERS shall exceed 1.0% of (i) the sum of the cash paid to STOCKHOLDERS
plus (ii) the value of the Parent Stock delivered to STOCKHOLDERS (calculated as
provided below) (the "Indemnification Threshold"). STOCKHOLDERS shall not assert
any claim for indemnification hereunder against PARENT or ACQUISITION CORP.
until such time as, and solely to the extent that, the aggregate of all claims
which all STOCKHOLDERS may have against PARENT or ACQUISITION CORP. shall exceed
the amount of the Indemnification Threshold.
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No person shall be entitled to indemnification under this Section 11 if
and to the extent that such person's claim for indemnification is directly or
indirectly related to a breach by such person of any representation, warranty,
covenant or other agreement set forth in this Agreement.
Notwithstanding any other term of this Agreement, no STOCKHOLDER shall
be liable under this Section 11 for an amount which exceeds the amount of
proceeds received by such STOCKHOLDER in connection with the Merger. For
purposes of calculating the value of the Parent Stock received by STOCKHOLDERS,
Parent Stock shall be valued at its initial public offering price as set forth
in the Registration Statement. It is hereby understood and agreed that a
STOCKHOLDER may satisfy an indemnification obligation through payment of a
combination of stock and cash in proportion equal to the proportion of stock and
cash received by such STOCKHOLDER in connection with the Merger, valued as
described immediately above.
12. TERMINATION OF AGREEMENT
12.1 TERMINATION. This Agreement may be terminated at any time prior to
the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of PARENT and the
COMPANY; or
(ii) by the Company (acting through its board of directors, if, by
September 30, 1997, the PARENT shall not have filed the Registration Statement
with the SEC reflecting an estimated minimum price for Parent Stock of at least
$10.50 per share; or
(iii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by PARENT (acting through its board of
directors), on the other hand, if the transactions contemplated by this
Agreement to take place at the Closing shall not have been consummated by
December 31, 1997, unless the failure of such transactions to be consummated is
due to the willful failure of the party seeking to terminate this Agreement to
perform any of its obligations under this Agreement to the extent required to be
performed by it prior to or on the Funding and Consummation Date; or
(iv) by the STOCKHOLDERS or COMPANY (acting through its board of
directors), on the one hand, or by PARENT (acting through its board of
directors), on the other hand, if a material breach or default shall be made by
the other party in the observance or in the due and timely performance of any of
the covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Funding and Consummation Date;
or
(v) pursuant to Section 7.8 hereof; or
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(vi) pursuant to Section 4 hereof.
12.2 LIABILITIES IN EVENT OF TERMINATION. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement, including, but not limited
to, legal and audit costs and expenses.
13. NONCOMPETITION
13.1 PROHIBITED ACTIVITIES. The STOCKHOLDERS will not, for a period of
five (5) years following the Funding and Consummation Date, for any reason
whatsoever, directly or indirectly, for themselves or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
temporary staffing, "PEO" or staff leasing, permanent placement or human
resource consulting or outsourcing business in competition with PARENT or any of
the subsidiaries thereof, within 100 miles of where the COMPANY or any of its
subsidiaries conducted business prior to the effectiveness of the Merger (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of PARENT (including the subsidiaries thereof) in a sales
representative or managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of PARENT (including the
subsidiaries thereof), provided that the STOCKHOLDER shall be permitted to call
upon and hire any member of his immediate family;
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to the Funding and Consummation Date, a
client or customer of PARENT (including the subsidiaries thereof), or the
COMPANY or of any of the Other Founding Companies within the Territory for the
purpose of soliciting or selling products or services in competition with PARENT
within the Territory;
(iv) call upon any prospective acquisition candidate, on any
STOCKHOLDER's behalf or on behalf of any competitor in the temporary staffing,
"PEO" or staff leasing, permanent placement or human resource consulting or
outsourcing business, which candidate, to the actual knowledge of such
STOCKHOLDER, was called upon by PARENT (including the subsidiaries
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thereof) or for which, to the knowledge of such STOCKHOLDER, PARENT (or any
subsidiary thereof) made an acquisition analysis, for the purpose of acquiring
such entity; or
(v) disclose clients or customers, whether in existence or proposed, of
the COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever except to the extent that the COMPANY has in the
past disclosed such information to the public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit any STOCKHOLDER from acquiring as an investment not more than one
percent (1%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or in the over-the-counter market.
13.2 DAMAGES. Because of the difficulty of measuring economic losses to
PARENT (including its subsidiaries) as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that could be
caused to PARENT (including its subsidiaries) for which it would have no other
adequate remedy, each STOCKHOLDER agrees that the foregoing covenant may be
enforced by PARENT (including its subsidiaries) in the event of breach by such
STOCKHOLDER, by injunctions and restraining orders.
13.3 REASONABLE RESTRAINT. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of PARENT (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of PARENT.
13.4 SEVERABILITY; REFORMATION. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
13.5 INDEPENDENT COVENANT. All of the covenants in this Section 13 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of any STOCKHOLDER
against PARENT (including the subsidiaries thereof), whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by
PARENT (or any subsidiary) of such covenants. It is specifically agreed that the
period of five (5) years stated at the beginning of this Section 13, during
which the agreements and covenants of the STOCKHOLDERS made in this Section 13
shall be effective, shall be computed
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by excluding from such computation any time during which any such STOCKHOLDER is
in violation of any provision of this Section 13. The covenants contained in
Section 13 shall not be affected by any breach of any other provision hereof by
any party hereto and shall have no effect if the transactions contemplated by
this Agreement are not consummated.
13.6 MATERIALITY. The COMPANY and the STOCKHOLDERS hereby agree that
this covenant is a material and substantial part of this transaction.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. Each STOCKHOLDER recognizes and acknowledges that he
had in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or PARENT, such as operational policies, pricing and cost policies, and
insurance costs that are valuable, special and unique assets of the COMPANY's,
the Other Founding Companies' and/or PARENT's businesses. Each STOCKHOLDER
agrees that he will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of PARENT, (b) following
the Closing, such information may be disclosed by a STOCKHOLDER as is required
in the course of performing his duties for PARENT or the Surviving Corporation
and (c) to counsel and other advisers, provided that such advisers (other than
counsel) agree to the confidentiality provisions of this Section 14.1, unless
(i) such information becomes known to the public generally through no fault of a
STOCKHOLDER, (ii) disclosure is required by law or the order of any governmental
authority under color of law, provided, that prior to disclosing any information
pursuant to this clause (ii), a STOCKHOLDER shall give prior written notice
thereof to PARENT and provide PARENT with the opportunity to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by the any
STOCKHOLDER of the provisions of this Section, PARENT shall be entitled to an
injunction restraining such STOCKHOLDER from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
PARENT from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
14.2 PARENT AND ACQUISITION CORP. PARENT and ACQUISITION CORP.
recognize and acknowledge that they had in the past and currently have access to
certain confidential information of the COMPANY, such as operational policies,
pricing and cost policies, and insurance costs that are valuable, special and
unique assets of the COMPANY's business. PARENT and ACQUISITION CORP. agree
that, prior to the Closing, or if the Transactions contemplated by this
Agreement are not consummated, they will not disclose such confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except (a) to
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authorized representatives of the COMPANY, (b) to counsel and other advisers,
provided that such advisers (other than counsel) agree to the confidentiality
provisions of this Section 14.2, (c) to the Other Founding Companies and their
representatives pursuant to Section 7.1(a), unless (i) such information becomes
known to the public generally through no fault of PARENT or ACQUISITION CORP.,
(ii) disclosure is required by law or the order of any governmental authority
under color of law, provided, that prior to disclosing any information pursuant
to this clause (ii), PARENT and ACQUISITION CORP. shall, if possible, give prior
written notice thereof to the COMPANY and the STOCKHOLDERS and provide the
COMPANY and the STOCKHOLDERS with the opportunity to contest such disclosure, or
(iii) the disclosing party reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party, and
(d) to the public to the extent necessary or advisable in connection with the
filing of the Registration Statement and the IPO and the securities laws
applicable thereto and to the operation of PARENT as a publicly held entity
after the IPO. In the event of a breach or threatened breach by PARENT or
ACQUISITION CORP. of the provisions of this Section, the COMPANY and the
STOCKHOLDERS shall be entitled to an injunction restraining PARENT and
ACQUISITION CORP. from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting the COMPANY and
the STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
14.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may be
enforced against the other parties by injunctions and restraining orders.
14.4 SURVIVAL. The obligations of the parties under this Article 14
shall survive the Closing or the termination of this Agreement, for a period of
five (5) years from the Closing Date or the date of termination, as the case may
be.
15. TRANSFER RESTRICTIONS
15.1 TRANSFER RESTRICTIONS. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or immediate family members, the
trustees of which so agree), for a period of one year from the Closing Date,
except pursuant to Section 17 hereof, the STOCKHOLDERS shall not sell, assign,
exchange, transfer, encumber, pledge, distribute, appoint, or otherwise dispose
of any shares of Parent Stock received by the STOCKHOLDERS in the Merger. The
certificates evidencing the Parent Stock delivered to the STOCKHOLDERS pursuant
to Section 3 of this
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Agreement will bear a legend substantially in the form set forth below and
containing such other information as PARENT may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION,
APPOINTMENT OR OTHER DISPOSITION PRIOR TO [FIRST ANNIVERSARY OF CLOSING DATE].
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) AFTER THE DATE SPECIFIED ABOVE.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
16.1 COMPLIANCE WITH LAW. The STOCKHOLDERS acknowledge that the shares
of Parent Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement
have not been and will not be registered under the 1933 Act and therefore may
not be resold without compliance with the 1933 Act. The Parent Stock to be
acquired by the STOCKHOLDERS pursuant to this Agreement is being acquired solely
for their own accounts, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Each STOCKHOLDER covenants, warrants and represents that
none of the shares of Parent Stock issued to such STOCKHOLDER will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the 1933
Act and the rules and regulations of the SEC. All the Parent Stock shall bear
the following legend in addition to the legend required under Section 15 of this
Agreement:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE 1933 ACT AND APPLICABLE
SECURITIES LAW.
16.2 ECONOMIC RISK; SOPHISTICATION. Each STOCKHOLDER is able to bear the
economic risk of an investment in the Parent Stock to be acquired pursuant to
this Agreement and can afford to sustain a total loss of such investment and has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the proposed investment in the
Parent Stock. Each STOCKHOLDER has had an adequate opportunity to ask questions
and receive answers from the officers of PARENT concerning any and all matters
relating
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to the transactions described herein including, without limitation, the
background and experience of the current and proposed officers and directors of
PARENT, the plans for the operations of the business of PARENT, the business,
operations and financial conditions of the Founding Companies other than the
COMPANY, and any plans for additional acquisitions and the like. Each
STOCKHOLDER has asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to his satisfaction.
17. REGISTRATION RIGHTS
17.1 PIGGYBACK REGISTRATION RIGHTS. At any time following the Closing,
whenever PARENT proposes to register any Parent Stock for its own or others
account under the 1933 Act for a public offering, other than (i) any shelf
registration of shares to be used as consideration for acquisitions of
additional businesses by PARENT and (ii) registrations relating to employee
benefit plans, PARENT shall give the STOCKHOLDERS prompt written notice of its
intent to do so. Upon the written request of any STOCKHOLDER given within 30
days after receipt of such notice, PARENT shall cause to be included in such
registration all of the Parent Stock issued to such STOCKHOLDER pursuant to this
Agreement (including any stock issued as (or issuable upon the conversion or
exchange of any convertible security, warrant, right or other security which is
issued by PARENT as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of such Parent Stock) which the STOCKHOLDER
requests, provided that PARENT shall have the right to reduce the number of
shares included in such registration to the extent that inclusion of such shares
could, in the opinion of tax counsel to PARENT or its independent auditors,
jeopardize the status of the transactions contemplated hereby and by the
Registration Statement as qualifying under Section 351 of the Code. In addition,
if PARENT is advised in writing in good faith by any managing underwriter of an
underwritten offering of the securities being offered pursuant to any
registration statement under this Section 17.1 that the number of shares to be
sold by persons other than PARENT is greater than the number of such shares
which can be offered without adversely affecting the offering, PARENT may reduce
pro rata the number of shares offered for the accounts of such persons (based
upon the number of shares held by such person) to a number deemed satisfactory
by such managing underwriter, provided, that, for the such offering made by
PARENT after the IPO, such reduction shall be made first by reducing the number
of shares to be sold by persons other than PARENT, the STOCKHOLDERS and the
stockholders of the Other Founding Companies (collectively, the STOCKHOLDERS and
the stockholders of the Other Founding Companies being referred to herein as the
"Founding Stockholders"), and thereafter, if a further reduction is required, by
reducing the number of shares to be sold by the Founding Stockholders.
17.2 REGISTRATION PROCEDURES. All expenses incurred in connection with
the registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting
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fees, but excluding underwriting commissions and discounts which shall be
payable by the respective selling parties), shall be borne by PARENT. In
connection with registrations under Section 17.1, PARENT shall (i) use its best
efforts to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the Parent Stock and use its best efforts
to cause such registration to promptly become and remain effective for a period
of at least 90 days (or such shorter period during which holders shall have sold
all Parent Stock which they requested to be registered); (ii) use its best
efforts to register and qualify the Parent Stock covered by such registration
statement under applicable state securities laws as the holders shall reasonably
request for the distribution for the Parent Stock; and (iii) take such other
actions as are reasonable and necessary to comply with the requirements of the
1933 Act and the regulations thereunder.
17.3 UNDERWRITING AGREEMENT. In connection with the registration
pursuant to Section 17.1 covering an underwritten registered offering, PARENT
and each participating holder agree to enter into a written agreement with the
managing underwriters in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
managing underwriters and companies of PARENT's size and investment stature,
including indemnification.
17.4 AVAILABILITY OF RULE 144. PARENT shall not be obligated to register
shares of Parent Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
18. GENERAL
18.1 COOPERATION. The COMPANY, STOCKHOLDERS, PARENT and ACQUISITION
CORP. shall the deliver or cause to be delivered to the other on the Funding and
Consummation Date, and at such other times and places as shall be reasonably
agreed to, such additional instruments as the other may reasonably request for
the purpose of carrying out this Agreement. The COMPANY will cooperate and use
its reasonable efforts to have the present officers, directors and employees of
the COMPANY cooperate with PARENT on and after the Funding and Consummation Date
in furnishing information, evidence, testimony and other assistance in
connection with any Tax return filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Funding and Consummation Date.
18.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of PARENT, ACQUISITION CORP. and the COMPANY, and
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the heirs and legal representatives of the STOCKHOLDERS. Any attempt to assign
this Agreement in a manner inconsistent with this Agreement shall be void and of
no force or effect.
18.3 ENTIRE AGREEMENT. This Agreement (including the Schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the STOCKHOLDERS, the
COMPANY, ACQUISITION CORP. and PARENT and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. Any disclosure
made on any Schedule delivered pursuant hereto shall be deemed to have been
disclosed for purposes of any other Schedule required hereby, provided that the
COMPANY shall make a good faith effort to cross reference disclosure, as
necessary or advisable, between related Schedules.
18.4 COUNTERPARTS. This Agreement may be executed simultaneously in
multiple counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
18.5 BROKERS AND AGENTS. Except as disclosed on Schedule 18.5, each
party represents and warrants that it employed no broker, agent or finder in
connection with this transaction and agrees to indemnify the other parties
hereto against all loss, cost, damages or expense arising out of claims for fees
or commission of any broker, agent or finder employed or alleged to have been
employed by such indemnifying party.
18.6 EXPENSES. Whether or not the transactions herein contemplated shall
be consummated, PARENT will pay the fees, expenses and disbursements of PARENT
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by PARENT under this Agreement, including the fees
and expenses of Arthur Andersen, LLP, Bracewell & Patterson, L.L.P., and any
other person or entity retained by PARENT or by WJG, and the costs of preparing
the Registration Statement. The COMPANY will pay all of the fees, expenses and
disbursements relating to this Agreement and the Merger, other than any fees,
expenses and disbursements that relate to the unique circumstances of a
particular STOCKHOLDER or STOCKHOLDERS. Each STOCKHOLDER shall pay all sales,
use, transfer, real property transfer, recording, gains, stock transfer and
other similar taxes and fees ("Transfer Taxes") imposed in connection with the
Merger, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each STOCKHOLDER shall file all necessary documentation and Returns with respect
to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or
she, and not the COMPANY, PARENT or the Surviving Corporation, will pay all
Taxes due upon receipt of the consideration payable pursuant to Section 2
hereof, and that
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he or she will assume all Tax risks and liabilities of such STOCKHOLDER in
connection with the transactions contemplated hereby.
18.7 NOTICES. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
(a) If to PARENT or ACQUISITION CORP., addressed to them at:
Nationwide Staffing, Inc.
600 Travis, Suite 6200
Houston, Texas 77002
Attn: Larry E. Darst, Chief Executive Officer
with copies to:
Rick L Wittenbraker
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana Street, Suite 2900
Houston, Texas 77002-2781
(b) If to the STOCKHOLDERS, addressed to them at their addresses
set forth on the Stockholder Signature Page, with copies to:
Michael L. McCann
Spencer Fane Britt and Browne LLP
1000 Walnut Street, Suite 1400
Kansas City, Missouri 64106
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(c) If to the COMPANY, addressed to it at:
Technology Plus, Inc.
4201 N.E. Lakewood Way, Suite 200
Lee's Summit, Missouri 64064
Attention: Richard L. Bronson
with copies to:
Michael L. McCann
Spencer Fane Britt and Browne LLP
1000 Walnut Street, Suite 1400
Kansas City, Missouri 64106
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Delaware, without regard or reference to any
conflict-of-law principles that would refer to the law of any other state or
jurisdiction.
18.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants and agreements of the parties made herein and at the time
of the Closing or in writing delivered pursuant to the provisions of this
Agreement shall survive the consummation of the transactions contemplated hereby
and any examination on behalf of the parties until the applicable Expiration
Date.
18.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
18.11 TIME. Time is of the essence with respect to this Agreement.
18.12 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be
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valid, legal and enforceable but so as to most nearly retain the intent of the
parties, and if such modification is not possible, such provision shall be
severed from this Agreement, and in either case the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
18.13 REMEDIES CUMULATIVE. Except as expressly specified herein to the
contrary, no right, remedy or election given by any term of this Agreement shall
be deemed exclusive but such shall be cumulative with all other rights, remedies
and elections available at law or in equity.
18.14 CAPTIONS. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement, and shall not
be used to construe or interpret any provision hereof.
18.15 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of PARENT, ACQUISITION CORP., the COMPANY and the STOCKHOLDERS
who hold or who will hold at least 50% of the Parent Stock issued or to be
issued upon consummation of the Merger. Any amendment or waiver effected in
accordance with this Section 18.15 shall be binding upon the of the parties
hereto, any other person receiving Parent Stock in connection with the Merger
and the future holder of such Parent Stock.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
"PARENT"
NATIONWIDE STAFFING, INC.
By: __________________________
Name: Larry E. Darst
Title: President and Chief Executive Officer
"ACQUISITION CORP."
TPLUS ACQUISITION CORP.
By: __________________________
Name: Larry E. Darst
Title: President
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"COMPANY"
TECHNOLOGY PLUS, INC.
By: __________________________
Name:
Title:
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STOCKHOLDER SIGNATURE PAGE
_______________________________ Address: _______________________________
Print Name: Richard L. Bronson ________________________________________
________________________________________
_______________________________ Address: 1314 Alford Avenue, Suite 102
Print Name: Bobby Wayne Watson Birmingham, Alabama 35226
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